Despite the ongoing move worldwide away from hard copy to electronic media, Hewlett-Packard predicts strong growth in digital printing markets into the foreseeable future. Kindles and iPads be damned, the folks in HP’s Imaging and Printing Group (IPG) expect hundreds of billions of additional pages will be printed digitally over the next couple of years across market segments. The firm says that the increase in all that digital printing will also drive demand for new services, which IPG will happily provide.
I recently had the opportunity to meet with members of the IPG management team in San Diego. While I’m skeptical about some the growth numbers they quoted especially in the consumer space, the IPG people I spoke with are quite certain that the future of digital hard copy is bright. IPG executive vice president, Vyomesh Joshi estimates that the worldwide digital hardcopy market including, hardware, consumables, and service will be worth about $292 billion next year and that number will grow in the future. Joshi says by 2015, approximately 1 trillion more pages will be imaged digitally than the number currently printed with a digital device.
There are several key factors fueling all this growth, says the HP execs. First, the amount of printable content is exploding. Manny Kostas, IPG’s senior VP overseeing worldwide marketing and strategy says people have access to more printable materials than ever before. He concedes that people print less of the total printable materials they have but he’s confident overall print volumes won’t drop. “There is so much content now, and it’s growing,” he explains. “Even if the percentage of printing comes down, print volumes will be sustained as people access the exploding amount of content they value and want to print.”
Kostas says that people are also discovering new ways to print as new technologies emerge, which further drives print volumes upward. Currently, mobile devices and the so-called cloud are providing new printing opportunities, he says. Thanks to the growing ubiquity of technologies like HP’s ePrint, which enables mobile printing, Mr. Kostas says more and more consumers are learning how to access and image content using an expanding array of gadgets like smartphones and tablets.
Many of the IPG executives I met with in San Diego are particularly bullish about the commercial space, which will be another growth driver for HP going forward. Billions of pages once imaged using analog processes like lithography are now migrating to digital devices. While some areas of the commercial print space such as design and photo processing have largely adopted digital technology, other segments including publishing and packaging remain dedicated to analog presses and flexographic devices. Going forward, IPG aims to move more of that analog printing over to its high-volume digital equipment, which includes the firm’s line of Indigo machines and its new HP Inkjet Web Press units.
To move more pages through SOHO and enterprise digital devices, IPG offers a wide variety of services including managed print services, which I’ll discuss in a minute as well as others HP’s Snapfish online photo service alone currently has 100 million subscribers. The firm plans to add more services and has an installed base of over 10 million web-enabled printers that it can leverage to support new offerings. On October 12, HP announced that it had partnered with the giant publisher Condé Nast to distribute content from well-know magazines such as Allure, Glamour, Golf Digest, Wired, and others directly to the subscribers’ personal printers.
Growing MPS
Along with the Condé Nast partnership, HP also launched an interesting new pilot program that really amounts to an MPS offering for SOHO users. The new HP Instant Ink service provides consumers with cartridges for a monthly fee of between $5.99 and $10.99 depending on the device. Officejet Pro machines will presumably print more so the plan costs more for these units. Subscribers receive two sets of cartridges when they purchase their inkjet machine so they have replacement cartridges on hand if required. After the device is installed, it uses its ePrint technology to monitor and order ink supplies as needed. The firm says it will work with certain retailers in the northeastern United States to initially offer HP Instant Ink. No additional details were available regarding the program except that it should be available by the end of the year.
In the office space, HP’s more traditional managed-print services appear to be doing well.. Currently, HP’s MPS business is rather significant. According to Coughlin, HP has some 575,000 machines under contract that are generating 23 billion pages each year. He says HP has over 3,000 MPS clients including 8 of the top 10 insurance firms and 7 of the top 10 healthcare firms.
HP is using a three-pronged strategy to grab more of the MPS market. The firm aims to optimize multi-vendor fleets and maintain all the various devices. Using the cloud and other technologies, the firm also plans to provide a range of connectivity and storage solutions to manage large and diverse print environments. Lastly, HP will improve the workflow for its clients to enhance overall productivity. Coughlin estimates that workflow represents 75 percent of the total lifecycle cost for a typical printing environment. Expanding workflow solutions and improving productivity is critical to HP’s MPS growth strategy.
Transforming what Coughlin calls “inefficient paper-based processes” to streamlined digital workflows is key to improving productivity, which puts the focus on HP hardware. Multifunction devices are seen as the on and off ramps to these optimized digital workflows and the firm will bring to market more LaserJet MFPs loaded with productivity and document management tools.
According to Kostas, HP’s hardware and solutions allow its clients to efficiently “manage the [scanner] glass.” He maintains that long-term success is all about “converting atoms to bits” as clients digitize and archive critical business documents such as invoices, contract, and other enterprise content. Equally important is providing the secure off-ramps that allow companies to safely and seamlessly “covert bits to atoms,” as Kostas puts it.
I expect that HP’s MPS business will continue to make great strides. The firm has executed on its MPS strategy and has managed to take market share from copier vendors and other printer OEMs. Most of HP’s success has come through its direct sales force team working with enterprise customers. Like other vendors, HP will find it more difficult as it works with partners to market MPS to small to medium sized business. It remains to be seen how successful the Instant Ink program will be. Some consumers may welcome the convenience of paying a flat fee for their cartridges. I bet, however, bargain hunters will eschew the program in favor of purchasing less expensive third-party supplies. Only time will tell.
Posted on 11/14/20111 comments
As an analyst, I cover the markets for desktop and office equipment along with the markets for the consumables these machines gobble up. I don’t follow the market for production devices very closely. I’ve always been interested in so-called Big Iron technology, however. In addition to satisfying my curiosity as a “printer geek,” watching the higher-end of the digital imaging market also provides new insights into where the overall industry is heading.
When I went to this year’s Graph Expo event in Chicago earlier this month, I was skeptical about the possibilities of seeing much new office equipment. The focus at Graph Expo is digital presses and production devices along with wide-format machines and printers for more industrial applications like for producing packaging. It turns out my low expectations were justified. While there was some office equipment tucked back in the corner of certain booths, I really didn’t find anything new. Still, I did learn a lot at the show.
One of the more interesting alliances announced at Graph Expo was news that the hardware manufacturer Xante will bring to market the first wide-format machine based on Memjet technology. Xante’s “Excelagraphix 4200 powered by Memjet” is a 42-inch wide device capable of printing on a range of substrates including foam board and corrugated cardboard as well as paper. Memjet provides the print heads and other technologies that deliver exceptionally high throughput speeds. Xante claims the Excelagraphix 4200 fires “3 billion drops of ink per second yielding print speeds up to 8 times faster than traditional inkjet technology.” The firm indicated its new machine can be used for a variety of applications ranging from printing packaging to signage to architectural and engineering drawings.
After a string of missed launched dates, Memjet appears to be making up for lost time. For more than a year now, the company has signed up a string of technology partners. Memjet’s client list now includes Lenovo and LG as well as Xante, and Memjet technology has been deployed in a variety of devices for label printing, desktop applications and, now, wide-format. Despite any skepticism on my part, it appears that Memjet technology is ready for primetime after all.
While inkjet technology has yet to make a big splash in the office, it is well established in the print-for-pay space. There was a lot of high-speed inkjet hardware at Graph Expo. Commercial printers are familiar with inkjet technology because it can be deployed in an inline configuration with traditional presses to add variable data to a static printed piece. Inkjet has also been a longtime favorite for “trans-promo” jobs. High-speed continuous inkjet machines have been around for years and are used for in-plant transactional-promotional applications such as printing bills, invoices and bank statements as well as direct mail and other promotional pieces.
Xerox had an interesting new inkjet device in its booth for trans-promo applications. The new CiPress 500 Production Inkjet System is a four-color, continuous-feed machine touted as being the “World’s only high-speed waterless inkjet system.” The machine represents the latest iteration of Xerox’s solid inkjet technology. I spoke with some of the machine operators in the booth, and while they declined to show me the stuff, they described the ink as being similar to the solid ink sticks used in Xerox’s ColorQube machines. The difference is the ink has been palletized for the higher-end device to support faster melting and printing. The new machine prints on a range of uncoated papers similar to those used by traditional wet-ink presses. Xerox says the solid inks employed by the CiPress 500 eliminates the need for driers to prevent papers from curling, so the machine has lower energy requirements than other inkjet production devices.
At Graph Expo, Canon demonstrated another high-end inkjet device. The DreamLabo 5000 was introduced earlier this year at the AIIM On Demand event in March. The machine is targeted at the retail photo processing and print-on-demand markets. It features a 12-inch wide print head based on Canon's FINE (Full-photolithography Inkjet Nozzle Engineering) technology and is designed to offer an alternative to traditional silver halide photos. The DreamLabo 5000 employs a seven-color dye-based ink set that includes photo cyan, photo magenta and gray along with the traditional CMYK inks. Canon claims it can print a 20-page A4-size photo book in 72 seconds or 40 4-by-6-inch snapshots in one minute.
