Print Copy Fax Scan - A Maturing Industry in Turmoil?

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Billy Bell.jpg"Our experience of the print, copy, fax, and scan strategies within medium and large corporate companies has revealed an absence of strategic empowerment to the corporate decision from the traditional supply chain" Billy Bell of SDC a tells SmartProcurement . "Whilst this is contentious because companies should ensure they make proper decisions and it is of course their primary responsibility, one wonders where the industries responsibilities lie in ensuring their customers get the appropriate advice."
High inefficiencies
"The result of the current situation is that organisations exist with significant inefficiencies with high costs and low employee productivity. This is represented by an over-abundance of ageing, inappropriate equipment and archaic deployment strategies that are irrelevant to the needs of the environment."
 
"SDC's potential in this sector has created between 20 and 50% cost reduction through upgrading the existing equipment and deployment strategy, transforming the supporting processes and integrating effective supplier and strategy management."
 
How did organisations get to this situation?
"SDC believes that the suppliers have, as is the case in many immature markets, have focused mostly on their own objectives such as market share and profitability above that of their customers.
 
Many business gurus have predicted that companies need to orient their value proposition around their customers' business objectives to achieve long term sustainable relationships. This however is an indicator of a mature business market and the serious players have adapted already and survived.
 
Whilst output equipment manufacturers are spending vast sums on research and development to bring devices to the customer that are innovative and user friendly, the supply chain fail to understand the requirement in the corporate to set effective strategies prior to the installation of the equipment. Replacement strategies alone just exacerbate the issues that are not being recognised or dealt with.
 
As a result decision makers find it difficult to obtain crucial information from the industry that would change their strategic direction and lead to competent up-to-date strategies.
 
We clearly are in a transitional stage in the output market and it will be interesting to see which of the local representatives will adapt to the rush of interest from large organisations towards regenerating the existing output strategies and achieving the promised efficiencies."
 
"The divided supplier-based technologies
The traditionally separate manufacturer-based supply chain and divided organisational management of printer-based and copier-based equipment has added to the complexity of the environment. This market has now merged and it is becoming increasingly difficult to differentiate between the manufacturers as the technology and total-cost-of-ownership gaps narrow.
 
In organisations copiers were always highly expensive to procure, remained deployed at a departmental level and were seen as "capex"; hence they remained under finance and procurement whilst networkable printers became the responsibility of IT due to the connectivity on the network. Printer capital costs are more often under the capex threshold and therefore are operating expense-level. Hence the explosion of the printer device count as printer units get thrown at poor SLA resolution negotiation and IT battle to contain the user demand.
 
Printers can copy and copiers can print, however printer based equipment is relatively inexpensive to procure but contains high running costs. Copier-based equipment is relatively expensive to buy and contains low running costs. How then does the decision maker decide which device is appropriate and when, especially when two groups of people are making decisions separately for what is now essentially the same technologies and functionality."
 
The cost of good advice
"It is interesting to note that the majority of printers, that dominate the unit count and absorb the majority of volumes, are sold through a distributor~reseller channel that make little margin from the supply and focus most of their real value on other IT products such as networking.
 
The cost of good advice is just too high, especially when the after sales annuity income streams such as consumables and maintenance go to other channels. The printer brand custodians invest little in direct representation since their primary customer is the distributor and hence the corporate decision maker will be lucky to receive any value transfer.
 
Brand versus customer focus
Copier based resellers do focus on their customers' needs and are dedicated with enough margin to sustain the business, but fail to counter the printer installation and low printer entry prices, looking myopically at the copier-based business alone, whilst the volumes go elsewhere, albeit on expensive-to-run equipment.
 
This is due to "brand focus" as opposed to a "customer-centric" focus since the copier brands generally don't cover the low to medium printer equipment that organisations require, or if they do they just can't match the low-end total cost of ownership of the printer-based market leaders.
 
It's a wonder why the local representations, or for that matter the international manufacturers, don't acquire or adopt a complete product offering since the majority of the corporate spend is on printer based equipment.
 
Locally there is a huge call for a multi-branding approach with a single service level agreement just to give the customer optional functionality and a single point of contact.
 
The corporate result of the divided responsibilities and lack of integrated value transfer from the industry are:
  • high capital costs due to under-utilisation of expensive capital equipment;
  • high running costs since the volumes go to expensive-to-run devices;
Organisational strategic focus
Organisations place little strategic attention on non-core business activities and cost structures that are perceived to be immaterial. As a result most of the selling and buying decisions on low risk commodities have been dictated by the suppliers with the belief that the area contained low risk to the business.
 
