We look at how the OFT’s call for an industry standard governing the total cost of ownership for printers has been received by the market.
Richard Herman, managing director of telephone recording device company Retell, is a happy printer customer. “We bought a Kyocera,” he says, “and it’s something like a third of the cost per page — maybe less — of what it would be from other manufacturers. We worked out that we print 200,000 pages a year. The printer had paid for itself after the first couple of years.”
Herman has done his sums, but according to the Office of Fair Trading, this isn’t typical of small businesses when it comes to counting the real expenditure involved in running a printer. In a 100-page report entitled IT Goods and Services last December, the OFT devoted a section to printers, coming to the conclusion that this sector of the industry tends to keep customers in the dark about running and maintenance costs.
“The OFT has been focusing on the fact that manufacturers control the aftermarkets,” says Peter Maude, managing director of CharisCo Printer Labs, which specialises in printing costs. “The particular focus of the report is aimed at the consumer, and therefore inkjet rather than laser.” But he claims similar principles apply across both markets.
The OFT report concludes with the recommendation that a test standard for printers should be developed and “published within 12 months”. According to the report: “The test results based on this standard should be made available to retailers and consumers as point of sale information.” If the recommendation isn’t carried out within a year, the OFT threatens to “consider further action, if appropriate”.
Is the market monopolised?
Maude argues that the dominant printer companies, notably Hewlett-Packard and Lexmark, “have not only got the monopoly
on the aftermarket, but have multiple monopolies because the technologies keep changing, so each printer generation has different components and is therefore a monopoly in its own right”.
His view is that this distorts competition, putting the emphasis on a scramble to get particular printers onto customers’ desks. Once they’ve done that, Maude argues, manufacturers can pretty well charge what they like for the consumables, making them less likely to encourage customers to do the maths that will expose the real running costs. It’s the classic marketing ploy of giving away the razor to sell the razorblades.
As you might expect, neither Hewlett-Packard nor Lexmark see it quite like that. “Lexmark has worked with corporates on cost of ownership since its inception in 1991,” says Jane Cronin, Lexmark UK marketing and channels director. From her perspective, Lexmark’s USP over its main competitor — HP — “has always been that we offer a lower cost of ownership”.
But what about a contribution to an industry-wide standard on printer TCO? “There are discussions going on already,” she says, “and I’ve been assured that we’re fully involved in them.”
Dave Poskett, HP commercial sales director, also claims his company is on top of the issue. “We’re typically at the forefront of everything to do with industry standards,” he says. “We chair several of the standards committees. Do we think it makes sense in terms of print and cost of ownership? Absolutely. Are we working with people to do something about it? Yes we are.”
Not very concrete, you might think. But printer TCO is a relatively new focus. “In the late 1980s, it popped up from time to time,” says Maude. “Even when I started CharisCo in 1998, you could say the market wasn’t ready for it then,” he adds.
Phil Jones, sales director at Brother, remembers his own attempts in the mid-1990s to draw attention to the issue, but blames the manufacturers rather than the market. “We’ve been calling for this for a few years,” he says. “I did manage to get every manufacturer around a table at this massive industry summit. All these people sat round the table like the United Nations and I said it would really benefit the user to be able to compare apples with apples. The meeting lasted for four hours and was inconclusive. I was completely frustrated.”
Jones feels that if you can buy a car by comparing different ownership costs, you should be able to do the same with printers. The problem is the politics of the market. “Firms that don’t have a strong TCO story just don’t want to sign up to it. They’re trying to hide a high running cost and it suits them quite well that there isn’t an industry standard.”
Times are changing
Jane Cronin sees signs of change: “When we first started out, it wasn’t a message that people were listening to much.” She remembers going into a Lexmark customer site five years ago with a sure-fire TCO proposition that entailed replacing two seven-year-old printers with one new one with reduced consumables and maintenance costs that would easily save £1m.
“They weren’t interested,” she reports. “They would only change things for savings an order of magnitude greater than this. I think that’s an interesting example of how people didn’t focus on these costs in those days. But they certainly do now.”
Or they try to. One of the problems is that total printer costs will typically be dispersed across the organisation and funded through a variety of budgets. “Most organisations don’t really know what devices they have and they don’t know what cartridges they use,” says Cronin. The printers might be bought centrally and rolled out, but could even be petty cash acquisitions. Out in the field, she was used to coming across “a proliferation of printers that didn’t talk to each other, all on different maintenance contracts and all using different toner cartridges. There are huge costs associated with that”.
Malcolm Mitchell, general manager of Xerox’ office division, agrees with Cronin about how multi-budgeting disguises the real outlay. “A budget holder who’s just about to buy a printer may well say ‘I’m not particularly concerned because I haven’t got to pick up the consumable cost’. It’s a thorny question for people like us who are keen to see a more open book policy on the TCO of these products.”
Kyocera head of marketing Tracey Rawling Church has had much the same experience. “Customers can readily recognise the difference in cost between our cartridges and HP’s — if they’re interested.” she says. “But that’s always been a challenge for us. The purchasing of consumables is so highly devolved: in an organisation employing 500 people, 400 of them will probably be buying consumables. The printer runs out, they pop down to PC World, and nobody is actually counting the cost.”
There seems to be consensus from all quarters that the TCO nut needs to be cracked. “It’s definitely worth getting that message out because there are huge sums involved,” says Cronin.
HP’s Poskett agrees: “It is a difficult thing to measure, we accept that. But our responsibility as the manufacturer is to educate the retailers and our partners to make sure customers are aware of the potential running costs of printers. We need to do the best we can to ensure the customer has the best choice and understands all the associated costs.”