Canon also had a new production device at the show based on electrophotographic technology. The firm launched its imageRUNNER ADVANCE C9075S PRO and C9065S PRO color multifunction machines at Graph Expo. Canon says the new machines, which are one of the first fruits of the Océ acquisition, are similar to the imagePRESS C7010VPS but feature Océ's PRISMAsync controller technology. The new machines are expected to start shipping this month in North America through Canon Authorized Dealers, Canon Business Solutions and Océ North America.
One of the key reasons to go to a production event like Graph Expo — or Print 09, drupe, etc. — is to get a sense of what’s going on with distribution. This year OKI Data Americas announced details of a national distribution agreement with Agfa Graphics. The deal with Agfa should extend OKI’s reach into the print-for-pay and commercial print space and provide Oki with additional distribution for its pro510DW, which is part of the OKI proColor Series. While admittedly, this deal does not have the heft of the Canon-HP announcement in 2009, which gave HP access to Canon’s high-end copier portfolio, it is still important. Unlike certain segments of the office market, the production space is growing and it appears that Oki is serious about capturing some of the production market.
I wouldn’t expect much of the news from Graph Expo to have a huge impact on office equipment dealers and VARs, at least not in the short term. That said, it is prudent for those in the office channels to stay aware of the trends in the production space. The technology deployed in high-end devices has a tendency to migrate down market. Moreover, alliances that are established in the production space can be easily expanded to further penetrate the market for office devices.
Posted on 09/26/20110 comments
I’ve been attending World Expo for more than 10 years, and during that time, I’ve witnessed a lot of changes at the show. Expo is a must-attend event for anyone who does business in or with the North American remanufacturing industry. It really reflects the trends shaping the dynamic digital imaging supplies industry.
The show has been held since the mid-1990s, and in the early days, companies catering to office machines composed the majority. Then, as the SOHO market exploded, more and more inkjet products and toner cartridges for personal laser printers were displayed as exhibitors sought coveted retail shelf space. The SOHO market is cooling, however, and over the past few years, the industry’s focus has flipped back to business users again.
Walking the show floor last month, I was struck by just how much the third-party supplies industry is now focused on supporting the office equipment channel, especially in terms of managed services. In the old days, of course, office equipment could be leased through some sort of volume-based, or “click charge,” contract. But the technology and programs being promoted at the most recent World Expo are very different than what one found walking earlier show floors. Heck, the stuff I saw last month is vastly different than what was available even a couple of years ago.
I’ve always been skeptical about the opportunities MPS provides to remanufacturers, especially those firms that are attempting to sell consumables exclusively using an MPS agreement. Moving from transactional sales to marketing services contracts is risky business, and the infrastructure required to manage print services can be pricey. The evolution of technologies represented at World Expo this year gives me pause. It appears that third-party supplies vendors are learning to work with technology vendors and hardware providers to support MPS initiatives, and conversely, hardware manufacturers and their channel partners are reciprocating.
Because of the third-party supplies industry’s interest in the subject, for the past several years, World Expo has been offering lots of information about MPS, and it has become a summer destination spot of sorts for the managed print services community. It seems that companies that manufacture and market hardware are as interested in third-party supplies as remans are in supporting MPS. I saw a number of IT VARs and copier dealers at The Imaging Channel’s 2011 Managed Print Summit along with senior managers from various hardware vendors (including Muratec, Sharp and Toshiba). Looking around the room, I also spotted representatives from Hewlett-Packard, Kyocera Mita, OKI and Samsung. Xerox was also represented with executives from its newly acquired NewField IT subsidiary.
Not only were there OEMs participating in the MPS forerunner event, but this year, hardware vendors were even working a couple of booths in the World Expo exhibit hall. Promoting its growing activity in the MPS market, OKI hosted a booth at the show this year. In my memory, this is the first time an OEM hosted a booth at the show. Attendees stopping by the MWA Intelligence (MWAi) booth would have seen Samsung-ites demonstrating Samsung’s XOA devices embedded with MWAi’s technology, which supports fleet monitoring and management.
It makes perfect sense for OEM channel partners to cozy up to remanufacturers. Third-party supplies offer much better margins than OEM consumables. Moreover, the remanufacturing industry today is made up of many companies that market products that are at least as good as the OEMs’ products, if not better. So the channel can make more money marketing products with equivalent quality to what they’re selling now. What’s not to love? And, of course, the OEMs want to support their channel partners as they further penetrate the SMB space, so they’re reaching out to the remans. Oh, brave new world!
The convergence of printers and copiers has yielded some interesting results. Increasingly, there are fewer differences between printer-based MFPs and lower-tier digital copiers. Likewise, printer OEMs offer A3 devices, while copier vendors have rushed into the A4 space. There have also been changes in the channels for the various devices. OEMs learned how to appropriately compensate the various constituents in the channel, and MPS contracts are increasingly available from IT VARs and copier dealers alike. Now it appears the impact of MPS is being felt in the remanufacturing industry. And with the support of the OEMs and their channel partners, the third-party supplies industry has a good chance of success in the MPS space.
When OEMs start staffing booths at World Expo, it’s enough to make even a skeptic believe!
Posted on 08/08/20110 comments
As you know, all of the hardware manufacturers have sworn various oaths to their investors, channels and customers that they’ll beef up their managed print solutions and grow their MPS businesses. Some of this is hype, of course, and I’m skeptical about a lot claims being thrown around. Frankly, I wonder if certain programs will ultimately succeed.
That said, I think Hewlett-Packard has become quite accomplished in its pursuit of the MPS market. It has successfully grown and managed its MPS business in a few short years. The company was a relative latecomer to the game and faced stiff competition from strong, established players such as Ricoh and Xerox along with other copier firms that had been marketing MPS-like programs for years. But using strategic acquisitions, the company has scored a string of successes since entering the market just over five years ago.
Much of HP’s MPS assets come through acquisitions. In fact, when HP looked to launch its nascent MPS program in 2006, it “acquired” one of its fiercest foe’s (Lexmark) sales executives, Bruce Dahlgren, to run the business. And when it has sought to more successfully penetrate certain market segments, it’s accomplished this through acquisition. The best example is the EDS acquisition. While it provided HP with a variety of other valuable assets, the nearly $14 billion EDS buyout has allowed the company to sign more MPS contracts with enterprise customers. HP had a small direct sales force prior to the deal but EDS provided vast resources to service the enterprise space.
While HP has focused much of its attention on the enterprise space, it has demonstrated a strong desire to capture more revenue from small- to medium-size businesses. It has put in place programs in different regions around the world to support its channels as they go after more SMB customers. Now it appears the firm will place more of its attention on the North American SMB market. The first concrete indicator came a couple of weeks ago, when HP announced it was acquiring Printelligent, an privately-held MPS provider based in Salt Lake City, Utah, that caters to the SMB market.
According to the HP press release announcing the acquisition, “Printelligent’s assets will be integrated into the LaserJet and Enterprise Solutions unit within the Imaging and Printing Group of HP.” The deal is pending what the firm calls “customary closing conditions” and is expected to close during the company’s fiscal third quarter, which ends in July. The terms of the purchase were not disclosed, but for sure the scale of this acquisition will be miniscule compared to the nearly $14 billion HP spent to gobble up EDS. But here’s another example of where size doesn’t necessarily matter. This acquisition ought to provide HP an established platform from which to deploy future MPS offerings.
According to the firm’s corporate website, Printelligent has been in business since 1988 and it launched its first MPS program in 1993. It claims to be “the industry's most experienced Managed Document Solutions provider.” Printelligent’s client list includes small-to-medium businesses in 39 states and says it can provide service to some 728 cities. It manages about 500 million documents per year. Printelligent will provide HP with an established presence in the SMB market and it also gives the firm MPS technology that’s been recognized as among the best in the world.
HP recently strengthened its arsenal for its assault upon the MPS market. Last month, it replaced the venerable LaserJet 4345 MFP line with its new M4555 MFP family. Originally launched in 2004, the 4345 MFP series was growing long in the tooth, but was historic nonetheless. HP has credited the 4345 machines with allowing it to compete toe-to-toe with copier manufacturers. While they are not the least expensive devices in terms of total cost of ownership, the new machines have slightly lower per-page costs than their predecessors thanks to a new high-yield toner cartridge. In addition, HP says the M4555 units use almost 20 percent less energy, presumably because the new machines use a chemical toner with a lower fusing temperature. And they come loaded with new management tools that were not available in the middle of the past decade.
Of course, HP isn’t the only hardware manufacturer looking to better penetrate the SMB market via strategic acquisitions. Earlier this year, Konica Minolta snatched up All Covered, an IT services provider based in Redwood City, Calif., that services SMB clients across the U.S. All Covered itself has grown significantly by purchasing smaller IT MSPs throughout the U.S., and that practice is expected to continue. Just after HP announced it was acquiring Printelligent, Xerox said it would acquire NewField IT, a U.K.-based print consultancy and software solution provider with an office in Philadelphia that services SMB clients. NewField IT developed the popular Asset DB package, which provides tools to remotely monitor and manage a small or medium-sized firm’s printers and copiers. Unlike the HP acquisition, NewField IT will operate as a wholly owned Xerox subsidiary.
