For the past two years, Lexmark has run a unique program connecting resellers with business consultancy teams in order to design and deliver the best ‘solutions’ for its corporate customers.
The way it works is that accredited resellers may enlist the support and advice of the company’s business consultants (some have been headhunted from firms like PwC) so as to be better prepared to vie for more challenging contracts.
Driving this need, according to Tim Champion, channel business manager Lexmark A/NZ, is a combination of dwindling hardware margins on the part of vendors and the channel, while for the customers, the challenge of integrating ‘output’ hardware with corporate systems is demanding much higher levels of expertise.
Further illustrating this transition is the fact that corporate copier sales have been falling as workers move towards printing, moving the emphasis further towards the PCs.
"We believe there is a whole new market category called ‘output solutions’ and we are developing a consultant practice to assist the channel and customers to allow customers to implement and improve business processes. It’s not, 'I’ve got the best printer', it’s, 'I’ve got the best solution for your business'," says Champion.
 |
| Lexmark's Champion: Working with an enormous variety of business systems |
Lexmark says that the success of this model reflects the diverging needs of different work groups within the corporate environment and the need for ‘right-fit’ solutions. The program is also structured so as to be very inclusive of the channel while of course benefiting from the fact that Lexmark is so wholly focused on printing. "Driving sales engagement allows us to work very closely with the channel."
Along with its consultancy emphasis, Lexmark boasts broad compatibility between its products and a wide range of corporate functions such as business process management, electronic content management, business systems, document management systems and electronic forms processing.
"Our ability to work with an enormous variety of business systems is pretty unique," Champion says. He adds that access to sophisticated integration tools ensures that customers are not pushed into buying niche equipment, which is normally more expensive and harder to support.
Generally speaking, corporate spending on printing or ‘output’ equipment and solutions accounts for around 1 to 2 percent of total company revenues, according to recent research by Gartner, while, ironically, paper usage is growing by between 3 and 6 percent depending on who you ask. Further, well implemented printing solutions can also help companies reduce help desk volumes by as much as 50 percent.
"When you’re looking at the billions spent on printers and copiers, what customers need is some sort of framework to reduce the cost of that investment," Champion says.
Paul Harman, operations manager Fuji Xerox Printers Oceania, believes that falling prices of printers generally, but especially in the colour markets (inkjet and laser), will bump product development into new directions, such as more targeted offerings.
For instance, he sees falling prices of colour laser printers forcing inkjet manufacturers to develop more specific products, while multi-function devices are already having a major impact on how printers are sold, bought and perceived.
Gartner reported a 17 percent fall in inkjet sales to 159,000 units for Q1 2005 while lasers rose 6 percent to 60,400 units.
Sales of multi-function devices rose 22 percent to 198,000 units.
| Printer sales |
|
"Consolidation of printer devices is something that all vendors are selling on to their channel partners," Harman says.
He sees resellers taking a leaf out of the books of photocopier makers and dealers in offering financed pay-per-copy arrangements. And like many others, he also envisages the growth in colour presenting new opportunities for resellers.
"Clearly the market is moving heavily to colour -- any heavy laden colour market is a good vertical to be in -- real estate, banking and finance, manufacturing and logistics have significant use for print devices," Harman says.
 |
| FXP's Harman: Falling prices to bump development into new areas |
Although drawing much scepticism from the channel and consumers until just a few years ago, multi-function devices have now emerged as one of the fastest growing segments of the market.
This has created two major boons for the channel. First, in encouraging customers to buy more consumables as people with MFDs tend to use more paper and ink. Second, they force resellers to expand their expertise across more functions.
Gartner analyst Jackie Yeung says that businesses and consumers are being drawn to replace their existing equipment with increasingly higher quality and competitively priced multi-function devices.
"The AIO [all-in-one] devices, with mature technology, multi-function capacities and affordable pricing points, will attract customers from various market segments," she says, adding that the increased sales of these devices will increase opportunities for the channel to expand the services side of their business. Inkjet or page multi-function products (MFP) and/or AIO can be applied as part of a whole document solution, she believes.
