[audio intro]

Steve Kahle: Welcome to Industry Live. We are here in Austin, Texas. There it is: Red Cheetah world headquarters. My name is Steve.

Andrew Morgan: I'm Andrew.

Steve: Otherwise known as...

Andrew: "Loose Cannon"

Steve: Or, "Mogie" [laughter] Chief of Loose Cannons.

Andrew: I am Chief of The Loose Cannons.

Steve: That's right.

Andrew: There are a lot of them.

Steve: Many.

Andrew: Except, most people can turn it on and off.

Steve: There you go, but you can't.

Andrew: I don't; I can, but...

Steve: You choose not to.

Andrew: ...I choose not to.

Steve: All right, so we're talking about Industry News. Andrew, talk to us about the United MBS Dev acquisition.

Andrew: You know, I think we've been down this road before. Originally, it was our thought when United announced this and they were kind enough to come down and see us the day that this was announced. With the SAP initiative I think that it was not an agnostic approach. They were intentionally and consciously pushing that program. This doesn't seem to be the case with MBS Dev. They look to be testing some merchandising and marketing strategies, in that demeanor.

Steve: Right.

Andrew: It will be interesting to see if MBS Dev goes down channel or cross vertical. So, I think there's a lot more to unfold here. However, they seem to be taking this approach much differently than in the past. What would you add to that?

Steve: Well I'd say when the team came down to talk to us, United team that is, they appeared to be very sincere. We were assured that the United reps were not going to be compensated to push the MBS Dev platforms. Overall, we'll take them at their word.

Andrew: Yeah, again, I think you hit it on the head, we're taking them on their word. Laura Gale and Terrence have been fantastic up until this point and we anticipate that to continue. So, we'll see how it shapes out over the next six months or so.

Andrew: PCI compliance. Tell me a little bit about what PCI compliance is, what it means to our dealers and to Red Cheetah.

Steve: Well, it stands for Payment Card Industries and basically it's a collection of all the major credit card providers: Visa, Mastercard, Discover, American Express. And, overall the main push behind PCI is for the industry to set standards so the government won't in terms of credit card security.

Andrew: Do you mean to imply that Obama would step in and actually have bigger government?

Steve: Well I'm sure he'd like to. Hopefully, were going to hold them at bay. And, overall, PCI compliance, we've heard about it over the years. We have, at the behest of Solveras, our great merchant card and gateway provider partner has been telling us, "Hey look, this PCI compliance stuff is for real" and it appears now the line is drawn in the sand.

So, it appears that July one is going to be that date where dealers, those that have that merchant accounts and also providers like Red Cheetah must be PCI compliant.

Andrew: Now, what does this mean, in your opinion, for our dealers?

Steve: Well, for the dealers it means, for many, they're going to have to change the way they do business. For example, those who were doing manual credit card processing, that's going to go away. We've had some dealers for convenience will write in credit card numbers on their rolodex.

Or, store a bunch of credit card numbers on an Excel file. And, those kinds of practices will basically reject a PCI compliance option. So, dealers are going to need to make some changes and overall it makes a lot of sense because when you look at the statistics the majority of credit card fraud cases happen from within the organization.

Andrew: What does this mean differently for Red Cheetah?

Steve: Well for us it's meant a lot of money. We've had to reinvest in a lot of new hardware, a lot of new firewalls. We've had to spend a lot of time and energy reconfiguring servers. You know, end of the day, even though it has been kind of a pain and we will be compliant, by the way by July 1st, it's going to make Red Cheetah more secure. And, also too, there's been a significant amount of documentation that's been required.

So we've had to go in and really detail out exactly what happens from the way we handle code to what happens when someone moves on. Making sure that all the security aspects are locked down properly to protect the infrastructure.

Andrew: Now you mentioned Solveras, our preferred credit card processor - what separates them in this process from the Skipjacks, the PayFlow Pros that we're currently integrated with as well?

Steve: Well I think Solveras has been a really pro-active partner, helping not only us but also our dealer community. So for a dealer to get PCI compliant, they're going to need to first fill out a questionnaire. And once that questionnaire's completed they'll also be subject to a scan of their network to makes sure there's no vulnerabilities.

And overall, Solveras has done a really good job helping dealers make those steps to become PCI compliant. They're helping us hold webinars and really get on the education push, so that all of our dealers are taking pro-active steps to be compliant by this July one deadline.

Andrew: It sounds like it's going to be an overall, a good thing for the industry, the Red Cheetahs, and the dealers of the world.

