Some technologies sell in good times and bad. Everyone needs to protect their networks, but will run out of room to store data, so storage and security are evergreens.
Hardware, especially desktops and peripherals, are more susceptible to the change in financial seasons. Companies are delaying refreshes until conditions and IT budgets improve.
Printers fall into the peripheral category and so one would expect printer sales to be slowing. But printer vendors, as ever, are bullish and say they have seen no slowdown - yet.
One vendor argument is that printers are mechanical devices that suffer wear and tear, and at some point become more expensive to fix than to replace.
Another is that as far as hardware goes, printers themselves are not particularly expensive; even laser multifunction devices (MFDs) are becoming very affordable.
But both those arguments - cheaper to replace, low cost of hardware - apply equally to the desktop on the executive's desk. Resellers need more convincing ammunition to keep winning printer sales.
CRN asked several printer vendors the question at the front of printer resellers' minds: How does one survive in printing?
Cutting costs opens doors
The one line that should always work with existing customers is the promise to save them money.
"A lot of companies don't know the total cost of printing in their company," says Richard Bailey, vice president of HP's South Pacific imaging and printing group.
The numbers would probably surprise many businesses. Paper plus hardware and toner adds 1-3 percent of revenue, according to a December 2008 Gartner report.
IDC estimated in 2008 the average annual hardcopy spend is 5 percent of revenue.
Resellers need to convince customers to audit their printing network and learn how much they are spending. Once the numbers are on the table, resellers can play around with configurations, consolidate printer fleets and suggest improvements to workflow.
In the past this up-front consulting has generally been worth paying for. Now that resellers are the ones initiating discussions in the search for business, customers are more likely to expect it as a free service.
"Given the environment we are in I won't be surprised if that becomes more of a cost of doing business," says Kevin Goffinet, Lexmark International's vice-president and general manager of worldwide SMB and printing solutions.
Vendors say there are several ways to make the case to cut costs.
The most obvious is to upgrade outdated hardware. Cost per page falls with every new model, and even at the budget end latest mono lasers can squeeze out a B&W A4 for less than 4 cents.
Goffinet says an Australian reseller told him he was bullish in a recession as it gave him the opportunity to tell customers to save money through printer upgrades.
A customer with creaking old models still cranking out the invoices may be saving money on new hardware only to spend twice that on consumables and servicing.
Showing the IT manager how quickly he or she could recoup return on investment and continue saving can go a long way to making a sale, and the extra features of newer models can close it.
Entry-level printers for SMB and SOHO now carry paper-saving features previously reserved for more expensive products. Duplex printing is becoming a new standard, even for models with relatively small footprints.
"Pull printing" - where a user needs to enter a PIN on the printer to get documents printed - reduces the amount of wasted paper which ends up lying forgotten on the output tray.
HP says using duplex can reduce paper consumption by 30 percent and pull printing another 15-30 percent.
Keeping track of those costs should be easier with click charge auditing - a cost per page breakdown that the Federal Government has made mandatory on its tenders since the start of the year.
Clickcharge gives departments the ability to accurately audit their printing and its adoption by the industry at all levels will give businesses visibility over this area of their operations that has normally been slightly hazy.
Auditing printer fleets and financial models like pay per click open up the possibility of converting a business selling printers into a managed print service.
MPS is a concept often talked about as a way to create recurring revenues, sticky customers and more profitable services. But now that fewer companies are spending, box-dropping resellers need MPS more than ever to distinguish themselves from the retail channel.
"This is going to force a trend that has been happening over the years - resellers who are just in the business to move the hardware are going to be under tighter and tighter restraints. It's going to force them to try to drive more managed services," says Goffinet.
MPS covers many profitable areas that take resellers beyond moving low-margin hardware. While one can question how printer sales will do in a recession, printing will always have one constant source of revenue: consumables. Toner and ink cartridges sell constantly through downturns because as long as people need to keep their businesses running, they will be printing.
"The hardware side can be impacted like any other IT hardware," admits Goffinet, but consumables have shown to be more or less constant. Consumables management can reduce inventories from stockpiles to a just-in-time model.
