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Continued consolidation: the state of play

Acquisitions are undoubtedly one route to business growth, and with Samsung and now Apogee, HP Inc. has completed two of the most high-profile deals to date

This month’s panel discusses the current state of play.

PrintIT Reseller: Are there too many vendors (both OEM and dealerships) operating in a declining office print market?

John Gifford, Founder & Managing Director, Fiducia Strategic Consultancy: “I am not sure it is a question of if there are too many, more a question of how many will survive and how many will not. The last five to ten years have already seen a decline in OEMs in particular, either by way of acquisition, exiting markets or complete closure, and I expect this trend to continue in the coming years.

“Those vendors that do not adapt enough to the changing digital landscape, declining office print market and technology advancements, may find themselves suffering more than others. I think most people in the channel are aware of the fact that some are much further ahead than others, and only those that truly embrace a services-led proposition are likely to survive. When you add in increasing customer knowledge alongside increasing customer demands for stronger service-led solutions and integration with IT rather than print as a standalone, it’s a challenging scenario. Uncertainty around the UK economy and the potential impacts of Brexit are potentially the cherry on the top of that challenge too.”

Mark Smyth, Chief Operating Officer, Vision: “If you compare our market to other sectors, for example mobile phones, there are four to five brands and two dominant market leading brands. In the personal computer sector, there are also four to five with three leading brands – generally far less than the printer hardware market in comparison.

“I last counted over 12 brands in our market, whilst some are re-branded from other OEMs, I personally feel this is too many and unnecessary in a B2B market, when you consider printing volumes in some categories are in continued decline. There are also challenges for resellers managing so many brand manufacturers from supply chain, logistics to technical and skill levels, this potentially adds costs to businesses and is another strong justification for consolidation.”

Phil Madders, Managing Director, Print Audit Europe: “I don’t think so. At PAE we work closely with all the vendors and the success and resilience of the market to date is down to the innovation and creativity of the OEMs and the channel that represents them.

“It is also fair to say we have been here before – the paperless office was imminent when I was a trainee at Canon UK in 1985 and the death of the fax was announced at a conference I attended in the early 90s.

I only have to look at our office to know that paper is still popular, and the fax market evolved to efax, scanning and email, and the engine of change was the MFP. If we agree that the channel is essentially about improving communications for our end-user customers then we can continue to evolve and provide our services and expertise to the business community. The method of delivery may change, but the objective will be the same.”

James Spencer, Director, Systems Technology: “I do believe there are too many vendors operating, with only a few that offer true end-to-end service where the customer comes first. With relatively low barriers to entry and the power of the internet, many pop-up companies present as established businesses however they are simply unable to offer the same level of service that more established players can offer, diminishing the industry’s reputation with poor call-out times, un-skilled technicians and non-original parts.

“The most common complaint I hear when walking into a new business opportunity is that devices are always breaking down and causing operating issues – this shouldn’t be the case and is something that’s close to eliminated with our unique preventative maintenance service. We value high quality service and helping businesses create efficiencies and work at optimum levels.”

Alastair Adams, Director of Commercial Group and Divisional Director of its MPS business: “I think that’s true, the whole office services arena is quite saturated. The industry is characterised by lots of small independent vendors, large manufacturers and large vendors selling both via the channel and directly. It’s extremely competitive, and we’re seeing increasing commoditisation, which

will continue as the way customers buy products continues to change.

“It is essential for us to understand what our differentiators are, and try to persuade customers to spend a little bit more. Isn’t that what salespeople are meant to do?! We need to really understand our customers’ requirements well and prove our expertise and relevance to them. We need to be agile in what we can offer them, which is a suite of services beyond print.”

Damien Evans, MPS Key Account Director, ZenOffice: “There are currently vendors who I don’t see how they can survive in the future unless they fundamentally change. From a selfish point of view, it would be great to see companies merge to reduce the number in the marketplace and the ones that remain ‘up their game’ and offer improved products and services.”

Julian Stafford, Managing Director, Midshire Business Systems Northern: “I don’t think there are currently too many vendors. You can’t have too much choice in a market.”

Elia Giovanni, Head of Marketing, Sharp Business Systems UK: “Each vendor owns a different value proposition, and furthermore, some vendors are choosing to seriously evolve that value proposition beyond the core of print. So there’s more variety. For me it’s more about which OEMs / channel partners are developing meaningful propositions to keep up with market expectations.”

Jamie Brothwell, General Manager Print, Exertis: “Ultimately the market in its current guise has existed with a broad spectrum of vendors for several decades. Of course, competition and choice are welcome, but we have seen very few changes amongst vendors during this time.

“The headline mergers that spring to mind are Konica and QMS, Xerox and Techtronics and more recently HP and Samsung. This would suggest that brand consolidation is not commonplace with vendors, unlike the dealer market where this is more prevalent. My personal opinion is that the market and ultimately the end-user benefit from mergers that bring brands together to create an ecosystem that provides an end to end solution.”

