It seems five minutes ago that Samsung announced it was exiting the printer market, selling to HP, and this month news broke that Fujiflm and Xerox have entered into a definitive agreement to combine Xerox and its longstanding Fuji Xerox joint venture. This month’s panel share their thoughts on the market impact
PITR: What are your views on the continuing consolidation in the market
– on both the OEM and channel side?
Steve Hawkins, Chief Executive, Xeretec: “I think it will continue from both the OEMs’ and the channel perspective – that is inevitable. Compared to other industries, OEM consolidation has been far slower, with more activity happening on the channel side over the last decade. The channel side will continue to consolidate as customers’ demands increase, and the smaller providers struggle to make their business models work.
“As the channel players shrink in quantity while customer demands increase, it is inevitable that OEMs will need to consolidate to survive. They will need to focus on a smaller group of larger channel partners and a customer base looking to consolidate around a smaller group of key brands.”
Sharon McNee, Research Manager, IDC: “Five major manufacturer powerhouses have emerged: Canon, HP, Konica Minolta, Ricoh and the new Fuji Xerox entity but we still believe that there are too many vendors operating in a declining office print market. There will be even more print software and hardware vendor consolidation as well as a major shake-out in the channel. Channel has never been such a precious commodity as it is now.”
Louella Fernandes, Principal Analyst, Quocirca: “The past few years has seen some significant market consolidation, and there is undoubtedly more to come. The market is struggling with remaining relevant in a rapidly changing digital landscape, and hardware commoditisation means that manufactures have to reinvent their products, services and business models.
“Many are highly reliant on their channel to drive higher value client relationships. While some channel partners have made a successful leap into services and solutions, there remains a large majority that need more support from their OEM partners to accelerate the change.”
Phil Jones MBE, Managing Director, Brother UK: “Normal economic cycles of markets declining always predict consolidation with fewer actors addressing the marketplace. Today though, it’s not always about the strongest surviving but the most adaptable. Either side of the supply chain both OEMs and resellers need to continue to stay relevant within the market, providing products and services which add genuine value in the moment or risk sales free fall and irrelevancy.”
Michael Burke, Managing Director, Purpose Software: “Whilst bigger isn’t always better in terms of innovation, this ongoing consolidation is an inevitable consequence of a maturing sector and increased pressure on pricing and provides organisations, both OEM and channel, with the scale to supply, implement and support a wider range of new products and services as well as gaining market traction. It will of course start to slow down and future acquisitions are likely to be strategic or tactical as further technological innovations occur.”
Nigel Allen, Marketing Director, KYOCERA: “The market is going to continue to consolidate, from both a vendor and channel standpoint. The demand from the market is for the portfolio in a managed print services contract to expand into IT areas such as cloud printing, therefore, OEM and channel partners need to up-skill the workforce. This can be by organic development or, as with our acquisition of Annodata, acquiring businesses who already have the infrastructure and experience of offering a range of IT services.
“Moving forward we will see the more progressive channel partners who want to grow in the market over the next fve to 10 years, look to expand their offering through acquisition. KYOCERA intend to assist these partners with a range of IT services to help them along that journey.”
Clive Hamilton, Group Managing Director, Pinnacle Document Solutions: “Consolidation in our market is good for customers in the way that it will drive costs down and increase the products that will be available from their OEMs/suppliers. Pooling R&D resources at corporate level will lead to more innovation and ultimately make us all more efficient and productive with an improved work/life balance. However, if you’re not the one that is acquiring or being acquired then you will struggle to keep pace with the innovation, price point and economies of scale that your competitors are realising.”
Jason Cort, Director of Product Planning and Marketing, Sharp Europe: “There has been a visible increase in channel consolidation over the past 18 months. This has been driven by a strong wave of external factors and industry trends including declining margins, digital transformation, IT security and emerging technologies such as AI and IoT. While this is prompting significant investment in both OEM and channel partner business models, it is also changing how manufacturers and channel partners work together.
“The expectations of end-users are also evolving. People are increasingly gravitating toward resellers that demonstrate holistic strategies focused on services and solutions, rather than specific product lines. This requires a much more consultative, customer-centric approach, rather than thinking purely in terms of transactional sales. It’s important that those operating in the channel are able to diversify their business offerings and sales approaches in order to meet these expectations.
“This raises the question of whether a business has the appetite to drive this level of transformation from within. While many do, others are choosing to sell up instead, taking advantage of the opportunities that this presents. More often than not, the mergers and acquisitions we see in the channel present a mutually beneficial scenario – especially for channel players seeking the ability to scale.
“Conversely, OEM consolidations – from the outside at least – all seem to have entrenched the combined organisations further into the print business. Naturally such industry acquisitions create significant cost reduction opportunities by eliminating duplicate costs. Expanded print based product ranges can also have significant benefits in some cases.
“However, none of this truly goes beyond print and certainly does little or nothing for office equipment resellers who need help in their digital transformation journey. The OEMs best placed to provide this are those who both understand the challenges of a reseller’s current business model and have the capability and breadth of portfolio to coach them through this”.
PITR: Will the emergence of ‘super dealers’ and ‘powerhouse’ OEMs positively or negatively impact on business growth?
Steve Hawkins: “I think on the whole it will be positive. The consolidation of the channel offers both smaller and larger partners different opportunities on a whole variety of levels.
“Those channel partners that focus on consolidating to enhance their strength and, critically, on enhancing the offerings and service delivery to the end point customer – should thrive.
“The consolidation of the OEMs and the inevitable requirement for them to be more channel-centric, will bring opportunities for the channel partners to work closer, deeper and in a more strategic manner with a smaller group of OEMs.
