What Xerox Should Really Be Worried About
Ed Crowley – Chief Thought Leader, Virtulytix
Right now, there is a lot of discussion about what is going to happen with Xerox. How will the new management team achieve their objectives of expanding margins, and growing EPS by at least 7% annually in order to return 50% of free cash flow back to shareholders as outlined in their Investor Day meeting? Will they survive the fight with Fuji? How much cost can they shave by cutting sales and marketing expenses? I think this is missing the real point.
Currently a significant shift is underway that has been taking place for years, but which is really gaining steam. And nobody really seems to be noticing as two key market leaders are ‘winning’ in the office. First, HP has now shipped over 1,500,000 inkjet printers based on the Page-Wide technology. That’s pretty amazing for a product that was just introduced a little over four years ago. And the installed base of Segment 3 CISS devices has already exceeded 3,500,000 with Epson owning 70% market share (details available in our 2018 hardware forecast). By the way, these are not just low-cost CISS devices for the emerging markets. These are high performance MFPs designed to displace many existing office A3/A4 color MFPs.
We have been talking about the coming shift to inkjet in the office, but we were wrong. It’s not coming – it’s here. Or at least well underway! Fundamentally, inkjet has a cost/price performance over laser and this is manifesting itself in a clear cost performance advantage. So why should Xerox be scared (or Ricoh, or Konica?). Simply because they do not have this technology. Okay, Ricoh has the Geljet and Xerox has solid ink technology, but neither is really competitive against PageWide and Epson EcoTank products.
Today’s office market isn’t growing. It’s all about being able to make more profit from your piece of the pie (through increased efficiency and effectiveness) or getting a bigger share of the pie, which both HP and Epson are doing. This can only be coming at other’s expense. We made the argument several years ago that ‘laser bias’ in the office was dead. It is just taking some laser engine manufacturers longer than others to figure that out!
This is all a part of the increasing commoditization in the industry as we shift to the next era in the office imaging industry which we call the “Data Era”. Learn more about this dynamic in our blog series and upcoming webinar on the future of Imaging.