Steve Hawkins, Chief Executive, Xeretec: “I don’t think the office print market is declining quite as badly as the industry makes out, and any consolidation that is happening is probably within the parameters of industry norms. Consolidation is a natural occurrence across any business sector, especially where there is over supply in a segment; like the A3 market, for instance.”

Shaun Wilkinson, Managing Director, UTAX: “Multiple vendors ensure competitive choice for customers, it is just a case of differentiating offerings and expanding portfolios. The market may be declining in terms of unit sales, but it is rapidly expanding in terms of requirements for smart solutions, which means that vendors need to re-present their business models.

“According to Quocirca’s survey ‘Channels to Managed Print Services, 2018’: The leading benefit following a move to selling MPS has been the expanded opportunities for selling document workflow solutions, noted by 67 per cent of channel organisations. Over half also agree that MPS has provided further opportunities to sell non-print related services such as IT services. Traditional print channel partners must be willing to step outside their comfort zone to capitalise on the opportunities.

“The statistics above are proof that there are still opportunities for vendors that are able to expand their vertical market expertise and meet the ever changing demands.”

Matt Hill, Sales Director – UK, Ireland & Nordics, Nuance Document Imaging: “If there are too many vendors chasing too few print opportunities, then this dynamic gives more power to the customers’ elbow when it comes to both choice and ensuring they get the best value. It also means that vendors need to think harder about how to differentiate and stand out in a crowded market – that too, plays to the customers’ advantage.

“From a vendor’s perspective, a declining market usually results in one thing – the survival of the fittest – so optimising value and being highly attentive to customers’ needs becomes even more important if their business is to succeed.”

Jonathan Whitworth, Managing Director, DSales: “The law of natural selection applies as much to the office print market as any other business sector. Those that adapt to changing market conditions will thrive and those that don’t will fail.

“There is a role for print devices in the office, but not as purely print devices. Those vendors and resellers that focus on solutions such as electronic archiving, document workflow and data security will continue to prosper. Others that stay fixated on click counts will not.

“Resellers are now recognising that a centralised device can also be sold as a document storage and processing hub, with solutions an integral part of the sales proposal. Develop offers a comprehensive portfolio of document management solutions to facilitate this need.”

Joe Doyle, Group Marketing Director, Kyocera: “The decline in general office print volumes has been an ongoing issue for this market, so it’s probably fair to say that the number of vendors has already reduced in line with this.

“Whilst the growth of electronic documents has resulted in a decline in general office print volumes, there’s an increasing demand for managed print services contracts to expand into areas such as cloud printing and biometric authentication. There are also business needs such as increased regulation, which drive solutions addressing security and compliance requirements. The challenge is how quickly OEMs and channel organisations can re-educate their teams and incorporate new value-added services.”

 

PrintIT Reseller: Is consolidation a good or a bad thing and do you see it continuing?

John Gifford: “As I mentioned, I do think the trend will continue for some time yet, but exactly how that will play out is difficult to forecast at this stage.

“The consolidation itself is not necessarily a bad thing at all, it may even mean the survival and improvement of some which could have a positive impact on the market in general. However, that is partially dependent on how these business operate post-acquisition and migration. End-user clients are more interested in cross-vendor and vendor-neutral solutions these days, be it MPS, document software solutions etc. but the danger of OEM acquisition of multi-vendor resellers could result in cornering the market too much, and removing the potential impartiality that some resellers may be able to offer prior to acquisition. Naturally this is a negative impact for end clients.

“Those organisations purchasing others talk about it not changing things and not meaning they only sell certain products, but the reality is that this is business, and they do not purchase a company to then continue selling competitive products in the same quantities.”

Mark Smyth: “Consolidation has helped us as it continues to reduce market competition, so it’s less for us to compete against. Consolidation also creates disruption, disruption drives change and that means clients look to move providers and employees look to change organisations. Selfishly if we can take advantage where opportunities develop, it helps and supports our growth. I see this trend continuing for some time to come, it’s almost consolidate or be consolidated!”

Phil Madders: “Consolidation is inevitable and a natural part of the cycle. Today it is Apogee and HP, before that it was Annodata and Kyocera, twenty years ago it was IKON buying everyone only to be bought by Ricoh. The market took a deep breath and then marched on.

“I think people often underestimate the channel’s ability to re-invent itself. In the 18 years we have been supporting the channel we have seen a cycle emerge. There is a large acquisition and company A is taken over by company B. Not all the employees of Company A are happy in the new environment they find themselves in so after a suitable period, depending on their seniority, they emerge to start their own company with a few of the customers that are not keen on Company B either. Inevitably some of these entrepreneurial spirits do not make it – but a lot do and they build companies that can compete with support from OEMs disaffected by the original takeover, and so we emerge with a new raft of vibrant local dealers servicing their business community. I don’t foresee anything changing this cycle.”

Steve Algeo, Financial Director, Systems Technology: “Consolidation is a trend that exists in our industry and one that I believe will endure. I’ve worked with a number of dealers who, at one point or another, felt that the time was right to sell, and have been able to do so in a marketplace that has many willing buyers and investors.

