The money is in the toner, silly

Duggan talked about a contractual rather than transaction-oriented model for printer sales. With the release of its high-speed,cost-effective multi-function lasers, HP found it began butting heads with the established and contracted office photocopier empires, which charged users on a per copy contract with device, consumables and servicing all bundled into a flat rate per page.

HP and its partners, coming from the traditional IT model which saw the hardware as one deal followed by a series of consumables sales with an increasing service requirement as the printer aged, had to adapt to the customer’s way of thinking.

The added pressure of non-genuine consumables eating into the annuity stream it had done its costings on may have had a lot to do with HP’s thinking about this go-to-market model, but there’s no doubt the company wanted a piece of that hot photocopy market and resellers just weren’t ready to listen. The company was forced to go direct, or so the argument goes.

That’s changing, said Duggan and more resellers are interested in leveraging the ongoing annuity that a consumables contract can bring into their business. “Two or three years ago HP was focused on direct. That has come full circle and HP is now thinking about the channel,” said Duggan. “The difference is the amount of mindshare we are getting from the channel.”

Duggan, goes further, saying MFPs and contractual sales go “hand-in-hand” as though it’s the only way to sell a printer with scan capabilities. “With the launch of MFPs the opportunity was there, but now it is better understood and there’s been a shift away from transactional to contractual sales,” he said. “This has been the most pronounced in the last six months.”

Now HP claims about 10 percent of resellers are taking part in HP’s Smart P.R.I.N.T. (Central. Printing Resource, Information & Technology) programs which help deliver print management services to clients. HP will even white label the service. Resellers are benefiting from triple the margin as a result, said Duggan.

The issue of ongoing consumables sales is one you hear from all printer vendors. Graham Harman, general manager of printer vendor OKI Printing Solutions is another example. Harman stressed how important it is for resellers to get a good share of the consumables spend from the printers they sell and install. “Resellers need to work out how to get that market, or regular stationery retailers get the benefits,” said Harman who said research suggests 50 percent of the cost TCO over the full life of a printer comes from consumables. The next 10 percent is paper. When you factor in other costs, that doesn’t leave much for the initial device cost.

hardware in is money silly the toner