The strong demand for work-from-home printing presents solution providers with major opportunities for new sources of growth, as the hybrid workforce settles in as the new reality, the president of HP Inc.’s printing business told CRN.
Tuan Tran, president of Imaging, Printing and Solutions at HP, said in an interview that the outcome of widespread remote work during the COVID-19 pandemic has proven that “printing is essential for working and learning from home.”
Tran--whose first full year as head of the HP printing division was 2020--said that the company has benefitted from having strong businesses in both office printing and home printing.
That allowed HP to quickly adjust its print offerings to meet the needs of a home-based workforce--for instance, by launching an Instant Ink subscription plan that’s tailored to small business users and debuting LaserJet Enterprise models that are ideal for home use, Tran said.
Looking ahead, “we do have a different view of what that office looks like. That office will be a place for collaboration and it will be combined with work-from-home,” Tran said. “And so that opens up an opportunity for many of these channel partners. Instead of selling just A3s that are centralized, big machines on the floor, we’re going to start packaging [solutions] up for you to deliver small devices that have security and manageability built in.”
For instance, “we have a whole set of small devices that have security and manageability, such as the 400 Enterprise series product. It’s got all the security and manageability of the 500 series product, with all of our dedicated corporate enterprise firmware, but now in a 40-percent smaller size. And it is 40 percent less expensive,” Tran said. “That’s perfect for the home office. That’s what [partners] ought to be thinking about--how do we outfit workers in the home, in order to actually connect back to their collaboration sites? That is the new opportunity. And that’s what we’re talking about to our channel partners who specifically focus on that SMB to [midsized] customer.”
What follows is an edited portion of the interview with Tran.
Did 2020 change your approach in the print business at HP? How so?
We’ve learned a lot in the last 12 months. We’ve had the good fortune of having a very large consumer, home-focused printing business, with a lot of analytics. When the world shut down, the first thing people did was when they went out and they started buying necessities. [As part of that] they bought a printer and a new set of supplies.
We could see that in our usage pattern--they were printing for their kids’ learning from home and for their working from home. We actually saw a usage spike as well as [a large amount of] new printers being installed. And for us, we’re like, “That feels good--hopefully that becomes a trend.” And 12 months into it, we’re actually seeing a pretty sustainable level of demand for both our hardware and supplies.
For us, 2020 was just about managing that significant demand shift from the office to the home and from schools to the home. That whole dynamic was such a big change for us that it really consumed our year. What we learned was, there are new “design centers” emerging--a home environment and a distributed office environment. We’re getting ourselves really clear on what the future is going to be when we come out of this pandemic.
How would you describe what this future is going to look like?
For us, we see a world where there’ll be many more devices--both inside your network as well as at home and outside your network. Those devices will require security and manageability, and a different service model--especially something like Instant Ink or HP+, geared toward the smaller businesses and potentially sold through the channel partner. Just like they’re doing with Instant Ink today. Our thinking is all about, in the home, how to really blend productivity and your home printing needs. And then in the office, it’s this distributed workspace with security and manageability as the center.
Are there certain things you’ve done to help partners embrace the work-from-home print opportunity?
No. 1 was just getting them product. Our inventory for printers has never been lower than it is right now--both for printers and supplies. We had a spike in demand, so it was just the basics of making sure we keep everything moving and operationally tight, in terms of maximizing the shipments.
No. 2 is getting [partners] really thinking about Instant Ink. In particular, this is in the U.K. and the U.S. and the developed geographies, where Instant Ink was a big deal. When [a partner] is selling a printer, this is the time to tell customers about Instant Ink. We always had two value propositions for Instant Ink--one was cost, and the other one was convenience. And the convenience value proposition went way up, because people didn’t want to come back to the store, even if they could. They want to be at home and they want their ink to just be self monitoring. And that helped our channel partners to attach Instant Ink 2X to 3X what we saw pre-pandemic. There was a spike in printer shipments, but there was a much bigger spike in Instant Ink subscriptions. We grew Instant Ink subscriptions by 45 percent last year. So it was huge. We went from 5 million subscribers to 8 million subscribers. That’s a big jump.
