The Power of Digital Printing
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1 September 2002 The Power of Digital Printing Taking the next step to new opportunity and profitability Jim Hamilton Associate Director CAP Ventures, Inc.
2 Page 3 Contents 3 Straight Talk About Digital Print 5 Evaluating the Production Digital Print Opportunity 7 Does the Quality of Production Digital Printing Match that of Offset? 8 Is Production Digital Printing Introduction For a number of years, commercial printers have been using digital printing technologies for applications like comps, proofing, and office printing. Many have also implemented black & white and color production digital printing systems. For those who are considering this step, how do you determine if production-oriented digital print technologies are a good fit for your operation? In this white paper, produced for IBM by CAP Ventures, we will show you how production digital print technologies can support your existing business, increase revenue, and help you to take advantage of new opportunities. Profitable? 9 What are Print Customers Saying About Production Digital Printing? 11 How Production Digital Print Complements Your Current Capabilities 13 Evolving Print Customer Requirements 14 Why Choose Digital Now? Straight Talk About Digital Print Some bold statements have been made about the future of print and paper. It wasn t so long ago that some were predicting a paperless office. Though that hasn t happened, few would downplay the impact that and the Internet have had on business life. Production digital print came to the market with very high expectations as well. Many wondered if it would entirely replace conventional printing technologies, which it has not. However, it has found an important place in commercial print environments and revenues associated with production digital print will continue to grow at a rate much higher than the overall commercial printing market. Revenues associated with production digital will continue to grow at a rate much higher than the overall commercial printing market.
3 Page 4 Figure 1 Growth of the On-Demand Production Digital Print Market in Comparison to Key Print Related Industries (such as commercial print, business forms, prepress services, direct mail services, photocopy services, in-plants, and data center print departments) The 14% growth of the on-demand production digital print industry will amount to $50.5 billion in The 14% growth of the on-demand production digital print industry will amount to $50.5 billion in While a large portion of this opportunity is in color, black & white production digital printing formed the foundation for the on-demand market and will continue to be an important component, producing the majority of printed impressions.
4 Page 5 Figure 2 Growth of the On-Demand Production Digital Print Market as Measured by the Retail Value of Print Evaluating the Production Digital Print Opportunity Let s lay everything on the table. You have heard claims about production digital printing. You might think that it s expensive or that that the quality is bad. You may have heard that no one is making money or that there is no market for applications like personalized print. Let s look at each of these claims individually. Is Production Digital Print Expensive? In general, production digital printing is less expensive for short runs and more expensive for long runs. Here is the quick answer: In general, production digital printing is less expensive for short runs and more expensive for long runs. Commercial printers are used to printing long runs. When you have a long print run, the cost of the plates and make-ready is spread out over many impressions, so the price of a single sheet is quite low. You know that you charge your customers less per piece for longer run jobs. That s simply the nature of long-run printing. With production digital printing, it is the cost of consumables and service that contribute the most to the cost of the job. This doesn t change much even when the job is a long run. So at longer runs (generally above 1,000 or so impressions), conventional print technologies are less expensive on a per-piece basis.
5 Page 6 The opportunity presented by production digital print, therefore, is not to compete with conventional print technologies for longer runs, but to take advantage of production digital print s capabilities to do quick turnaround jobs, cost-effective short runs, and personalized print applications that simply can t be printed using conventional print technologies. Unit Manufacturing Cost High Low Offset Digital Print Opportunity Digital Low Run Length High Figure 3 Cost Comparison of Offset and Digital (shows one inherent capability of production digital printing: cost-effective short-run printing) Regarding expense, here is an important factor to keep in mind: commercial printers who underutilize their production digital printing equipment will suffer because they must continue to pay for the equipment and its service. Of course, this would also be true for the owner of an idle offset press, but the service model for production digital print equipment is entirely different from offset presses. The simple fact is that an owner will spend much more on a monthly basis for the service for a production digital printing device, in many cases whether it is running or not, than for a 2-up or 4-up offset press. If that production digital printing device is operated efficiently and run at sufficient monthly print volumes, however, it can be a profitable device that opens up new business opportunities.
