The recent swath of sector acquisitions ranging from HP’s purchase of digital imaging corporation Apogee to IBM’s purchase of open source software provider and cloud platform gateway Red Hat has many in the channel waiting with bated breath for the other shoe to drop. This environment has only fueled analyst conjecture surrounding a Xerox/HP acquisition, and substantial uncertainty for those within the imaging industry.
As everyone from resellers to manufacturers stare down the edict to adapt or find themselves obsolete in the face of mounting competition, how are we really faring today and what does the future hold? Key channel players around the world from the OEM, remanufacturing, and service segments share their thoughts on today’s market environment, the most striking changes of late, how the channel is adapting, and what makes for a happy ending tomorrow.
The state of the channel
From service providers focused on bundled customer solutions to segment agnostic remanufacturers concerned with delivering sustainable peripheral products, how does one characterize the state of the channel today? Surveying a cross section of those with a clear view to the front line reveals a wide variety of highly nuanced perspectives – with all in agreement that it has been anything but static.
“The imaging industry today is scrambled in an exciting sort of way,” says ECI Software Solutions Strategic Partnerships Manager David Brown. “Anecdotally, we can all see slow and steady page volume erosion.” Citing the companion impact of that erosion on the channel, fueled by changing consumer printing behavior that has left everyone scrambling for a shrinking piece of the pie, he adds, “Likely stemming from a combination of both digital transformation and technology evolution, we’re all seeing a lot of consolidation on the vendor and OEM side, from the mom-and-pop shops to the big players. And despite the fact everyone saw it coming over the past several years — as page erosion has been more gradual than drastic — everyone is still patiently pondering what might happen, waiting to see how it plays out.”
Offering perspective from the other side of the pond, Brother Nordics Imaging and Printing Solution Specialist Jesper Olsson sees a clear change in the sector. “From my perspective in the Sweden market – a region well known for early adoption of new technologies, print volume decline is now quite obvious.” Qualifying those decline levels as highly dependent on vertical markets, he adds, “Some segments have significant declines, while others take a bit longer. For example, the public sector is slower to change than others. If pressed for a prediction, however, I would say those decreases will continue and will eventually hit most verticals and regions.”
For his part, Clover Imaging Group Chairman Jim Cerkleski says, “If nothing else, it has holistically been dynamic.” Bullish about the remanufacturing space, he reports minimal changes in opportunities and business, despite the well-documented competition today among manufacturers gunning for the same printed pages. (Cerkleski, notably, is part of the executive leadership team of Clover Imaging Group that recently acquired Clover’s imaging business from 4L Holdings.)
Mike Betsko, Director of Solutions, Sales & Marketing at Canon U.S.A. Inc., adds, “I would say the industry is exciting, challenging and fun to work in today. In my opinion, it’s strong and continuing to evolve as technology evolves, communication methods evolve, and information regulations evolve. The shift to the cloud is upon us. That is what is so exciting about being in our industry. Every day is different, every customer is different, and every day brings new opportunities to help solve a customer’s business challenges using the hardware, software, and services we offer — not only to solve the immediate problems, but to help them grow and expand.”
With breakneck digital conversion and the substantial impact it has had on traditional business models, what’s constant is that the sector has been anything but dull in recent years.
“While the same customer base remains, the purchasing model has completely transformed from transactional to contractual,” reports Cerkleski. “Speaking to the toner and inkjet product market specifically, the changes we’ve seen through our dealer customers has happened at lightning speed, and been driven by OEMs and the managed print model.” As a remanufacturer with a truly holistic view of the larger marketplace, the changes he sees span contract manufacturers to dealers, with an integrated offering across virtually every aspect of print, from scanning systems and A4 and A3 devices to network management and data storage in the cloud.
Adding that the most tech-savvy firms have an advantage in today’s environment, he says, “There’s no question new opportunities exist for everyone in the channel today, but the truth is, if you’re the head of IT for a large corporation your chief concern right now is security. Any company with more than 50 employees has sophisticated networks that run not only shared company printers, but everything from private data networks to the HVAC system. Based on this, providers that have evolved their offering to include comprehensive IT services are much better equipped than smaller players without a comprehensive understanding of the IT side of prospective customers’ businesses to earn the trust needed to touch company networks and win new clients. The providers selected by customers are no longer selling printers and toner cartridges alone – but an entire technology service offering.”
