Motor manufacturer Ford has saved between 1% and 3% of its annual revenues by outsourcing its printing and copying.
Ford has joined the growing list of companies that have signed up for Hewlett-Packard's Total Print Management service. This is a combination of hardware, software and services that is expected to save companies such as Ford 30% in printing, copying and fax costs.
Printing is an under-appreciated, under-recognised, boring technology that everybody depends on. But chief information officers and chief financial officers looking for some easy cost savings may want to take a closer look at what it really costs to process all that paper.
Industry estimates peg printing costs at between 1% and 3% of a company's annual revenues. To put this into context, the average company's entire IT budget is 3% of revenue. With all of the focus on cost savings during the past few years, it is surprising that most companies have ignored these hidden expenses. Reducing those costs by 30% amounts to a lot of cash.
Suppliers such as HP, IBM and Xerox all agree that few companies know what it really costs to print, fax and copy documents each year. Fewer still are actively managing those costs. HP estimates that the average company's printing costs amount to £436 per employee per year. Hardware costs pale in comparison.
Most companies focus their buying criteria for printers based almost exclusively on the cost of the hardware, yet the printer itself represents only 5% of the total cost of ownership.
The cost of printers has fallen dramatically in the past few years, resulting in a proliferation of devices within the enterprise. Printers are so cheap that end-users can often put the £100 to £300 in hardware costs on expenses, adding to the growing inventory of printers, copiers and fax machines.
Worse still, few companies have established standards for all their output devices. In fact, if standards do exist, they are likely to be for network-attached devices only.
Operational costs amount to 45% of total cost. Toner cartridges, drums, ink and paper, otherwise known as consumables, cost companies almost 10 times the cost of the printer over the life of the asset. And for companies without printer standards, costs are even higher.
Consumables are manufactured for the specific devices, and it is rare that a cartridge made to Þt an HP printer will run in a Lexmark. This means that purchasing departments are required to keep supplies on hand for every printer, copier and fax machine in the enterprise.
Operational costs also go beyond just consumables. Increasingly robust environmental policies are forcing companies to dispose of printer cartridges in an approved manner or pay someone to do it for them.
Some companies have recycled toner cartridges to cut down on this expense, but suppliers such as Lexmark are now building proprietary technologies - also known as "killer chips" - into the cartridges. Killer chips are controversial because they discourage recycling and also make it more difficult for the customer to purchase cartridges from other, less expensive suppliers.
An enterprise will spend 50% of its costs for printers and copiers on support. Many companies purchase maintenance contracts to avoid expensive downtime and even more expensive service calls.
But these contracts are often tiered, based on printing volumes and service levels, so the more heavily these devices are used, the more expensive the support.
As with operational costs, support is more than maintenance. Calls to the helpdesk for printer jams, "out of toner" messages and broken machines are adding to the cost of running these devices. Service calls for devices without maintenance contracts can easily cost more than £100 per call.
Ford has become the largest customer to date for HP's Total Print Management service. It comprises hardware, software and services, allowing Ford to upgrade its print, copier and fax machines to new, multifunctional, networked devices and shift the ownership and management of these devices to HP. The three-year deal is worth between £55m and £80m.
Research by Cap Ventures has suggested that the document outsourcing market is expected to grow by 4.1% over the next three years.
One of the attractive features of HP's Total Print Management service (and IBM's Output Management Service) is that they are constructed to Þt into an organic IT implementation.
Suppliers bill customers based purely on use, and the devices are shared and allocated or de-allocated via the network, on demand. This allows companies to align their printing costs with the growth of their business.
Total Print Management fits into HP's Adaptive Enterprise strategy, the HP approach to organic IT - and HP is not alone. IBM's Workplace On Demand services are designed to manage the entire end-user computing environment based on on-demand philosophies, so eventually users will share computing capacity, storage, print, copy and fax services via the network.
The key to a successful deployment of document outsourcing is to understand how employees actually use these devices. It does little good, for example, to remove a desktop printer from the admin desk only to discover that staff are spending half their time waiting in line for the network printer to produce their documents.
Clearly, users who are accustomed to having a local printer available when they want will feel a loss if their printer is removed in favour of a shared one.
Before making these kinds of decisions, companies should assess their need for privacy and confidentiality, the volume of documents produced by employees, business cycles for document production, the physical locations of those employees and the type of printing and copying required to support the needs of the business.
A phased implementation of new document management processes is best. Even though there are tremendous financial benefits; Ford, for example, is deploying the HP service on a business-by-business basis.
This deliberate, planned implementation allows Ford to assess business needs, communicate changes to the employee base, minimise disruption, use up any consumables in the inventory, and iron out problems that may be associated with this change.
This approach could be best practice for many other organisations.
Julie Giera is vice-president of research at Forrester Research.