“The dynamic of a smaller group of key channel providers and a smaller group of OEMs must bring a competition level that sharpens up the behaviour of the OEMs and channel providers, which can only be a good thing.”
Sharon McNee: “Larger dealers and dealer groups are subsuming the smaller players. The strongest, most adaptable, IT savvy dealers are the key targets for the print vendors. Print vendors are in channel grab mode as they look to maintain, grow and enhance their channel partner base to tap into the market for print related services in the SMB space as the market for enterprise print services subsides. The market will become more competitive as players strive to differentiate in a declining market.”
Phil Jones: “Much depends on what side of the fence you sit. As businesses get larger it can be more difficult to be responsive and mid merger or acquisition it’s easy to take your eye off the external market as you become internally focused on integration issues.
“It’s easy to lose your customers when this happens so we often see revenue shift from one customer or channel to another. On the plus side, stronger businesses, big and small have more predictability, investment and resources to invest in new portfolio offerings which can lead to expansion. Some might argue it limits choice with fewer players however we are in a free market and the climate is still very competitive, so I’m confident that buyers still hold the inﬂuence even with fewer suppliers in a smaller market.”
Michael Burke: “The impact of this new generation of ‘mega dealers’ will be to create a split in the market as they start to present a significant challenge to OEMs that have traditionally dealt direct with the largest accounts. These new organisations have the breadth, skills and coverage to compete directly with OEMs which have had it their own way for too long. Of course, as these ‘mega dealers’ turn their attention to the larger accounts, this will then open up more opportunities for smaller dealers to go after the mid and low end markets (where the now ‘mega dealers’ used to operate).”
Nigel Allen: “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 a more transactional sales approach.”
Clive Hamilton: “My personal feeling is that super dealers have to spend much more time on divestments and integration of businesses, systems and customers which naturally will slow down organic growth. It takes time to develop real value out of the synergies that potentially exist through mergers and acquisitions. Often these larger dealers will become more inward focussed and lose touch with their customers. The challenge is to balance all the advantages that growth can deliver and turn them into real benefits for your customers, employees and shareholders.”
Steve Hawkins: “As the OEMs consolidate, there will be an inevitable period of disruption due to their businesses being internally focussed to make the mergers/acquisitions – and all this entails – happen. Most channel partners have experienced this in the past from the OEMs, and know the challenges this creates.
“Those channel partners that can work through this period and can focus on enhancing their value to the end point customer – whether that be through consolidating or through other means – in my opinion, have endless opportunities to thrive and grow.”
Sharon McNee: “Growth will come from selling print related services and solutions but the question is whether this will return enough sustainable business long-term to make up for the ever shrinking consumables revenues. Vendors and channel partners must finely balance managing their bread and butter print business while simultaneously developing new near adjacent markets.”
Louella Fernandes: “I think the market will see more consolidation and be dominated by fewer brands. OEMs will need to develop stronger partnerships outside of print with ICT players and drive more innovation in both their core and adjacent businesses.
“Some vendors are better positioned for change than others, and ultimately it requires more than new products and services, it needs major changes to corporate culture away from the traditional product-centric business models.”
Phil Jones: “Anything related to solutions or services continue to attract attention demand side as people look for efficiency, productivity or OPEX based benefits. Challenge will present itself if you have not built capability to address those requirements in terms of billing platforms, operational or sales resources. Chunks of revenue can either be secured for years or lost in a single event.”
Jason Cort: “We are starting to see the super dealer trend emerge across Europe, which means the market is getting smaller. However this doesn’t necessarily translate into a negative impact on business growth. Ultimately, super dealers will only remain meaningful to the market if they choose to evolve their value propositions to keep up with customer expectations.”
Michael Burke: “Dealers wanting to compete in this new environment will need to deploy integrated, multi-capable and agile systems that support diversification into new business channels and accommodate the added complexity that this will bring.
“For smaller dealers wanting to take advantage of these new markets, they must decide whether they want slightly updated versions of what they already have, with the same integration, accessibility and support issues or deploy a single integrated ERP solution that is scalable, delivers a lower cost of ownership and frees up resources to be deployed more productively.”
Nigel Allen: “The challenge is how quickly OEMs and channel partners can re-educate their teams and incorporate the new value added services on offer. Security and compliance with regulations such as GDPR is becoming top of customers’ agendas, therefore vendors need to review their portfolios and sales and marketing approach to ensure they are not left behind.”
Clive Hamilton: “The biggest challenge in the future is for our channel to be more integrated in an IT environment with all-inclusive IT type procurement methods, such as SaaS or DaaS style agreements (subscription contracts)… This maybe a challenge, however as in so many other industries the challenge also is the opportunity. We have the infrastructure, customer base and experience and expertise in delivering products and services into the market place. It is crucial to build relationships with innovative suppliers that can help us on that journey.”
Jason Cort: “In any rapidly evolving landscape there are always challenges. However these are often intertwined with future opportunities. The consumerisation of IT and the development of emerging technologies are moving at breakneck speed, throwing up a host of associated issues. The increasing number of connected devices, for example, means security is now a major challenge. But this also creates an opportunity for vendors and resellers to differentiate themselves.
“In November, Sharp’s digital colour MFPs with an embedded data security option were the first to be certified for Common Criteria, a set of guidelines used to evaluate information technology equipment. This type of certification not only puts end-users at ease, it also underscores the importance of factoring key industry issues like security into product designs.
“Because we are now part of the Foxconn family this is something we’re able to do more of. Our improved financial position also means we’re able to invest in future technology areas like AIoT and 8K, which we believe will form the basis for many new exciting business applications.”