"For improving margins, resellers may offer various unique and value-added services or solutions to customers in market segments," Yeung says. "They should understand customers’ wants and needs from the market segments and then create their unique services or solution to those customers."
Epson marketing and communications director, Mike Pleasants, says in the corporate environment customers are looking for a provider that is more ‘solution oriented’.
Essential to this, he believes, is successfully targeting and demonstrating expertise in specific vertical markets. "Resellers will be respected, listened to and will end up winning if they can demonstrate knowledge of the segment they intend to target," he says.
According to Yeung, "the channel may adopt more services-related offerings with the printing hardware in order to provide a one-stop shop service for the customers. It depends on their strengths and which market segments they are focusing on". This has in turn driven sales of printing-related software, now an essential part of services and integration in the printer market.
"Services and integration is usually driven by the reseller understanding a particular market segment and probably also supplying some sort of software into that segment as well," Pleasants says.
More than hardware
Derek Austin, corporate sales manager A/NZ with Nasdaq-listed document management software company ScanSoft, says companies that try to sell hardware alone are left in the dangerous position of having nothing to compete on but price. "The need to provide more than the hardware is rapidly becoming a given. Once you can offer more than the device itself as a reseller you are buying into the customer’s problems," he says.
 |
| Epson's Pleasants: Vertical market skills are key |
"It’s solutions sales and it’s having a relationship with the customer."
ScanSoft is one of the world’s leading providers of printing software. It has development and supply agreements with most of the leading printer manufacturers and will soon announce the expansion of its international deal with Kyocera to Australia.
The company believes that there is a lack of attention paid on the part of resellers to the nuances of customers’ printing requirements, presenting massive opportunities for those that can quickly mobilise to do so.
"I would say less than 5 percent of businesses are using document management and archival devices such as optical storage," Austin says. "The market is huge, especially now that multifunction devices are more affordable."
In terms of niche verticals, ScanSoft sees a big opportunity for document management and workflow solutions. "There is a real opportunity for resellers to understand the processes their customer has and provide value by addressing what those processes are in terms of work and document management needs. That’s much more than selling in a multi-function device," he says.
David Kutteh, managing director of Sydneybased reseller Chemist POS Direct sees the pharmacy industry as one of the more rewarding vertical markets for printing. The company is one of only a handful of resellers supplying Kyocera printers to the sector where, for the most part, printing is virtually continuous.
"They [pharmacies] use the laser printer non-stop from the moment they open to closing time," Kutteh says. "On average a pharmacy would print up to 400 to 500 pages per day -- for every medication they must do a printout."
Helping business even further, the state government made it compulsory four years ago for all pharmacies to have larger printers so as to meet regulations for producing CMIs (Consumer Medical Information). This has helped to phase out monochrome inkjet printers in favour of colour lasers in the pharmacy sector.
Further driving the transition, many hospitals now require colour printouts of pills on bottles, while nursing homes increasingly request colour photos of patients on their medication bottles so as to reduce confusion and errors.
"In the near future there will be a standard requirement for colour scripts to be given to nursing homes and hospitals," Kutteh says.
Currently the company makes a lot more of its revenues from actual hardware sales rather than consumables, but expects changes in the pharmacy industry will shift the balance over the next few years.
Added to this are the already large numbers of third-party software applications in the pharmacy sector that require their own servicing and upgrading, he said.
| Corporate printing spending |
|
Supply the colour
Jeremy de Silva, product marketing director with OKI Australia/New Zealand, believes the growth in colour has created new opportunities for the channel to increase sales of supplies to offset declining hardware margins. "Invariably the price of the hardware, even in lower-end machines, is about a fifth of the overall costs. It is vital for the reseller to maintain that supplies business."
Added to this, he believes, the growth in multi-function devices is expanding the opportunities for resellers to market solutions arrangements, which can in turn lead to improved sales of consumables.
"Increasingly, what we are trying to do is get them to sell with the hardware and extended warranty -- they interface with the customers and keep up the supply side.
"Client retention on the supply side has become a major challenge for the channel."
De Silva adds that customers recognise services as a better alternative these days for managing their printing. "Customers are increasingly looking to a managed services businesses where they actually take on the entire service, maintenance of the hardware and supply of the consumables as well."
