Management of office printing – for outsourcing

The industry of printing and image processing has for dozens of years been associated with sales of equipment. The services of market players have been an «inevitable evil», a byproduct of the highly-profitable business of sales of equipment and still more-profitable business of the sales of expendables. The services and that area primarily implied repair and other «service support» of equipment required by users but never being the core of business.

The turning of a company, whether a manufacturer or a common dealer, from customary sales of hardware to service-oriented operations is a most complicated stage for all industry players. In fact, in Russia alone, according to various estimates, the volume of the industry (IDC, Gartner, ITResearch) attains $2-3 billion per year, (considering expendable and service support).

A question arises if a company oriented to commodity sales can become service-oriented. The answer is yes. A vivid example is the IBM Company. Back in 1993, 90% of the Corporation profit was accounted for by hardware sales. But in the 4th quarter of 2008, the most difficult quarter in the history of the American economy, IBM signed contracts for $17.2 billion, out of which amount 9 billion was accounted by services. In the same quarter, the net profit increased by 12%, the gross margin being 47.9%. IBM has demonstrated a capacity of turning to service-oriented business. The transfer was difficult, being associated with the replacement of the administration, change in the company culture, and also overcoming a number of a multitude of other barriers.

Are present-day Russia’s market players regard the current economic crisis as an impetus to change or do they prefer returning to sales of boxes? An example of numerous companies in the printing industry has revealed that a service-oriented model demonstrates better survival during the change epoch. Only the change in development trend permits surviving.

Today quite a lot of equipment suppliers complain that the crisis has been worrying the life out of them, the decline of sales has reached 50%, they have to look for methods for cost reduction and lay off the personnel. In this case few of them can answer the question «what are you trying to change in your business?» In most cases the companies have been merely waiting for the economic collapse to be over.

We believe that for many printing companies (the manufacturers, distributors, service centers and resellers) the best time has come for re-orientation of their business to offering managed print services (MPS).

The term Managed Printing Services (MPS) is defined in Wikipedia in the following way
«MPS involves managing hardcopy fleets (copiers, printers, multifunction devices and fax machines) in a unified fashion. The term is typically associated with outsourcing of the fleet to an external vendor».

There are three phases of introduction of that type of outsourcing:

1. Control. At Phase 1, the introduction of MPS focuses on organizing control of the fleet of the print equipment.
2. Optimization. At this phase, the utilization of the available fleet is ensured. All the devices operate in an optimal regime without downtime, overload, ensuring convenience, efficiency, and rational utilization of the working time, space and expendables as well as other resources).
3. Improvement. At the final phase the user achieves better performance than that envisaged by optimization. The new solutions to management of documents circulation increase the effectiveness of the main paper-consuming business process.

To put it simple, MSP is a possibility not to pay for a refrigerator but for the cold produced. In the Russian market for several years there have existed various types of contracts referred to differently, as: by the copy, by the page contracts, by the click contracts. The user pays for the actually printed pages (the copies produced, the fax communications) normally on the monthly basis In this case the user no longer needs to take care of purchasing expendables, assignments to the company’s own IT personnel, replacement of expendables, print errors, small and other repair, other service and planned replacement of the equipment.

The set of MPS services includes:

1. Financing of equipment supplies (independent or via leasing company); remote monitoring of the printing device status (errors, replacement of the expendables, etc.)
2. The installation of the equipment, its integration into the network medium, analysis of the existing fleet (number, operating characteristics, load, service life, etc.)
3. The current monitoring of the device use, recommendations for the change in the equipment base, replacement of expendable (even without the user call)
4. Assigning an operator to the device (in case of high-capacity devices with 12, 24-hours working load)
5. Repair and preventive service of the devices (including replacement of resource and damaged spare parts)
6. Regular reports on the use, working load and other events in the equipment fleet, including statistical data on the use of the devices by particular identified users
7. Statistics on the use of color documents, text, images, using of non-standard paper, etc.)

At the end of 2008 – early 2009 almost all the leading manufacturers of the printing equipment employed strategies for transfer to MPS. The most illustrative in this respect are such suppliers as Xerox, HP, Samsung, Ricoh, Konica Minolta and Sharp. The vendors offer the companies reducing their equipment fleet and print costs via outsourcing of print management. «This approach to earning money by suppliers looks strange», said Stephen Cronin, President of Xerox Global Services in an interview to Wall Street Journal.

Ken Vallerstein of Gartner claims that the majority of organizations have no idea how many printers, copiers and MFD they have available and how many documents they print. According to the estimates of that research agency, the cost of documents in the companies ranges from 5 to 15%. The Xerox Company performed its own research to come up with a lower estimate of 3-4% of the turnover. But even those figures look impressive.

Since the beginning of this year Xerox and HP repeatedly claimed that the market has an increasing need for consulting services to demonstrate the companies how the huge bases of desktop print devices can reduced and the employees can be made to use network multi-functional devices for working groups. The vendors claim that such changes may reduce the print cost by 30%.

In this case Mr. Cronin claims that Xerox does not insist on the replacement of the available Xerox equipment fleet, «Today over half a million of the devices serviced by Xerox are competitor’s products», he days.

In January 2009, Procter & Gamble made a contract with Xerox for several years for an amount of over $100 million. According to estimates, the paper consumption is to be reduced by 40%, and the cost of print by 20-25%. Dow Chemical, another MPS consumer from Xerox, reduced the equipment fleet from 15 to 6.6 thousand devices.

Edward Crawley, President of the American research company Photizo Group, states that the American MSP market will increase by 36% in 2009 to reach $15.7 billion. In one interview he admitted that he had long been looking for a metaphor to describe office print. And once he found it: the difference between the print management on your own and outsourcing is the same as having your own car and the use of an ordered limousine, and in that case one does not have to summon the limousine, it being always nearby and ready to take the passenger to the destination required.

In the former case it is necessary, on a regular basis, to take care of the technical condition of the car and have unexpected breakages repaired, to replace the oil and other fluids and fill the fuel tank. It is also necessary to have official checkups. But the «ordered limousine» service deprives one of all those cares, and besides a driver will always take him to the destination required.

True enough, the above analogy does not consider an important feature: an ordered limousine proves cheaper in operation compared with one’s own car.

Without a doubt there are a number of disadvantages in transfer of the office to the MSP. A company that handed over the management of its print to an outsourcer proves tied up to a single provider of services to become dependent on the conditions and the status of the latter’s business. In addition, the employees who get used to personal desktop printers will have to use common network MFD, which is not always convenient. (In Xerox practice, some office employees hid their printers from the outsourcers under the table.)

Thus, the biggest manufacturers have made their choice. Time has come for the common industry players.

Alexander Goloschapov

Tags: article, Outsourcing of office printing, Printing management