Samsung Electronics has been aggressively investing in the development of its Printing Solutions business for the better part of the past decade. The significance of this investment to Samsung cannot be understated – the vendor views printing as the next wave of its growth, following chips, TVs, and mobile devices. Printing is a key element to Samsung Electronic's goal of growing B2B sales to beyond 20% of total revenue and helping achieve the vendor's ambitious Vision 2020 sales target of $400 billion.
The significance of this investment to Samsung cannot be understated – the vendor views printing as the next wave of its growth, following chips, TVs, and mobile devices.
To emphasize its commitment to the print industry, Samsung recently invited members of the U.S. analyst community on a tour of its Suwon- and Seoul-based headquarters in Korea during the first week of February. The two-day tour was hosted by leadership from the Printing Solutions divisions of Samsung Electronics Co. (Korea) and Samsung Electronics America (SEA), with the three goals of expanding analysts’ understanding of the Printing Solutions business, increasing visibility of the Printing Solutions division by leveraging analyst networks, and soliciting analyst feedback. During the tour, Samsung provided insight into its vision and strategy through executive presentations, 1on1s, and tours of its facilities.
The following provides an overview of Samsung Printing Solution’s long-term vision and strategy to accomplish its goals, with some gap perspective and analysis along the way.
Market Opportunity and Samsung Goals
Samsung rightly acknowledges that the printing industry remains very large and very profitable, despite flat or declining unit sales and page volumes. The vendor estimates that the printing solutions industry is one of the top-3 IT industries in terms of global market size (other industries include smartphones and PCs), and estimates that the B2B printing solutions market is around $114 billion. In addition, while Samsung didn’t forecast margins, it is gap's expectation that the vendor will generate greater profitability in printing than in its mobile device and PC businesses.
Looking to this market opportunity, Samsung reiterated plans to further evolve its business structure beyond its traditional B2C operations to support B2B sales growth. In terms of sales targets, the vendor expects B2B to generate approximately 21% of total Samsung Electronics revenue by 2020, with an unspecified, though likely measurable, contribution from Printing Solutions.
Samsung's ability to achieve its lofty goals will require continued investments in Printing Solutions, an aggressive strategy, and channel development that together result in competitive share gains.
Samsung Electronics is seeking to grow its overall business from about ₩200.65 trillion (~$167 billion) in 2015 to $400 billion by 2020 (possibly a "reach" goal). Therefore Samsung’s B2B sales, at 21% of total, would represent about $84 billion by 2020. Assuming a conservative B2B sales contribution from Printing Solutions of 10%, this would translate into a Printing Solutions B2B revenue target (again, likely a reach) of approximately $8 billion by 2020 (note that print leader HP reported $21.2 billion for its fiscal 2015). While these are rough estimates, it remains clear that Samsung has set a very high bar for itself, despite scaling back its goals compared to past years (Samsung previously targeted "#1 printing brand by 2020"). Samsung’s ability to achieve its lofty goals will require continued investments in Printing Solutions, an aggressive strategy, and channel development that together result in competitive share gains.
The strategy outlined by Samsung Electronics leadership in Korea last week largely mirrored the strategy outlined by SEA at its National Dealer Meeting in September 2015. Overall, Samsung observes that forces including mobile/cloud technology and an evolving definition of the office are driving significant change in the printing industry. With this change – what Samsung often refers to as a "paradigm shift" in the market – the vendor believes that, similar to its entry into TVs and smartphones, it is better positioned than its competitors to leverage its technology leadership and capture market share.
The Printing Solutions group’s strategy leads with a number of strengths, including Samsung’s printing hardware portfolio, its end-to-end in-house engineering, the Android-based Smart UX solutions platform, competencies in mobility, cost competitiveness, Samsung’s brand strength, and its greater electronics portfolio. Samsung also continues to emphasize the importance of its dealer-led channel strategy, while acknowledging that it will likely have to evolve its business structure in order to target and support the large customers that will generate its desired growth rates.
One core element of Samsung’s strategy is the breadth of its hardware portfolio, including small office devices up to the vendor’s first 60ppm A3 copier MFPs released mid-2015 (the "MX7" series). In addition, Samsung proudly recognizes that most of its printing technology, including hardware components and supplies, as well as the Smart UX solutions platform, are developed in collaboration with Samsung’s various business groups, such as Samsung fine chemicals (toner development) and Samsung Advanced Institute of Technology (new materials, technology, simulation).
Samsung claims that its in-house development results in both innovations and time-to-market advantages versus many of its competitors in the industry, as well as cost synergies that can translate into partner margin expansion. However, Samsung leadership also recognizes that competing on hardware specifications, time-to-market, and pricing, while advantageous, is only one component of its larger strategy to differentiate itself from industry competitors.
Smart UX and Solutions
Despite frequent occasions to highlight Samsung’s hardware portfolio, and specifically the MX7 flagship MFPs, it was the Android-based Smart UX solutions platform that was positioned as the core element of Samsung’s plan to differentiate itself. In conjunction with large tablet-like displays on many of its MFPs, Samsung notes that its UI is immediately familiar with a range of users that are accustomed to mobile devices.
