Managing Print Costs With Usage-Based Solutions

Transcription

1 Research Brief Managing Print Costs With Usage-Based Solutions Abstract: Many users are unaware of the cost of hardcopy output or the ways they can assess and manage output costs. Usage-based programs provide fixed monthly costs when acquiring and running print output devices. By Cécile Gobin and Malcolm Hancock Recommendations Printer vendors should develop "pay for usage" programs targeted at workgroups and departments in small and midsize business (SMB) and corporate customers. Vendors should promote the lower cost of ownership of modern output devices compared with the installed base. Vendors need to educate channel partners about the benefits of managing output costs with usage-based programs. Users should develop a strategy that includes the measurement and tracking of output usage. They should review their output needs regularly, replace and right-size output devices. Users should evaluate usage-based product offerings against their current procurement model. Publication Date: November 20, 2002

2 2 Managing Print Costs With Usage-Based Solutions Maturing Market Drives Usage-Based Printing Solutions Budgets are tight and expenses need to be considered carefully. On average, enterprises are spending between 1 percent and 3 percent of revenue per year on hardcopy output. Even a modest reduction of 10 percent per year on such costs can generate substantial savings, fund investment in a modern, more productive range of output devices, and generate ongoing savings. The maturing printer market, combined with the emergence of multifunction products (MFPs), is forcing printer vendors to compete not on product specifications, but by offering a combination of hardware and software. Hardware solutions appeal to both vendors and users. For vendors, they represent an incremental revenue source, an opportunity to enhance customer satisfaction and retention, and a chance to engage the channel in service-related activities. Users benefit from cost savings, no capital expenditure, simplified budgeting of output costs, and improved productivity, at a time when total cost of ownership and cost per page are becoming key elements in the decision to purchase output devices. In general, usage-based programs are a vehicle for leasing hardware while incorporating other items such as services and consumables into a fixed monthly payment, which is based on the hardware, maintenance and the number of consumables. Users' print volume and print density are used to determine the quantity of consumables that will be needed per annum. Print volume are agreed jointly between the vendor and customer. Usage-based programs do not offer a price per page as is the case in "pay per page" ("click charge") copier programs and usage-based program customers do not pay for underconsumption, as with copier pay-per-page offerings. Vendors With Usage-Based Solutions Of the printer vendors contacted during our research, only Hewlett-Packard (HP), IBM, Lexmark, Nashuatec-Rex Rotary-Gestetner (NRG) and IKON currently offer usage-based programs for printers and MFPs in Europe, although several vendors are developing programs or evaluating them. HP Launched at the end of 2000, Printadvantage is the primary offering of HP's managed print services, which help customers to better understand and control their output needs through a process of analysis, recommendations, implementation and management. It is designed for companies seeking an output fleet management solution, while keeping control over their expenses. A Printadvantage contract is normally three years and can be extended to five years. HP provides and maintains the print hardware. The contract is based on the number of consumables agreed with the customer when signing the contract. The monthly payment is calculated by Printadvantage software, based on the customer's hardware, print volume and of consumable needs. Printadvantage is available with HP LaserJet printers, MFPs and business inkjets. It can include HP products already installed on site. HP produces an annual report that reviews the state of the contract. If, after the first year, the customer has used more than the agreed number of consumables, the monthly amount will be adjusted for the following year. In the case of underconsumption, credit will be given.

