By West McDonald, Vice President of Business Development, Print Audit & Owner, FocusMPS
Some big news quietly hit the wire last week that Lexmark International Inc. had decided to work with Goldman Sachs Group Inc. to “explore strategic alternatives.” What this means exactly is anybody’s guess but one thing we know for certain is that it’s not about maintaining the status quo. Lexmark has, historically, been one of the strongest providers of printing devices and solutions the world has ever known. For those in the office imaging business, Lexmark and Hewlett Packard printing devices are de facto standards. The news of Lexmark investigating “alternatives” is a very, very big deal. Industry changing big.
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HP (Hewlett Packard) is undergoing its own set of challenges. Arguably the largest producer of single function printers in the world, the company recently split out the imaging and print business into HP, Inc. which was slated to go live after the spinoff completion on November 1st, 2015. This new offshoot includes the PC business as well, although 80% of profits come from the imaging group. Not all is rosy here either as Goldman Sachs analyst Simona Jankowski states that HP’s imaging group will experience pressure due to “fundamental challenges related to secular declines in PCs and printing.” Good times abound.
“…HP’s imaging group will experience pressure due to ‘fundamental challenges related to secular declines in PCs and printing.’ Good times abound.”
– Simona Jankowski, Goldman Sachs / West McDonald, Print Audit
Xerox isn’t abuzz with all good news for its document technology division either. 3rd quarter results for 2015 saw a 12% decrease in total revenue for their Document Technology business and margins took a slight hit too. This is due, according to the report, to “developing markets pressures”. The Xerox report also stated that Xerox is “reviewing structural options for the portfolio.” Translation: Change is imminent where “X” marks the spot.
Some readers may say that moderate MPS growth is still possible in the office imaging space. I don’t disagree. I just don’t think “moderate growth” is enough to get any of us excited. In a recent article by Robert Palmer of BPO Media he says something that sums up my feelings on this idea: “It is interesting to see vendors positioning slight growth in MPS as a significant achievement, while virtually ignoring the fact that the core transactional printing business is tanking.” I don’t think any of us are looking for tough growth. We need to think bigger than that and maybe that means thinking differently about what we offer and who we offer it to.
Ever an optimist, I don’t see any of this as entirely bad news for our industry. Xerox, HP, and Lexmark are all meeting the challenges head on and doing what it takes to restructure and diversify their portfolios. They are focused on the long-game and making the changes necessary to adapt and prosper. For example, Xerox has grown its services revenue to over 56% of its portfolio and Lexmark spent $1 billion on the acquisition of Kofax to boost the value of its Perceptive software group. These are positive movements and I truly believe that the big OEMs will make the necessary adaptations for their long term health even if a few years from now they look nothing like they do today. Adaption and change is healthy and how we run our businesses is not excluded from that truth.
“It is interesting to see vendors positioning slight growth in MPS as a significant achievement, while virtually ignoring the fact that the core transactional printing business is tanking.”
– Robert Palmer, BPO Media
Of course it isn’t just the OEMs that need to think about change. As an office equipment dealer looking not just to survive but prosper the need to become operationally more efficient and diverse has never been more important. The question is how do we cut costs and grow revenues in a contracted office equipment market? Here are 3 things you can start doing today to take advantage of growth tomorrow:
1. Employ Predictive Analytics: To focus on driving up profit, one of the best things you can do is make sure you are employing automation tools. Systems and software are far less expensive than labor. Companies like Print Audit have software tools to help drive JIT supplies fulfillment with predictive analytics as well as powerful alerting for critical service alerts. Most dealers don’t take advantage of the power of predictive analytics to drive down costs. Doing so could lead to dramatic savings for toner and service fulfillment.
2. Examine alternatives to Cost Per Page (CPP): Per user printing volumes are going down and total annual paper shipments prove it. Alternative billing methods that are NOT impacted by decreasing volumes are currently being developed by groups like Print Audit’s Top 100 SBB (Seat Based Billing) Council. Customers will benefit by having budgetable printing costs and overall cost reduction by incorporating print governance rule sets.
3. Diversify your offering: Your customers worry about more than just paper and ink so maybe you should too. Start exploring adjacent areas of expertise that you could expand into. Many office equipment dealers have adopted Managed IT Services portfolios to broaden the areas they can help their clients. Print Audit has produced an E-Guide called “Diversifying Beyond Managed Print” which can give you some great ideas.
“Your customers worry about more than just paper and ink so maybe you should too. Start exploring adjacent areas of expertise that you could expand into.”
– West McDonald, Print Audit
The world around us is changing at breakneck speed. Cars are starting to drive themselves, security checks at airports are being handled with Iris scans, Google Photos is using facial and location recognition to organize your memories, and people are using digital means to share information within the office. We can’t slow down the rate of change happening in the office and elsewhere but we do have the power to come out stronger and more successful.
Now it’s your turn! Do you think this article is on point or out of touch? What other signs in the market place point to changes that we need to be ready for? What have you done to mitigate change in the past and what things are you doing today? We look forward to hearing your comments!