Print outsourcing: some key points of correct management of printing costs

The awareness at the beginning of the present decade that the onset of the Internet epoch has not served as an impetus to a substantial decrease of the scale of user printing but rather conversely, which led a number of organizations to searching for methods for drastic reduction in printer print costs.

For some it implied handing over all the print organization problems, or some of them, to a third party in the form of most diverse options starting with the lease of "printer complexes" and contracts for their maintenance prior to outsourcing to a third party of the entire set of printer print – from acquisition and maintenance of the equipment itself to supply of cartridges, paper and technical support services and administrative accounting. Such initial options of service organization during the recent years have been substantially reorganized as both buyers and suppliers have become better aware of what aspects of the model what aspects of the model operate satisfactorily where it is possible to reduce the greatest cost reduction, what cost mechanisms and indices of the const level are the most adequate and what the weakest points of office print are.

But despite the fact that, say, the Dutch Banking Group ING and HM Revenue & Customs reduced by millions the expenditure items of the budget for printer print and copying, the majority of companies so far organize printer print on their own.

George Politsyn, client manager and an expert in external organization of of services with EDS believes that only a single company out of 10 uses the services of external print organization. Such organizations as Ministry of Work and Pensions of Great Britain, which intends to invest 400 pounds into a project of seven-year cooperation with the companies Xerox and EDS to reduce the costs of printer print are currently much better prepared for the assimilation of the experience of their predecessors. According to the information about the general status of the printer print organization, there is yet a lot to study.

"Paper track"

The most serious problem that organizations face is lack of awareness of the problem. Before analysis of the activity preceding any contacts for the organization of printer print, only few top IT executives of medium-sized and big companies are aware of the number of the printers used in the organizations and expenses on printer print, to say nothing how actively those printers are used, the number of suppliers of the equipment, its age and the need for repair and maintenance. All those circumstances taken into account, according to some estimates printer print and copying account for up to 3% of the annual income of some companies, which is some worrying "white spot". For instance, Hewlett-Packard believe that in the United States alone, this year the users will print 1.3 trillion pagers, compared with 1 trillion in 2002.

The bulk of that process is not managed "Historically, the process of printer print is only poorly associated with its organization", said David Wilson, he head of managed services of Oki Printing Solutions.

As a result, the price offer for managed printer print services is simple, as was pointed out by Politsyn. "Control of print cost through the understanding how much you spend at a moment, consolidation of the equipment fleet and redistribution of the print flows to jointly used printers". There are several very important indices for the companies who want to reduce their costs and provide higher-quality services to the users. The major problem that appeared during the last several years is understandably general economy. While two to three years ago some printer manufacturers and the companies engaged in IT services proposed a potential reduction of costs of about 30%, the implementation experience has demonstrated somewhat lower figures compared with those expected.

"We have revealed that 30% is the limit value ", said the Chairman of Oki Wilson. "When you are making a transaction whose purpose is to reduce the print cost by 30%, one discomfit the operation of the entire service in pursuit of that objective". 12-15 % is a more realistic and stable level. Somewhat more optimistic, Politsyn, a representative of the EDS Company, regards the basic value as 20% for those who chose managed printer print services. Cost reduction can be achieved mainly by three factors as follows: standardization of equipment, rational and centralized use of printing, copying and scanning equipment. In terms of the amount of the equipment alone, there is much evidence that certain activities can reduce printer expenses by 30% to 50%. Standardization and simplification of the equipment i, according to Oki's Wilson, the primary vital step. After you installed the printers and MFD from the same manufacturer, and having reduce the variability of printers used in different services of the organization, the companies can fill the huge gap in the printers cost account. When the service provider is a company specializing in printers, the economy may be still greater. Moreover, standardization of equipment helps solving another problem. Today al most every organization uses a multitude of printer makes and copiers scatteres about the office and acquired from many manufacturers. As a result, companies find that they have to keep premises filled with cartridges, ink and toner. Standardization and outsourcing of respective operations to a third organization renders the problem nonexistent. The following advantage is less evident. One of the first steps of the provider of printer print is replacement of overage equipment by a new one – that immediately reduces the current repair expenses. When the cost of any unplanned interference is 100-225 pounds per device, the economy may be very great.

"One of the most substantial items of economy may be refurbishment of equipment whose warranty period has expired", says Wilson. Discarding overage equipment has another advantage. "From 15 to 30% of all calls to support service is associated with printer and copier problems ", claims Wilson.

That was justified by the New College Durham, which recently approached a provider of services for the printer print organization Kyocera and its partners XMA and Alto Digital. It was revealed that the main economy lay in freeing for other tasks a team of employees previously engaged in IT resources.

Concurrently with standardization, consolidation is involved, i.e., an increase of the number of users per printer. An acceptable index that is most organizations and suppliers are trying to achieve is 7-10 users per printer. The company managing the assets of HSBC, a giant of finance services in Great Britain, has raised that standard still higher. While moving to another headquarters in London it managed to increase the ratio of printers to users from 1:4 to до 1:15. Along with other improvements it is expected to save 890 000 pounds within five years.

Such consolidation is not always a success for users who are used to having specially assigned equipment always at hand, but in the course of analysis of utilization, the manager can always determine an optimal disposition of each printer /copier and "thus avoid the detrimental on the effectiveness of the personnel performance ", believes Politsyn.

It is thought that the key problem here is the production of key management information. The understanding of the requirements proved the most attractive in the services of managed print services for the New College Durham. The College has about 130 printers, their total output being millions of pages per year. "One of the main advantages is the reduction of print expenses ", says Alan Rayes, human resources development manager. Where we used to have black spots, we know precisely today what our monthly expenses are.