It appears that the pursuit of the SMB market is getting underway after more than a little talk. You can bet you’ll be hearing a lot more about important acquisitions as we move into the second half of the year.
Posted on 06/09/20111 comments
The problem with being skeptical — especially as openly skeptical as I am — is that you sometimes have to eat your words. I currently find myself in that situation, now that several companies have released machines featuring Memjet’s high-speed inkjet technology. While I grew increasingly skeptical about the technology’s viability after numerous announcements were made that hardware sporting a Memjet print engine were about to start shipping but never materialized, the company has made a flurry of announcements regarding new partnerships since the start of the year, and I’ve been told a variety of machines are now available. With more hardware slated for launch in the near future, the firm is beginning to quiet naysayers like me — at least as far as the technology is concerned.
Inkjet technology has been slow to gain converts in the office space, so I don’t write about it much in “The Skeptic” blog. With a few notable exceptions like Hewlett-Packard’s CM8050 and CM8060 — the so-called Edgeline digital copiers — most inkjet office devices lack the capabilities to really support business users. There is perception among consumers that inkjet is for the home and laser is for the office. Eventually, even HP was forced to pull the plug on the Edgeline devices when they failed to overcome the market’s bias toward laser. Memjet is supposed change all that. In fact, Memjet technology is supposed to upset the entire digital imaging industry and change the world as we know it.
The technology is the brainchild of Kia Silverbrook, an Australian inventor who founded Silverbrook Research in 1994 to develop Memjet heads. Based on microelectromechanical systems (MEMS) nanotechnology, the heads feature nozzles, heaters, and firing chambers densely packed onto a CMOS chip. Memjet heads can be ganged together in arrays that span virtually any width, enabling them to image output ranging from a snapshot to a billboard. Unlike traditional inkjet print heads, which shuttle back and forth across a page while printing, the Memjet array remains stationary and the paper passes by it when imaging to support high-speed printing. The company says the array used in an A4 device contains 70,400 nozzles and fires 900 million 1.4 picoliter ink droplets each second. The A4 Memjet device images one page per second for a bli 60-ppm top print speed and employs a 32-bit RISC controller and a 648 MHz CPU.
My initial encounter with Memjet technology came during the Photo Marketing Association’s (PMA) 2007 International Convention and Trade Show. I had the privilege of meeting Kia Silverbrook and seeing a prototype of a snapshot photo printer based on Memjet technology at the PMA show. Spitting out snapshots faster than anything I had ever witnessed, the technology was impressive. During our meeting, I was told the European photo kiosk vendor, Photo-Me International, would soon launch a device for processing digital snapshots in retail environments based on a Memjet print engine. In addition to the snapshot kiosk, the firm said that industrial printers with Memjet technology would soon be available.
Although the meeting at PMA in March 2007 was my first experience with Memjet, I soon learned that many in the industry were well aware of it. Silverbrook Research aimed to license its print engines rather than build and market hardware. I later learned that the company had been actively wooing potential licensees, including many of the leading printer OEMs. After the news broke of the machine at PMA, I spoke with representatives from several different printer companies who knew of Memjet. While they were impressed by the technology itself, many engineers I spoke with were skeptical as to whether the heads could be mass produced. They doubted the tens of thousands of nozzles in the Memjet head could be fabricated and maintained in manner that would ensure a long life without failures.
The Road To Market
After creating a buzz early in 2007, no further word came from Memjet about devices with the firm’s technology and the Photo-Me kiosk never reached the market. The next year, Memjet established four commercialization companies—Memjet Home and Office, Memjet Label, Memjet Photo Retail, and Memjet Wide Format. Memjet representatives said that rather than leading with photo kiosks, the first products would come from Memjet Home and Office. But 2008 and 2009 passed without the launch of the machine. Memjet shifted gears again, and began saying last year that its first machines would be labeling devices, and demonstrated prototypes at Drupa in Germany and shows in the United States during 2010. I’m not sure when the machines actually became available, but Memjet confirmed for me that labeling devices from several companies including Neopost USA and Astro Machine are currently shipping with Memjet technology.
Earlier this year, the company was in the headlines once again after announcing at the 2011 International Consumer Electronic Show in January that several of its licensees would market desktop office devices. While you may not have heard of some of these companies, like WeP Peripherals from India and the Taiwanese firm Kpowerscience, you’re certainly familiar with what is no doubt Memjet’s largest licensee to date, the computer giant Lenovo, which is now preparing to sell Memjet office devices in China. As part of a larger product launch in May, which included a range of laser devices, Lenevo recently demonstrated for its Chinese dealers the new RJ600N — a 60-ppm office machine featuring a print engine sourced from Memjet Home and Office. Kim Beswick, vice president of marketing for Memjet Home and Office, says the RJ600N will begin rolling out of the factory in June and should be in the channel by July.
Now that Memjet devices are out in various markets, I’ll have to stop referring to the technology as the digital imaging industry’s version of “cold fusion.” Still, the ultimate success of a Memjet office printer is far from certain. In my estimation, the RJ600N has a couple of strikes against it and the question still lingers—how well will all those nozzles perform over time?
The machine’s biggest weakness is that it features a dye-based ink set. Dye-based inks tend to smear and deteriorate when exposed to moisture. More robust pigmented inks are required for printing important business documents. A recent post at PCMag.com also indicates that the RJ600N’s printing costs are 2 cents for a black-and-white page and 6 cents for a color page. While the price of color pages is good, I think frugal office managers will be more inclined to opt for a device cheaper to run when printing black-and-white documents, which usually account for the bulk of office printing.
The final chapter is a long way from being written about Memjet. Lenovo certainly has the brand and channel to make a run at marketing the RJ600N. I haven’t seen pricing fro the machine, but if it’s near Memjet’s recommended $600 price point, the RJ600N should be able to compete toe-to-toe with the color lasers in terms of acquisition costs and print speeds. My skepticism regarding overall market acceptance lingers, however, because of the operating costs and dye-based inks. And then there’s the issue of maintaining all those nozzles.
When it come to Memjet, I’d say little healthy skepticism is still in order.
Posted on 05/25/20110 comments
It’s been nearly two months since the horrific 9.0-magnitude earthquake struck northeastern Japan, triggering a massive tsunami that destroyed large swaths of the coastline north of Tokyo. Manufacturers have reacted swiftly and have been largely successful in their attempts to restore operations, although damaged infrastructure and disruptions in the power grid continue to limit production at some sites. Canon and Ricoh each told their respective investors recently that the disaster has affected both sales and manufacturing domestically and trimmed billions of yen from their bottom lines. They also warned of potential supply-chain disruptions and lowered previous earnings projections for the year as a result of the earthquake. More bad news related to the quake is expected from other Japanese hardware manufacturers in the upcoming weeks.
Canon reported on April 26 that its operating profits during the period from January 1 through March 31 slipped to ¥82.50 billion from ¥86.84 billion the year prior. The bottom-line hit came despite the firm’s ability to grow top-line revenue about 11 percent, up from ¥755.5 billion during the first quarter of last year to ¥839.2 billion during the same period this year. Regardless of the increase, the firm estimates it lost ¥21.4 billion in net sales because of the earthquake. Prior to the disaster, Canon said it expected to rack up ¥860.8 billion in net sales during the first quarter with an operating profit of ¥103.7 billion for the period.
Ricoh reported earnings results for its fiscal year the day after Canon released its quarterly numbers. On April 27, Ricoh said it recorded ¥1.942 trillion in net sales during the period from April 1, 2010, through March 31, 2011, which represented a nearly 4 percent drop in revenue from the same period the year prior. Ricoh’s operating income fell 8.8 percent to ¥60.1 billion, while net income tumbled 29.5 percent from the previous fiscal year to ¥19.6 billion. In February, Ricoh indicated revenue for the fiscal year just ending would total ¥2.020 trillion, while operating income and net income would stand at ¥85.0 billion and ¥35.0 billion, respectively. In a Form 6-K filed with the U.S. Securities and Exchange Commission (SEC) on April 27, Ricoh explained the shortfall, saying it “suffered damage to its equipment in manufacturing, sales, service, and R&D sites … [and] sales and shipments of products were delayed widely in Japan due to the shattered transport systems and the shortage of gasoline.”
Canon and Ricoh each detailed for the investment community last month how the earthquake disrupted their businesses. In its SEC 6-K, Ricoh indicated it sustained ¥9.4 billion of damage from the quake. Both firms were forced to close facilities in northeastern Japan, the region hardest hit by the quake. Canon executive vice president and CFO Toshizo Tanaka said the disaster caused “serious delays in production and shipment.” In a prepared text accompanying Ricoh’s financial presentation, the firm’s director, deputy president, and CFO Zenji Miura was quoted as saying domestic sales were especially hard hit. Even outside of the impact zone, Miura said Ricoh’s Japanese sales force didn’t pursue sales aggressively because “it was a particularly difficult time to talk business with customers and each company was reluctant to make additional investments.”
