There are many occasions when a market that is described as booming actually does live up to the hyperbole. This is certainly the case for the multi-functional printer/multi-functional device (MFD) market right now.
Since their arrival in recent years, MFDs have evolved to become absolute staple parts of large enterprises’ document management strategies. It’s not that hard to realise why: in one chassis buyers get a printer, scanner, fax machine and copier, thus reducing theoretically by a quarter the amount of kit they need to purchase for the essential running of their business. Who could argue against that?
Such clear and demonstrable payback from MFDs in the corporate world should easily be translated into the SME environment where such cost benefits will have a more profound effect. So does this mean that the SME arena could provide a licence to print money for the channel?
According to market research company Gartner, MFPs, colour page devices and photo devices were the main drivers behind a double-digit increase in sales in the printer, copier and multifunction product (MFP) market in Europe, the Middle East and Africa during the fourth quarter of 2004 as box prices continued on a downward trajectory. Furthermore the demand for MFDs is changing the dynamics of the whole printer market. Explains Tosh Prabhakar, Gartner Analyst for Printing Markets and Management: “Vendors are now pushing their MFP offerings at the expense of single function machines (both printers and copiers). Hardware costs are continuing to decline, especially in the 11-20 page per minute speed band ... This obviously appeals to end-users/buyers who can purchase an MFP machine that would print/copy/scan and offer fax functionality (generally optional) at the same relative cost as a single function printer. Success of MFP has been driven by the success of more colour devices in the office. This has helped push more colour use in the office and pushed the sales of MFP machines in the office. Therefore, cost per page; physical size of equipment; lower hardware costs; more colour devices vs. mono; have all been strategies used by vendors to push the sales of MFPs at the expense of single function printers.”
Phil Keoghan, UK president of IKON, an independent distribution channel for copier and printer technologies, outlines what this means for SMEs: " These devices offer numerous efficiency advantages including: compact design, fewer purchasers, reduced operating costs, consolidated supplies and maintenance and less training to name but a few. All this inevitably makes MFDs an exciting proposition for SMEs and increasingly products are being designed with this market in mind. As cost decreases and functionality increases MFDs are becoming more attractive to smaller businesses and an increasing number of SMEs are purchasing MFDs.”
One size does not fit all in the MFD arena and a key thing to remember about MFDs is that there are quite clear demarcations, in terms of functionality, between the types of MFDs currently available, says Paul Jackson, principal analyst at market research company Forrester: “There’s really two types of MFD: the high-end tends to be dominated by Kyocera and Xerox devices targeted at corporates who want to scan and print in colour; and then there are the more common devices which are targeted more at the small to medium sized business such as the HP all-in-one or similar devices from Lexmark and Canon.”
The printing quality of MFDs is more or less at the same levels as the printer only version of the device because the printer engines and components are the same. Therefore buying an MFD, which is physically similar in size as single function printer, is a very attractive option, especially for SMEs. But it’s an issue that should be considered. Adds Jackson : “Colour reproduction can be good for plain printing but it could be quite expensive if you put large volumes though them. MFDs are good for draft colour jobs but not really to replace colour laser printing on acetates, for example, or for using when the main fax is busy etc.”
Given therefore that there is an undoubted appropriateness and purpose for MFDs in the SME environment, what and where are the opportunities and how can they best be realised and from whom?
Alex Ward, commercial director of printing and peripheral distributor Midwich enthuses as to what the SME arena can offer. “In the last 18 months growth has been explosive. There are more and more devices available and many vendors who haven't had a MFD are coming to market with products. Price has been a driving factor in the growth but also [end users] are demanding more and more the ability to do more than just print with one device; they want to do other things as well; that is the functions that MFDs deliver.”
And Ward believes that MFDs make selling print technology an easier proposition for the channel, especially in the SME environment. He argues that it’s easier to identify the key purchaser: “In the corporate environment the person making the purchasing decision is not clear; it may be that someone is dealing with fax supplies, another with copiers etc., and the print requirement comes from the IT department. In the SME, the buying decision for everything is generally made by the same person who can see the benefits of the ability to have everything in one box.”
Rachel Dean, product manager of Kyocera believes that the IT manager’s influence in SMEs has become crucial. She says: “We used to interact with procurement managers but we’re now definitely dealing more with the IT managers. We’ve found that there is more interest in putting machines on the network and what effect is this going to have, what is it going to cost, how reliable is it going to be. [IT managers] also want to know that it is easy to manage the MFD and how it seamlessly fits into the network and won’t cause problems.”
IKON’s Phil Keoghan identifies some typical problems that decision makers at SMEs tend to make: "In the SME market most procurement decisions are based on price and many have made the mistake of forgetting that they are buying more than a box - they are buying the solution that the box facilitates. Many SMEs will have a buyer that does not appreciate that the true cost of ownership of a printer comes not from the purchase price, but from all the paper and toner. Buying a MFD will also save on man hours and increase efficiency in document workflow, offering a more compelling cost reason to invest. As such, SMEs need to think hard about the most appropriate ‘enabler’ that allows them to achieve their company’s goals and MFDs are a real consideration.”