Pay upon upon printing

It is a fact that the majority of organizations have only a poor idea of the total print output performed by end users. Not infrequently, the only index that they deal with is paper consumption, and far from all the companies control it "The awareness of (and reduction in) the cost of print of a single page there is undoubtedly the main incentive", says Nale Sawyer, marketing manger of Hewlett-Packard in Great Britain.

The estimated price models for the majority of contracts for printer print services are based on estimated of the cost of printing of a single page — the cost that normally includes all the equipment and its refurbishment during the contract validity period, paper, cartridges, maintenance and support of customer service jointly with the supply of key management information.

It involves accounting for each device, which the suppliers normally provide with monthly or quarterly bills. Nevertheless, in addition, the suppliers set minimal liabilities with respect to printer performance, the figures of 20 000 to 40 000 pages per month not being unusual.

But the gain does not only lie in making print cheaper. The majority of providers of services have been attempting to create "production islets": i.e., zones where a printer, a copier, and scanners and fax machines are installed. When all these capacities are united into a multifunctional unit, the expenditures further decrease, particularly where copying is joined with printing.

A problem that often needs to be solved when turning to such a multifunctional environment concerns property. Polytsin says. "In the majority of organizations copier expenditure is listed as maintenance of the equipment, whereas the printers pertain to the IT-budget.

"Normally, this refers to the functions of the head of information department but one of the most difficult things consists in the fact that this is a matter of internal policy. But reduction of the cost is far from everything. In addition, the companies are very much interested in the management of printer print as provides them a greater degree of control, which may provide a basis for security. A human resources manager printing out the salary details of the employers may, for instance, be limited by having a single printer or a security code, which is to be put in, otherwise the output information will remain in the printer memory.

"In case you only want to attain an economy of funds, in a year you may find yourself in a difficult situation ", says Wilson. Possibly, you will need a guarantee that the supplier should pledge to familiarize you with technical novelties and not only with basis makes. Contracts as such should be long enough to ensure their amortization within several years but not long enough for them not to bind the organization and not to make difficult switching to another supplier. Wilson recommends the period of three to five years.

The company HM Revenue & Customs decided to look more attentively at their 10-year-old contract for IT equipment with 'Aspire' and at the support services of Capgemini. Until recently the 'Aspire' printers were commonly available. About 700 printers from various manufacturers and makes were serviced independently and every department made its own orders for supply and maintenance. There was no monitoring or control according to Eddy Gigna, a manager for information and development Capgemini (Aspire). "There was no centralized accounting and nothing could be coordinated.

Under the managed services contract with HP, 700 existing systems were replaced by 300 new HP with centralized management, maintenance and an automated system of equipment replenishment.

As to the general business advantages, Gigna reports reduced expenses on print equipment and auxiliary materials, the customer support service, the installation/refurbishment of the equipment. But most of all, as he believes, an increase in the productivity of personnel was influenced by an access to printing devices.

Such examples emphasize the importance of numerous factors that come into play in an attempt of getting a maximum advantage from outsourcing some functions to third parties. As emphasized by Politsyn, that requires some profound knowledge, which is gained with experience. He believes that "As in any contract for outsourcing of some functions to other organizations, the main thing is to make the assets work".

In practice: ING Group

"How many printers do we have"? When Rob Erbrink, Vice-President of the Danish Banking Giant ING was asked that question in 2001 he had to guess as it had never occurred to him before. "His intuition suggested to him: “There are about 200 units in our headquarters in Amsterdam". The subsequent check revealed that the actual number was close to 640. The major thing was that print expenses were absolutely unknown to the bank as was the case in the majority of other companies. Similar to many other organizations, ING acquired printers from seven to eight suppliers and some devices had been used for up to 8 years. "We had no idea what printers operated in each department, some of them were part of the network, whereas others were merely connected to PCs. Our maintenance expenses were huge".

Moreover, some departments made orders to their own suppliers (for ink and toner cartridges), which overfilled the storage premises and a huge number of invoices.

ING realized that the problem should be taken in hand and shifted responsibility to other shoulders. The company signed a printer print managed services agreement with Hewlett-Packard for three years under its PrintAdvantage Program. HP replaced the entire printer fleet in Amsterdam by new machines and analyzed their utilization. In each department “printer isles” were established with a main printer, fax machines and a scanner." Within a year 640 printers turned into 350", says Erbrink. And although their number increased to 420, the ING economy in three years proved considerable: EUR 3.4 million.

But there was still potential left for further improvement. "The problem was that each time that we needed a new printer, we had to make a new lease agreement and issue an invoice. There was much paperwork to do". ING decided to make a 'Pay Per Use' agreement, which is valid until the year — 2009 and makes HP fully responsible for the printer print equipment for about 3 000 persons. In addition, only printed sheers are charged for (although HP sets a minimal charge for the printing of 40 000 pages per month), ING is also provided guarantees for a range of services in case of maintenance failures and equipment replacement.

"For us, the main economy consists in the cost of invoices and calls and call to various information centers — currently we have only a single contract, and we issue invoices to HP only four times a year ", says Erbrink. "When the printer is out of order, it is repaired within four hours, or is replaced automatically. Cartridges can be obtained within 10 minutes".

Similar to other big companies, one of the main ING tasks was that of use control. Now that task was performed by the HP remote control service, which provides report of the availability of equipment and auxiliary materials and utilization of each printer. However, all the efforts for reduction of the printers available and optimization of their use do not mean that their page number decreases. "From 40 million per year that number increased to 70 million", points out Erbrink, " And the figures increase". Nevertheless, we estimated that within three years to come, we can save another EUR 2.9 million".

Kenny MacIver

Tags: article, Outsourcing of office printing, Printing management