Canon and Ricoh’s toner and toner cartridge manufacturing capacity was restricted due to the earthquake and the impact of that diminished capacity has the potential to felt into the foreseeable future. Word has circulated since early last month that there are currently shortages of Canon consumables. On April 7, Canon’s channel partner Image Star announced it was raising prices on all Canon cartridges because they were “becoming increasingly difficult to come by.” Image Star said it expected the situation to worsen over the “next few months.” On April 11, one of Canon’s most famous—and influential—customers, Hewlett Packard, told its channel partners that dozens of toner cartridge SKUs would only be available in limited quantities because of pending shortages. In a note to the channel, HP also warned “The availability of select toner cartridges and LaserJet devices may be impacted going forward.”
I have yet to confirm any actual shortages of Ricoh toner, but there are strong indications that shortages are all but inevitable. While toner production resumed on May 10, the toner plant at the Tohoku Ricoh facility was offline for almost two months, which is bound to limit the availability of certain toners. Ricoh has told clients that it is shifting production to factories not affected by the earthquake because of interruptions at plants located in the quake-damaged region. On April 4, Ricoh Europe issued an update on the earthquake indicating that things were relatively normal at many sites and the firm was “shifting production to other parts of Japan, reviewing our production processes, and finding alternative suppliers where applicable.” Perhaps reallocating production allowed Ricoh to dodge a bullet, but I suspect shuffling production along with the loss of the Tohoku Ricoh facility has substantially strained Ricoh’s supply chain. You should expect shortages.
I should also point out that while Canon and Ricoh have worked hard to overcome production issues related to damaged factories and warehouses and limited access to electricity, they also must cope with the restricted availability of certain essential raw materials, especially toner resins. Two of Japan’s largest fine-chemical suppliers to the digital imaging industry, Kao and Sanyo, sustained serious damage as a result of the tsunami at their resin facilities located along the northeastern coast of Japan. In addition to the damage to Kao and Sanyo’s physical plants, access to the area by rail and by sea is being severely hampered. So, even if the companies can get lines up and running, it questionable if they can get supplies in or finished product out their factories.
Although I’ve read a number of reports recently in the mainstream press that the overall situation in Japan is quickly getting back to normal, I’m skeptical about how relevant those claims are to our industry. When speaking to investors recently, both Canon and Ricoh warned that uncertainty lingers about their ability to procure raw materials and secure a stable source of electricity. Moreover, in northeastern Japan the ability of Canon or Ricoh—or any other manufacturer—to move freight and ship product overseas is extremely limited. Over the next few weeks, we will learn how other manufacturers like Konica Minolta and Oki are doing when they report their earnings. I expect that in many ways, most Japanese OEM will echo much of what Canon and Ricoh said last month and underscore the fact that the situation remains strained.
Posted on 05/11/20110 comments
If you read this blog regularly, then you know I'm skeptical that managed print services can continue to drive revenue indefinitely for companies in the channel. One of the key goals of MPS is to get customers to print less and less printing usually means less money. Ultimately, the only way that the channel can keep generating more cash selling MPS is to learn how to make money when customers opt not to print.
With its Airmail2 technology, DocSolid, a firm that markets enterprise document scanning solutions, claims it can help its customer do just that. The firm says by providing a best-practices approach to document capture, its software can help dealers deliver more value through their managed print services and generate revenue whenever end users scan as well as print.
Airmail2 is a cloud-based universal capture solution designed to support all MFPs, digital copiers, and scanners regardless of vendor. End users affix a stamp to a document being scanned and press the Airmail2 button displayed on the machine's front panel. The scanned document is sent to the cloud-based Airmail2 Post Office where the Airmail2 Mail Man sorts it, which is an image processing service. According to the information in the stamps, the service separates each document and executes the delivery instructions. PDF files can be delivered to a user's inbox or a network folder. Captured images can also be sent to a document management system like Autonomy, iManage, and Worldox.
"In most offices today, there is a paper scanning free-for-all going on that we call Scanarchy," says DocSolid president Steve Irons. He explains that most enterprises are engaging in some sort of unmanaged scanning via an assortment of MFPs and scanners that are isolated and lack any established controls, security, or support. Mr. Irons says Scanarchy is a real problem and insists, "If you manage all of the printing there is an opportunity to manage all that scanning. Nobody does that right now."
Mr. Irons says not only does the technology streamline end-user workflow, Airmail2 also makes life a lot easier for a company's IT team. The technology is not integrated into a corporate e-mail system, so setup is simple. Images are also delivered either as attachments or as links to eliminate image storage and trafficking issues. "When you explain Airmail2 to CIOs, they get it. Enterprise scanning can be a real headache for IT organization and our technology adds real value by making scanning much more efficient."
DocSolid released Airmail2 Enterprise Scan Capture for Law Firms in January and Mr. Irons realized at that time it would also be popular with companies offering MPS programs. He says Airmail2 is appropriate for MPS programs that support roughly 500 users, although he says that number is not etched in stone. "I'm not saying this is always the case, but if a customer is big enough to buy MPS, they would probably benefit from a managed scanning grid." Mr. Irons reckons that Airmail2 can add 5 percent to the price of a managed print contract.
DocSolid tapped Supplies Network to distribute Airmail2 to its dealer channel. In a prepared statement, Supplies Network senior vice president of managed print services Doug Johnson said, "Their [DocSoild's] device-agnostic, SaaS-based solution enables our resellers to add a simple, yet comprehensive scan capture solution to their MPS engagement—all while using their customers' existing MFP infrastructure." Supplies Network indicated that by partnering with DocSolid, it broadens their MPS services portfolio significantly to included managed scanning as well as managed print.
Initially, Airmail2 for MPS will be distributed via a pilot program run by Supplies Network for between 15 and 20 MPS-related resellers. The full rollout to Supplies Network resellers is expected in June. Stand-alone pricing for the scanning service includes a one-time $3,995 enterprise-wide licensing fee and it costs $495 annually for each enabled capture device. There is also a $995 annual support fee and each stamp costs 4 cents.
I think that Airmail2 could be popular. In fact, I wouldn't be surprised to see some sort of scanning management solution quickly become a key component of any MPS offering. Currently, it's not unusual to find scanning and workflow tools in most large, enterprise MPS contracts. My only skepticism is how well will the channel be able to sell the service to SMB customers. Regardless of how attractive a scanning solution might be, the ultimate success of Airmail2 will be largely dependent on how well the channel can articulate its value proposition.
Posted on 04/27/20110 comments
With a plethora of new products and services customized for certain groups of end-users, all of the companies in the MPS space seem to be busy sub-segmenting the market. Over the past few months, the industry has seen the launch of a spate of new applications that allow better penetration of specific market segments. As the market has matured and MPS has achieved a new level of acceptance, it has attracted a diverse mix of new customers and practitioners. The days of "one-size-fits-all" offerings are long gone. Of course, by supporting an ever-widening collection of end-users, manufacturers and their channel partners are further driving demand for MPS in all market segments regardless if the client is small, medium or large.
Let's take a closer look at some of the new products launched in the past couple of months that are bound to either drive new sales, make ongoing operations more efficient—or both.
At the end of March, Konica Minolta launched its new bizhub vCare Mobile application. Using a mobile device, the new app provides technicians and other service team members with comprehensive, real-time diagnostics for any of the bizhub vCare-connected devices they maintain. Konica Minolta offers the technology free to all its registered business partners using the vCare DRM solution. The bizhub vCare Mobile also delivers auto-service call dispatching and device-generated supply replenishment alerts, and it supplies users with basic machine information such as registration date and meter counts along with reporting print volume, toner usage, and machine uptime.
News of Konica-Minolta's latest MPS app followed the debut of Ricoh Americas Corporation new @Remote Enterprise Pro technology. Used in concert with Ricoh's @Remote Connector fleet management software, the new @Remote Enterprise Pro technology expands the capabilities of Ricoh's Intelligent Remote Management System to support enterprise-level organizations. It enables large organizations to manage hundreds to thousands of networked devices from a single app. @Remote Enterprise Pro delivers detailed reports via Ricoh's secure Web-based portal so system administrators can scrutinize various usage characteristics, including page counts, page sizes, duplex versus simplex, monochrome versus color and other network activity. It can automate service and toner alerts and communicate directly to service providers as well as support remote firmware upgrades.
The introductions of these two technologies within 48 hours of each other illustrate nicely how manufacturers are slicing and dicing the market to better support individual segments. Konica Minolta's bizhub vCare Mobile will be great for dealers' service fleets, while the Ricoh technology will support the in-house IT teams of organizations with large, far-flung installations.
Hardware manufacturers are not the only ones offering new tools to help efficiently maintain equipment. A few weeks ago, Katun Corporation and BEI Services announced they've incorporated what they've dubbed "Demand Time" territory-alignment software into the BEI Services component of Katun's Customer Solutions Program. The program is designed to provide assistance when assigning technicians' coverage territories or regions. After assigned, the technology can then be used to monitor each territory and make adjustments as needed without adversely affecting other areas of the assigned workload.
