I Saw Bigfoot. Bigfoot Likes MPS.

I Saw Bigfoot.  Bigfoot Likes MPS.

Let’s roll the clocks back about four years.  A little known company called Memjet made its first public appearance in March 2007.  A grainy webcast witnessed by hundreds of the printing industry’s most established players showed a video of an inkjet printer spitting out page after page of color documents at never before seen speeds.  Sixty pages per minute, the presenter said to a hushed audience that was just then realizing that this Memjet company could deliver a color page every second.

A 60-ppm color laser printer in 2007 carried the price tag of a Mercedes.  Memjet’s would be about $600.

But speed wasn’t the only thing that was jaw dropping about Memjet.  Very early speculation suggested that Memjet would revolutionize the ink supplies business.  Memjet disclosed that its printers use very large ink tanks that are over twice the volume capacity of industry standard tanks.  The company also considered embracing ink refill, which would serve as an alternate Memjet’s distribution strategy for supplies.  The company even openly discussed the idea of adopting a Netflix approach to the supplies business, all in the spirit of lowering consumables costs for end-users.  Through its uncommon vision and tactics, Memjet hoped to supply end-users with six months of ink for roughly $15.

After the presentation, Memjet vanished from the spotlight.

Gone.  Bigfoot went back to the woods.

Over the next four years, there would be more Memjet sightings.  A paper trail of hundreds of inkjet patents was tracked, a Memjet prototype was spotted at a trade show, and tall tales about the company were whispered around industry campfires.  Memjet’s plan was to sign companies that would license its technology and sell its blazing fast inkjets under their own name, but no one knew who Memjet had approached or what was promised.  Most said that Memjet was too late to the game and that the company had brought new technology to a mature market that had few, if any, companies who were interested in joining.  Memjet said they had exciting, yet unnamed, customer prospects in all three businesses (labels, photo retail and home/office) and proceeded to establish a forth business – wide format.

In its most basic form, the printing industry’s business model can be summarized by selling low margin hardware, which is then subsidized by profitable downstream supplies sales (see Fig 1):

Fig 1

Cheap ink is in direct conflict with the printing industry’s traditional business model regardless if you are Memjet, Kodak, Lexmark, or HP.  Only by selling hardware at a healthy profit can a printer company sustain a low cost ink supplies business model, otherwise the strategy does not make sense (see Fig 2).

Fig 2

Around the same time, another aberration was developing in the printing industry.  For years and years, printer and copier manufacturers encouraged their customers to re-think their document expenses.  In the spirit of saving on overall costs, copier manufactures suggested that a single multifunction copier could replace a customer’s underutilized fleet of printers.  Conversely, printer manufacturers pressed their customers to replace their big walk-up copiers and array of desktop printers with strategically placed multifunction printers.  Both cases marked the first time customers were pressed to think about their printing habits and were promised lower costs and better service for doing so.

Over time, the concept of more efficient printing took on a life of its own.  Business owners loved the idea of saving money and IT managers were thrilled at the notion of having fewer printers to deal with.  A handful of enterprising businesses then saw an opportunity to make money by managing a customer’s entire document process.

Managed Print Services was born.

In a nutshell, Managed Print Services (MPS) brought the copier business model to the printing industry.  A customer would pay a MPS provider a monthly retainer (contract) to manage, maintain, service, and supply its entire fleet of printers.  For customers, a MPS contract would eliminate not only the hassle of maintaining their printers, but would also allow them to have far more control over their supplies costs (ink & toner).  For a Managed Print Service provider, the business model enabled them to secure profits based on their monthly retainers by 1) eliminating the number of printers used by a client, 2) lowering their own ink & toner costs when resupplying their customers, and 3) by selling printers as the client grows or as their existing printers die off.

The MPS business model completely contradicts the traditional printing business model that stresses high supplies costs.  In the MPS business, the service contract is the profit center (see Fig 3).

Fig 3

Las Vegas, Nevada. January 7,  2011.

I saw Bigfoot.  I could not believe my own eyes as the Memjet printer pushed through color documents at one page per second.   I even captured the sighting with my video camera inside the Lenovo Product Showcase at CES.  Memjet announced Lenovo China as one of its first three partners for the office market:

Witnessing the new Memjet Office Printer at work is truly a sight to behold, even if you think printing is as exciting as toasting bread.

Memjet also clarified its ink supplies business model , which relies on a network of  authorized partners, qualified by Memjet’s OEM’s to distribute Memjet brand supported ink.  Those partners, who could potentially number in the thousands worldwide, would serve as a global network of re-fillers that stock Memjet-certified ink and potentially refill systems.  That vast network  of re-fillers could leverage the massive production and distribution channels used by other consumer and office printer manufacturers or replicate it with traditional refill partners, saving Memjet’s partners countless millions of dollars in costs.  Those cost savings translate to more affordable supplies for end-users and Memjet’s proposed 1 cent black & white, 5 cent color cost-per-page claims are among the most competitive in the inkjet industry.

Given Memjet’s concrete plans to revolutionize the printing industry with blazing fast print speeds and attacking its traditional consumer and office printing business model, a market opportunity became clear:

Bigfoot likes MPS.

Memjet’s willingness to allow its OEM’s to put their name on a printer and the company’s reinvented ink supplies business model seems a perfect fit for the burgeoning MPS market (see Fig 4).

Fig 4

When it comes time for a MPS provider to replace a client’s dead printer, a Memjet based printer would be a strong solution.  A Memjet-powered color printer would be a very low cost investment for MPS customer ($600 vs. $4,000) and will give the MPS provider complete control of its supplies costs, something no other printer manufacturer can or will do.

With the opportunity come a number of challenges that Memjet faces before it becomes an industry leader in the MPS market.  Equipment consolidation is a major factor for MPS providers when choosing a product, as they are motivated to replace multiple products with a single device, which lowers the provider’s overall costs.  Memjet has yet to develop a multifunction printer, which may be a set-back in the company’s future MPS plans.   MPS providers also love products that can duplex (print on both sides of a page), which again speaks to lowering overall costs and is a feature missing from Memjet-made devices.

Memjet also has to establish its reputation in the printing industry.  MPS providers are motivated to keep costs down and covet devices that are durable, require little maintenance, and can stand years of abuse, all of which will take time for Memjet to prove.

Among the three partnerships Memjet signed last month and announced at CES (Lenovo, Kpowerscience Co., Ltd., and WeP Peripherals Ltd.), the biggest may prove to be WeP Peripherals of India, the country’s largest MPS provider.  Through WeP Peripherals, Memjet’s business model of providing low cost supplies and the durability of its products will be put to the test.  A successful WeP Peripherals partnership may be the fuse that lights an explosion of Memjet MPS partnerships worldwide and can be the foot in the door for countless companies who want to be in the office printer business.

MPS may keep Memjet out of the woods.  The path starts in India.