Not really, actually. I’m still very interested in it, but I thought it was an attention-grabbing title and would serve as a good warning that this blog will not be about Managed Print Services. Instead, our latest blog will focus on a handful of notable trends ripped from the Price and Promotions Report Excel cells and Market Intelligence Report paragraphs that gap intelligence publishes on a weekly basis..
I hope the print industry will be ok with one less opinion piece about MPS…
HP’s Big Surprise
For those still in shock over the news that HP plans to spin-off or sell its PSG group as it continues its transition to a services-led business model, a visit to our Dashboard should help put things in perspective. A quick search for the terms “HP” and “Acquire” spells it out pretty plainly, HP has placed an overwhelming focus on building its enterprise services and solutions repertoire throughout the last five years, while largely relying on organic growth to drive its already-dominant printing and PC businesses.
That’s 18 acquisitions of enterprise services, solutions, storage, and security vendors (counting Autonomy); six printing and imaging acquisitions; and two PC and mobility acquisitions. And although HP did not reveal financial details with many of these acquisitions, it is a very safe assumption that enterprise software and service’s share of HP’s total investment dollars during the last five years is closer to 90 percent. Just EDS and Autonomy alone combine for over $24 billion in purchases.
Everyone has been quick to attribute HP’s recent spin-off statements to the downfall of webOS, the emergence of tablets, PSG’s profit margins, and the services-led mindset of Leo and his board. And they are certainly not wrong. However, considering that over half of these enterprise services and solutions acquisitions came with price tags well over $1 billion, and much of this funding came right out of PSG and IPG’s profits, it is surprising that more of us did not see this coming.
Note: This section was written before today’s Meg Whitman announcement. However, I do not have any data suggesting that we should have seen it coming.
Color is Catching Up
I don’t know about the dealers in your Dealer Partnership Program, but mine have been moving some serious color boxes. While color’s share of overall MFP sales has consistently grown in recent years, the contracts submitted by members of the gap intelligence Dealer Partnership Program throughout the current quarter brought a very significant black-to-color shift, giving color models a 58 percent share of all A3 Workgroup MFP contracts submitted. Similarly, despite the A4 Monochrome MFP segment’s strong value proposition and fit in many MPS and fleet scenarios, the current quarter also brought a significant increase in color A4 Desktop and Workgroup MFP sales, which accounted for 44 percent of all A4 contracts so far this quarter.
The market-wide transition to color is of course taking place at a slower rate than within my private sector pricing database, as most mid-to-large size organizations maintain an appropriate mix of color and monochrome devices across their fleet. However, the bulk of my dealers specifically target small organizations, many of which only have one A3 device at each location and are generally open to paying a premium to make sure that one A3 device is color-capable. Combine this with the fact that manufacturers continue to look for more ways to make upgrading to color justifiable, and it appears that the SMB segment may be approaching the color tipping point.
In case you are wondering, my dealers’ top selling model so far this quarter is Ricoh’s 20ppm MP C2051 (including its Savin and Lanier equivalents).
Color CPCs Stabilizing, But Way Down
While we’re on the topic of making color justifiable, our public sector contract data shows a significant decline in average CPCs for A3 Color Workgroup MFPs during the last two and three-quarter years. In fact, since the start of 2009, the average color CPC among A3 Color Workgroup MFPs in the public sector has fallen by over 11 percent to just $0.066, while mono CPCs within the segment declined by an also-steep 9 percent. And although color CPC erosion has stabilized overall, the last year has still brought a 4 percent drop in average color CPCs in the A3 Color Workgroup segments.
Given the fact that the average CPC for A3 Monochrome Workgroup models fell at a far-lower 6 percent rate over the same period, it is quite clear that vendors and their various dealer and direct sales entities are digging deep to make investing in color less scary.
While much of these reductions came at the expense of service and supply margins, manufacturers responded with their newest generation MFPs, increasing many toner yields, while only marginally increasing the costs of these cartridges. As a result, the average suggested toner-based costs per page (CPP) among active A3 Color Workgroup MFPs fell by 17 percent. The last 11 quarters brought a similarly-impressive 9 percent decline in A3 Color Workgroup MFPs’ suggested monochrome toner CPPs. Considering that the last few years have also brought cost improvements to many maintenance items, the street-level CPC declines shown in the first chart help to explain how dealers and branches can afford these declines.
ELFA Data: Are We Back at 2008?
At the end of every month the Equipment Leasing and Finance Association (ELFA) releases its Leasing and Finance Index, reporting the key metrics within the equipment financing sector. The report includes statistics gathered from across the equipment financing industry, polling some very recognizable print-related lenders (HP, Canon, DLL, GreatAmerica, BOA, KEY, Wells Fargo) and serves as a barometer for the leasing climate within the printing market. Because of that, during the last week of every month we cover the ELFA’s findings in our MFP Market Intelligence Report (The August 2011 report should be out soon). Although it is often mixed-in with our coverage of the week’s twenty-something other topics, the ELFA does an excellent job in communicating current equipment leasing conditions and I personally find it to be a very valuable addition to our Market Intelligence Reports.
It is also very helpful to take a step back and see where the ELFA data rollercoaster has taken us during the last few years.
Many would be surprised to learn that lease approval rates were actually higher in the last report than they were at the start of 2008, as 76.3 percent of all applications were approved in July, 2011. It would be convenient to look at this data and say the economy has improved to pre-recession levels, but I wouldn’t go that far. I’ve found that many dealers and reps have sharpened their “approvable radar” since the start of the great recession and some of this approval rate resurgence may be due to the fact that salespeople have become far more selective regarding who they approach to lease equipment. The improved leasing climate should of course also be largely attributed to moves our government has made to infuse and free-up capital in the financing markets.
Whatever you want to attribute it to, this is one rebound that I can attest to witnessing on the street level, as an increasing number of my dealers are submitting contracts signed with companies in the real estate and construction verticals in recent months, something that was unheard of a little over a year ago.
It’s a bit harder to draw a clear story from ELFA’s new leasing volume data. Actually we may need to add a few years to this trend before we have a better idea of where we are right now. That said, there are a couple key take-aways from the chart above. Since the recession, the end-of-year highs have been just as high, but leasing volumes during the rest of the year has been pretty dismal. However, for those optimists among us, new lease volumes during the first seven months of 2011 are up 23 percent compared to the same period in 2010, and the pre-tsunami first quarter was up 33 percent year-over-year. To be fair to the pessimists, it should be noted that leasing volumes through the first seven months of 2011 are 20 percent below the first seven months of 2008.
In case you haven’t noticed, the economy is not in the clear yet, but the ELFA data shows that the leasing market is at least heading in the right direction.
Once again, all of this information came directly out of our syndicated Market Intelligence and Pricing and Promotion Databases. And for those of you who may not be OK with one less MPS-related blog this week, you can rest assured that there is no shortage of MPS content in our weekly reports.