3 Printadvantage customers can access daily online updates that allow them to assess their usage of consumables and order consumables or maintenance kits. They also have a priority phone number, with a dedicated Printadvantage team, for service calls. The program is available through all HP resellers. The margins applied to the program are decided by the reseller. The basic cost of a three-year Printadvantage contract is about 15,000 euros, highlighting the program's primary focus: the corporate environment. IBM IBM's Pay Per Page offering is a customized service to help customers to control their print volume costs. It includes hardware (IBM office printers, production printers and MFPs), maintenance and consumables. The cost is based on the customer's hardware, an estimate of print volume and. IBM's program can include existing hardware from IBM or other suppliers. Contracts are for three years in most cases. Billing occurs annually and consumables are provided directly by IBM. Although resellers can sell and promote such offers, most Pay Per Page deals are done directly with IBM, owing to the size of the targeted companies (midsize and large businesses) and the average contract value (starting at about 50,000 euros for a three-year contract). IBM's program started in 1999 and is available in all Western European countries. IKON IKON does not have a formal cost-per-print program for printers. However, it has printer Fleet Management Agreements that are negotiated individually; IKON may make a cost-per-print assumption as a component of the overall agreement. Fleet Management Agreements currently account for only a small percentage of IKON's business compared with its cost-per-copy contracts for copiers, which form the majority of copier deals. Most IKON print management agreements are instigated at the request of customers, rather than by the vendor's marketing or sales efforts. The agreement is usually for a three- or five-year term and is available for Lexmark, HP, Ricoh and Canon laser printers and MFPs. IKON's Fleet Management Agreements present two scenarios. Firstly, and in most cases, customers request a solution to help them manage their copy and print output devices. In this instance, the monthly price includes labor and hardware costs, which vary according to the hardware. For example, a contract may require a dedicated technician. In the second scenario, customers request that consumables are part of the agreement. IKON then incorporates a cost per page into the monthly payment, based on of consumption and print volumes. The performance of the contract is reviewed annually and the customer is only charged for consumables used; that is, credit is given for underconsumption. 3

4 4 Managing Print Costs With Usage-Based Solutions Lexmark Lexmark PagePlus (also known as ValuePrint) is a generic program including the supply of hardware, consumables, service and maintenance kits if needed, all in one monthly payment. Calculation of the service charge is determined by customers' hardware as well as by of print volumes and. Lexmark term this Real Usage Budget Billed (RUBB). If additional cartridges are needed, they can be purchased from Lexmark. Based on RUBB, the minimum value of PagePlus-associated hardware is about 2,000 euros. It is designed mainly for SMBs looking for a finance or click-charge solution or seeking to replace their installed base. All Lexmark laser printers and MFPs are available within PagePlus and dealers can also incorporate service, if requested. The program is available through the channel, with an incentive for channel partners to sell PagePlus. PagePlus has been available in Norway since November 2001; it was launched in Germany and France in September 2002, and will be extended to other Western European countries soon. NRG NRG has a cost-per-page program deployed on a country-by-country basis across Europe. It is particularly strong in the Benelux region and Germany. In the Benelux region, the Paper Flow program varies according to NRG customer needs. It includes the hardware (NRG or existing non-nrg hardware; printers and MFPs as well as copiers), help line, maintenance and consumables: basically, everything except the paper. The price depends on the print volume agreed with the customer and contracts of three, four or five years are available. NRG started this offering in the Benelux region with its copy machines 20 years ago and extended it to its laser printer range in Selling 85 percent of it products direct, the vendor has no need for "off the shelf" solutions. NRG targets its MFP customer base and is also strong in the government, logistics and transport sectors. In Germany, the Pay Per Page program covers printers, faxes and MFPs. It can be applied to customers' existing products, whether NRG or not. The cost per page is calculated by analyzing the hardware, consumables and services costs. The Pay Per Page program is also available through certified dealers and is targeted at all sizes of business, production sites, banks, administrative agencies, clinics and universities. The Pay Per Page program started in Germany in Since then, the company has created Office Consulting, a division of NRG Germany that has more than 10 consultancy managers and over 50 analysts to handle print analyses. Programs Under Development Kyocera Mita The vendor currently offers only leasing deals. However, its U.K. subsidiary is working on a click-charge package that includes not only hardware but also supplies and maintenance. This scheme is expected to be announced before the end of It will run alongside the existing leasing program, which was developed in January 2002 with CF Asset Finance and covers Kyocera Mita single-function and multifunctional digital copiers and laser printers.