Companies can also save money simply by reducing the number of printer vendors and unique devices on the asset register. This normally means toner supplies can be reduced as a result, unlocking capital that otherwise sits in the storeroom.
Tying up consumables in a managed services contract protects this lucrative stream from intense competition. Catalogue companies that target receptionists with free holidays to Bali in return for signing over the account can introduce non-originally supplied toners and inks into the business.
Vendors always insist their consumables produce better prints and are friendlier to the machine. The argument is that if quality, yield and reliability are not important to receptionists, they are to employees.
Managed services gives resellers a more homogenous environment to plan better workflow. Goffinet says he sees managed services as creating a "hardcopy infrastructure" upon which a company can add applications just like one does with a network made of servers. He gives the example of MFDs that scan to a network or to a management-type system.
"At that top level is where things get interesting from a reseller perspective because now you are talking applications, higher-end workflow and getting into content management where you start taking pages out of the business," says Goffinet.
Lowering the page count wins points on the green IT front, too. Customers are still susceptible to the green IT pitch, but only if they save money at the same time.
"It can't just be the environment if it's going to cost them money," says Goffinet.
But how does a reseller get into document management? It's going to be a lot of work for a box dropper. There's the networking, the applications and most importantly the IP in integrating document management into the business processes.
Output focused resellers such as copier dealers have a head start in the move to document management systems, as it is a logical move to go from paper-based processes to digital ones.
At the higher end, managed print services open the door to content management systems, where the focus is less on printers and more on scanners, which act as gateway devices.
Content management systems (CMS) aim to capture images as close to the workflow as possible. A bank branch would scan documents from a customer on the spot and feed it in real time to a back-end system, instead of sending them off to a centralised imaging centre.
Once in electronic format, documents can be stored in repositories and indexed for search and retrieve.
Some printer vendors like HP have developed their own CMSes to provide a fully integrated approach. Others, including Lexmark and Kyocera, have remained agnostic in the name of wider compatibility and not developed or bought a CMS of their own.
Documentum and Filenet are common CMSes in the enterprise, with Microsoft's Sharepoint targeting small to medium businesses. Below that level the market opens up to about 20 contenders for SMBs, and then dozens more for the individual workstation.
To justify the cost of installing and maintaining a CMS application a company would need at least 50 employees, says Goffinet.
Virtualisation and the network
"I wouldn't call printing non-business critical, because in some industries if you can't print then your business will suffer," says Steven Caldwell, Asia Pacific managing director for software Thinprint.
"So in logistics, if you can't print out delivery dockets, you're going to have trucks lined up in the street. If it's customer service and you can't print out an invoice at the point of sale, it can lead to a poor customer experience and the loss of repeat business. So I wouldn't call it non-critical."
Thinprint is print management software which sits in the data centre to reduce the strain printing can place on infrastructure requirements. With virtualised environments becoming all the rage, printing can be a fly in the ointment for remote offices running Citrix or VMware which connect to the data centre via a narrow 128k LAN pipe.
Rendering and spooling of print jobs in virtualised offices happens in the data centre, and the print data must then travel out to the printer over the LAN. The problem is that a 100-page print job can generate 100MB of print data, which would then take one or two hours to travel over the LAN to the end-user's printer.
Thinprint applies massive compression to reduce the size of the data by up to 98 percent and print times from one hour to five minutes.
This saves time in calls to IT support and time spent waiting around the printer, raising productivity. It also reduces the bandwidth requirements for branch offices. But raising network management and performance can be difficult when many customers think only of the hardware when it comes to print.
"I think, tragically, printing is often pushed down the list of priorities. We are always trying to get people to think about printing during the formulation of their strategy and not as an afterthought," says Caldwell.
With business managers under pressure, resellers need to work harder to get IT across as an issue that needs to be constantly addressed. Webster says resellers should keep up marketing activities to stay top of mind with current customers and to get in front of new ones.