Steve: I think so. I think it's going to be a more secure industry. And that'll hopefully keep rates down, and create a win-win for everybody.

Andrew: And there have been a tremendous amount of cases of credit card theft that drove this. Correct?

Steve: You bet. Like T.J. Maxx, there was a huge credit card situation. One of the main credit card processors was at Heartland, really got hit hard. So overall, it's going to be a big thing. And also too, something that's very important too is, is typically dealers are on the hook.

So if there is fraud, they can be subject to a lot of fines. So this will help put in a layer of protection.

Andrew: Very nice.

Steve: We invite the audience, go check out the Red Cheetah site. Go to our blog. And Brian Ernst, our systems director, has put together a really good detailed blog of what PCI compliance means, what are the details?

So look for that. And also dealers, look for future webinars about PCI compliance.

Andrew: Because this is not specific to Red Cheetah. It's not specific to our dealers. It's not specific to our industry.

Steve: Right.

Andrew: This is Visa, MasterCard, Discover, American Express wide, all encompassing net. Correct?

Steve: Correct. Anybody who basically has a merchant account and takes credit cards. And any company that has a platform like Red Cheetah that accepts credit cards, will be subject to PCI compliance.

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Andrew: So changing gears Steve, from PCI compliance. We have an opportunity to speak to Greg Welchans, president of Supplies Network. Greg was recently named by OPI magazine, one of the most 100 influential people in office products.

Steve: Wow.

Andrew: Really, really great opportunity. So Greg Welchans if you could tell us a little bit about yourself.

Greg Welchans: Well thanks Andrew. It's a pleasure to be with you guys. I guess, I got into the industry back in 1981 with a little office products company based in Dallas, called Miller Business Systems. Which at the time grew up over the next 12, 13 years to be one of the biggest in the industry.

I spent 12 years with them. And through acquisition that started about '88, '89, when everybody started getting bought up, I got involved in the Power Channel through that acquisition, and spent a little time with "Office Depot, " and then some more time with US Office Products.

In 1998, I left the dealer channel and got into your business, and actually joined ECI Squared at the very beginning of their business, and spent three years there. And in 2001 I made a sales call and was calling on a company called Supplies Network, trying to get them to buy into a piece of ECI Squared business and a new operating system and which they never did actually. But they hired me instead, and I've been here ever since. So, there you go.

[laughter]

Andrew: So you sold yourself and not the product, is that what happened Greg?

Greg: I guess you could say that Andrew, thank you.

Andrew: Good job. That's a harder sell. I mean, good for you. Good for you. So, Greg give us a definition if you would, of managed print services of MPS?

Greg: OK. Well, managed print services involves managing hard copy device fleets, things like copiers, printers, multi-function devices and fax machine in a unified fashion. While the end user can do this, it is more typically kind of associated with outsourcing the fleet of those devices to an external vendor. So there are really typically three reasons why an end user might want to use this strategy and adopt an outsourcing vendor.

The first reason is really controlling the fleet. So during this phase of MPS the outsourcing partner is usually focused on gaining control of the fleet for the end user. What they are actually spending on toner, what they are actually spending on fixing the printers that break and the general maintenance of that printer fleet.

The second phase is optimization. So once we understand the fleet or the dealer understands the fleet, the implementation is focused on optimizing the fleet by trying to ensure that the hardcopy assets, those things we talked about earlier are deployed in an optimal manner.

So during that phase, the vendor is making sure that the most cost effective printers are placed correctly throughout an end user environment. Then they look at things like who needs to be printing in color and who doesn't. And then they deploy the correct printers to the areas of the company.

They are really trying to get the best cost per copy, or best cost per printed page for each part of the company. And then finally the vendor looks at enhancing the environment. And in this phase the customers moved beyond optimization to enhancing the capabilities of the fleet by using things like document management and document workflow. To improve the basic business processes such as where the loan applications are printed or other paper intensive kind of processes are.

Multi function printers now have the ability to scan and document digitally, right into a folder on a network. And thus reducing the need for print and storing documents effectively. So that's part of it. And so the managed print service providers look couple of different ways. And they vary in sizes and abilities. And a vendor-centric kind of provider would be somebody like HP or Xerox or Konica Minolta, Toshiba or other companies that also manufacture hardware and supplies.

These MPS providers tend to be really hardware centric and focused. The other kind conversely is something like Carbon6 or our program which is a vendor neutral managed system that focuses initially on analyzing the current assets and then progresses through the other phases of that we just talked about of what an end user expects of an MPS program.