6 Page 7 This is also why it is important to work with an equipment vendor that offers a wide range of products to suit your needs. You don t want to end up with a system whose ideal monthly volume is too high for you to support. It is better to build digital print volume on a single, perhaps less robust device and then add production capability as you need it. DonÕt underestimate how important a vendorõs service program can be in maintaining your productivity. In addition, a production digital printing system is much more than just a fast printer. It must be supported by front-end software and workflow tools to make it truly effective. Not all vendors understand how to make their hardware operate effectively in production environments. System productivity is also supported by an effective service program. Don t underestimate how important a vendor s service program can be in maintaining your productivity. Does the Quality of Production Digital Printing Match that of Offset? It is important to make an apples-to-apples comparison here, and to do so, we need to look at black & white and color separately: Digitally printed black & white halftones are suitable for many print applications and are used extensively in books, technical documentation, and promotional literature. Black & white Most black & white production digital printing devices support at least 600 dot-per-inch resolution. This produces very good results for text, line work, and tints. Halftones are good, but do not yet match the quality produced on an offset press running a 150 line-perinch screen ruling. Even so, digitally printed black & white halftones are suitable for many print applications and are used extensively in books, technical documentation, and promotional literature. As with any method of printing, the quality of a halftone is dependent on the quality of the scan that it is derived from. Using four-color offset as the standard, you will find that color production digital printing devices compare very favorably to four-color offset, particularly when printed on comparable substrates. Color The majority of color production digital printing devices support only the four process colors (cyan, magenta, yellow, and black). To make a fair comparison to offset, you must therefore consider only four-color offset, and not include jobs that offer extra colors, special inks (like Pantone colors), varnishes, or coatings. Using four-color offset as the standard, you will find that color production digital printing devices compare very favorably to four-color offset, particularly when printed on comparable substrates (see more on this below).
7 Page 8 You also know how great a difference paper can make in a job. This is equally true of production digital printing, but most digital print jobs have historically been printed on low-quality office papers. Today s digital printing devices are supporting wider and wider ranges of papers, however, which makes a big difference in achievable levels of quality. If you make an apples-to-apples comparison, you will find that production digital printing devices are capable of excellent quality. Rather than taking anyone else s opinion for it, though, make sure that you see print samples that are representative of your own work. Then you can decide for yourself. Is Production Digital Printing Profitable? Like any other business opportunity, production digital printing is most profitable when it is part of a well thought out business plan. Like any other business opportunity, production digital printing is most profitable when it is part of a well thought out business plan. In addition, for some applications of production digital printing you will need to build the appropriate infrastructure for it to succeed. This often relates to the ability to quote and administer short-run jobs as economically as possible. If your current administrative infrastructure is set up to handle large dollar jobs only (perhaps via direct or phone contact with dedicated sales representatives), you will want to consider a more automated solution for your on-demand work. This might include: Automated quoting for certain types of jobs Predetermined pricing for existing customers Web access to a digital repository (i.e. an archive of electronic documents) Online customer job ordering of existing print jobs through a Web browser As with certain kinds of offset printing, it is important to remember that there are types of production digital printing where customers have many commercial printers to choose from, and as a result the competition is fierce. The most competitive market for production digital print today is for black &
8 Page 9 white copying and printing. Obviously, a customer in a commodity market has many choices for a service provider. This is why commercial printers who enter the production digital print market should focus on value-added services (like quick turnaround, Web access to documents, variable data, and color) rather than competing in commodity markets on price alone. Is There a Market for Personalization? The ability to personalize documents is one aspect of digital printing that separates it from traditional offset printing methods. Personalization can range from simple addressing all the way to fully variable, one-to-one documents. Much of the coverage in trade magazines has focused on high-end, fully variable, color, one-to-one documents. These documents are fantastic, but they only represent the tip of the pyramid. They are very high in value, but are also complex and often difficult to produce. It should come as no surprise that it is taking a little longer than expected for the high end of the personalized market to grow. You shouldn t doubt for a moment that the personalized printing market will grow, but its success will likely be built on the back of less glamorous print applications like addressing, direct mail, post cards, and automated fulfillment of marketing documents. What Are Print Customers Saying About Production Digital Printing? CAP Ventures recently surveyed a group of print customers, meaning people in charge of purchasing print. (CAP Ventures prefers the term print customers to print buyers because not all people who buy print have the title print buyer. Many are marketing and other corporate managers who manage print budgets as part of their responsibilities.) Their responses are an important indicator of the market s reception of production digital print. As illustrated in Figure 4, we asked how their print spending was split among different types of printing systems.
