As we turn the page on 2023 and look back, we see the sun setting on turbulent seas. With the impact of COVID, supply chain challenges and worker dislocations now firmly in the rearview mirror, the waters ahead seem almost serene by comparison. Certainly, there isn’t anything on the horizon that could be as calamitous as those not-too-distant times. Or is there? While the seas appear to be calmer, sailing in the Bermuda Triangle, also known as the office technology industry, is never without its worries.
Looking ahead, conditions appear to be highly favorable for office technology OEMs and their distribution channels to navigate through what might be considered a “normal” year.
From an economic perspective, the inflationary swells that brought so much turmoil to conditions last year have begun to abate. While it is likely that the effects of inflation will continue to be felt through the early part of this year, it seems likely that the interest rate environment will improve as inflation settles down toward its 2-3% target. With this transition, the leasing environment for office technology should improve throughout the year, providing ample opportunity for OEMs and dealers alike.
While troughs appear to be on the horizon for page volume, they’re nothing compared to the rogue waves that have affected the industry over the last several years. Sailing through these small dips should be no problem. And although total pages will continue to decline, the pace of such decline should finally stabilize, making things much more manageable for OEMs in particular.
Next year’s economic business outlook appears to be positive for most businesses. Although earnings are forecast to experience some slight headwinds, the general consensus is that most businesses, particularly larger organizations, will continue to deliver solid earnings. And with many of these businesses sitting on strong balance sheets, they should be positioned to acquire technology and related services, particularly in areas where such acquisitions can deliver efficiency gains leading to bottom-line profit improvements.
OEMs and dealers alike will continue to find opportunities in new print and print-related markets. Those engaged in targeting the commercial print space should continue to benefit from offset to digital transitions and the shifts occurring among commercial printers and in-plants as they move from traditional output providers to marketing services businesses. Looking beyond historic commercial print, packaging and other industrial printing applications will continue to gain traction in 2024, primarily offering OEMs an avenue of growth in an otherwise mature market.
Maybe the largest of all opportunities, software and services could prove to be the key lynchpin in 2024, particularly for office technology dealers. It’s been many years since office technology providers have layered software and services into their delivery portfolios. In many cases, these businesses have gained significant traction and are now contributing substantial revenue and profit for industry players. With small and mid-sized businesses clamoring for support in designing and implementing internal IT systems comparable to large companies, 2024 could not be more primed for software and services growth.
Yes, 2024 is shaping up to be a year of clear skies, calm seas and smooth sailing. Or is it? It wouldn’t be the office technology industry if there were no storm clouds on the horizon. While the seas are flattening, we can’t lose sight of the core economics of the industry and the fact that for OEMs, flat year-over-year revenue performance is considered good. We also shouldn’t lose sight of the dark clouds on the horizon and the need to sail clear of the challenges that could materially impact the industry. And what are these challenges?
Let’s begin with the collapsing commercial real estate market. While commercial real estate and its collapse isn’t necessarily a direct harbinger of stormy seas, it does provide yet another indicator that companies will continue to migrate to hybrid work environments, a clear challenge for equipment providers and a likely drag on page volumes.
What about AI and digital transformation? One thing we know about AI is that it continues to accelerate in its adoption. Looking back at 2023, we can see that a major part of economic growth came from a small subset of organizations involved in AI development. Scanning the horizon, it is likely that this development will ultimately be put into practice, and organizations both large and small will make heavy investments in further AI-based process automation. As this occurs, the impact on digital transformation and workers is likely to be profound, and unfortunately, these trends may represent a storm that the industry has no choice but to sail through. Can OEMs and dealers benefit from the AI revolution? Certainly. However, few dealers are capable of delivering true AI-oriented workflow solutions, and the list of OEMs with these capabilities is even smaller.
Of all the potential storm clouds on the horizon in 2024, our impending elections have the potential to be the most significant. They may also be much ado about nothing, although given the dichotomy of viewpoints that exist in our nation, there is certain to be a group that is upset with the outcome. How will this play out? What will the impact be on the economy? While we can speculate, until we reach these potential storms we just won’t know.
While the future can never be accurately predicted, it’s been some time since the industry has enjoyed smooth sailing. Enjoy it while it lasts!
Dennis Amorosano is the president and founder of Dendog Strategy Insights LLC, a management consulting firm focused on strategic planning, new business development and go to market execution. Providing services in the areas of strategic business planning/execution, new business development, content creation/marketing automation and technology sourcing support, Dendog Strategy Insights brings 30 years of technology marketing, sales, product planning, software engineering, and professional service experience to help clients implement strategies that yield success.