Louella Fernandes looks at what printer vendors are doing to ensure their long-term survival in a period of disruption.
The print industry, like many industries, is on the brink of significant change. Market disruption, characterised by intense competition, more demanding customers and a constantly shifting technological landscape, is threatening the legacy hardware driven business. As the print industry struggles with declining print volumes, hardware commoditisation, lower margins and sustaining growth, vendors are increasingly re-examining the structure of their businesses and looking for ways to deliver better financial performance.
Consequently, the industry is poised for a wave of acquisitions and restructuring as vendors look to adapt to new market demands and shed assets that no longer meet strategic needs. Lexmark and Xerox are the latest to declare that they are exploring strategic options. While, typically, hardware companies have relied on earnings growth to deliver shareholder value, shrinking legacy hardware markets have impacted revenue, leading to acquisitions in the software and services space.
Lexmark’s bid to expand its enterprise software presence began with its acquisition of Perceptive Software in 2010. It has since made 13 software-related acquisitions, the most recent being Kofax for $1Bn. Meanwhile Xerox acquired ACS in 2010 to build its business process outsourcing service capabilities. This has paid off for Xerox, with services now accounting for 57% of its revenue.
Speculation is rife as to whether Lexmark’s hardware business will be acquired and if and when Xerox will split into two separate technology and services businesses – in a similar way to HP’s split into HP Inc. and Hewlett Packard Enterprise.
Whatever the outcome, the market is undoubtedly set for consolidation. All vendors are navigating the same path and trying to understand where the new markets lie – the cloud, mobile, big data and the Internet of Things. Some vendors, such as HP and Ricoh, are working to commercialise their 3D printing technology – but this is still a relatively nascent market.
The shifting business landscape may be daunting, but there are some key opportunities for print manufacturers to maintain or even enhance their competitive positions:
Adapting to the ‘as-a-service economy’. The consumer preference for services over products and subscriptions over purchases is permeating into the business market. This is driven by increasing customer demand for flexibility that will allow them to take advantage of new technologies. With an as-a-service model, customers are not burdened by significant upgrade costs and can more accurately estimate the on-going cost of access to technology. Managed Print Services (MPS) is already an established service model in the market, offering a lucrative recurring services revenue model, along with increased customer retention long after the printer hardware sale. While the MPS market is relatively mature in the enterprise space, there are further opportunities to tap into the largely underpenetrated SMB market. For the channel, digital services around printer device diagnostics and predictive/preventative maintenance have significant untapped potential. MPS vendors should drive further innovation in their engagements around cloud delivery, security and mobility. These are key enablers, not only for the as-a-service economy but also for digital transformation.
Driving the digital transformation journey.
Despite talk of its demise, paper remains a key element of the connected and collaborative office workplace and still plays a critical role in the business processes of many organisations. However, paper bottlenecks can hinder business productivity and efficiency. Print vendors are uniquely positioned to connect the paper and digital worlds and are developing stronger expertise in workflow solutions and services. In many cases, leveraging investments in Smart MFPs, which have evolved to become sophisticated document processing platforms, gives vendors an opportunity to maximise the value of their hardware offerings. Vendors need to change legacy perceptions of their brand and be accepted as ‘a trusted partner’ in the enterprise digitisation journey. Business process optimisation and workflow capabilities will become a key point of differentiation for vendors in the industry, requiring a balanced hardware, software and service portfolio.
Exploiting the Internet of Things (IoT).
All printers are things and the connected Smart MFP is part of the IoT landscape. Vendors can exploit the enormous generation of data to monitor actual customer product and service usage. This data enables manufacturers to deliver better service performance through predictive data analytics (think proactive service and supplies replenishment) and, by collecting information about customer usage of products or services, vendors can improve product design and accelerate innovation. Developing strategic partnerships with open technology vendors can pave the way for seamless integration of printers/MFPs with mobile devices and drive the development of a broader mobile solutions and services ecosystem.
Expanding high value print services.
This year, online brands such as Net-a-Porter and Airbnb have expanded their brands into print, and print launches amongst independent publishers are at a 10-year high. Print’s tangibility and durability, its credibility and the feelings of trust it produces can set it apart from the noisy, cluttered online landscape. Research has shown that readers are more likely to retain information on printed material, leading to higher engagement levels. Many of the traditional print vendors can leverage their own or third party hardware (including print, visual and display signage technology), services and tools to develop cross media channel communications. Partnerships and alliances with technology vendors in this space will enable print vendors to participate in both the online and offline customer communications space.
The print industry cannot afford to rest on its laurels and must be mindful of the speed and dramatic transformation experienced in other industries. Consider how Salesforce, Amazon Web Services and even Uber have rewritten the rules of their markets. Is there potential for a similar disruptive force in the largely closed and proprietary print industry? Disruption may not come from traditional competitors, but from those outside the industry. To adapt and thrive, the industry must become more open, expand partnerships outside the industry and continuously innovate. This means creating new products and/or channels and engaging customers, partners and employees in new ways. Ultimately the question remains, is the print industry ready to disrupt itself?
With over 20 years’ experience in the print industry, Louella Fernandes is a respected and globally recognised analyst focusing on the evolution of business printing. Louella is currently Associate Director for Print Services and Solutions at Quocirca.