It’s hard to define a year. Some folks may call 2010 a recovery year. Other print industry watchers may call it the year of MPS, the year of services, or the year of the A4s depending on their focus (or bias). Whatever you want to call it, 2010 was certainly quite eventful and I believe set the stage for an even more exciting 2011, especially if the economy cooperates. With that, and in honor of the king of top-tens, David Letterman, I give you the top ten office and production printing themes of 2010 (not necessarily in a particular order).
10) CBS Puts Spotlight on MFP Security
Security has been a major focus of copier vendors for years, but a single 5 minute exposé by CBS News in April changed the way both the manufacturers and clients view the safety of the documents held on an MFP’s hard drive. In the news segment, an undercover team acquired three off-lease MFPs from a New Jersey area wholesaler and within hours were able to extract private information from each unit’s hard drive including medical and police records. One copier actually had original paper documents still on its platen glass! It didn’t take long for local news outlets and the print and online media to take hold of this story and turn it into a mainstream topic overnight.
Before I knew it, my work-related conversations with distant relatives changed from “What’s new in the copier market? My MFP is always broken” to “What’s new in the copier market? I heard they have data security issues.” This really happened…
Although many vendors were quick to call the CBS piece overly sensational (and it was), most of these same manufacturers also swiftly took this opportunity to bolster their MFP security offerings and integrate security into their marketing messages. Within weeks, nearly every major vendor released an announcement touting their largely similar security capabilities and as the year progressed each new MFP product launch brought a higher level of standard security features – most of which were previously offered as options. Many vendors and dealers also began to integrate document security as a component of their overall offerings, either as part of the implementation of a MPS program or as an end-of life value-add/revenue generator.
Eight months after CBS changed the way misinformed second cousins everywhere view copiers, data security has never been as important from both a product and marketing standpoint. And at least for the foreseeable future, it appears that vendors will continue to look to security as a way to create diversification and add value to their products and services.
9) The Yen
Each of my top ten themes of 2010 have been very influential, but if you ask many players in the industry, most would agree that the strength of the yen (strongest in 14 years) has had as big of an impact on their financial performance as any competitive change or event. The same could be said to a somewhat lesser extent for the American printer and copier companies that largely source their engines from Japan, making just about every possible vendor affected by this shift.
1 US dollar = 84.3400 Japanese yen
You could take my word for it, or you could take Canon’s who said in July that for every one yen increase against the dollar, its six-month operating profit falls by 4.7 billion yen ($56.33 million!!). And…in the last 6 months the dollar has fallen over 10 percent versus the yen to 84.2 yen for every dollar.
8 ) The Energy Consumption Race
The speed race (for office MFPs) is over, having a complete line of color copiers is no longer a competitive advantage, and everyone has a third party solutions platform. So how does an eco-minded and margin-conscious vendor compete without just offering a better price or investing to expand their direct sales and channel presence? That’s right, provide a more eco-friendly product and do a better job presenting this advantage through sales and marketing.
Like most other major trends of 2010, the idea and practice of reducing the environmental impact of manufacturing and operating MFPs is not new. However, the technology allowing for greener MFPs and the execution of vendors’ eco-based sales and marketing efforts improved significantly this year. With the introduction of new low-melt toners, increased adoption of recycled and biomass components, expanded use of LED print and scan engines, and a continued focus on warm-up and recovery times, the once obscure TEC rating reached a level of importance that now rivals the printing industry’s previous star acronyms.
Vendors are quickly realizing that many deals require that their sales force support their usual PPM, TCO, CPC, and MPS acronym selling points with feel-good environmental metrics to close deals and hopefully save a couple inches on the polar ice caps.
The acquisition and integration of vendors and resellers has been a major theme in the office and production print industries for many years and 2010 was certainly no exception. However, outside of the acquisitions of a handful of software players, service providers, and regional dealers, much of this year’s printing-related integration activity revolved around Ricoh and Canon’s respective efforts.
Ricoh and IKON
With the acquisitions of Lanier and Savin still quite fresh in most industry watchers’ memories, it is safe to say that IKON is not Ricoh’s first integration rodeo. And although the lessons learned in these previous acquisitions were certainly applied, the first two years of Ricoh’s latest endeavor brought their share of challenges. While IKON’s efforts throughout recession-impacted 2009 were focused on selling as much as possible with some targeted integrations (HR, IT, and UK Production), 2010 was identified as the year to really begin synergizing. On a nation-wide level this integration initially took the form of combining non-sales operations (admin, billing, call centers) and later the integration of IKON and RBS’ regional and area branch management, while the two direct sales entities still function under separate brands (Not unlike RBS and Lanier direct). Meanwhile the assimilation of IKON at Ricoh headquarters followed a similar path as previous integrations, as much of the newly acquired company’s leadership landed in positions at the top ranks of Ricoh US and Ricoh Americas.
There have been some indications that the IKON brand will essentially be retired, which was the case for Ricoh/IKON Canada this summer, but overall the future of Ricoh and IKON has still yet to be determined (or revealed). Regardless of what the future brings for the IKON brand, with most back-end and management integration complete, it is now up to Ricoh to prove that the addition of IKON’s massive sales presence and services acumen will result in a similar increase in sales and more importantly, profitability.