Beyond providing better ways to monitor and maintain equipment, innovative new tools are being released that should allow sales reps to close more deals. The software developer NewField IT added a new feature to its Asset DB in February that enables consultants and sales reps to view user-specific printing habits and device output activity on a floor map. The result: MPS professionals can show clients how a specific user or department uses a particular device or group of devices. It delivers deep reporting details, including print volumes, paper types, or the amount of color a user or group prints via a particular device or group of devices. Rather than relying on usage assumptions, the technology is designed to provide hard data to help sales teams garner consumer acceptance of new implementation plans and close deals more quickly.
Companies are also providing sales teams with enhanced mentoring support. Earlier this year, MPS Results launched its MPS Fusion program. It delivers 12 weekly one-hour sessions via the phone and web that coach participants launching and managing an MPS business unit. MPS Results says its MPS Fusion curriculum provides insights into business planning, recruiting and hiring, compensation programs, sales management and methodology, and more. It includes tools and templates to help implement all aspects of the sales and operational process. Additional support is also available through the MPS Fusion Round Table, an on-going forum for MPS professionals to interface and share experiences.
All this activity demonstrates that manufacturers and their channel partners are gaining better insights into the various strata of consumers that make up the MPS market. They are now well on their way to tailoring products to meet the particular needs of smaller and smaller sub-segments. This is great news for the MPS industry because it is bound to fuel new growth.
I've seen the same phenomenon in the hardware market for decades. More and more machines are added to product lines to precisely match the device with a price-performance ratio required to attract a specific sub-set of end-users. Speeds and feeds and feature sets are all adjusted and placed into increasingly narrow price brands. The results are a range of models that are not too feature rich, and not too bare bones, but just right to attract savvy end-users. Something similar happened with supplies, too The price and page yields of cartridges were adjusted and now there are low-priced SKUs for folks who don't print much and higher-priced, higher-yield SKUs for those who demand more pages from their cartridges.
Without being specific, I'd like to add in closing that I often find it easy to be skeptical about the success of certain initiatives I've seen within the MPS market. That said, it's clear that various players in the space are becoming savvy to the needs of a diverse group of potential customers, and are attacking the market with a sophisticated product mix that is bound to attract more customers.
Posted on 04/13/20110 comments
On March 28, Forbes.com ran an article indicating that printer manufacturers are experiencing parts and toner shortages as a result of the disaster in Japan. The post was based largely on a research report written by Barclays Capital analyst Ben Reitzes, who contends that Canon and Fuji Xerox are facing shortages and these kinks in the supplies chain will impact two of their largest technology customers, Hewlett-Packard and Xerox, respectively. I agree with Mr. Reitzes. However, I'd like to expand beyond the four companies he focused on, because the earthquake and tsunami in Japan will adversely impact almost all of the hardware manufacturers and the many supplies vendors that have ties to Japan.
Most Japanese OEMs have issued several damage reports at this point, and it appears that Canon and Ricoh have been hit the hardest by the disaster. Canon reported that it closed its inkjet operations at Fukushima Canon and I've seen no indication it has reopened. Canon Chemicals, which makes toner cartridges and advanced functional polymer components, was temporarily closed along with Canon's Toride plant, which makes office imaging products and chemical products. As of this writing, I had not heard these facilities had reopened. I also understand that Canon Precision, which produces toner cartridges and sensors, and Canon Mold are offline.
Although it said that sales from Japan represent only 3 to 4 percent of its total revenue, Hewlett-Packard filed an 8-K report with the Security and Exchange Commission (SEC) on March 22 related to the quake. The OEM told the commission its employees were safe and its offices in Tokyo sustained no "major structural damage," but its Sendai office had been damaged and was closed. It didn't name Canon, but HP said components like LaserJet printer engines and toner come from an unnamed Japanese provider. It added, "This [earthquake aftermath] is an evolving situation; we are in contact with our partners, suppliers and customers and are continuing to assess the impact to HP's business." This quote seems to make clear that Mr. Reitzes (and I) are correct in asserting there's a real risk of shortages.
The impact on Ricoh has been dramatic. The firm reported it closed five of its subsidiaries including Ricoh Optical Industries, Hasama Ricoh, Tohoku Ricoh, Ricoh Printing Systems, and Ricoh Unitechno. It appears that the Tohoku Ricoh was hardest hit, which could mean serious problems for the firm. Located approximately 15 miles south of Sendai, the operation manufactures printers, MFPs, and toner. It remained closed two weeks after the earthquake. A recent damage report from the firm said that while its Atsugi, Gotemba, and Numazu plants were operating after the quake, rolling blackouts still limited production.
As Mr. Reitzes indicated, Fuji Xerox has suffered some production problems. About a week after the earthquake, the company indicated that while it hadn't sustained much physical damage, production had slowed. Work at factories in Niigata and Suzuka had been temporally curtailed because of part shortages. On March 29, Xerox President Global Customer Operations Armando Zagalo de Lima issued a prepared statement saying, "Since all of Fuji Xerox's key sites and manufacturing operations are in the Tokyo area or regions south and west from where the earthquake hit the hardest, our facilities were not damaged."
Konica Minolta's warehouse and domestic sales subsidiary in Sendai was damaged, but its production site in the Kanto region, which includes Tokyo, were operating after the quake. After a brief initial damage report indicating things were okay, Konica Minolta reported it had concerns regarding "raw material procurement and electric power supply." On March 28, the firm reported that it was exploring the possibility of moving some hardware production to China while realigning supplies manufacturing within Japan. Specifically, the firm was looking to move some toner production from its Kofu factory to its Tatsuno facility because of blackouts at the Kofu plant.
Oki Data announced on March 17 that its operations were suspended at its production facility in Fukushima, which manufactures certain printers and consumables for the Japanese market. Operations were suspended after the earthquake but partially resumed on March 16; no further information from Oki has been forthcoming.
So far, I have not heard anything from Brother or the copier groups at Sharp and Toshiba. Kyocera Mita had issued a group statement but nothing specific to its printer and copier division.
In addition to all the hardware, a significant amount of the world's toner and toner components come from Japan. There's a strong risk that toner supplies will feel the affects of the quake. Kao Corporation, Mitsubishi Chemical, Mitsui and Co., Nippon Carbide, and Sanyo Chemical are some of the giant Japanese firms that make toner resins or other components such as waxes, charge-control agents, and more. Some also make the finished toners as well. Various well-known foreign chemical companies including Cabot, Dow, and DuPont also make fine chemicals for use in digital imaging devices in Japan. And, of course, there are numerous large Japanese companies that market finished toners including IMEX, Mitsubishi Kagaku Imaging, and Tomoegowa.
Mr. Reitzes noted the dependency of the industry on these chemical producers in his report. "While office equipment companies keep inventories of resin at toner plants and also have inventories of end-product toner cartridges," he said, "we believe makers of copiers and printers may
consider curtailing production to avoid an interruption in toner cartridge supply." He also said that there are additional components that he left unnamed that could cause problems for certain hardware manufacturers.
While I agree largely with Mr. Reitzes's predictions, I am skeptical of his sanguine conclusion that this is a "short-term" blip that "will be sorted out over the next quarter or two." This crisis will be much more long-lived for the industry. Of course, Mr. Reitzes is only analyzing the impact of the quake on the four companies I noted earlier—Canon and HP, Fuji Xerox and Xerox—and perhaps they'll be clear of the mess by the fall. But I doubt it. Canon has taken a very serious hit and it will be reeling from the earthquake well into next year. You can bet there will be LaserJet shortages like we saw in 2009. Moreover, Canon's inkjet business has been dealt a body blow. Its inkjet facility in Fukushima manufacturers heads, tanks, and machines. Who knows when that plant will be back on line? Fuji Xerox is in much better shape, but nothing is clear about the fate of Japanese firms with important manufacturing in the affected region. It will take more that a quarter or two the get things back to normal.
I hope I'm wrong, but I think this will be a tough year for the industry. Printer and copier dealers are destined to struggle to meet a demand that's starting to grow as the economy improves. There will be shortages and delays of hardware deliveries and supplies will be scarcer as we move into Q2. Finding non-OEM supplies will also be a problem because remanufacturers get many of their toners and components from Japan. The good news is customers will be aware of the situation so perhaps they won't grumble.
Posted on 03/31/20113 comments
On March 10, Fort Worth, TX based eCommerce Industries, Inc. (ECi) announced it had purchased FMAudit, LLC of Jefferson City, MO. ECi, as the name implies, markets a range of e-commerce solutions and other business software designed for specific industries including companies that sell and maintain office equipment. ECi will add FMAudit's print management tools and data collection applications to its software offerings for the dealer channel, which currently includes the popular La Crosse and OMD business management solutions.
While specific details of the acquisition were not disclosed, Kevin Tetu, president and founder of FMAudit, says his company will be a wholly owned subsidiary ECi and will be operated as a separate business. Mr. Tetu will remain at the helm and the rest of the company's senior management team will stay in place. He is not expecting widespread layoffs as a result of the acquisition and says, "In fact, we'll be adding new team members." There will be some changes, however. FMAudit headquarters will be collocated with ECi's OMD unit, which is also in Jefferson City. Mr. Tetu says combining the offices will improve efficiencies. He would not rule out the possibility of some redundancies in the workforce after the move, which could result in a few lost jobs.