Have you seen channel partners transitioning to selling home printers yet?
Probably not at a large scale. Their bread and butter is printers on contract. For a lot of the copier channel [partners], this last year has been about [going into] retrench mode. They saw a 40 percent reduction in their revenues -- and when you have a 40 percent reduction in revenue, you’re working on cost reduction. For their business model, they have to embrace a much more distributed work environment.
What are you expecting for folks like that and for that whole part of your business?
There are a couple of encouraging signs. No. 1 is what’s happened with SMB. Most SMBs are back. There was a period where SMBs were shut down--landscapers, orthodontists, dentists office, those are the types of SMBs I’m talking about. Those guys were all shut down. And that was probably a period of three or four months over the spring and summer timeframe. When those businesses came back, their printing behavior returned to pre-COVID. That’s very encouraging. That happened in the U.S., that happened in Western Europe, that definitely happened in China. So it was a global phenomena--SMBs are actually back. So that’s why you see that many of these channel partners are recovering back from their summer lulls. And all the OEM announcements that came out [recently] in terms of financials, instead of a 40-percent reduction in revenue, now they’re seeing more like a 20-percent reduction in revenue. As large corporate enterprises, public sector, all those guys start coming back to work, we expect that number to approach pre-COVID levels. Maybe slightly lower because there will be this permanent distributed work. But we expect that number to get close to where it was pre-pandemic. But the timing of that is, I guess, the $1.9 trillion question. How fast does the vaccine happen, what does the return to normal look like? We expect that to be fall / early next year. That’s the best indication we have, from the science, from the amount of vaccines--the thinking is that that’s when the return to the office is going to come back.
What does the office printing opportunity look like for channel partners when that happens? Will it be significantly different from prior to the pandemic?
We do have a different view of what that office looks like. That office will be a place for collaboration and it will be combined with work-from-home. And so that opens up an opportunity for many of these channel partners. Instead of selling just A3s that are centralized, big machines on the floor, we’re going to start packaging [solutions] up for you to deliver small devices that have security and manageability built in. We have a whole set of small devices that have security and manageability, such as the 400 Enterprise series product. It’s got all the security and manageability of the 500 series product, with all of our dedicated corporate enterprise firmware, but now in a 40-percent smaller size. And it is 40 percent less expensive. It has less duty cycle, but it has all the manageability and security you need. That’s perfect for the home office. That’s what [partners] ought to be thinking about--how do we outfit workers in the home, in order to actually connect back to their collaboration sites? That is the new opportunity. And that’s what we’re talking about to our channel partners who specifically focus on that SMB to [midsized] customer.
If more partners are going to be selling printers for homes instead of for offices, how are you handling that change? How do you work with channel partners around that change?
It starts with us in understanding customer needs and defining the products--for instance, a product like the LaserJet 400 that is designed for this new work environment. It’s also about designing the services. We have Instant Ink, which is really great--but it’s not really tuned toward small and medium businesses in terms of print plans. We’ve started moving in that direction--we have a brand new print plan at 700 pages for $24.99. That’s not what a home user would do, but for a small business, that gives great value. And we’re integrating a lot of our LaserJet products, which has toner, into our Instant Ink program. So you’ll see us be able to actually provide that service to small and medium business users.
Then our channel partners can take the devices and the service, and start putting bundles together to drive that to end users. In addition to that, we’re enabling them with new software and solutions layered on top, like Flexworker. For larger channel partners, they can combine the billing of a managed print service offer with an Instant Ink offer for people in the home. A large customer may have a management service contract already but want to outfit 200 people to work from home with a printer. Well, for that printer that sits at home, the first 150 pages will be paid by the company. Anything above that, you pay directly at HP. So those creative options will allow a lot of flexibility in terms of what is company paid versus personal paid. We’re uniquely qualified to be able to offer those types of channels.
With this shift -- more printing in the home, less in the office -- what is the net of all that for printing hardware and supplies?