Maybe then Ricoh will ramp up its integration of InfoPrint…
Canon and Oce
Ironically, Ricoh’s acquisition of IKON was also a driving force behind 2010’s other major integration. In November 2009, Canon found itself with a huge channel void following its loss of IKON and some serious hurdles to achieve its production print, wide format, direct sales, and services goals. One thing Canon did have was plenty of money in the bank and almost no debt, clearing the path for its acquisition of cash-strapped Oce and (eventually/theoretically) helping the vendor over each of the aforementioned hurdles.
Canon and Oce have made no secret of the currently integrating companies’ cross-selling relationship and the two certainly put their PR teams to use with no less than 16 related announcements in the last six months. Of course, most of these announcements have been merely formalities, as Oce’s direct sales operations have likely been carrying much of Canon’s office MFP and color production lineup for months. However, there is not much else to promote, as the continued hold-out of several remaining shareholders still limit Canon’s voting rights at Oce to 87 percent. Dutch law requires that Canon must have 100 percent voting rights to achieve total control or make structure-changing decisions and the vendor cannot change its $8.60 per share offer until March 2011. So Canon and Oce will continue to focus on cross selling until then.
Canon and Oce originally targeted a two to three year integration roadmap and it is unknown how this unintended delay will affect their integration plans, but there is no doubt that 2011 will also be an integration year.
6) Panasonic Exits A3 / Samsung Entering?
The A3 consolidation forecast crowd got another feather for their caps in April when Panasonic announced plans to exit the copier market to focus on expanding its line of A4 products. Panasonic will continue to produce new A3s through Q1 2011 and will supply parts until Q1 2018, but you will have a better chance of seeing a Panasonic MFP on a retail shelf than in an enterprise-level bid going forward. You did not have to be Nostradamus or even Yogi Berra to see this one coming, as Panasonic’s investment in its A3 products and channel have been waning for years. But considering that Panasonic’s exit came in the wake of Canon’s acquisition of Oce and a procession of pro-A4 reports, it was hard not to see it as a sign of things to come.
However, rising above the murmurs of A3 consolidation emerged news of a new player entering the ledger size arena. Yes, Samsung. After several years of marketing re-branded Toshiba A3s in Korea and fully exploiting its A4 niche across the globe, the electronics giant shifted its focus to include the copier market with the likely goal of offering a complete range of solutions within the office printing space. In fact, it could be said that Samsung’s full-line ambitions extend beyond printing to becoming a complete IT provider with a lineup that includes printers, computers, monitors, projectors, and servers – and this product expansion is just another step toward that goal.
Focusing on the entry-level color sweet spot, the 35-ppm CLX-9350ND and 25-ppm CLX-9250ND color A3 MFPs have been making their way west, starting in Korea late in the second quarter and reaching Europe by the end of Q3. We are running out of time for a US launch in 2010, but it looks like the new color A3s and possibly 30 and 40-ppm monochrome copiers are on their way. Samsung certainly faces its challenges in expanding to A3 products as it must convince its A4 dealers that its A3 solutions are also right for them and their clients, in terms of performance, value, and reliability – especially given that many of its dealers already carry at least one established A3 brand. However, one lesson analysts across gap intelligence’s various research categories have learned is not to underestimate Samsung when it targets a new product category and A3 MFPs is no exception.
5) Vendors Become the Channels
Call it brand agnosticism, call it a revised channel and product assortment strategy, call it a reaction to all of the channel consolidation and acquisitions, but the theme of selling through other vendors has become increasingly prominent in the last year.
This phenomenon really kicked off in July of 2009 when Toshiba announced a new strategic agreement with HP that would allow its dealers and direct subsidiaries to easily sell and supply HP printers (TABS runs a similar program with Lexmark too). Within two months, HP announced plans to supplement its A4 line with Canon A3 MFPs for its North American and European major enterprise MPS deals. By May of 2010, Konica Minolta had revealed plans to resell Kodak’s DigiMaster production printing systems in addition Kodak’s document scanners (Kodak already sold its presses through Ricoh and IKON). And just a few months back, HP announced plans to sell Toshiba A3s in Asia Pacific MPS deals, filling the remaining geographical holes left by the Canon supply agreement. Combine these agreements with the introduction of Canon’s MFPs across the various Oce Imagistics branches this summer and Oce’s agreement to sell its presses through offset giant manroland just this month and there has been an unprecedented number of vendors selling other company’s products.
Really cross-selling agreements are not all that new, but an increasing number of vendors have come to a realization that these partnerships are a very useful way to either expand their channel presence or product assortment, and they certainly became more popular in 2010. I believe we can expect the same going forward.
4) The Phone and the Cloud
When I first began my transition to the enterprise printing space, a colleague summed up the motivation behind most MFP solutions with a single phrase: “It’s all about building a better funnel between the data and the page.”