…it was the Android-based Smart UX solutions platform that was positioned as the core element of Samsung's plan to differentiate itself.
Samsung stated that it has generated growth in several key metrics of its Smart UX platform. Since its launch, the Smart UX portfolio has expanded to include a total of 33 apps, while user downloads exceeded a monthly total of 56,000 in Q4 2015 via the Samsung Printing App Center, with the greatest number of downloads occurring in South Korea, the U.S., and Western Europe. Samsung specifically highlighted and demonstrated its new Dynamic Workflow application that was launched in December 2015, which enables users to customize workflows leveraging multiple apps into a single shortcut.
The vendor’s SDK has been downloaded a total of 195 times, with an approximate 60% of downloads generated by software developers. Despite this growth, Samsung recognized that it must continue to invest in opportunities for platform expansion, including additional support for dealers, software developers, and ISVs. Samsung also conceded that the success of its platform will largely hinge on a significant increase of Smart UX-ready printing devices in the field.
One area of development is Samsung’s not-yet-disclosed plans for a platform that enables dealers to monetize apps that they and/or software partners develop. First discussed at SEA’s 2015 National Dealer Meeting, Samsung has not yet announced any of the platform’s details, however company executives did state that an e-commerce service would enable Smart UX to serve as not only a competitive differentiator, but also an incremental revenue source for channel partners. While Samsung did not provide estimates for the size of this market opportunity, it noted that mobile app portfolios are becoming increasingly saturated and that Smart UX could therefore become a new ecosystem for developers to migrate to.
Samsung stressed the importance of its leadership position and deep expertise in the mobile industry as a core differentiator and competitive advantage in the printing industry. This is based on Samsung’s observation that office environments are changing rapidly, with mobile and cloud technology dictating changes in printing behavior. This, in turn, is a component of Samsung’s belief that its larger portfolio (and brand) serves as a major differentiator – what the vendor has referred to as its "seamless digitization workflow."
Specifically, Samsung emphasized its support for a range of mobile print solutions, including its own proprietary apps, its in-house PrinterOn technology, and its growing fleet of NFC-enabled printers (complemented by Samsung NFC smartphones). The vendor also stated its commitment to the Mopria alliance as one potential solution to the fragmented mobile market and low public awareness of mobile print. Samsung stated that its stance in the mobile market is ‘flexible’ to capture opportunities as they occur, confirming most vendor and industry observations that mobile remains a small and still fragmented portion of the print market. Statements from industry sources suggest that mobile pages represent a fraction of total pages today, but Samsung as recently as late-2015 predicted mobile pages could see 20% CAGR in the coming years, representing an opportunity where Samsung could capture disproportionate pages based on its positioning.
A theme among Samsung’s various presentations and discussions last week was managing and competing on cost. The most prominent component of this message, which intersects with Samsung’s mobile-led strategy, is the development of its Smart Printer Diagnostics System (SPDS) and RemoteCall solutions, which were launched in June and December 2015. Both solutions are designed to improve device diagnosis and troubleshooting, and Samsung positions the applications as a means for its dealers to expand margins by reducing customer visits and improving device uptime.
As noted, Samsung continues to emphasize the role that its dealers play in its channel-led business structure. In terms of its B2B growth strategy, Samsung views its dealers as a customer’s trusted advisor in the buying process, and stressed that this role is highly critical given the brand indifference it has observed among end-users. In addition to tools such as RemoteCall (above), Samsung offers a range of other dealer-oriented resources, including the Partner Training Program, the mobile-based Samsung Printing Catalog (SPC), and the Marketing Support Portal (MSP).
However, Samsung acknowledged that its ability to achieve its growth targets will require the Printing Solutions division to capture business with mid-market and enterprise customers that are typically too large for Samsung dealers. Yet, to-date, Samsung Printing Solutions has maintained a dealer-led business structure. With that, it appears increasingly likely that Samsung will invest in the development of, or possibly acquire, a direct presence that will expand Samsung’s addressable market and potentially accelerate sales growth. While Samsung has largely avoided channel conflict and made very few direct purchases, the vendor did acquire Simpress of Brazil in December 2014, which at the time was viewed as one of Samsung’s first attempts to expand beyond its dealer-led structure.
Throughout its two-day analyst tour, Samsung Printing Solutions provided a significant amount of visibility into its actual operations, its achievements, its vision for the company, and its strategy to reach its ambitious growth targets. As a relatively new entrant in the printing industry, Samsung has the unique opportunity to continue evolving its business with less conflict from legacy interests, programs, and structures that can hinder a competitor's ability to change. The vendor has created what appears to be an effective strategy for portfolio leadership, channel partner support, and differentiation through mobility and a solutions ecosystem.
In order to meet its sales growth targets, it is gap intelligence's opinion that Samsung must continue to invest aggressively in the development and support of its channel, evolve its solutions platform, and acknowledge to itself and its partners that the creation (or acquisition) of a direct presence in the relatively near term is the only practical means of achieving the sales growth it desires by 2020.