The printing sector is embracing a range of cures in an attempt to solve that depressingly familiar business disease: disruptionitis.
Twenty years ago, as the internet started to erode print’s business model, there were plenty of people insisting that there was no disease; that the sector was merely suffering a minor headache that would pass with time.
Now, though, the consensus is that something – anything – must be done. Vendors have responded by trying everything from conventional remedies to shock therapy.
In the past year or so, Xerox has split into two companies, HP Inc has signed a deal to buy Samsung Electronic’s printer business, and Lexmark International has been sold to a Chinese consortium.
Meanwhile, HP Inc has launched an all-out assault on the A3 copier market, Brother has unveiled a new range of business printers, and Fuji Xerox Australia has reversed its decision to expand into the IT software and services market.
Competition is one reason for the big changes in the printing sector, according to Brother’s general manager of sales, Dean Kendall.
“As with any major change to a market, there are always winners and losers. 2016 saw many manufacturers exiting the entry-level inkjet and laser markets, and instead targeting the B2B SMB and corporate users with non-traditional solution-based products. Understandably, profitability has become a big motivator for many,” he says.
Another reason for the all of the consolidation, restructuring and innovation being done by vendors is the change in customer demand, says general manager of marketing and product strategy at Ricoh, Joe Ciliberto.
“When you look at the appetite for technology today, a lot of customers are really asking for information in more accessible formats. Mobility has definitely been a huge driver of information change for our customers, and that translates into how they digest information,” he says.
Ciliberto says vendors believe they need to make significant changes to shore up revenues and profit margins.
“The standard office print is definitely moving to a digital platform, and I think a lot of companies, to try to get on that digital bandwagon, are looking at acquisitions as a method to do that,” he says.
“Speaking for Ricoh, we had the foresight early on to look at IT companies. We did acquisitions early on in the piece because we saw that as something that would benefit us in the long-term. It also allowed us to expand our offering.”
HP Inc’s director of printing systems for the South Pacific, Ben Vivoda, says HP Inc has also recognised that it needs to change the way it does business. One source of future revenue growth will come from “reigniting the home with a focus on printing from mobile devices”. HP Inc is also focused on “disrupting the A3 copier space and pursuing continued growth in managed print services,” says Vivoda.
“Our strategy is anchored in market trends. We think about how the commercial and consumer worlds are blending, what millennials’ expectations are, the impact of mobility and security, and the shift towards selling everything as a service. HP is reinventing the printing industry for a world that’s increasingly digital, mobile, visual and social,” he says.
One step forward
Gartner statistics clearly illustrate the scale of the challenge facing the printing sector.
Australian print volumes actually jumped 9.1 percent between 2013 and 2014, from 42.6 billion pages to 46.5 billion pages, according to the research group. But they then fell – by 5.4 percent to 44.0 billion pages in 2015, and by another 4.8 percent to 41.9 billion in 2016.
The decline is forecast to continue. Volumes are expected to fall 5.4 percent in 2017, to 39.6 billion, and then another 4.3 percent in 2018, to 37.9 billion.
Gartner says printing will also go backwards internationally, with global volumes forecast to slide 4.3 percent between 2014 and 2018, from 4.1 trillion to 3.9 trillion. Between 2017 and 2020, the forecasts are for international office printing volumes to fall by an average of 3.0 percent per year, while enterprise consumables spending falls 4.1 percent per year and enterprise hardware spending falls 1.5 percent per year.
Gartner analyst Lai-ling Lam says that paperless office initiatives and changing business processes are driving this reduction in office printing, which in turn is reducing demand for hardware.
“Print providers and manufacturers are embracing these disruptors, and are transforming their businesses from focusing on hardware to adjacent services and solutions to survive in this industry,” she says.
“As a start, they are investing in high-volume digital business printing technology, managed print services and closely aligned managed content services, and they are deepening their reliance on the more profitable colour business.
