MPS Trends and Directions The opportunities today look different than what was available 10 or even 5 years ago in the managed print services (MPS) industry. In change and uncertainty there are enough possibilities for each firm to find its own unique opportunities. The question is, are you “prepared” and “qualified” for these special opportunities? Have you or will you recognize them when they appear? This column examines several of the MPS trends that Photizo Group has observed that are likely to affect your decisions in the near future. These have been gleaned from several sources: Photizo Group’s 2011 Outlook webinar, Photizo’s Q3 2010 MPS Insights Journal issue on Trends and various brainstorming sessions we have had on the subject. 1. Monthly charges paid for device management will plunge “I believe that device management is going to become food/water/shelter in managed print, I really think that it is going to be table stakes,” declared Doug Johnson, Senior Vice President of MPS for Supplies Network. Commoditization of the imaging device management software market is most evident in the fierce price competition. Most office technology resellers have considered these solutions as a cost of doing business in an attempt to streamline costly overhead and allow for scale of economy during growth as opposed to a revenue source, e.g. charging for assessments. Due to this perspective, dealers and resellers have been very price conscious in choosing their solution. While there are significant differences among the industry’s software companies, device management is becoming a standard functionality. Commoditization has made this business model unsustainable long term, raising questions about how companies such as PrintFleet and Print Audit will retain long-term value in the device management space. The recent acquisition of FMAudit by eCommerce Industries (ECi) signaled a change in the marketplace and device management firms will need to provide broader functionality, partner or seek acquisition as the market evolves, or face increasing market pressures. 2. Basic MPS gets bypassed for projects in document workflow. “When you get a client to a certain level with MPS, you had better be ready for something greater than MPS because all of a sudden you have improved their business practice for them and they want to know what else you can do for them. MPS has provided the opportunity to become a business advisor not just another vendor,” says Michael Greenburg, owner of Printology. The next level for MPS vendors is becoming educated and prepared to look at document life cycle management using document workflow analysis. There are as much savings and productivity improvements to be had as the optimization of the entire fleet. Solutions are coming around that will allow providers to enable document workflow without becoming deep workflow experts, without getting into the software, and without integrating with the client’s ERP system. This trend will require domain experts in multiple verticals. The three verticals that have had the most attention are financial services, legal and healthcare. Multiple press releases by Xerox and HP healthcare verticals are evidence of this trend. This past January, Xerox bought WaterWare in a bid to store customers’ electronic medical records (EMR). The medical industry is fraught with compliance issues and regulations (HITECH and American Recovery and Reinvestment Act) and they are looking to automate even more and move forward with initiatives focused on EMR. 3. Stage 3 and Stage 4 (Business Process Optimization (BPO) and Information Technology Outsourcing (ITO)) will become increasingly important for dealers and IT resellers to maintain healthy margins. Whereas Stage 3 is predominantly document-centric (although it may be electronic rather than paper-based), BPO and ITO may not have a document component. As a result, this new stage (or convergence of MPS and non-MPS stages) requires an entirely new set of skills and partnerships. It is with this backdrop that Photizo has formulated what we call Stage 4. With Stage 4, vendors move beyond just providing a solution to manage the documents involved in a business process, to offering outsourced management of the complete business process. This convergence presents an opportunity for dealers who have an understanding of their client’s document processes to help them make the transition to more efficient business processes. Vendors not only broaden the scope of their MPS engagement, they will drive a regular stream of high value ongoing revenue as outsourced providers. 4. Multiple factors will contribute to a precipitous decline in cut paper. Networking, cloud computing, and user demographics are all contributing to the growth of the MPS industry and the eventual paperless office. Networking and cloud computing have advanced to the point where large companies recognize that imaging is not part of their core and have or are planning to outsource their printers, copiers, MFPs, scanners to MPS providers. The misnomer “Paper free in ‘93” has come and gone. The above factors are contributing to a revival of the paperless office. While Photizo does not believe we will reach a paperless office, we believe we will reach a “less paper” office. The combination of cloud computing, portable data access (such as the iPad), almost universal wireless and/or cellular access, and the ultimate transition from our current workforce to the next generation of workers who have always been Web device-centric (and don’t see a need to print) will result in a seismic shift in printing volumes. Whether this comes in 10 or 20 years, it surely will occur. 