This of course proved to be completely true. And it did not take long for vendors to come up with their newest funnels, as businesses finally began to implement cloud services and mobile communication and computing devices approached ubiquity. While access to the cloud from an MFP is certainly not where it will be several years from now, 2010 brought new cloud-connected solutions from a number of vendors and promises of future cloud capabilities from nearly every player. Meanwhile, mobile printing solutions are emerging from all angles, including offerings from MFP manufacturers, inkjet vendors, third-party solution providers, and whatever you want to call Google and Apple.
3) The MPS Tea Party
The MPS Tea Party has transitioned from being viewed as a loose-nit group of fringe extremists to a very influential market force. And the major parties are certainly taking notice and embracing the MPS Tea Party message to gain more votes – I mean place more boxes, capture more clicks, and maintain their piece of the printing market pie.
Sure the Tea Party activists are just now settling on a definition of MPS, and some forecasts by Tea Party “thought leaders” could be seen as grossly exaggerated, but the public has spoken and it’s clear that they want lower costs, intuitive workflows, and common sense printing infrastructure.
Of course MPS is more of a 2000’s phenomenon than 2010-only, but the most hyped printing sales and management model since the metered click is changing the way copiers and printers are sold now and into the future. In addition to the less positive page volume, MIF count, and OEM toner usage implications of this transition, MPS is really forcing vendors and resellers to focus on selling solutions (not just saying it), providing companies with a new level of infrastructure workflow support, and supplying dealers with an unprecedented level of tools and resources.
It will be interesting to see if the grassroots Tea Party campaigners stay true to their beliefs or fall in line with the box-pushing powers that be once sworn in, but you can bet that MPS will make it on my Top 10 of 2011 list.
2) No Ignoring A4s
The writing has been on the wall for some time. Copier vendors have a lot of reasons to include A4 MFPs in their product portfolios. Page volumes are falling, A4 MFP feature sets are evolving, A4s are proving to be logical MPS options for a myriad of scenarios, and the price/value equation of A4 MFPs in many office environments is becoming increasingly favorable. If that wasn’t enough, this year’s market share data removes any doubts, as the leading market share growers were not the A3 vendors that have been snapping up mega dealers and competing vendors, but the A4 vendors with the right products and ownership costs.
With all of these reasons surely in mind, 2010 brought some notable entries into the A4 arena, as Konica Minolta and Ricoh Europe (US soon) took their first honest-to-goodness A4 workgroup MFPs to the market, Sharp refreshed its trend-setting A4 line, and Canon revealed a prototype 50-ppm to 60-ppm monochrome A4. The challenge for many copier vendors will be effectively establishing justifiable TCOs for their A3 and A4 lines to avoid channel confusion and limit cannibalization. But the fact of the matter is that they are going to have to eat some of their own young to build a solid A4 presence.
If there is anything to be learned from 2010, it is that there are a number of hard truths facing the printing industry and the key for success is making sure we adapt to these market changing influences. Just ask H.G. Wells. If that means investing in the development of an A4 line to provide the best solutions for clients and resellers, even if it’s at the expense of hardware margins or the relevancy of low-volume A3s, it’s still worth it. So watch out Segment 1 and 2 A3s, not to mention the numerous printer manufacturers who are about to see an influx of A4 competition, this trend is not going to change in 2011.
1) Shift to Services
With the benefits of IBM’s repositioning as a service company now proven and the results of HP’s acquisition of EDS becoming extremely clear, services quickly became a hot topic among printing industry players in 2010.
Xerox led much of this latest services charge with its acquisition of ACS, adding a BPO powerhouse to its already respectable IT services business and market-leading MPS operation. Less than one year later, Xerox doubled its Q3 profits and grew its revenue by 68 percent, as the company began to realize the synergies and opportunities provided by ACS. 2010 only really marked the first phase of Xerox’s ACS integration and its associated services transformation, and the company would certainly maintain that most benefits of the integration have yet to be realized. Xerox was already fully invested in positioning itself as a “document company” before the acquisition of ACS, but the message is now abundantly clear that Xerox is a services company.
Xerox’s View of the Services Market
Of course Xerox was far from alone, as we saw most other major players increase their focus on services throughout the last year. Dell certainly helped lead the acquisition trend with its 2009 purchase of Perot Systems and has made no secret of its future services ambitions. The always conservative Canon was not in the position to make a services acquisition this year, given its ongoing integration of Oce (which also has a solid services business) and the quickly shrinking field of service providers available for acquisition. However, the vendor certainly expanded its services capabilities with the launch of a cloud-based MPS and IT services partnership with Fujitsu and the initiation of a European enterprise management service collaboration with Accenture. Meanwhile, both Ricoh and Konica Minolta addressed their own enterprise services offerings and pledged to bring new services programs and tools downstream for use by dealers and targeting SMBs. Less than two months ago Toshiba, which already had a MPS operation that far exceeded its market share, announced a reorganization to position itself as a services-led company. And you can bet that Toshiba will not be the last to do so.
Overall printers and pages are still driving most of these companies and paying for their diversification, but it is becoming quite clear that the road they are going down leads to services.