Once the document output costs are consolidated and the employee efficiency impact is recognised the area becomes increasingly seen as requiring increased attention since the area represent annuity based costs and the long term effects have been expensive. We only have to consider the settlement on the rental contracts to see the contingent liability and the requirement for suitable asset governance.
 
1995 strategies still reign
It is this reason that most of the current corporate strategies relate to the technology and processes available in 1995, even though technology has shifted significantly with increased speeds and functionality (multifunction etc) at drastically lower price points. This is known as a convenient print and a departmental copy and fax strategy. In 1995 the fastest network laser was 16 pages per minute. With a high print demand convenience printing was therefore an acceptable strategy to keep the user base productive.
 
Absence of formal policies and procedures
Departmental management make most of the printer deployment decisions as IT, in their service-oriented fashion, supply what business want instead of investigating what they need, offering a predetermined strategy and applying the appropriate decision. Rarely in fact have we found a formal strategy in play that is used as a framework for each decision and that the organisation would have to support.
 
Cost allocation
Departmental ownership of devices due to cost allocation requirements result in duplicated device count without consideration of the volumes and capacity usage. We find most companies utilise less that 20% of the technical capacity of the devices resulting in abnormally high capital cost elements. Within three years the running costs of the devices cause an "economic redundancy" as manufacturers strive to keep new products competitive in their drive for unit-based market shares. The result is that again most equipment just costs excessively on the swings and round-abouts.
 
Whose responsibility is Decision Empowerment?
SDC believes an industry is required to lead the way with appropriate strategy advice. Recognising the clients' inability to make sound decisions, for whatever reason, should therefore lead to good advice before ambiguity, appropriate deployment before profit opportunity and unit market share. Yet time and time again we find large companies exist with:
  • ink-jet printers - these are designed for the small-office-home-office and are the most expensive technology;
  • no consistencies between devices, employee counts and volumes, indicating a complete lack of strategy application;
  • deployment ratios of between 1 device per employee to 1 between 3 when best practice would be around 1 to 6 or 8;
  • huge investment into single-function equipment;
  • lack of life-cycle management;
  • copiers and multi-function devices sitting in obscure locations without ever being used more that 10% of technical capacity;
  • rental contracts being settled because the device did not last the financial rental period;
  • 70% of devices are more than 3 years old with high running costs;
  • more than 50% of printers are parallel attached and therefore are available to one person only;
  • onerous minimum billing contracts;
Accelerated maturation shows positive signs
The converged technologies have caused an accelerated maturation of this market. The increased competition and customer awareness of the inefficiencies has caused:
  • capital prices on copier based equipment to decline rapidly;
  • running costs on printers to become more in line with their copier-based competition;
  • colour costs are still accelerating towards the mono level;
  • a commitment to new business relationships and service such as outsourcing or managed print services;
  • current economic redundancy of within 3 years;
  • equipment life cycles have reduced to between 9 and 18 months;
  • the new opportunity of economic redundancy;
Customer awareness and strategy requirement
Many organisations have become aware of the onerous inefficiencies in the document output and are ready to look at new ways of addressing their employee document output needs.
 
It is apparent however that the resellers are still highly technology-focussed and the corporate companies need to see how to set the appropriate strategy first. This would require:
  • creating a vision of a future strategy based on the technologies, the business environment and the future of the company;
  • looking at business relationships first and their applicability to the future vision;
  • setting policies and procedures to allow a consistent governance within;
  • understanding the existing environment and creating a sound business case to support the vision;
  • reviewing the service levels required to support a centralised, balanced deployment or a dedicated printing approach;
  • how to transcend towards a new strategy, cater for the high sensitivity of the area and utilise effective change management;
  • consideration of existing financial contracts and how to deal with them;
Once these considerations have been dealt with you are ready to look at the technologies and equipment you need.
 
The bottom line
The bottom line is great efficiencies are possible but these are going to come from sound confidant business decisions that are appropriate for your organisation. At this stage it is questionable whether the supply chain has broken away enough from the traditional hardware based focus and whether they will deliver the value, information and intellectual property transfer to empower the corporate decision.

The author of this article, Billy Bell, specialises in developing strategies for optimising document output in corporates. He can be contacted on (+27) 82 888 3218 or see Billy in action on the .16th of April 2008

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