Steve: That's awesome Greg. Can you give us a snapshot of the vision for the Supplies Network Carbon6 program and how it compares in contrast to other options in the marketplace?

Greg: Sure. Carbon6 is a comprehensive MPS program that allows dealers to help control and reduce office printing costs of their customers. Unlike other kind of incomplete managed print programs that normally include printer cartridges and emergency services, Carbon6 includes comprehensive suite of services that deliver a proactive approach to keeping the customer productive and at the same time lowers their costs.

From a dealer's perspective, there are two ways that Carbon6 can allow a dealer to bill their end user for MPS programs. The first way is in bundles. So a dealer can buy a bundled cartridge from Supplies Network which means that a cartridge like a HP cartridge or Lexmark cartridge has the cost of the software, National Break Fix Services, proactive monitoring and auto toner replenishment built into the price of the cartridge.

So a cartridge that might cost a $100 just selling it transactionally, might cost a $101 dollars from a sell through process to the dealer but include all those services. Or, it actually could cost less because some of our manufacturers offset the price and they actually get a cost advantage that way.

And then the second way is per page. So Supplies Network will sell the dealer a page if you will. The price of the page includes all those same costs associated with the bundle. But different printers specify a different price per page, meaning the cost of a page from a color printer will likely be different than the cost of a page from a monochrome or black and white printer.

Steve: Gotcha.

Greg: Yeah, and so we are offering ranges from the very simple to the very complex based on the dealer's desire to really own the customer or simply offer a better service. And I think that's what makes us different Steve is that if a dealer doesn't really want get heavy under managed print but wants to provide better service, we have an offering for that and it's simple. And if they really want to get into owning the customer and owning the environment, we have an offering that really will help them do that also.

Andrew: Awesome. Now Greg as the launch of PSG assists their dealers in doing that transition from transactional to contractual.

Greg: Absolutely Andrew. Several months ago, and I guess we should define what PSG is, it's we call our Professional Service Group. And it is a tool for resellers who would really to accelerate the timeframe to sell and close managed print services contracts with their largest customers. So the PSG provides... our company actually provides an experienced team to work in tandem with the reseller, and their customers in every step of the sales cycle.

Andrew: Wow!

Greg: Yeah, the PSG Group engagement with the reseller begins with the initial customer appointment. So the dealer will say, "Hey I've got a contact, a C level contact at this end user. Let's go make a sales call through the entire assessment process, through the strategies and the proposals all the way to closing the business."

And so, really what this program does is it helps resellers achieve two important goals. The first goal is to provide an effective, efficient sales cycle; secure the contracts with their top customers before a competitor does.

And the second goal is to really lower the financial risk of the dealer by them being able to minimize their own staffing requirements and developing quality contracts that are really profitable for them going into the future.

Andrew: That makes sense, Greg. And tell us how dealers can get involved?

Greg: Well, with Carbon Six or our Professional Services Group they get involved in different ways. With Carbon Six, they actually develop their own systems with Carbon Six's software and services. And they develop their own staff to do things.

With the Professional Services Group, they don't have to really invest a lot in those things because we do everything for them. But Carbon Six offers really a wide variety of supplies, brands, both OEM and compatible, and hardware to really meet the range of needs in the customer environment.

So as an HP collaborative infrastructure partner and really leading edge, many awards kind of program, we feel like we have the right solution for the dealer in whatever phase they want to get to.

And if they want to get involved in it, they can contact us by either visiting our website at SuppliesNetwork.com/CarbonSix. Or they can call us at 1-800-775-5056.

Andrew: Greg, it sounds like you guys really have a great jump on the industry, in this respect. I know you've been doing it for a long time. And it sounds like you have really built a world class program over there.

Greg: Well, thanks. And we appreciate the opportunity to share it with your dealers, Andrew.

Andrew: Well, you're very welcome. And you've always been a great friend to Steve and I both personally and a great supporter of Red Cheetah over the years. And so, we value the relationship and thanks for the time today.

Greg: All right. You guys take care.

Steve: Thanks, Greg.

Andrew: Thanks, Greg.

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Andrew: So, Tubby, tell me some new things at Red Cheetah.

Steve: Well, we're still thanking Andrew for that. We're very excited about Outpost. More importantly we're very excited... [laughter] How much did you weigh in this morning, by the way?

Andrew: Like 310. [laughter] I can't help it. So tell me about Outpost. We always lose it at this point of the day. Steve needs a nap. Old people, they tend to like to nap in the afternoon. Get your love handles out of the way and tell me about Outpost.