So how should the industry go about it? Robin Edwardes, managing director of Tally, the printer division spun off from Mannesmann-Tally, warns: “It’s not just about the cost of consumables, it’s about the cost of servicing and warranty. And are other parts included?”
The question is a good one, because behind the consumables and the various printer technologies, each has its own set of longer-life replaceable components that will need to be costed into the overall TCO.
Like HP, Lexmark’s laser-class technology simplifies this issue by using an integrated toner and drum as a consumable.
“Assume the life of the printer is three to four years,” says Cronin (although she’s aware that large accounts may keep them longer). “You know how many hundreds of thousands of pages you’re going to be printing each year. With our integrated units, replacing the cartridge replaces the drum, so you maintain print quality. Then allow for a service every 300,000 pages or whatever. We take the total cost, add in the service, the fuser and our cartridges, and we total that over the life of the printer. [The customer] can then [look at] the different technologies being offered by other manufacturers knowing this total cost.”
Graham Lowes, marketing manager at OKI, is a keen advocate of the separatist approach. “We believe that if you have a separate toner and drum, the user gets maximum life out of each individual component,” he argues, adding that this also allows OKI cartridges to have a higher capacity than HP’s. “If you use combined drum and toner, you may run out of toner well before you exhaust the life of the drum.”
CharisCo’s Maude says: “The contention of firms such as HP is that [the separatist approach] doesn’t provide the same quality of print as a drum you’re replacing more frequently. But then you may be replacing them far too often and creating unnecessary waste and cost.” He points out that Kyocera goes one step further, with a long-life drum made of much more durable ceramic material. “It’s a totally different structure, totally different materials,” he says. These very different technologies make an ‘apples with apples’ TCO comparison a tough proposition.
Some corporate customers today do put a lot of effort into printer costing, according to Mark Lloyd, UK managing director of Minolta-QMS.
“True cost of ownership assessment tends to happen more in the larger organisations that are doing big, planned roll-outs of equipment. They want to look at everything, from how much they pay for the consumables, the number of user interventions you’ve got to put a cost on, the number of consumables you’ve got to change,” he says. “When you move down the scale — and traditionally our strengths have been in the SME market sector — they’re really only interested in the upfront price and what a typical page will cost.”
Xerox’ Mitchell confirms that large customers are more TCO-aware. “They will ask to run a product on a set range of jobs to understand what the consumption is in terms of consumables. But more often than not, people will give us sample prints and ask us to assess coverage and therefore consumption, so it depends on the level of honesty from the manufacturer as to what the cost of producing those prints is.”
A true TCO assessment should weigh up all the appropriate technologies, warns Tally’s Edwardes. “Because we sell all different types of technology, we can say ‘if you’re printing that on an inkjet it’s going to cost you 3p per page, on a colour laser used in mono mode it’ll cost you 2p, on a mono laser 1p, on a dot matrix printer it will cost 0.12p per page, and an impact line printer will bring the
cost down to 0.05p per page’.” The range of costs is significant, particularly in the SME market. A customer settling on the wrong technology to print 2,000 plain mono invoices a month, for example, could be paying £2,000 too much over the three-year life of the printer.
“The goal is to aim for a TCO measurement that crosses all the technologies and manufacturers,” says CharisCo’s Maude. He started his company with the aim of driving towards a de facto standard. “We wanted to develop a test methodology that would treat everything alike,” he says.
It is not proving easy. “Over the years, what has become very, very clear is that manufacturers take a view that they will be involved in this sort of independent scheme, but they will not be the first to sign the paper. Even Kyocera has shown reluctance to be the first to sign.” Maude judges the problem to be that, particularly in the present economic climate, no company wants to commit funds until there’s clear evidence that the idea is workable.
Perhaps pressure from the EC and OFT will make a difference.
The life of ‘lifetime components’
CharisCo’s weekly newsletter, TCPGlobal, makes a strong case for measurement standards. But it also understands the technical complications. Drum life is a case in point.
In a laser class printer the image is created on a rotating drum by a scanning laser beam or an array of light emitting diodes (LEDs). The light image leaves a pattern of static electricity on the drum, and as the drum continues to rotate, this image attracts the toner particles, which are subsequently transferred to the paper.
"To achieve this,” says TCPGlobal, taking the Oki B4000 mono printer as a case in point, “the drum is rotated three or four times to prepare it by warming the drum and drawing in the paper.” The actual transfer typically takes just over three further rotations, after which the drum will rotate three or four times more to finish off. This means the drum will rotate between ten and 12 times for every page printed.
That’s when printing a single page at a time. For a multi-page print job, however, the warm-up and finish-off sequences happen only once, so for the bulk of the run the total number of rotations is three-and-a-bit times the number of pages.
As TCPGlobal puts it: “500 copies of a single page sent in one continuous print job would cause about 1,633 rotations of the drum, while 500 individual print jobs would cause a massive 5,500 rotations.” This is nearly three-and-a-half times more wear and tear. It is evident from this that depending on usage patterns, the life of the drum, defined by the number of mechanical rotations it makes, will vary hugely if measured simply in terms of the number of pages printed.
Mono laser-class printers like those from Hewlett-Packard and Lexmark cut this Gordian knot by integrating the drum with the cartridge and therefore treating the drum as a consumable, although, as Peter Maude points out, “the drum potentially gets disposed of after one use, when actually it’s got two to three cycles left in it”. On the other hand, when running TCO assessments on printers using separate toners and drums (the norm in colour laser printers), usage pattern becomes very important.
And it’s equally important, of course, to understand the usage patterns assumed by manufacturers in their drum life quotations.
This was first published in April 2003