“Looking back, we can also see large consolidations triggering the next tier of dealers to seize opportunities and accelerate their own growth via acquisitions. Overall, consolidation is a good thing if it helps to improve the quality of service to clients and assists in firing up the ambition of the remaining dealers.”

Alastair Adams: “There is consolidation and partners have been acquiring small businesses for years. More important for us is to understand what consolidation means to our customers, which is a simple supply chain where more services can be provided by fewer partners. Manufacturers are feeling the pressure as much as channel partners: prices are coming down, so everyone is trying to find new ways of adding revenue and margin in order to improve profitability. Customers want their managed service to evolve and this means adding new solutions beyond print. This is a great opportunity, but it requires bringing new people into the organisation with the requisite skill sets, rather than to overestimate what the existing sales teams can achieve.

“I believe the real consolidation is around the service offering and how to implement additional services successfully, which is more important than the consolidation of vendors.”

Damien Evans: “Consolidation is not a bad thing as you should get pooled resources and ideas to make hardware, software and services better for the end-user. The managed print industry can be a bit of a dinosaur and it must continue to evolve in our technology-led changing world.

“In my opinion, consolidation will continue over the next few years, manufacturers will merge and become stronger as a combined entity. You have seen this with Samsung and HP – watch what happens to Canon and Xerox next.

“You will see a bigger divide in the future between local dealers and super dealers/vendors, there will be a place for both, but they will have to offer more than just print i.e. all office products and IT services; customers do not want multiple suppliers.

“Mergers won’t be just between two print companies, you will see mergers or acquisitions between IT solutions, facilities management, stationery companies; managed print in the future will be more than just selling photocopiers and printers.”

Julian Stafford: “I think consolidation is inevitable. The reduction in recurring revenues allied to the ever increasing skills required to properly maintain and network the latest MFPs, means sheer scale is a vital ingredient if you’re going to survive and flourish in this market long-term.”

Elia Giovanni: “Market forces will ultimately steer the market where it needs to be. I’d say it’s a natural thing. Buyer behaviour and expectations are changing, digital transformation is on our customers’ agenda. Not all OEM and channel partners have the appetite to transform the competencies of their salesforce, and ultimately business model to compensate for the eroding margins on MFP service/annuity. Consolidation will continue.”

Jamie Brothwell: “For businesses, consolidation should improve operational efficiency, result in long-term cost savings, improve market share and offer a more expansive portfolio that can reach a wider customer base. However, we must also consider the people element and the impact, if negative, on the loss of jobs due to a combination of roles from multiple organisations.

“Competition is healthy as it encourages differentiation and innovation, as well as maintaining quality and efficiency.

“Consolidation in the IT industry and the channel has been a feature for many years and this is likely to continue.”

Steve Hawkins: “While it could be argued that a potential negative of consolidation means there are fewer choices for consumers, on the upside I think that consolidation often better aligns technology and solutions to create a more compelling offer for the customer. This can range from better value and choice, better pre-sale and post-sale support, to improved consistency of service. Overall, consolidation could be seen as an opportunity to deliver a better customer experience.”

Shaun Wilkinson: “Consolidation will continue as it does in every industry and as customers’ demands increase. Providers who struggle to make their business models work will look to consolidation as a requirement for adaptation.

“In my opinion, consolidation is a positive move for both vendors and customers. It leads to great sales opportunities for the SME vendors who can offer best of breed hardware and solutions, instead of manufacturer dictated solutions and it will also increase innovation for customers and drive down costs.”

Matt Hill: “Typically, a market that offers ‘more choice’ tends to be thought of as ‘better’. But a consolidated company can benefit from additional resources to further hone or develop a solution, or to deliver a successful service to even more customers; in that scenario, consolidation is also advantageous for the customer.

“A consolidated business can also deliver increased economies of scale, helping customers to drive more value from their existing relationships with their supplier. Furthermore, when we think of the global economy, consolidation can be advantageous for smaller businesses that may not have the resources they need to compete or trade effectively overseas.”

Jonathan Whitworth: “Any mature market will see consolidation as the weak providers are weeded out. This is always a good thing for the market winners because it ensures emphasis is on high service and support provision and not purely price.”

Joe Doyle: “Consolidation is only a bad thing if you’re unwilling or unable to evolve to meet the changing needs of businesses. We feel that the trend is likely to continue, and in doing so will create opportunities for the channel and vendors alike.

“As IT services become more of a standard offering, the competition will increase as traditional print vendors and OEMs encroach on managed service providers and VAR markets. Those partners who understand that excellent service levels are key, will continue to grow and take market share at the expense of more a transactional sales approach.”

www.fiduciaconsultancy.co.uk
www.visionplc.co.uk
www.paebusiness.com
www.systemstechnology.co.uk
www.commercial.co.uk
www.zenoffice.com
www.midshire.co.uk
www.sharp.co.uk
www.exertis.co.uk
www.xeretec.co.uk
www.utax.co.uk
www.nuance.com
www.dsales.eu
www.kyoceradocumentsolutions.co.uk

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