Mr. Tetu says that the ECi acquisition will fuel additional growth for FMAudit. "We are really excited about the acquisition. It allows us to grow in new areas and enhance our offerings. It's really great news for our customers and we'll be able to add new clients." Mr. Tetu indicated that the FMAudit brand will continue to be used. "We've invested heavily in the FMAudit brand and it's well known in the market place," he explains.
It appears that the FMAudit acquisition will follow the course set by other ECi buyouts. The firm has a proven track record of growing through acquisition. ECi now caters to a diverse mix of what its website calls "micro-niche vertical businesses." It supports lumber and building materials and janitorial services companies with software as well as firms that market office products and equipment. It has acquired a couple of key technology vendors in the office equipment space. In 2006, ECi acquired OMD, which targets its business solutions at small to medium sized office equipment dealers with annual revenue between $500,000 to over a billion dollars. In 2007, ECi acquired OMD rival La Crosse Management Systems. In both cases, the firms have been run independently and the brands have survived.
FMAudit's Secret Sauce
Established in 2004, FMAudit was one of the first companies in the data collection space. The company's technology supports TCO reporting as well as consumables monitoring and service alerts. The firm offers a range data collection technologies including its Viewer USB for running initial print assessments and its web-based WebAudit application as well as Local Agent for capturing data from meters non-networked device meters. In addition, the company also offers FMAudit Onsite software, which runs on a client's server.
The secret sauce in FMAudit's technology is its ability to synchronize with ERP systems. The FMAudit solution can map devices with clients and accounts. Using bi-directional ERP synchronization, FMAudit pulls data from an ERP system and matches it with specific devices and pushes meter read to generate invoices.
Prior to the acquisition, FMAudit has been a partner with ECi and its technology is integrated with the La Crosse and OMD ERP systems. Mr. Tetu says that FMAudit will soon be integrated with other ECi ERP systems including the DDMS and Britannia systems for office product markets. "We expected our data collection to support other activities like cartridge acquisition or service calls. We'll be provide assets for new customers like office supplies vendors and IT VARS."
FMAudit has been enjoying growing popularity especially over the past few years. It's widely believed the company has gained market share from its largest competitor PrintFleet. Just days prior to the acquisition, the firm celebrated the 100,000th installation of its FMAudit Onsite device data collection software. The company has an impressive roster of OEM partners, including Canon, Dell, HP, Konica Minolta, Kyocera Mita, Lexmark Muratec, Océ, Ricoh, Samsung, Savin, Sharp, Toshiba, and Xerox. The firm also works with a range of companies on the cartridge-side of the business including CDW, Inkcycle, LMI, Printer Essentials, and Supplies Network.
In addition to its various hardware and supplies partners, FMAudit has partnered with some of the industry's leading ERP vendors. Beyond ECi, the company's data collection technology interfaces with Digital Gateway, Evatic, Jim2 Business Engines Nexent Innovation, and Signature Software. Despite the fact that ECi competes directly with some of these firms, Mr. Tetu says the relationships are sound. I asked him specifically about the relationship with Digital Gateway. "It will remain intact. We've been having conversations since the acquisition has been announced and we are discussing how we can expand the relationship."
I think the acquisition is a good move for both ECi and FMAudit. The deal will allow FMAudit's technology to reach more customers as Mr. Tetu indicated. I'm skeptical, however, that other ERP vendors will be as quick to embrace FMAudit as they had in the past. Mr. Tetu's comments notwithstanding, it seems likely that ERP companies such as Digital Gateway would feel more comfortable working with other data collection companies like Print Audit or PrintFleet rather than cozying up to the competition.
Posted on 03/16/20110 comments
"Printing was like water. It came from somewhere, and no one knew who paid for it."
But the game has changed, David Bates, Xerox vice president of office marketing programs, recently told the audience at the 14th annual Lyra Imaging Symposium. Complacency has been replaced by customers' sharpening focus on reducing expenses, improving productivity and simplifying work processes. With that focus comes not just opportunity, but growing complexity for folks in the channels as they attempt to support clients with managed print services.
Speaking to a gathering of some 155 attendees at the "Navigating The Road To Profitability" symposium hosted by Lyra Research, Mr. Bates said today's customer base is not monolithic. During his keynote presentation, Mr. Bates graphed a continuum of seven channel segments that caters to a diverse customer base ranging from large enterprise and governmental users to users in the home.
"One size does not fit all," he stressed, and demonstrated how each channel segment offers customers a unique value proposition and set of attributes. While acknowledging that MPS plays an important role in today's office market, Mr. Bates concluded that "MPS is not for everyone."
I agree with Mr. Bates, wholeheartedly. When MPS first gained traction in the industry, it was heralded as some type of "killer app" that would change the entire industry. Well, that's simply not true. Some market segments will be transformed by MPS, but its impact on other segments will be more muted. And some, specifically SOHO, won't feel much impact from MPS at all.
Nonetheless, MPS received a lot of attention at the Lyra symposium held at Rancho Las Palmas Resort and Spa in Rancho Mirage, CA, at the end of January. Lyra staffers told me upwards to 60 percent of the sessions touched on some facet of managed print over the course of the day-and-a-half long event.
In one such session, Bill Melo, vice president of marketing and enterprise services and solutions for Toshiba America Business Solutions (TABS), detailed how his firm is addressing what I think is one of the most critical challenges in today's market—lower shipments of hardware and declining print volumes. According to Mr. Melo's data, during the three-year period between July 2007 and June 2010, pages printed with office multifunction monochrome machines dropped between 17 and 29 percent depending on the class of the device, while full-color output dropped between 14 and 19 percent. "This," Mr. Melo says, "is the new normal."
To make up for losses in hardware and supplies revenue, TABs is focusing on the service component and offering more solutions to end users. The company aims to be part of what Mr. Melo calls the "MPS land grab." He cited Gartner Research data that projects by next year 70 percent of business with more than 250 employees in North America and Western Europe will acquire their printers, copies, MFPs, and consumables through some type of MPS program. By offering more MPS solutions, TABs wants to allow its channel partners to make money when their customers print or when they are enabled not to print, thanks to the services provided through their managed document infrastructure. Mr. Melo insisted that today's winning growth strategy comes from managing pages and providing services that go beyond the page.
After the TABS presentation, a panel was convened of executives from firms marketing MPS solutions and technologies that support MPS programs. The companies included FMAudit, GreatAmerica Leasing, Preo Software, Supplies Network, and Xerox. Joel Mazza, director of Lyra's Managed Print Practice, moderated the panel. The panel further developed many of the points discussed by earlier speakers. Most panelists, for example, mentioned the need for flexibility and how end user demands differ from client to client. After taking questions from the floor, one attendee, Jim Lyons, a past HP exec who now blogs regularly about the industry, commented on how sophisticated conversations about MPS are growing. Rather than musing broadly about "opportunities," speakers and panels at the symposium are focused on concrete details of deploying, operating and managing programs so they can meet end user needs.
Mr. Mazza offered me his take on the MPS market. "Rather than being a new market, MPS—at its core—is a new and more efficient model of distribution for print-related equipment, supplies, and service," he explains. "As more consistent offerings permeate the market, and customers can more readily adopt that model of procuring print, the overall market from a supplier standpoint—across each revenue category for hardware, supplies and service—will consolidate." Looking at the competitive landscape, Mr. Mazza says there is mounting pressure for more consolidation within the industry. "MPS will increase that pressure and accelerate the pace in the coming years." By increasing productivity through "innovations that support highly efficient managed print engagements," he feels the most efficient suppliers, "will have greater leverage to maintain profit margins at lower and lower price points, forcing weaker players out of the market."
Most of Mr. Mazza's predictions are likely to play out, although when this will happen is unclear. For years, industry watchers have been saying the demise of various vendors is inevitable, yet it's been a long time since a hardware vendor has failed. Perhaps the time is at hand. Given the lower print volumes and demand for hardware, some changes have to occur in the markets for office machines. Those companies that can adapt and change to best meet the individual needs of a diverse customer base, of course, have the best chance of survival. From what I heard at the Lyra symposium, many vendors recognize this requirement. Whether they can execute remains to be seen. Clearly the stakes are high.
Posted on 03/14/20110 comments
From January 24 to 26, Lyra Research hosted its annual desert shindig at the Rancho Las Palmas Resort and Spa in Rancho Mirage, CA. Celebrating its 14th year, the 2011 Lyra Imaging Symposium was entitled "Navigating the Road to Profitability." A range of topics related to the digital imaging industry's recovery after the devastating effects of the Great Recession were explored. In general, it was an upbeat event, although there were plenty of signs that the industry has yet to get back to where it was before the economy tanked.
I'll post two blogs covering Lyra's recent symposium. In this first posting, I'll detail the event itself and some of the general trends Lyra's analysts identified for attendees during the day and a half of sessions. In the second blog, I'll focus more specifically on managed print services and what speakers shared concerning MPS.
