PRINTING SOLUTIONS: The Sun Shines On The Printer Business

Printer vendors and solution providers have several reasons to smile. As

printers gain more importance in the IT scenario, not just CIOs, but even home

users have a wider range to choose from. Even as the machines sport better

technology features, they are becoming affordable to all user segments.

Outsourcing of print services is also gaining acceptance and is viewed as a

cost-effective option by several SMEs and corporates.

Sunny times are streaming in for printer vendors and partners. As compared to

other IT products, printers and solutions related to them have always been given

a step-motherly treatment. But the scenario has changed noticeably in 2004. The

ubiquitous printer is no longer seen as an expensive product or an additional

expense when purchasing a PC.

Customers

now include the printer cost in their budget when a PC has to be bought.

Different customer verticals select vendors, depending on their preferences. Off

late, as printers are increasingly bundling with PCs, the market has become all

the more buoyant.  

Slashed prices



The main and the biggest reason why customers no longer think twice before

going for a printer is because of the falling prices. According to IDC, around

66% of inkjet multi-function devices (MFD) shipped in the AsiaPacific region

during 2003 were priced-below $200. A single MFD used to cost three times more

than a single-function inkjet back in 2002. But its price is almost the same as

that of a mid-to end-segment inkjet.

When inkjets made their entry a few years ago, an entry-level printer used to

cost around Rs 6,500. Today, a printer with 2,880 dpi can be purchased at about

Rs 3,000. This is a whopping 100% reduction. As a result, during 2003-04, up to

80% of the inkjets were bought by the SOHO segment.

Although the slashed prices kept the inkjet business ticking, the market has

reached a saturation point. HP, the market leader for inkjets consciously pushed

all-in-one (AIO) devices, creating the AIO/MFD category and dominating it, while

conceding half the inkjet market.

A

major development that happened during 2003-04 relates to the shake-up in the

mid-segment inkjet market. This segment felt the pangs when MFDs cannibalized

the marketshares of inkjets priced at Rs 6,000 or above. It is estimated that

the MFDs gained over inkjets by 30% for 2003-04.

Meanwhile, the photo inkjets segment retained its preserve at the higher end

of the spectrum, and many photo studios drove the demand here as digital cameras

became popular. Looking at the current inkjet market dynamics, the mid-segment

will continue to decline as MFDs gain marketshare. At the lower end, the price

drop has reached a threshold point and analysts do not expect any more price

cuts.

In the high-end segment, a marginal drop in end-user price is inevitable as

it is the only way to create a demand in that space. An entry level photo

inkjet, which is now in the sub-Rs 7,000 mark, is expected to slide to the sub-Rs

6,000 range in Q3 of 2004-05, since most of price cuts during the fiscal occur

during the holiday season.

Evident trends of 2004



Inkjets giving way to laser printers: The most common trend that was

observed across several verticals was the replacement of inkjets with laser

printers. The main reason for this is that corporates or SMEs do not want to be

bothered with issues related to consumables, like changing cartridges often or

having a dried cartridge. This is especially so if the printing load is on the

higher side.

"At

times, when printing a document is imperative, the cartridge of an inkjet

printer is over, and the personnel have to go out and print the document. This

hassle can be prevented when they have a laser printer," explained Manoj

Wanvari of Growmore Computers.

Another reason attributed for this shift is that a laser printer offers

better print quality vis-a-vis inkjets. Printing is also faster. "Keeping

in mind the cost of cartridges, and changing them at regular periods, having a

laser printer reduces the overall Total Cost of Ownership (TCO)," said

Natesh Mani, Office Group Executive Director, Xerox.  

Laser

standalones to laser MFDs: SMEs are shifting to laser MFDs from standalone laser

printers. "These MFDs are ideal for SMBs as an individual can not only take

print outs, but he can manage his documents, send a fax, scan important

documents and send them to a client," remarked PG Kamath, GM, Lexmark

International (India) . According to IDC, the segment of laser MFDs observed a

growth of a whopping 117% in 2004 over the previous year. Again the main driver

for this growth was dropping prices.