Word of mouth marketing remains one of the favoured methods of finding business, so making sure current customers are more than satisfied can give the referral system a boost.
"Always treat the customer in your store right now as king, provide excellent service and try to align your objectives with his. Who knows, his business could be tackling the exact same issues as yours! Your existing customer base is your biggest marketing tool and loyalty pays," says Heidi Webster, brand and marketing manager at Brother Australia.
Green IT provides a powerful emotional and moral (and, if government, contractual) selling platform when paired with lower costs, but concepts like the responsible lifecycle of a product are still filtering through. For example, business is slowly coming to terms with the idea of an emissions trading scheme, but carbon taxes won't address issues like landfill and toxic waste, says David Finn, Kyocera Mita Australia's managing director.
While most hardware manufacturers are talking more conservative numbers, Finn is expecting business to grow 12 percent on last year. Kyocera's environmental and cost-savings messages get lost during good times, says Finn. "We are actually more positive in a bad time than in a good time."
Finn attributes the big contracts Kyocera has won from competitors since the start of the year to running costs of up to 60 percent less, a sustainable approach to printing and a lower impact on the environment.
The move from dropping printers to a more involved role in printing will require some key personnel. If you can't fix machines yourself, then you're wasting your time, says Finn.
Resellers who outsource break/fix work on printing rather than doing it in-house are shutting themselves out from the most profitable part of the business, and will struggle to justify why they need to be involved at all.
But adding a tech to the team is not a cheap exercise. Including a $50,000 salary, car, tools and inventory, each tech will add about $100,000 a year to running costs. [See breakout]
Document management requires techs with training in networking and systems engineering certifications. Goffinet says resellers exploiting that overlap between the traditional paper business and IT networking are in a position to do well.
"People that have both sets of skills to migrate to the electronic side, those are going to do well in this downturn. The unfortunate thing is that there aren't many resellers that are that way, but the ones that are, and I've met several here [in Australia], are doing well," says Goffinet.
Although positive about Kyocera's prospects, Finn acknowledges this will be a difficult time for resellers, including those in print. "Any major recession sorts out the players from the stayers," says Finn, who adds that the market may shrink 10-15 percent.
He is seeing the number of acquisitions rise and resellers shrinking or quitting altogether.
Those print resellers most likely to survive are those with a background as copier dealers, says Finn. He describes the average profile of a copier reseller as having three or four technicians, a support desk and two to three sales people, a managing director active in the business, and a turnover of $2-5 million returning a 10 percent profit.
Gross profits for managed print services run by three or four technicians are around 60-70 percent, says Finn. If the labour is outsourced a reseller falls back to a 10 percent margin.
Loyalty programs pay
Finn says there is another lesson the IT industry could learn from copier dealers: brand loyalty.
Resellers who shop around among vendors for the best deal of the day give vendors no reason to invest in their business. With consolidation and competition on the increase, vendors are more likely to help loyal resellers win deals over a reseller with a wider portfolio.
For resellers to survive they need to align themselves to a vendor, says Finn. "If you spread your loyalty too thin, then you are loyal to no-one and then no-one is loyal to you either."
Copier resellers are a case study in brand loyalty. Over 50 percent have single brand representation; the next 25 percent represent two brands, according to Kyocera's own channel.
"The rest are complete prostitutes, they will take the deal of the day," says Finn.
But what about the reseller's role of trusted adviser who picks out the best products for their customers rather than pushing the latest from a single vendor?
This is where resellers get it wrong, says Finn. Independent advice is "valid to a point", but mostly all that is required is "sound" advice, says Finn. He candidly admits that when it comes to printing there is very little that separates products from one vendor to the next - except for environmental performance. The sheet and feed rates are similar across all vendors.
"Each one will do the job just as well, so then you're selling on price," says Finn. He cites the slowing rate of innovation - the gap between product launches has gone from 12 weeks to 12 months.
A slower rate of innovation means fewer bursts of marketing dollars from the vendor on promotions. Which just reinforces the message to resellers - selling print is becoming less about the hardware itself, and more about how you use it.