“From where I stand, the most striking change has been the perspective shift,” reports Brown. “The commoditization of pages has led to a substantial shift in mindset toward value-added services and solutions. As everyone competes on price, differentiation comes with wrapping services around traditional hardware and software through technology integration rather than micro-processes.”
Citing software-enabled solutions that eliminate manual staff intervention managing every kind of process from inventory management and billing data collection to secure release printing, and the remote management of entire device fleets, he is pleased to report, “The final frontier is full management, which we’re much closer to than we were just three or four years ago. With this shift also comes a significant level of industry interdependence, as creating more efficient processes that meet customer needs requires close collaboration with the entire channel, from software vendors to OEMs, supply vendors wholesalers and finance companies. It’s a good thing we’re all willing to do that in the environment we live in today.”
Betsko notes, “Our industry has moved far past the device being seen as just a piece of office equipment, and more toward it as a core part of an organization’s business platforms where information securely connects with other lines of business applications, process automation, approval processes and more. Having an MFP with built-in security and governance features is necessary; however, the MFP alone will not solve all of our customers’ business needs. This is why additional advanced authentication methods, advanced capture solutions, information management workflow and business analytics solutions are paramount to how organizations protect their information in 2020 and beyond.”
So how are companies and customers adapting to these changes of late, and how might they respond going forward? Our experts weigh in with their predictions based on the key trends they’ve witnessed firsthand.
For his part, Olsson predicts imminent changes on the horizon, spanning new customer segment targeting and customer-centric solutions. “I believe we will definitely see a change, but the big question is who will be driving that change. The market is to some extent wide open for disruption, and providers can either hold on to the old model or transform to entirely new customer-centric solutions.”
Championing the strategic value of deploying IT service provider inspired models featuring flat rate, seat-based pricing as an alternative over traditional managed print consumption-based programs, he cautions non-believers, “Channel players that are slow to respond will surely find another industry like IT services moving in to disrupt their business by providing completely different customer-centric solutions. A segment like IT has little to lose by tapping this market while enjoying the benefit of incremental revenue it offers.”
For Cerkleski, the single biggest game-changing move in the channel has been the rate of competitive price dropping. “OEMs are being notably aggressive to compete on price per page,” he says. Citing recent price reductions as great as 50% lower per-page than they used to be, he credits the number of manufacturers competing for shrinking customer print volumes. “In the past, even companies with color printers would set their devices to a mono setting in order to save money,” he says. “A significant proof point of device manufacturer competition for the printed page today lies in the fact mono printed pages have come down between 4% and 5% based on the new widespread affordability of color. The change is striking. What used to be 10 cents per color page in the recent past is now commonly under five — which is of course exciting for us as a remanufacturer, with clear opportunities to sell four cartridges instead of one.
According to Brown, smart solutions that link data sources to elevate and streamline imaging functions lead the pack in strategic adaptation within the sector. “In line with today’s personal technology user experience, the expectation bar has been clearly raised for a more robust user imaging experience,” he notes. “As consumer technology becomes an increasingly pervasive element of every user experience, you’re seeing multifunction devices with 12 embedded software applications being sold as opposed to 1,000 copiers to meet customer needs.”
For his part, Betsko sees increased focus on security and the shifting to cloud adoption. “For security, the change isn’t on the side of how we approach securing our technology. This has been a part of our DNA from the beginning.” The change, he says, has really come from the place security has in the conversation, going from often no more than a checkbox at the end to something that frequently leads the discussion. As far as cloud adoption, he says, “With the advancements in SaaS solutions and the security and governance controls they must abide by, organizations are seeing the benefits of moving their on-premise server-based solutions to the cloud, not only for the security aspects but to also reduce administrative costs. I have seen an increase in customer requests to move their purchased on-premise solutions to the same solutions-hosted option.”
Here to stay
In this arena of seemingly perpetual evolution, what mainstay channel tenets promise to remain unchanged? Several, say our frontline experts.