5 Oki Although the vendor does not offer a pan-european program, some country subsidiaries have partnered with local companies to provide financial solutions. For example, the U.K. subsidiary launched a finance solution in association with Siemens Financial Services in July It allows Oki channel partners to offer a fixed-term rental over a three-year period on Oki products. Table 1 outlines the usage-based print solution available in the European marketplace. Table 1 Usage-Based Print Solutions Europe, 2002 Hewlett-Packard IBM IKON Lexmark NRG Program Name Printadvantage Pay Per Page Fleet Management Agreement Geographic coverage Worldwide Western Europe United States, Canada, United Kingdom, Denmark, France and Germany Applies to Customers' Existing Hardware Existing Hardware Can Be Competitors' Product Products Covered PagePlus/ValuePrint Norway, Germany and France Yes Yes Yes No Yes No Yes Yes No Yes HP mono and color LaserJet printers, business inkjet and MFPs IBM office printers, production printers and MFPs Lexmark, HP, Ricoh, Canon laser printers and MFPs Lexmark laser printers and MFPs Pay Per Page in Germany, PaperFlow in the Benelux region Europe Copiers, MFPs and printers Billing Monthly Annual Monthly or quarterly Monthly Monthly Includes Services, Spares, Maintenance, Toner and Cartridges Yes Yes Yes Yes Yes Includes Paper No If required If required No No Length of Contract Minimum Spending for Three-Year Contract (Euros) Price Calculation Usually three years, can be five years Usually three years Three or five years Usually three years Three, four or five years 15,000 50,000 Not available 2,000 for hardware and extended warranty consumable consumption MFP = multifunction product Source: Gartner Dataquest (November 2002) 1,000 in Benelux 2,500 for on-site analysis in Germany 5 Gartner Dataquest Perspective The majority of printers are acquired with a "buy and forget, replace when dead" attitude, while copiers and most MFPs are acquired on a click-charge or leasing basis. Digital copiers and MFPs have taken output away from single-function printers for more information, see "Convergence: Changing the Face of Office Output," (HARD-WW-DP-0312). Printer vendors need to adapt their business strategies to compete effectively with copier vendors, and usage-based programs will provide an important weapon in their arsenal. Copier vendors whose product range includes printers should consider widening their cost-per-copy offerings to their customers' printer fleets, as IKON and NRG have done. Such vendors' strong relationships in the copier area are an opportunity for them to strengthen their presence in the printer market.

6 6 Managing Print Costs With Usage-Based Solutions Usage-based programs offer the following benefits: They are attractive not only to users but also to channel partners that wish to enlarge and add value to their portfolios. Equipment purchases are centralized, allowing companies to cut the cost of managing output devices and to gain efficiency in their support, maintenance and engineering. They provide a way for SMBs or large departments to understand clearly their output costs, to predict budgets for the duration of the contract, and to gain a new fleet without capital expenditure. This is a good start and probably substantially more than most users have undertaken. They are ideal vehicles for improving satisfaction and retention in a wide range of customer types. Usage-based programs should appeal to all sizes of business considering the purchase of output devices for workgroup and departmental use. Vendors should incorporate usage-based programs in a wider portfolio that encompasses custom consulting, output assessment studies, outsourcing, facilities management, click-charging, leasing, rental, purchase programs and maintenance and service contracts. They also need to ensure they "speak the same language" as copier vendors, to bid equally with them. They should be prepared to see their product lines compared to those of competitors. They should pay attention to service and support costs and not place too much emphasis on customers' print coverage. Training for vendors' sales forces and channel partners is essential to drive wider adoption of such programs. Gartner Dataquest advises users to get more from their output fleets by replacing, modernizing and ensuring devices are the right size. Usage-based programs can form an important part of this strategy, depending on particular requirements and the commitment to replace aging devices. The degree of customization varies between different programs. If a comprehensive review of output requirements or workflow is required, a full output assessment study should be undertaken. A usage-based program could be the resulting procurement method recommended by the study. However, it is critical that customers know how much printing they are doing in advance and to have reliable information. They should therefore start monitoring it now. Key Business Issue What strategies are vendors implementing in order to succeed in this market? This document has been published to the following Marketplace codes: HARD-WW-DP-0394 For More Information... In North America and Latin America: In Europe, the Middle East and Africa: In Asia/Pacific: In Japan: Worldwide via gartner.com: Gartner, Inc. and/or its Affiliates. All rights reserved. Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice