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Staples pins growth plan on IT service
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September 19, 2008 – Staples Inc. is planning to make it easy to back up your company’s PCs.
The Framingham retail giant is expected to introduce next week a suite of services that goes beyond selling office products, including technology services, all while deepening Staples’ presence among its core customers – small and midsize businesses.
Staples’ IT services will include online backup sold through Staples subsidiary Thrive Networks Inc., which is based in Concord and provided by a division of Hopkinton-based EMC Corp. (NYSE: EMC).
The deal is expected to provide a huge sales channel to business customers for EMC subsidiary Mozy Inc., said Mozy COO Vance Checketts, who plans to double the company’s percentage of lucrative business backup customers during the coming year.
“In terms of the SMB market,” he said, “it’s hard to beat a partner like Staples.”
Expanding to data backup may be just the tip of the iceberg for services Staples can use to solidify its standing with SMBs, said Lauren Whitehouse, an Enterprise Strategy Group analyst.
“As a trusted partner (with SMBs), they have a relationship where this might be a slam dunk for them,” she said.
Shopping vs. Services
Staples (Nasdaq: SPLS) operates an e-commerce business second only to Amazon.com Inc. among U.S. retail websites, and e-commerce now represents more than one-third of Staples’ total revenue.
Officials have said the retailer’s IT services would be initially offered in the Boston area and considered for expansion to other markets if successful.
Staples reported that its North American Delivery division, which includes online, catalog and contractor sales, generated 37 percent of the company’s total revenue by midyear versus 35.6 percent by midyear 2007, according to the company’s second-quarter earnings report. While reporting that growth, Staples also acknowledged that retail sales slipped 1 percent in total and 7 percent in same-store sales compared with the year-earlier quarter. The company cited declines in customer traffic and average order size.
Staples acquired the 65-employee Thrive Networks in late 2006 to provide IT services to Staples’ customers. The retailer’s services are now branded as Thrive Networks. Storage industry giant EMC started offering online backup product Mozy after it bought Utah-based Berkeley Data Systems Inc. in October 2007.
Backup front and center
Staples officials, who plan to officially announce the Mozy agreement next week, declined to comment.
Mozy initially targeted consumers, but EMC’s acquisition has turbocharged Mozy’s SMB business. The backup company doubled the number of business customers during the first six months of the year, bolstered by its association with EMC, Checketts said.
About 25 percent of Mozy’s 850,000 users are business customers – but they account for 50 percent of Mozy’s revenue – and by early 2009 businesses will make up about 50 percent of the customer list, with the Staples deal being a major factor, Checketts projected.
Such growth should contribute plenty to Mozy’s top line because the profit margin from business customers is greater than individual consumers, said Henry Baltazar, an analyst for The 451 Group. “There’s more money to be had in SMBs,” he said.
Earlier this month, Mozy said it had reached an agreement to provide online backup to small-business customers of Hong Kong-based Lenovo Group Ltd., similar to the deal Boston-based competitor Carbonite Inc. closed with Lenovo to provide trial online backup service subscriptions for Lenovo’s Ideapad line of desktop and laptop computers.
In July, Waltham’s AmeriVault Corp. announced that it would be reselling MozyEnterprise to its SMB customers. AmeriVault director of marketing Scott Bush said the company offers Mozy’s product as another option to its own suite of backup services.
He said he expects the arrangement to generate additional customers for AmeriVault’s own products.