“Providers are also exploring new requirements for print management software, revenue opportunities created by the global adoption of mobile devices, and the need for document security enhancement and managed IT services that extend well beyond printing toward the digital workplace.”
The future is now
Resellers know the environment is changing, but they feel there is still plenty of money to be made in print.
Copywell Australia director Bill Triafylos says the sector is in good shape, even though people are “panicking” at the moment.
“Copy clusters and printing [volumes] have come down, but everybody needs these machines to scan, and of course you still need to print. I’ve been hearing about paperless offices for the last 12, 13 years. People are scanning more – but they are still printing,” he says.
Nevertheless, Triafylos says his Melbourne-based business understands the market is moving, and is prepared to move with it. For example, Copywell designed a 3D printing webpage (which hadn’t launched when CRN went to press) after noticing an increased demand for 3D printing in the second half of 2016. “What we lose in print, we’ll pick up in 3D printing,” he says.
Meanwhile, in the regional NSW city of Coffs Harbour, the Fuji Xerox Business Centre Mid North Coast has actually experienced an increase in demand for hardware, as customers try to do more themselves.
Nevertheless, there has been considerable pressure on margins, says co-owner Gary Evans. “It’s a pretty competitive market, and some companies in Australia are making no money,” he adds.
That’s forcing vendors and resellers to look at complementary opportunities, says Evans. “One of the things we’re looking at is software and workflow. Other businesses I know are looking at IT; the other one is telecommunications. I’ve looked into that, but you basically lose money for the three years, so it’s not for us.”
Evans believes that customer demand will continue to evolve. “There’s definitely a shift to more colour,” he says. “I can’t remember the last time we sold a black-and-white machine. The price of colour has probably bottomed out. The model of how that’s distributed could potentially change. Currently, most people in the industry will buy a machine and have a contract for the service usage. That could possibly be tweaked, where they either pay a total contract, or they pay on demand when they need it – like if you want petrol for a car, you pay for it then, rather than having a contract.”
Brighter days ahead
It seems safe to say that the printing sector will continue to experience plenty of change in the next five years. As print volumes keep falling and customer demand keeps changing, vendors are likely to respond with more consolidation, restructuring and innovation.
Nevertheless, there’s genuine reason for optimism. Kendall from Brother is one person who predicts good times ahead. “Despite the recent changes we’ve seen and future anticipated trends, the future of print is bright and profitable for Brother resellers. Needless to say, Australian resellers may need to adapt and make subtle business changes to respond to the continually shifting marketplace,” he says.
Ciliberto from Ricoh also believes the print sector has a healthy future – although he adds that what we think of as the ‘print sector’ is likely to change.
“I think the print sector is going to evolve from just being a print industry to something more holistic – to what the customers want in an office today,” he says.
“They might need print, but they might need print in a specific format. They might need to print banners, for example, or they might need to print 3D. I think the word ‘print’ needs to change to more of a workplace or holistic approach, because really, what we’re about is outcomes for customers.
“It’s about what toolsets we have as businesses to be able to help our customers. Although print will still play a part, I think the ability to look at print in isolation really needs to come
around to the type of print they’re looking to achieve.”
Major mergers in the printer channel
Mergers and acquisitions (M&A) are a tried and tested method to achieve growth even in a declining market.
In March, Australian HP managed print partner Forum Group announced the acquisition of national print business Imagetec. In doing so, it has grown its business to about 6000 customers and expects revenues to reach more than $75 million.
The buyout represented the latest in a string of acquisitions for Forum since it was founded in November 2011. Its other recent acquisitions include Chilliprint in 2014, QBM in June 2013 and Agem Printing in April 2013.
Imagetec provides managed print solutions and is a reseller for printers, accessories and related products.
Forum Group chief executive Bill Papas, who will continue to lead the combined entity, said the acquisition would deliver benefits to existing Forum customers and add new value to Imagetec customers through a broadened range of products and services.
Craig Rollinson, Imagetec’s CEO, accepted a role as chief operating officer of Forum Group, is tasked with bringing the two organisations together from an operational perspective.