Of the total market share of laser printers in 2004, 23% was occupied by MFDs.

IDC estimates that by 2008, more than 50% of the market will be occupied by

them. HP's Country Category Manager, Shared Printing and Connectivity, Samir

Shah said that laser printers offer the lowest TCO. He attributes the reason for

growth in the laser market, as these printers will be picked not only in metros,

but in upcountry markets too, because of dipping prices.

Product quality is another reason why MFDs are considered to be superior to

standalones, given the number of tasks the latter can perform. Unsurprisingly,

HP was the market leader in this area. It was voted the 'Vendor of Choice'

for laser MFDs during the Channel Choice Awards held by DQ Channels recently.

However, Lexmark International managed to create a dent in this segment with its

pricing and product offering.

Among single function laser printers, the USP will no longer be faster print

cycles. Instead photo printing will be the most intrinsic feature of these

machines. Banking on this shift, Canon introduced its PIXMA series, which are

photo printers. It is expected that in the near future, most single function

laser printers will have photo printing as a regular feature. "This also

translates in the fact that more digicams will be sold, as printing from them

will be more common," highlighted Sanjit Sinha, Senior Manager, Hardware

Research at IDC.

Lowering TCO: "CIOs today are paranoid of the hardware costs and are on

the lookout of driving this down. In IT, printers are one product whereby the

cost can be reduced if the correct model is chosen," elaborated Kamath. He

added that for a printer, the acquisition cost is 5%, while 95% is the

maintenance cost.

If a low-cost printer is bought to lower acquisition costs, in all

possibility the maintenance costs may turn out to be very high, thereby

increasing the overall IT expenditure. CIOs will look at the entire printing

requirement of employees and hence also see the functionality provided rather

than just the acquisition cost. This therefore becomes the deciding factor while

buying a printer.

Brother International elaborates the term as True Cost of Ownership by saying

that to have a lower TCO, one should not merely consider cost per page of the

printout. Insetad even the requirement of the employees should be taken into

account.

"Today, there are software that can trace which employee has printed how

many pages and what has he printed. This is also an useful way to bring down the

cost, as printing can be controlled when it is monitored," explained Kamath.

Steady growth of dot matrix printers: This segment also witnessed a stable

growth as more DMPs were sold as compared to laser printers. The leading vendors

in this category, in no particular order, were TVS-Electronics, Wipro

ePeripherals and Epson India. DMPs are expected to grow in 2005, and stabilize

as other printers dominate the market. Sanjit said that there are definite

customer verticals that would go in for DMPs like airlines and telephone

companies.

Changing customer requirements



As the market matures, customer requirements are undergoing a change too.

"Today, school children use the Internet to complete school projects.

Submissions in schools are done with the help of a PC. Children need printouts

for the same reason. This was not the scenario a couple of years back,"

explained PG Kamath, GM, Lexmark International (India). A color inkjet would be

used in this case.

Kamath cited another example of women who run small-scale businesses from

home. They too need printouts for showing customers the rates and also the

products being sold. "They also need to print order forms and other

associated documents as well," said Kamath.

There is another section of home users who make use of inkjet printers.

"People abroad increasingly make use of their PDAs, digicams, cell phones

and PCs to take print outs," remarked RS Anand Kumar, Country Manager

(India), Brother International. This is the reason that the company is going to

come out with three networked inkjet printers exclusively for the home segment

in the next month.

NV Mahadevan of Chennai-based TVS-Electronics observed, "With customers

across all segments are more aware of their printing needs and costs associated

with it. They are thus entering shops with much better product knowledge."

Emergence of color printers



Across segments like home, SOHO, SME and corporates, purchase of color

printers also saw a hike. "Since Internet is increasingly accessed today in

homes, the graphic intensive printouts are also much more," cited Anand of

Brother International.