Today what we’re seeing is that the business volumes, in terms of total pages, are down. But we’re actually capturing some of those in the home. Because of our high mix of home printing--and because home printers generally are higher cost per page--that allows us actually to be neutral to HP. And so we’re doing very well as a print company because we have that dynamic. We expect that when printing comes back in the office, top line and bottom line, print will be a growing business over the next few years. Because what you’ll see is top line and bottom line recovery, as the economy recovers. So you’ll see that in our models--because we had such a tough 2020, it’s going to come up. And then you’ll see that in the channel partners as well.
For our [fiscal] Q4 numbers, units for printers were up 9 percent. Our revenue for home printers was up 21 percent. Those are numbers we haven’t seen on that home side for a long time. Home has a high unit number [while] office is a small unit number, but lots of pages. We’re seeing growth in our home business today that’s offsetting the business declines. But from a unit perspective, we’re way up.
We see the hybrid workforce as something that’s advantageous to HP. If you’re a channel partner and you’re going to bet on a company, we have the small, low-cost devices. We have the best security and manageability in the industry. So if you think about us as an office print player--unlike the Xerox’s of the world, unlike the Ricohs of the world, unlike the Konica Minoltas of the world, unlike the Kyoceras of the world, we have that very strong small distributed printing fleet with security and manageability. That’s always been our strength. And so that’s something that I feel very confident about--that the tailwinds of the market favor HP.
So you feel like HP was positioned for this situation in a way that others weren’t?
Well you never know how the world’s going to turn out. Many people were saying, “Printing is dead.” The thesis before all of this was that printing is going to fall off a cliff. It was like, “printing is going to decline when people are at home.” That was the prevailing wisdom. And it was a shock to many people that--like we’ve always said--printing is a central part of who we are. When we have to work and learn from home, printing is necessary. That shows out in all of our numbers. That’s probably the biggest thing we learned. PCs are essential for collaboration, but printing is essential for working and learning from home. That was something that was a debate [prior to] the pandemic.
Is there any sort of outlook you could share for managed print services?
My belief is that when the world comes back, you’ll see some slight reduction in printing in enterprise. It will be more workflow-driven, more [about] how we actually enable remote workers. For that balance, I don’t know how that’s going to shake out. But clearly, as I think about distributed printing, workflow, security, manageability--I’m confident about our strategy and where we’re headed. Now, where the market is, that’s hard to say. Assuming that all the vaccine information seems to be true and the vaccine is effective, I expect late 2021 [or early] 2022 to be a time when we can all get back together and have a face to face.
Through this pandemic, we learned a lot. We’ve adapted our strategy and our focus. And we feel like we’re very well-positioned for when the world emerges from the pandemic, with more work-from-home and distributed offices. We think we’ve got the right strategy and the right set of products and portfolios and services to really win in the marketplace. When that happens? That’s hard to know.
Speaking of managed print services, I wanted to ask about Apogee and how the integration has gone since the acquisition?
We’ve learned a lot. No. 1, Apogee unlike other acquisitions we’ve done, we kept them very independent. So we treat them just like another channel partner--in terms of allocation of products, in terms of relationship with HP. It’s completely hands-off--they have their own board and everything else. Having said that, it’s been an incredible opportunity for us to learn about Apogee and how they run their business. One of the key things we’ve learned is that it’s not so much about the product, but it’s the services you layer on top. That direct customer engagement and the value-add is what you put on top. A lot of Apogee’s impact on the bottom line isn’t around selling printers and more supplies. It’s about helping people manage their paper documents better.
And so, that insight around what works for a channel partner, the things around Workpath, the things around Command Center, the things around Smart Device Services, the things around balanced deployment--for all of that, we have a great “lab experiment” with Apogee. It helps us, because it gives us a really good sense of what’s valued with a channel partner. The future of the channel partner is not so much printers and supplies. It’s about workflow services and IT services that you layer on top. So as you think about that concentric circle of services that you can layer on top of your hardware--yes, you have put hardware, but you layer on support services, workflow services, copying service, mass mailing services. You also have a stack that HP is equipped to offer which is PCs--layering on applications, disk imaging and IT services on top. Those are the growth areas for channel partners. Because you have that direct interaction with the customer, you can configure a printer, you can configure a PC. You can actually load workflow applications, you can load Office 365 and specific images and customized applications. That’s where the value-added is going to be over the next three to five years.