“Beyond the paper it’s often printed on, we are really in the information business,” says Olsson. “Even though the primary media for customer information is now digital, increasingly affecting the role of paper media in the world, paper still has place as a vital intermediate format that won’t go away in my lifetime. There is still a lot of business to be done – just with a smaller piece of the pie. I believe that even if the document business undergoes substantial disruption and transformation, our primary challenge of finding and delivering more efficient approaches to customer core business processes remains. In that vein, transparent movement of documents between digital and physical media is a core capability with no shortage of opportunity for us.
Betsko says, “This is very much a people-driven business, and the relationships, consultative approach and the service and support are not going anywhere. The technology will always continue evolving to keep up with market requirements and whatever the next new thing is, but it invariably needs that proximal presence of highly skilled people backed by a strong technology and vendor support.” He adds, “I think you’ll see a continuation of the security and cloud shift both from the standpoint of what the technology can do and what services the channel offers.”
Cerkleski agrees that printing will remain a constant. “It’s in no way dead — just different,” he says. “I would venture to say there’s probably even more copy paper being sold today; people are just printing differently. They still collect data, leveraging cloud-based software to store it as they get rid of their file cabinets in increasingly paperless environments. That said, in every office environment when those cloud-stored documents are needed, they’re printed, and will likely continued to be printed for review and destroyed up to four times in the next three years. The printing will always remain.”
“There will forever and always be an impetus to improve the customer experience,” adds Brown. “As an industry, we can default and say that the best solution is a cheaper solution, but the reality is that the best experience may not always be the lowest cost.” He explains, “Price is a nebulous thing. Take, for example, the cost of a standalone print device. While it may be less expensive than a total service package that includes companion supplies, maintenance and repair for breakdowns, the addition of RFID readers for limited personnel printing, software-enabled automated inventory and purchase order functionality – the time spent manually managing all these companion services represents substantial costs to the user that can typically translate to a 30% customer cost savings when alternatively rolled into a device. As the customer experience goes – comprehensive package solutions are a solid example of elevating the customer experience.
Outlook for the future
In the absence of a crystal ball foretelling the channel’s definitive future, those with a clear view of the channel remain optimistic.
“The future is bright,” says Cerkleski. “In an increasingly crowded space with everyone targeting the same business, there’s no question there will be a considerable volume of consolidation on the horizon. No different than the automotive, pharma or biotech industries that have undergone the very same level of consolidation in the past, change is a natural part of every industry’s lifecycle.” He believes both the consolidation of large OEMs competing for customer pages and the effective defense of their IP against new mold competitor technologies will ultimately help a smaller number of key players emerge victorious as tomorrow’s core equipment providers. He adds, “While change is rarely easy, the entire marketplace should welcome it in this case, as it will make the entire industry financially stronger.”
“I’m not Nostradamus, and don’t own a Magic 8 Ball, but I’m willing to bet that digital transformation will continue one business process at a time,” says Brown. “Dealers that used to sell copiers alone are in a great position to expand their offering to include additional layers of technology and software from Microsoft Office 365 to VoIP. Not everyone will rise to the challenge, but with a little ingenuity there could be a place for nearly everyone. With every transformation there are opportunities, and this industry is no exception.”
“My outlook for the industry is unquestionably optimistic, with the expanding requirement of security and cloud adoption, and the new opportunities that growing trend is creating for new revenue streams,” says Betsko. “Device attachments ratios to customer LOB applications continue to grow every year, illustrating just how important these integrations to MFP’s are. I think the channel will begin to drive a device-as-a-service approach, with some already having started, introducing a subscription model for office equipment with their solutions.”
For his part, Olsson also sees clear light at the end of the imaging tunnel. “While it may come off as a cliché, I believe change is good. If there was no change, there would be no opportunity. By identifying true customer infrastructure and service needs, and reimagining the way we deliver solutions that are customer- instead of product-focused, I definitely see a happy ending.”
Despite marked levels of uncertainty throughout the channel, one thing remains certain: These are exciting times indeed for imaging.
Noelle Kull is Principal of KCI, a strategic communications consultancy based in Chicago. A trusted partner to startups and the Fortune 100 alike, she translates thought leader insights to compelling content in verticals spanning med tech and manufacturing to higher ed and beyond. A global citizen passionate about cultural exploration and modern technology, you can find her penning magazine bylines in Budapest, ghostwriting books in Chiang Mai, and leading desk-side media tours in New York City.