9 Page 10 Other type of device 5.9% High speed digital black &white printer 12.6% Large format digital printer (30' wide+) 8.1% Offset press 44.7 Color copier/printer 13.5% High speed digital color printer 15.3% Figure 4 Spending by Print Process While offset printing continues to garner a large amount of print buying, digital processes are capturing a significant portion of that print budget. In addition, these print customers have a good understanding of the benefits of production digital printing. As shown in Figure 5, when asked about digital color s key strengths, print customers place great importance in fast turnaround, costeffective short runs, less waste, variable data, and other key production digital printing benefits.
10 Page 11 Can send a job to a location for printing that is closer to the point of need 3.5% Can create versions of a document 1.7% Other 4.1% Can print variable information or personalized documents 11.0% Fast turnaround time 38.4% Can print as needed with little to no waste(vs. long run and inventory) 16.9% Cost is affordable for short runs 24.4% Figure 5 Perceived Strengths of Digital Color How Production Digital Print Complements Your Current Capabilities Rather than thinking of production digital printing as a threat to offset printing, you should consider how it could be used together with your current printing capabilities. Production digital print provides an excellent complement to the traditional print technologies used by many commercial printers. Rather than thinking of production digital printing as a threat to offset printing, you should consider how it could be used together with your current printing capabilities. Production digital printing can complement your current capabilities by allowing you to: Match the required run length to the technology: You can be more profitable when you use the right tool for the job. Using offset technologies for short runs is not very cost effective. In addition, there may be jobs that have different requirements throughout their life. For example, a book might require a hundred editorial preview copies, then a run of 20,000, and then multiple short runs of several hundred or so. In such a situation, offset and digital are an excellent complement to each other.
11 Page 12 Provide quick turnaround: Production digital printing allows you to provide quick turnaround for small quantities on short notice. Providing this level of service can be an important way to develop customer loyalty, like when a company discovers on Thursday that it needs brochures for a weekend trade show. Use the technologies together: Jobs can be printed using components from digital and offset technologies. For example, many companies print four-color offset shells using offset presses and then use black & white production digital print technologies to imprint variable information on them. In this case, offset printing is used for static material that is produced in large quantities, and digital is used to add variable or targeted information to the piece. Make customers printed pieces more effective: Production digital print technology allows you to offer your customers new ways to think about their printed pieces. For example, a long-run job can be broken into multiple targeted pieces. Instead of making many copies of an allencompassing product catalog, you might make multiple versions that are better suited to a smaller audience (for example, distributors that sell only a subset of the full product catalog would be better served by a catalog that just includes those products). You might also offer to time sequence a piece, so that rather than printing a large quantity and then drawing from stock, you would print smaller quantities as needed. This allows the customer to make updates and correct errors between printings, thereby making the document more effective. One of the things that makes digital production printing particularly attractive is that you can often support those devices with the same workflow that feed your presses. This is particularly true of Adobe Acrobat Portable Document Format (PDF) workflows. One of the things that makes digital production printing particularly attractive is that you can often support those devices with the same workflow that feeds your presses. This is particularly true of Adobe Acrobat Portable Document Format (PDF) workflows. Book printers have been quick to see that the same PDF that was created for direct-to-plate can also be used for a production digital printer.