5. International MPS adoption will be swift. While MPS requires a broad set of tools and skills, the components are available to compile and implement nearly anywhere in the world. North America and Europe are early leaders, but other regions will grow quickly. Asia Pacific, followed by Latin America will experience rapid expansion in the MPS space. Photizo Group’s latest 2010 Market Share and Forecast Analysis shows 6 of the top 10 fastest growing countries are from the Asia Pacific region. The region’s average CAGR from 2009 to 2014 is estimated to be an impressive 41 percent. Three drivers will be seen in Asia Pac: (1) an increase in MPS offerings by the OEM vendors intensifying market competition, (2) an increase of MPS providers in the channel and an emergence of software, solutions, and infrastructure providers forming an MPS ecosystem, and (3) customer awareness and demand. Europe is highly fragmented and the MPS market dynamics vary by country. Currently, MPS penetration is still below 25 percent of the market. Europe represents the largest growth opportunity for MPS. The implication is that winning a strong position in the European MPS market will be key to future growth for vendors. European channels will embrace MPS, driving significant MPS growth. This means that cross-country channel programs (e.g., Office Depot and Xerox) will emerge to support regional MPS customers. 6. The pace of mergers and acquisitions for aftermarket supplies and channel participants increases. Katun acquired Media Science’s toner business, Clover acquired ERS and NER Data’s imaging supplies division and Image1, and then Golden Gate Capital invested in Clover and West Point Products. The flurry of acquisition activity in aftermarket supplies has not stopped and the likelihood of it continuing is high. It appears the third-party supplies business (reman or refill, etc.) is gaining credibility in the equity funding market, based on Golden Gate’s action. This will complete another critical piece in the industry infrastructure to enable non-equipment manufacturers to provide high-quality supplies as part of their MPS programs. This along with other industry developments is adding pressure to the printer industry that should drive adoption of MPS by OEMs and non-OEMS. 7. Xerox moves beyond their core business and becomes more ACS-like. Xerox picked up Global Imaging Systems (SMB expansion in 2007) followed by Veenman (2008), Irish Business Systems (2010) and now Concept Group (SMB expansion in 2011). They are buying channel and in most cases their moves have hurt their competitors. Their largest acquisition was ACS in September 2009. ACS has turned into a boon for Xerox as it has provided higher profit potential and additional MPS opportunity. The impetus behind this acquisition was HP buying EDS and Dell buying Perot Systems. All three of these acquisitions show MPS converging with IT managed services and BPO. With the success that Xerox has had with ACS, the company will continue to move in that direction as evidenced by the recent partnership with Office Depot in Europe. 8. Unconventional market entrants will invade the MPS industry. The imaging market is wide open for new approaches and participants. Unconventional market entrants such as consumables and office supplies vendors are coming up with their own MPS programs, some of which are quite sophisticated. Some have powerful new MPS tools and sales approaches that empower dealers to loosen their OEM ties. Hybrid dealers have come from the reman industry, equipment financing companies, infrastructure providers or any other company that can put together all the pieces of MPS and provide a one-stop shop to customers to manage the entire print lifecycle from hardware, consumables, tracking, digitization, and workflow management. MPS involves consulting and puts all MPS entrants, be it OEMs or other players, at the same starting point. Printing will no longer remain the exclusive domain of the OEM providers. 9. Cloud and mobile printing will change you and your business. Smartphone sales are exploding with approximately 175M units sold globally in 2009, up 24 percent over 2008. Smartphone sales will exceed PC sales by 2012. The number one requested feature for the iPhone and iPad is to print. Smartphones are not the only devices that need to print; there are readers (Kindle, Sony, iREX), netbooks (Verizon, Psion, ASUS), and tablets (Entourage, Android, iPad). Cloud printing is made up of three services: cloud print services (EFI PrintMe, HP ePrint, Google CloudPrint), mobile print services (Apple AirPrint, Global Graphics/Intel) and wireless connections to select print models (HP ePrint, Epson PrintJini). At CeBIT 2011 a new Cloud Printing Alliance was started with the support of Brother, Dell, Konica Minolta, Kyocera Mita and Oki. The impact on end users, IT and print providers is extensive. Besides the technology implementation across multiple platforms, multiple locations (airports, hotels, conference centers, company locations, etc.) the security issue must be addressed. The total process can be rolled into an MPS contract and let print manufacturers handle the details. In conclusion, when entering a new market or trying to flourish in a market, it is important to stay up-to-date on the trends. MPS is rapidly evolving and your business’ ability to stay ahead of the curve can determine its success. Each trend listed above can be viewed as either an opportunity or a threat. It is up to you to determine which one it will be. Mike Huster is a senior consultant and partner of Photizo Group. Mike has been in the hardcopy and technology industry for over 25 years, working for IBM and Lexmark before helping start Photizo. Prior to joining Photizo, Mike worked at Lexmark International in various management and staff roles in Worldwide Marketing, eCommerce, and Lexmark Electronics. Prior to that, Huster spent 15 years at IBM where he held management positions in sales and marketing, R&D and engineering. Huster earned a B.S. in Mechanical Engineering from the University of Cincinnati, an MBA from the University of Kentucky, and an M.S. in Mechanical Engineering from Georgia Institute of Technology.