OKI is also trying to encourage its channel to market pay-per-copy arrangements where appropriate. "Some customers have opted for pay-per-copy arrangements, which are growing in popularity as the cost of copies declines."
 |
| OKI's de Silva |
As for other opportunities, OKI is actively educating its channel on several existing and new areas.
Most interestingly, OKI is educating its channel partners on how to branch out into offering dedicated printing and label services, beyond merely supplying the relevant equipment.
This is something that de Silva says is potentially very lucrative for the Australian channel if the US is anything to go by. While the corporate environment in North America is moving quickly towards in-house colour printing, several industries, including hospitality, advertising and others, are catching on.
As part of its push into this new area, OKI has a wide-reaching partnership with print software company Impulse Logic to use its SignIQ software for creating labels, product images, bar codes, prices and messages.
"This enables our resellers to go into different verticals -- pharmacy, liquor, toys -- and provide a solution for signage as well as labels," de Silva says. "Resellers get two bites of the cherry: hardware and then supplies. Not just with toner but also with media."
Mark Vella, MFP and copier product manager with Kyocera A/NZ, believes that software will be a key enabler for the channel to increase services revenues, and cites the imminent extension to Australia of the company’s existing partnership with ScanSoft as providing a major impetus.
"The more software solutions we can supply to the channel, the more hardware sales we can get in the channel," Vella says. "Resellers that have a history of selling software and solutions now have a new opportunity to sell the hardware -- this is a huge opportunity to grow our business through the reseller channel."
The convergence of printing, copying and other devices will serve to drive this transition even further, Vella believes, as customers look to squeeze more value from their equipment.
He also agrees with OKI’s de Silva and others that the move towards in-house colour printing presents fresh opportunities for the channel to develop new businesses in specific verticals. "The nature of the beast is that everyone will be able to justify high-end colour in the future."
This is likely to be especially pronounced in the small to medium business segment.
Control, manage, reduce costs
Rebekah O’Flaherty, Hewlett Packard vice president and manager of its Imaging & Printing Group South Pacific, believes that SMBs are now generally more aware of new printing technologies as a means of containing print costs both through third party agencies and via their existing in-house equipment.
 |
| Kyocera's Vella: Software a key enabler for services revenue |
"We believe that SMB customers are paying more attention to the cost of their output," O’Flaherty says.
Addressing this need, HP has developed a pay per page printer program called PrintAdvantage, which it claims allows customers to better monitor and manage print costs. The company reports strong uptake of the program and expects that it will be one of its key sales drivers moving into next year and beyond. For the customer and the reseller, this program also emphasises the fact that colour printing can be done cheaper in-house.
Looking at the enterprise space, cost of ownership and operation naturally remain of chief concern. "The enterprise segment is also coming to grips with outdated copier contracts that no longer reflect their output environment and that represents a great opportunity for HP and its channel," O’Flaherty says.
"Through our enterprise printing solutions and Total Print Management (TPM) services, HP is helping enterprise customers to better control, manage and reduce the costs of their imaging and printing infrastructure." HP reports that its corporate customers have managed savings of as much as 20 percent via its printing solutions.
Glenn Gibson is director of Wholesale Printer Technology (WPT), a Sydney-based distributor that is pushing what he describes as a ‘left field’ channel program of ‘zero cost’ hardware with all sales derived from consumables.
The company is the Australian distributor for the TallyGenicom range of printing solutions, which are exported directly from Japan. Called the Factory Sponsored Program (FSP), it provides the free use of a colour laser printer, which is covered by a free, open-ended warranty plan, so that customers only pay for the consumables they use.
Customers are also unbound by fixed contract arrangements, and can simply upgrade models or numbers as they need.
"From an end user’s point of view the flexibility of the plan and its upgrade path removes the fear and risk of technology obsolescence," Gibson says.
"Also, as it’s a consumables-only plan, the end user can have multiple units in each location with no extra capital cost. Printing 1000 pages on 10 printers is exactly the same cost as printing 10,000 pages on one printer."
For resellers, the benefit is in not having to outlay or pass on any capital expenditure for printing to customers, meaning that the money a customer would normally spend on printing hardware can be spent on other products or services. The program is now being deployed in the UK.