12 Page 13 Evolving Print Customer Requirements What do your customers need? How could you better serve them? It s important to step back and take a look at what you produce for your customers, and how you can make those documents more meaningful, deliver them more quickly, or help them bring those documents to a wider audience. The following trends are having an impact on many businesses served by commercial printers. All of them can be addressed by key advantages of production digital printing, which include the ability to produce cost-effective short runs, provide quick turnaround, and create versioned or personalized versions of documents. Time to market: Any company that sells a product needs supporting materials to go along with it. These include brochures, sell sheets, and price lists. The sooner a company can get these materials, the sooner it can start selling it. Anything that improves the time that it takes to get these products to market will be a great benefit to your customers. The fast turnaround times of production digital printing makes it easier for you to meet this important customer requirement. The short runs made possible by production digital printing are also important in producing multiple copies of documents for review or in producing relatively small quantities for specific events. Taking advantage of published corporate documents: Virtually all companies have a large number of sales, marketing, technical, or internal documents that are published and used. Service providers can help improve access to these documents by creating electronic versions of documents that can be printed in appropriate quantities when required. Production digital printing s ability to print short runs and quick turnaround jobs helps to support the effective use of these documents. Commercial printers should not overlook the opportunity to provide fulfillment services as part of this. For example, allowing your customer s employees to access a Web site or call an 800 number when a document is required is a valuable service that makes those documents more effective. Customer relationship management: Companies want to develop solid customer relationships. Much of that relates to how they communicate with their customers.
13 Page 14 The ability to create short runs of versioned documents (i.e. several versions of a document might be created, each addressing a particular segment of the overall audience) and personalized one-to-one documents (i.e. documents that are addressed to that specific reader) is particularly important. These aspects of production digital printing provide companies with important tools for improving customer relationships. The Evolving World of the Commercial Printer As customers change, so must commercial printers. They must anticipate the impact of market trends and offer new and innovative services to their customers. As customers change, so must commercial printers. They must anticipate the impact of market trends and offer new and innovative services to their customers. CAP Ventures believes that fulfillment services will be a growth area for commercial printers and other print service providers. Fulfillment services could include print and distribution services, Web-based ordering/e-commerce, online document management, and variable printing. All of these services are well served by production digital printing systems. Why Choose Digital Now? As you assess a purchase of a production digital printing system, keep in mind the following factors: It s a tested technology: Production digital printing came into broad use in the early 1990s for black & white and the mid-1990s for color. The technologies are being used today in a wide range of environments. The devices are productive, reliable, and consistently produce good levels of quality. It s a growth market: CAP Ventures expects the retail value of print in the on-demand market to grow at a compound annual growth rate of 14% between now and This is much faster than the overall printing and publishing market, which will only grow at about 2%. We believe that much of the opportunity for commercial printers will be in production digital printing and related services.
14 Page 15 Digital printing helps position you to be their provider now and in the future. Business processes are moving to digital: As business processes move to digital, your customers are going to expect different things of you as a service provider. Digital printing helps position you to be their provider now and in the future. It comes down to this: the technology is mature, the market is growing, and opportunities are opening up for commercial printers with a willingness to take advantage of these trends. About CAP Ventures sidebar Based in Norwell, Massachusetts, CAP Ventures is a market research and consulting firm whose focus areas include on-demand digital printing. You may be familiar with CAP Ventures from the On Demand show and conference, which CAP Ventures co-sponsors. CAP Ventures has been covering the ondemand market for over ten years, providing its clients with strategic consulting services, market research, analysis, and forecasts. For this white paper, CAP Ventures drew upon its market knowledge and database of research statistics
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16 International Business Machines Corporation 2002 IBM Printing Systems Dept. HT7/002N P.O. Box 1900 Boulder, CO Printed in the United States of America All Rights Reserved The following are trademarks or registered trademarks of IBM Corporation in the United States and/or other countries: the e-business logo, IBM and Power to the Printer. Other company, product and service names may be trademarks or service marks of others. References in this publication to IBM products or services do not imply that IBM intends to make them available in all countries in which IBM operates. Visit the IBM Printing Systems Web site at ibm.com/printers The IBM home page can be found on the Internet at ibm.com
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