Steve: All right. So, Mogie we're very excited about Outpost. We're still marching forward. One of the big things that we're doing is the concept of continually providing value for our dealers.

And we're excited about Outpost because we're taking a number of revisions that have been bundled together that really impact the e-commerce experience. We're giving dealers significantly more functionality. They're going to be able to not only customize what we call widgets or components on the page, they're going to be able to really control layouts, so a first in the industry.

A dealer will be able to say, "Look. I want to apply this very green, recycling friendly type layout and apply it to 100 of my corporate accounts. And I'm going to use this other more conservative layout for my government accounts."

So we'll really allow a lot of customization. But overall, we're going to ensure that the e-commerce experience is still very streamlined, very efficient. Overall, when you look at say a Staples or an Office Depot, there's this Mardi Gras of confusion, distractions. There's everything competing for your eye.

We're going to keep things very focused to allow the dealers customers to be able to very easily come in, place their order and move on about their day.

Andrew: It sounds like it really is going to allow the end users to have a very customized experience.

Steve: Yeah.

Andrew: That's fantastic. It is. Now what's the date on Outpost launch?

Steve: Well, December one is our target. And if our team doesn't make it, then I hear you're going to be bringing in a lot of your firearms.

Andrew: I will. It will be a sad day in Austin. So we're going to make that date.

Steve: All right. We shall.

Andrew: No question asked. Transitioning, some upcoming events that the Red Cheetah team will be at, any of those that you're going to? Are there any eating contests that you're traveling to across country?

Steve: Yeah. There is a pie eating contest in Dixieville that I'll be attending. That's a part of Texas. Well, the most important one, I guess, or leading off, we've got the Kansas City Dealer Trading Seminar happening next week, April 29th.

Andrew: And that's in Kansas City.

Steve: Kansas City. Correct.

Andrew: OK.

Steve: And then following what do we have?

Andrew: The IS Group Meeting in Denver, Colorado the beginning of June, I believe the second through the fourth.

Steve: Right.

Andrew: And we'll have a couple of folks there for the IS Group for those buyers.

Steve: Yeah. So the big ABC show by S.P. Richards. You might be having some conflicts there.

Andrew: I might...

Steve: What's going on with that? Andy, do you want to tell the audience what's going on?

Andrew: I might not make that show.

Steve: And why is that?

Andrew: I say with a deep breath, so my twins are...or well not mine. I'm not having them. Steve is.

Steve: That was our secret.

Andrew: That's why he looks like he put on weight. He's carrying my twins. [laughter] So my twins are due the first part of June. So depending on how that goes, might not make it. So that would be the first ABC, I have missed since the very first one.

Steve: Wow!

Andrew: So hopefully, I'll be able to get to that because I know nothing will get done unless I go since I have to do absolutely everything.

Steve: Yeah. I want to see you carry the entire company on your shoulders.

Andrew: I will be. Right on my belly is where I carry it. So after the ABC in Miami at the end of June, where are we headed after that?

Steve: We charge a World Expo, 14th and 15th of July.

Andrew: In Vegas, hopefully.

Steve: That's right.

Andrew: Yeah. That's always a good show for us, a lot of managed print that will be discussed there.

Steve: Correct.

Andrew: What's after that?

Steve: Well, I guess the big event that we're looking forward to, our own event. Coalition. C11.

Andrew: Coalition 11. Which happens?

Steve: February second, third and fourth.

Andrew: Where's it going to be?

Steve: Here in Austin.

Andrew: At the Westin, at the Domain. So Coalition site, obviously, is launching soon as well with this. So there'll be more to come on that.

Steve: Very exciting. Joke of the month. What is it Andrew?

Andrew: So a teacher was teaching her fifth and sixth grade class about the 10 Commandments. And right after she got to "Honor thy mother and thy father" she asked, "Is there a commandment that dictates the brothers and sisters of those in the room?" And very, very quickly little Tommy in the corner raised his hand and said, "Yes. Yes. 'Thou shalt not kill.'"

Steve: There it is.

Andrew: So there it is. So anyways that said...I was raised with three older brothers. I have the scars to prove it.

Steve: Yeah. Like forks.

Andrew: Yeah. Forks in hands, gunshot wounds.

Steve: Yeah. Just name it.

Andrew: Yeah. It was anywhere in the same boat. You got abused just today.

Steve: That's true. I did. I did.

Andrew: So it's going around. So thanks for being a part of Industry Live. We'll see you again in just a little while.

Steve: Look forward to it.

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