"Attendee and sponsor numbers have bounced back, with the industry's recovery," says Frank Stefansson, Lyra's CEO and executive vice president. Rising from 148 in 2010 to 155, the number of registered attendees was up modestly this year. According to Mr. Stefansson, there were a number of first-time attendees who represented companies new to the symposium. The number of exhibitors was up by more than a third, growing from eight in 2010 to 13 this year.
Mr. Stefansson said a new networking roundtable preshow event was added to the event this year, which was both well received and well attended. Participants—seated at round tables—discussed various topics including MPS and mobile and cloud printing. Each table was dedicated to a different topic. "We also had a great lineup of featured speakers and panelists," said Mr. Stefansson. The agenda featured nine Lyra analysts along with 24 industry speakers and panelists who represented companies from across the industry including HP, Xerox, Mohawk Fine Papers, Lucidiom, Toshiba America Business Solutions, United Stationers, EFI, and InfoPrint Solutions. As usual, the various symposium presentations addressed a number of segments ranging from the production space to the office to consumer markets.
One of the opening talks, presented jointly by Lyra president Charles LeCompte and Ann Preide, vice president of publications, indicated that the overall hardcopy industry has been improving in terms of revenue for the past year and a half. By comparing the total quarter-to-quarter results of 11 companies reporting hardcopy revenue, it was revealed that the industry as a whole has improved from the nadir reached in the second quarter of 2009. The recovery has been uneven, however, with revenue inconsistently rising and falling. By the third quarter of last year, which was the most recent quarter in the presentation, total revenue for the 11 firms was still down more than 20 percent from the high-water mark reached in Q4 07.
David Rocheleau, vice president of Lyra's consulting group, provided the firm's forecasts for office markets. Mr. Rocheleau's numbers reflect the good-news-bad-news dilemma that many in the printer, copier, and MFP space are now wrestling with. The good news is that after moderating from earlier declines, shipments of monochrome MFPs are now expected to be flat through 2014. The bad news is that shipments of color printers will also be flat. Several years ago, most industry watchers predicted that shipments of color printers would increase steadily, while unit shipments of monochrome copiers and MFPs declined. Now, shipments of both machines are expected to be flat. One bright spot in the copier and MFP space remains: color machines and their unit shipments are expected to grow into the foreseeable future.
The director of Lyra's Hard Copy Advisory Service, Larry Jamieson, painted a fairly rosy picture of the business inkjet market. With shipments of lower-end workgroup lasers largely stalled over the next three years, Mr. Jamieson forecasts that most of the growth at the low end of the office equipment market will come from workgroup inkjet all-in-ones and printers. For reasons that I've indicated in past blogs, I'm skeptical about inkjet machines popping up in offices in the near term. While hardware manufacturers have advanced their technology significantly in terms of lower operating costs, better print speeds, and more durable output, the channels selling into small- and medium-sized businesses continue to reject the technology. Of course, Mr. Jamieson's numbers indicate shipments, and not necessarily where or how the machines will be used. If his numbers are accurate, I'm betting all those business-class inkjets will end up in small, home offices rather than in SMB workgroups.
I missed the gaggle of Wall Street analysts that in the past closed Lyra's symposium. Shannon Cross of Cross Research and Citigroup's Richard Gardner were the only two analysts from The Street to grace this year's closing panel. They shared the stage with Mr. LeCompte and addressed questions asked by Mr. Stefansson and from attendees on the floor. The Wall Street Watch panel was engaging and informative, but I was struck by the low head count. In the past, the panel was stuffed with financial analysts, jockeying for the microphone and the chance to be heard. The low turnout rate is one more sign of the hardcopy industry's maturity. Wall Street is now paying more attention to markets for iPads and other gadgets instead of machines that put marks on paper. While the industry is mature, however, it's still worth well over $100 billion when you add up hardware, supplies, and services. I'm sure Ms. Cross and Mr. Gardner's clients are aware of this.
Overall, Lyra's 2011 symposium was a success and generally upbeat. People didn't appear shell-shocked like they were at last year's Lyra event and at so many other industry events held during and just after the recession. There was a resolve reflected of an industry determined to thrive in a market that has been changed forever. New opportunities are arising and firms in the hardcopy industry plan to fully leverage each that comes their way. One of the most promising opportunities discussed at Lyra's Symposium, of course, was MPS, which I'll discuss in my next blog.
Posted on 02/17/20110 comments
OEMs have invested billions of dollars over the past few years to acquire assets so they can market more high-margin services along with their traditional hardware, software, and consumables products. Hewlett-Packard and Xerox have been the industry's biggest spenders in this M&A game. In 2008, HP paid approximately $13.9 billion for Electronic Data Services (EDS) and more recently Xerox struck a $6.4 billion deal for Affiliated Computer Services (ACS).
While the billion-dollar acquisitions grab all the headlines, hardware manufacturers have signed many smaller deals to gain access to new services markets. Because these investments are smaller, they can go unnoticed. Regardless, the implications of smaller deals are enormous as more and more OEMs adjust their business models and move from transactional sales to becoming managed service providers. The recent acquisition of All Covered by Konica Minolta Business Solutions U.S.A. (Konica Minolta) is one example of a small deal that may have a big impact on the digital imaging marketplace.
Headquartered in Redwood City, Calif., All Covered provides a range of managed IT services to small- and medium-sized businesses (SMBs). All Covered's services include server and desktop management along with on-site networking support and consulting. Cloud computing is all the rage these days, and the firm also provides an assortment of cloud-based services such as backup and disaster recovery.
According to Kevin Kern, Konica Minolta's senior vice president of marketing, his company has been interested in offering more managed IT services for awhile. "We acquired the copier dealer Hughes-Calihan a couple of years ago and we found the managed services they offered were complementary to Konica Minolta's break-fix services." Since that time, Mr. Kern says Konica Minolta has been on the lookout for other service organizations to acquire. A Konica Minolta dealer since 1993, Hughes-Calihan provides various managed services for integrated computer networks and multi-media presentation technologies, and they also lease equipment. "We want to expand our IT services, " says Mr. Kern, "and we found All Covered was a perfect fit with what we're doing."
We can expect Konica Minolta to make similar acquisitions. Mr. Kern indicated that there is "tons of room for organic growth" and the firm also plans to grow by acquisition in the MSP space. A report on the CRN website (www.crn.com), which features news and information related to the channel and solution providers, indicated that Konica Minolta is looking to grow its services business by 100 percent over the next 12 to 18 months.
All Covered itself has been growing like wildfire, and that is expected to continue as Konica Minolta looks to expand its services business. All Covered's M&A program is fairly aggressive. Its website features a section I found interesting with information regarding how companies interested in selling out can reach All Covered for an acquisition assessment. There are also plenty of press releases reporting various buyouts from the past few years. CRN reports the company has completed 16 buyouts in the past three years, and in 2010 it had revenue in the neighborhood of $60 million. Last year, the firm indicated it would acquire up to 50 IT VARs and MSPs. Currently, All Covered has 22 offices spread across the United States.
Details of the All Covered acquisition were not made public. It was disclosed, however that the firm will be run as an independent business and retain its name. The company's management and workforce of approximately 350 will remain largely intact. Because Konica Minolta offered a limited number of services, there was not much overlap in the each firm's labor force.
Industry analysts are bullish about the deal. In a prepared statement, Konica Minolta quoted IDC's Keith Kmetz, vice president of IDC hardcopy solutions programs as saying, "As the printing and imaging industry continues the transformation toward a more services-led model, it is imperative for market players to integrate more IT-related services as part of a comprehensive product/services package." Mr. Kmetz praised Konica Minolta as being forward thinking and says the deal gives it "instant legitimacy in providing customers with a wide range of the necessary IT services/support offerings, along with an already well-established roster of printing and imaging solutions."
Wirth Consulting's Terry Wirth is equally upbeat about the acquisition and says it will greatly benefit Konica Minolta customers. On his www.wirthconsulting.org website, Mr. Wirth wrote, "Konica Minolta's acquisition of All-Covered is a win-win for all parties involved, especially customers and end users." He opined, "In the old scenario, a customer may require both Konica Minolta and an IT supplier in order to provide critical, total network services. This means that any solutions-development had to be coordinated between three entities. In the new All-Covered scenario, solutions-development need only be coordinated between two entities, significantly streamlining the process."
In general, I agree with the analysts. In addition to the above positive comments, All Covered should also allow Konica Minolta to further penetrate the fragmented SMB market, which is huge and difficult for OEMs to service properly. As a skeptic, however, there is a risk of upsetting the channel. Dealers that are already offering managed services in the SMB market may not look too favorably on Konica Minolta moving more into the space. I can anticipate there may be some difficulties for the company managing its channel. Mr. Kern paints a rosier picture. He says that for many smaller dealers, the All Covered acquisition gives them the infrastructure they didn't have so they offer more services. "The small- to mid-sized dealers really like the idea of offering managed services but they lacked the infrastructure." I'm sure Mr. Kern is right. It sounds like Konica Minolta has already considered any conflicts and is accentuating the positive to its channel partners.
Posted on 02/08/20110 comments
Last month, Océ North America announced it has expanded its portfolio of managed print services with two new offerings. Océ's latest MPS solutions include MPS Express for small office environments and MPS Enterprise for mid- to large-sized businesses. Each program is designed to help corporate clients quickly realize the benefits of an MPS package regardless of their size or the complexity of their printing fleet.
