The Future of Imaging Part 5 - The Services and MPS Era

Virtulytix Thought Leadership Blog Series – Post 5

 From Typewriters to the Data Era. Service & Commoditization Era

 Ed Crowley, Virtulytix, Chief Thought Leader (CTO)

 In exploring the past – and future of the imaging industry, we have looked at the transition from scribes to mechanical devices (typewriters) to the impact era and most recently the ‘heyday' of the office imaging products, the page era. Through much of the industry's history, progress has been enabled through tangible products and by technology innovations in them to generate documents. It has been an amazing history of innovation with price performance levels increasing at fantastic rates, and features being incorporated at lower or no cost premiums (remember when duplex cost extra?). Of course, the evolution continues.

 At the same time, massive changes in the office environment have always been subject to influences from non-technology forces such as demographic shifts, adoption of new business models such as industrialized manufacturing, and general economic trends. During the most recent era of service and commoditization, changes in the industry were being heavily influenced by all of these factors.

The economic recession of 2008 had a massive impact on driving companies to focus on containing the cost of office equipment technology, accelerating the demand of Managed Print Services (MPS) and the appeal of its much-touted potential of saving up to 30% of a firms office printing and copying costs. The shift of the workforce from baby boomer to millennial dominance is changing the demand for print as the first generation to be raised on the internet, touch screens and mobile devices become the largest portion of the workforce. The millennial generation is the first generation to have the internet available from adolescence forward, in essence, to be ‘raised on the internet’.  Lastly, the shift from ‘transactional ownership’ to ‘pay for use’ is becoming a dominant business model trend.

All of these forces combined to drive two dominant themes during the last era – commoditization and servitization . Increasingly, customers perceive less differentiation between office imaging products as they increasingly offer a similar set of features and similar price performance points. In most cases, they have also far surpassed usage requirements. How often do you see a printer or MFD sitting in an office printing 2,000 or 3,000 pages a month when it is rated as a 50 ppm or greater device? Think about it.  As a 50-ppm device, the printer is capable of printing 480,000 pages a month if it was printing 8 hours a day, 5 days a week, for a full 4 weeks of the month. Data from our Page Volume Index (based on actual operating data for over 20,000 devices spread across a large number of end-customers) tells us that most are operating at below a 3,000 page a month average. That 3,000 pages per month only represent 1% of the capacity of a 50-ppm printer. You might say, that’s an unfair comparison – 50-ppm is not the typical office device. Okay – how about 20-ppm. That’s a pretty common performance point. And it equates to 192,000 pages per month at 100% capacity. Our 3,000 page per month usage only represents 2% of the capacity.

 The point is, most products offer far more performance and, in most cases, capabilities than any customer ever uses. Customers are beginning to realize this. As a result, the plethora of features thrown at the customers is met with a steady yawn. As someone who spent over 20 years of their life as an office products product manager at major manufacturers, this fact of life really hurts. But it is the reality with its reflection in the steady decline of hardware prices as vendors increasingly rely on price leadership to win customers. This is what drives commoditization and the reality is that relying on product feature differentiation commoditization not only is here to stay but will only get worse.

 At the same time, vendors are attempting to move to services to add value and drive revenue from usage versus using a transactional sale model. This has been achieved with varying degrees of success by different resellers and manufacturers. Lexmark attempted to shift to a services-led model with a high software-based value add component but was unable to successfully merge its software and hardware-driven business models. Xerox has led in services for years (one could argue they began with services when they introduced the cost per copy concept in the '60s) but has been struggling in more recent years to show results that can keep their investor base happy.  Some resellers such as M2 in Europe and EO Johnson in the USA have made impressive strides in offering services as a core business model for engaging customers. However, a large portion of the market still struggles to move beyond a cost-per-copy arrangement to offering true management of the customers fleet, a core basic concept of MPS.

 And this leads us to where the industry is evolving now – the data era.  This is where things really start to get interesting. In our upcoming webinar, I will be discussing what this next era looks like, how things are changing, and "what's next".  So, click here (LINK) to sign up for our webinar on Thursday, March 28 at 10:00 am EDT.

 I encourage you to share your thoughts and opinions on the industry’s journey through the Virtulytix website blog, the Virtulytix LinkedIn site or the LinkedIn discussion group at Imaging Industry Transformation.

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