The opportunity here for the reseller is to articulate to the SME that this “enabler” is a device that meet the functional requirements of the SME. This is in contrast to the corporate arena where sales conversations have usually been oriented toward calculating costs per print and cost of ownership. The preferred methods of buying MFDs usually fall into two categories: sales or lease. There seems to be a natural tipping point where one method is the most appropriate: this is where the end user’s print demand is to produce output at a rate of 20 pages per minute (ppm). Once the 20 ppm threshold has been crossed, companies typically will be looking to acquire technology on a lease basis, whilst sub-20 ppm users tend towards acquisition on a purchase arrangement. Resellers need to be able to understand the end user and be flexible enough to enter into whatever arrangement suits the user.
To a distributor such as Alex Ward, such flexibility has a double-edge. To him, winning sales propositions are those that reflect the differing needs of both the end user and the particular reseller. He says: “We have different propositions for each market and according to each different reseller and what market they are attacking. We work with vendors to identify the champion products in their ranges that are best suited to particular markets for our resellers. A key point for resellers should be to look at the many environments where the products are going into and the applications it will be used for.”
The result of such thinking should be to identify the value-add areas and for SMEs in the MFD environment there are probably none more reading than with consumables. MFDs are used not just for printing—an application has its own intrinsic lucrative consumable opportunity—but also for applications such as copying where the usage of consumables is far greater. Moreover, many MFDs now support colour which trebles the consumables potential.
Sold in the right way to SMEs, consumables should present resellers with an ongoing revenue line. This right way of selling includes making sure that SMEs are appraised of the right way of using the devices. Phil Keoghan, for one argues that it is completely necessary for resellers to educate SMEs as to the printers’ solutions and approach them with creative propositions. Even though most would agree that these days MFDs are fairly self explanatory in their usage, some quick pre-sales explanation of the potential of devices will almost certainly reap rich rewards when this potential is realised by the end users who will be effectively locked in to an ongoing relationship for consumables for example. A number of resellers would attest that most of the support calls that they take regarding MFDs are geared towards advising on how to get the products to do the job they were meant to do, rather than complaints about unreliability.
Another key point to raise to SMEs is just how much a MFD can potentially add to the company bottom line. Explains Jeff Dutrizac, analyst at the Info-Tech Research Group: “We’ve found that enterprises are spending 1–3 % of revenue on document output. It doesn’t sound like a lot but when you look at annual revenue it is actually a lot, especially for an SME. An SME making £10 million per year, thus has a document output requirement that is costing anywhere between £100,000–£300,000 a year, and we look at potential savings [using a MFD] of 10-30%, which translates into savings of £30,000–£90,000. Depending on a firm’s strategy, they can either add this straight to the bottom line or they can put this money back into the IT budget, and invest it into other key technologies.” Such arguments will be very strong.
Yet there are still a number of challenges ahead for the channel. One is actually to construct a differentiator in a package with respective to fellow, competitive sales outlets who are aiming to sell more or less the same type of solution to the same SMEs. Jeff Dutrizac recommends service as the route for resellers to take in order to get an edge. He asserts: “the market is seeing commoditised functionality that is pretty much the same across the board, the key differentiator is the service that comes with the device: the added extras; the support and maintenance contracts; the disaster recovery. Will the MFD reseller be able to provide back-up plans if the device goes down? Will they have a local service technician available to fix the problem in one or two hours? Will they have a local warehouse to provide a replacement device? For the most part with an SME this could represent a single point of failure. If it goes down you’re losing your printing, your faxing, your scanning, and your copying. You’re pretty much cooked for the day.” Rachel Dean of Kyocera agrees. “The key is reliability, especially for SMEs. If you have a machine with all four functions you certainly don’t want that machine to have any downtime at all. Things don’t just come down to price; the MFD market has to look at the service elements of the machine.”
Martin Boffey, trade marcoms manager for Brother, also agrees. He says: “All our products that go to channel come with 12-month warranty. One of our challenges is to make marketing localised for resellers and make raise awareness on a local basis so that [end users] have a more informed choice and can go back to the same people from whom they bought time after time. It's the people buy from people attitude that is strong for [SMEs].”
The revolution in MFD technology is also taking place. Paul Jackson of Forrester is impressed with developments in waterproof paper from HP whilst Martin Boffey believes that one possible emerging technology is wireless networking within MFDS. He says: “This is something that is predominantly in the development stage at the moment and there is a bigger issue of changing the whole network. Wireless technology will [first] be going into the inkjet products and rollout to the bigger machines as time goes on.”
But it would be an error to assume that inkjet will be the only base technology for printing in MFDs. Alex Ward of Midwich believes that laser-based MFDs will have a huge impact on the market, boosting considerably print speeds and quality. Midwich expects to be selling later products later this year.
The fundamental thing is that MFDs offer a rare mutual benefit for users and sellers alike. Says IKON’s Phil Keoghan: "The multifunctional device allows SMEs to become document management experts in their own right, allows savings and makes them more efficient. MFDs produce integrated intelligent workflow, which allows companies to begin improving document management practices. Businesses are changing the ways they work and as well as wanting to become more efficient at document management they are increasingly seeing the benefit of producing marketing collateral in-house.” And for his part, and possibly on behalf of the channel Alex Ward sums up the expectation: “For MFD business in the SME sector I hope in the next year to at least double or triple the number of resellers we’re working with to make the most of this opportunity. We expect enormous growth from this sector, more than in any other product area.