"We have abandoned the one-size-fits-all MPS model," says Robert Russell, Océ North America's director of Enterprise Account Development and MPS, Document Printing Systems. "It's inefficient and it just doesn't work. The new programs offer the flexibility to customize MPS for specific customers, while streamlining the processes required to implement and run Océ's MPS offerings."
In addition to being flexible enough meet the individual needs of a variety of clients, Mr. Russell says Océ's MPS programs are easy for customers to understand, which improves sales cycles and adoption rates. Many potential customers have heard about the benefits of MPS but they've also been exposed to a lot of hype, which often leads to uncertainty and scares away new customers. "The industry still isn't really clear about what MPS is," says Mr. Russell. "Often customers don't understand it at all. Our focus is not on posturing and marketing that adds to confusion. It's on providing clarity so potential customers understand how we'll deliver the promise of MPS."
Mr. Russell offers the following cautionary example. A potential client with a complex printing fleet made up of an assortment of hardware is looking to sign up for an MPS package. As the customer meets with a sales representative, it becomes clear that changes—maybe substantial changes—must be made to the printing infrastructure before a managed print package can be implemented. At this point, customers may balk at the prospect of replacing perfectly good operating equipment with new stuff so the client can realize some future benefits. "Our goal is to simplify the onboard process so that our clients can begin to experience the benefits of an Océ MPS engagement quickly," says Mr. Russell. "It's easy for people to understand our value prop and the benefits Océ provides. It's not complicated."
No Rip and Replace
One unique feature of Océ's new program is it allows reps to take over virtually any printer fleet regardless of whether the machines come from a variety of hardware vendors. Mr. Russell says Océ does not always employ the so-called "rip and replace" method of removing equipment and replacing it with more vendor-specific hardware at the beginning of an MPS contract. Instead, the new MPS programs leverage a client's existing print infrastructure to expand resources. No new hardware is required to initiate an Océ MPS program. They support the customer's legacy fleet of mixed manufacturers and mixed technologies, including both laser and non-laser platforms. "We are completely hardware indifferent," he says. "That's what's really different about our program—we can come in and quickly take over a very diverse fleet." "Often times our clients already have too much hardware, that's why they are interested in a managed print engagement. Based on a true 'services' led approach, we focus on the document (paper or digital) and help our clients print less."
The new MPS Express program is designed to accommodate businesses with 50 or less devices. For these small firms, Océ has eliminated the typical lengthy or complicated assessment phase to generate a proposal. "MPS Express provides web tools for reps," Mr. Russell explains. "They enter critical information like a customer's page volumes and the number and types of devices they're using and the program delivers a proposal, as well as a contract. It's all very simple and easy and removes any confusion for the customer." Mr. Russell says Océ can begin monitoring and managing the client almost right away.
Because it's designed for more complex environments, MPS Enterprise relies on a "consultative engagement" process to put together the final package. Océ's MPS analysts work with potential clients to understand their corresponding printing patterns and develop unique objectives. The analyst details long-term goals for clients in order to implement a customized MPS program. Like the MPS Express program, MPS Enterprise can accommodate a variety of machines, including wide-format devices or production equipment. "We want to manage all of our customers' output devices," Mr. Russell says.
According to Mr. Russell, Océ North America has been marketing managed print solutions since 2007. The program was piloted in the Chicago market first and the firm started to hire MPS reps in 2009. Océ North America reorganized its MPS program in 2010 and Mr. Russell was tapped to head it up in July of last year. He says all the activity is what led to the launch of MPS Express and MPS Enterprise this year, which is currently available across North America.
Océ North America's new MPS programs are a smart move. They should allow the company to grab business from small companies that have been reluctant to sign an MPS contract as well as meet the needs of larger clients. Despite the fact that it represents a huge market, the SMB segment has proven elusive and it remains largely untapped. That may be changing, however. Océ is one of a growing number of firms offering different programs customized to better penetrate small-office environments. Hewlett Packard, Lexmark, and Xerox are a few others I know now have different flavors of MPS to meet the differing demands of customers in the SMB and enterprise space. Sub-segmenting the market is a clear signal that the overall MPS market is maturing and efforts by firms like Océ and its competitors to offer more choices will ensure it continues to grow as it matures.
Posted on 01/19/20110 comments
The market research firm InfoTrends recently released a study indicating that managed print services will have an adverse effect on the consumption of toner and paper along with the revenues that come from the sale of these consumables. According to a press release issued on November 30, InfoTrends found that MPS programs will lower revenue from the sales of "…marking and paper supplies in the United States by $2.6 billion in 2014." A similar study performed by the company in the Western European market predicts MPS will reduce consumables sales in that region by €1.56 billion in 2014.
InfoTrends is one of the first research firms I'm aware of that is pulling back the curtain a little on the downside of MPS. In all the hoopla around the growth of managed print services, one piece seems to get left out—MPS will drive down top-line revenue. That's by design. Most—if not all—MPS programs promise to reduce customer costs by efficiently managing the way that hardcopy is generated. Efficiencies are often achieved either by reducing the number of machines in a customer's printing device fleet or by reducing the amount of pages that the client prints. And in some instances, an MPS package will do both. So, regardless of the fact that the total amount of money spent on MPS programs is growing, the impact on revenue growth for the industry as a whole has to be negative, especially in the long-term if MPS is as popular as many believe.
It's been difficult to gauge what impact MPS has had on the current market—perhaps it's already had an effect. The horrible recession and subsequent weak recovery in established Western markets clouds the picture.
Beginning in 2008 and lasting into the first part of this year, most OEMs reported that hardware revenue and unit shipments were down across categories. Who knows how much, if any, of that drop was from MPS? Overall, sales of consumables have also been down, although sales of certain third-party supplies, which are less expensive that OEM products, have been up. The sudden drop in demand for hardware and consumables wreaked havoc on the supply chains at many companies including Canon, Hewlett-Packard, Lexmark, Xerox and others. As companies took steps to slow production, product shortages arose, which further eroded top-line revenues and shipments. Did MPS play some role in the shortages? Did customers unexpectedly turn to leases and run down inventories? It's impossible to tell.
The InfoTrends Study
Among other things, InfoTrends set out to determine what the overall impact of MPS will be on print volumes, paper usage, and the consumption of ink and toner as we proceed through the next few years and presumably emerge from the economic downturn. The firm used Web-based surveys to poll hundreds of MPS users and MPS providers in the U.S. and Europe. The company conducted follow-up interviews with certain respondents to "probe on more intricate issues."
According to John Shane, the project manager of the study and a director at InfoTrends, it is "imperative" that the industry realizes how big a role MPS will play in the markets in the medium to long term. InfoTrends predicts that by 2014, 28 percent of all office print volume in the U.S. will be generated via some type of MPS program. In Western Europe, MPS programs are expected to deliver 22 percent of office printing. If this estimate is true, the growth of MPS has been phenomenal in offices in the more established printing markets of the U.S. and Europe, which supports Mr. Shane's observation that understanding the downside of MPS is an imperative in today's market.
In a prepared statement, Mr. Shane explained some of the reasoning behind InfoTrends's estimates. The company calculated baseline numbers based on a data set forecast as "if MPS was never invented," he said. When that baseline number was compared to InfoTrends actual numbers, Mr. Shane says, "We see that MPS will reduce the consumption of marking supplies by 10 percent (6 percent in Western Europe) and paper by 7 percent (5 percent in Western Europe) by 2014."
As interesting as all this market information is, I wanted more, of course. I like to know, for example, how much of the reduced consumption is color pages versus mono? Presumably, demand for pricey color pages is dropping, which will drive toner consumption down. But is mono printing dropping too? And what's the overall trend in third-party supplies? Are OEMs creating a closed market for their supplies through MPS, or does MPS drive dealers to look for more remanufactured supplies so they can grab the higher margins they provide? In terms of paper, how much of the reduction is from people requiring less hardcopy and how much results from simply printing on both sides of a sheet of paper?
Of course, these are exactly the kinds of questions InfoTrends wants to leave hanging so folks who read the press release will reach for their wallets. Because I'm a cheapskate, I probably won't buy it, but I still think InfoTrends is on to something in its claims that MPS will drive down the demand for hardcopy.
Perhaps it will become more clear over the next few months if MPS is already impacting the industry adversely. It appears that hardware vendors have weathered the worst of the economic storm. Most OEMs have reported a turnaround. As we move through 2011, it will be interesting if we start to see some declines in certain categories of hardware and/or consumables. It will be particularly telling if sales of office machines such as workgroup printers or Segment 4 copiers demonstrate a pronounced decline. If these types of revenues start to drop—and we see no uptick in other categories—it's likely that MPS is to blame. Of course, while top-line numbers may take a hit, bottom-line numbers should improve as vendors learn to wrap higher margin services around the hardware.
Only time will tell, but we should heed Mr. Shane's advice and pay close attention to the situation. The stakes are certainly high.
Posted on 12/14/20101 comments