It has also been observed that more corporates are purchasing color laser

printers. Kamath has a slightly different opinion on this as he said that there

is very selective market for those who would purchase color printers, either

lasers or inkjets. "Those in the field of advertising who need color

printouts for their business purposes are the ones who are purchasing it,"

added Kamath.

In order to save unnecessary color pages from being printed, a software known

as Optra Forms is installed in Lexmark printers. In this, those employees who

need color print outs are given passwords and only they are permitted to take

color printouts.

Interestingly, in the color laser MFD market, Xerox and Canon began providing

solutions to their clients. The reason attributed for the same was that they

were losing ground as compared to HP - market leaders in this category.

MFDs versus standalones



It's a unanimous and resounding opinion in the printing industry that MFDs

will observe a steep growth in the years to come. However, they will not replace

standalones - either in the inkjet or laser type. Vendors and solution providers

both felt that both these types would continue to co-exist as they have a

defined target audience.

Natesh elicited the reasons because of which MFDs will not replace

standalones. "If the total requirement of photocopying, printing, scanning

and faxing is about 10-15,000 pages per month, the TCO on MFDs will be higher

than the standalones," he stated.

In case of enterprises wherein the above requirement is in the range of

15-25,000 pages per month, the TCO would be at par with standalones. And, in

enterprises where the above requirement is over 25,000 pages per month, the TCO

of MFDs would be lower than standalones, very few IT managers would risk

creating a single point of failure in their enterprise. Delhi-based Pawan Durani

of OA Compserve had a different suggestion as to why MFDs will not overtake

standalones in the market. "Customers are showing resistance to buying MFDs,

as they fear that if one utility goes wrong, then the entire machine goes

waste," he



remarked. He further added that they are trying to change that perception.

Giving a totally different perspective is Mahadevan. "Scanning and

copying is declining, except for niche segments. Hence, they might not add to

sales, and rather act as a deterrent to their growth," opined he.

Services offered



Growmore Services' Manoj said that when printers are initially installed in an
organization, they train the personnel for basic problems like changing the

cartridge or removing paper jams and other primary problems they may encounter.

They also. "We have a team of 48 engineers, and if needed, we provide

resident engineers too. Also, we give basic information to clients to identify

genuine and fake cartridges," elicited he.

Anand

explained that warranty is another issue that the customer demands. He said that

providing a three to five year warranty enhances the faith of the brand in the

customer's mind. HP's Sameer said that they have a Direct Premium Support

Provider program, wherein they extend their help to their partners. "We

also have an online helpline as well as a 24/7 service, wherein our personnel

help the customer sort out a problem at any given hour," he said.

Xerox provides a Return To Depot service, whereby if the printer is to be

taken to the service center and is repaired then. While, in case of a larger

account, on-site service is also provided, by sending an engineer. Bharat

Bhushan of Delhi's RR Systems said that since vendors have their own toll-free

number and call-center services, their complaints can be solved at any time. He

further said that vendors giving a warranty for their product is an additional

benefit for the customers.

Incentives for the channel



Vendors have to keep solution providers and other members of the channel

enthused to sell their products to various customer verticals. Lexmark has a

scheme for its Diamond partners knows as, 'Duniya Ki Sair Kar Lo', which is

valid till June 2005, and is for selling inkjet printers. Those who achieve the

targets get to fly to Europe. It has rolled a different scheme for Premium

partners, wherein on achieving set targets, they will be taken abroad.

HP's Samir Shah said that they have a Privilege Club, wherein its members

are given special incentives, demo resources and also accessories that are used

with printers. Xerox India has incentives for customers and the channel both. If

a buyer replaces his inkjet printer with a Xerox laser printer, then both are

given discounts. Greater incentives are given to the channel community for

selling color printers.

Solution providers in the printing segment are contented to be in this

business. And why not. So if are considering to get into this business, step-in,

while the printing business booms.

AMISHI SHAH

with inputs from DQC News Bureau, New Delhi and S Gopikrishna of Chennai