Importantly, Gibson adds, resellers need not worry about losing accounts to vendors going direct. "More and more manufacturers are taking hardware business direct, and specialist consumables suppliers are taking away the aftermarket revenue opportunities."
WPT says that the program has been especially successful in the education and real estate markets where printing volumes tend to be higher and colour is in high demand.
"What it does for the reseller is offer a unique solution for the customer where the Harvey Normans and Office Works can’t compete," Gibson says.
O’Flaherty agrees that consumables are where the real money is in printing. "Like many parts of the IT industry the margin on printer hardware is being compressed."
However, a printer has an ongoing annuity attached to it and too often this margin opportunity is ignored by resellers, she says.
"I’ve often said that if all printer manufacturers stopped selling printers in this country, supplies resellers would enjoy 10 more years of a revenue stream.
"Most retailers are wanting to know now more than ever how to ensure they capture both the printer sales and the supplies sales. Consumables are just the outcome of printer sales and print volume and both are increasing in unit terms."
Ian Fewtrell abandoned the mahogany-row pressures of running multi-nationals down under some years back for a stint at business consulting while contemplating his next move. Surprising himself as much as his former associates, he found himself drawn towards the business of ink.
Having identified a number of established ‘compatibles’ suppliers in China, Fewtrell quickly identified a local niche and around 18 months ago formed Sydney-based InkXpress, which is fast stamping its mark as a supplier of competitive ink and toner products, undercutting ‘originals’ by between 30 and 40 percent.
The company expects to hit turnover of more than $500,000 this year and recently appointed a sales rep in Melbourne.
InkXpress services a growing number of organisations throughout the corporate and educational environments, which Fewtrell says are more than happy to forgo the assurance of genuine consumables for major cost savings.
For years heavily stigmatised by dodgy backyard operators, compatibles are starting to gain widespread acceptance, even at the big end of town, Fewtrell adds, claiming that much of his business is with banks and other large institutions.
"The first myth to dispel is that originals don’t break or go wrong -- that stigma of the old compatibles is out of date. This is a multi-billion dollar business."
Although around 10 percent of all consumables sold in Australia are compatibles, Fewtrell expects this to increase substantially to refl ect other markets such as the UK where the proportion is around 50 percent.
He has also geared his business to appeal to the philanthropical leanings of customers, by giving 10 percent of ex-tax sales to their charity of choice.
Picture a new market |
 |
| HP's O'Flaherty: Resellers ignore annuity sales |
Looking at the consumer market, while colour multi-function products continue to sell like hot cakes, the rising flood of digital cameras is fuelling what was recently an entirely new market segment: photo-printers.
Not only are they appealing for their convenience, but these products have, in relatively short space of time, managed to surpass the quality and durability of traditional prints.
"In the consumer segment the standout opportunity for us is in home photo printing," says O’Flaherty.
HP forecasts that home photo printing will increase by 62 percent or 15 billion photos printed per year over the next three years. Driving the market, it believes, are increasing numbers of digital cameras, mobile phones, PDAs and other handheld devices capable of capturing and storing images.
HP expects that PCs will eventually become unnecessary for digital printing with products like its HP Photosmart all-in-one printer, which provide sophisticated on-board editing capabilities.
HP now claims that users can produce a photo-lab quality 6x4 print for only 50 cents, or an A4 size print for $2.50 as opposed to the professional lab price of $8.00.
Epson sees a big future in this segment too, and has likewise moved to offer printers producing only the standard 6x4 sized prints.
"We’re seeing that area grow quite dramatically," says Epson’s Pleasants. He adds that there is a dramatically better life span for digital copy paper with most digital photos now of better quality than traditional silver halide. "The growth in digital cameras has driven inkjet printing at home to new heights."
And for consumers themselves, as HP’s O’Flaherty puts it, "Who would have thought that you could hold a kid’s birthday party in a park and give all the kids studio quality photos at the end of the party in their show bags -- and the image can last for more than 100 years!"
-1.jpg&w=100&c=1&s=0)
.png&w=100&c=1&s=0)
