As another year begins it’s time to examine the trends that will impact the document imaging industry in 2015 and beyond, along with the trend setters who will be setting the pace in the coming year. To help identify those trends and trendsetters we contacted six industry analysts, all of whom have strong opinions on what’s happening and where things are going. Those analysts include Brian Bissett of The MFP Report, Andy Slawetsky of Industry Analysts, Keith Kmetz of IDC, David Ramos of InfoTrends, Ken Stewart of Photizo Group, and Charlie Brewer of Actionable Intelligence.
Keith Kmetz
Mobility & the Cloud
It’s a given that mobility and the cloud are two of the hottest trends today, tomorrow, and the next day. IDC’s Kmetz considers it a necessity for the various players in the industry to embrace these two trends, particularly the cloud. “It’s the third platform as we call it at IDC and there’s a lot of opportunity there. From a print standpoint all the traditional players need to find their place as far as cloud offerings and for capturing the mobile opportunity.”
“From an OEM standpoint when you talk about cloud it will be interesting to see what traction cloud offerings from Xerox, Lexmark, and Ricoh will gain within the channel,” adds David Ramos of InfoTrends. “Based on early feedback, the OEMs need to improve their support mechanisms to the channel in order to help drive sales.”
But the big question, particularly with the cloud, asks Ramos is, “Does it lead to better margins, and revenue diversification?”
The industry is going to find out, or at least spend some time figuring it out.
Brian Bissett
Managed Services and ECM
“We’re going to be hearing more about IT services,” predicts Brian Bissett of The MFP Report. “That seems to be the new MPS. We’re also seeing more vendors pushing through the channel document management/content management software, trying to move upstream from basic scanning.”
“If I have money, and depending on what brand I sell, I’m looking at Managed Services and ECM,” adds Andy Slawetsky of Industry Analysts.
But what’s money got to do with it?
“Those are hard areas to get into on my own,” responds Slawetsky. “It can cost a million or more dollars for a dealer to get into Managed Services or ECM.”
For dealers who don’t have the money to do it themselves, he recommends partnering. With either approach, the key to success is doing it right.
“People are going to be upset if you sell a networked services and support contract and you can’t support it,” says Slawetsky. “And people are going to be upset if you sell them ECM and you tell them you’re going to support the content and it doesn’t work.”
Slawetsky identifies Konica Minolta and Ricoh, both of whom are big in Managed Services, as trendsetters in this space. Thanks to some hefty acquisitions, Konica Minolta with All Covered and Ricoh with MindShift, both are well positioned to continue to build out their Managed Services offerings.
“You might argue Ricoh is in an even better position with MindShift because MindShift is considered the cream of the crop,” opines Slawetsky. “That was a good acquisition and you wonder if other [OEMs] will follow suit.”
Ken Stewart
Ken Stewart of Photizo has high praise for Konica Minolta as a Managed Services provider and a potential partner for dealers looking to build a Managed Services business. “They continue to make great strides and have a super aggressive acquisition strategy. Over the next four or five years they’re going to be a challenger for the top five in terms of Managed Services overall.”
Looking at ECM and content management, Slawetsky is impressed by Lexmark. “Certainly, everybody is pushing ECM and that’s all we heard about from Lexmark [at their October 2014 press and analyst briefing].”
Meanwhile, Konica Minolta is taking a similar approach with ECM as it has with Managed Services by acquiring regional ECM companies and providing dealers with a turnkey ECM solution.
“The dealer doesn’t need to invest or it’s a minimal investment to get in, and all of a sudden they’ve got a revenue stream and it’s supported by the mother ship,” opines Slawetsky. “It’s a great concept.”
Time to Transform
With mobility, the cloud, Managed Services, and ECM, this is a time of transformation for the entire document imaging industry. Expect that transformation to continue above and beyond those solutions and services segments.
“Dealers considering alternate revenue streams should look at Toshiba’s digital signage,” states Ramos.
“The big OEMs are looking to transform their business from print towards something new, i.e., 3D printing or digital signage,” adds Kmetz. “We’re hearing more about kiosks, the transition from services to solutions—services to print documents to IT to workflow, from a solutions standpoint it’s scanning, security, capture, document content management, collaborating, and more about growing with ‘our customer,’ and targeting verticals.”
Enhancements in Print Management
Another trend worth watching is what’s happening in print management, specifically a greater focus on user analytics.
“Next year we think it’s going to accelerate even faster with more assessments packed onto that and more ERP integrations,” says Stewart.
He reports that some software providers are working on software tools that will help end users manage their own MPS accounts so they don’t have to rely on vendors. “There’s some mistrust and the toolsets vendors are bringing in aren’t always in the best interest of end users,” notes Stewart. “Look for somebody to introduce a software toolset that helps end users manage their vendors.”
Andy Slawetsky
Decline of A3
It may be premature to sign off on A3, but some analysts feel the end is near. “You wonder how long it’s going to last,” observes Slawetsky about the document imaging industry’s love affair with A3. “The writing is on the wall.”
He views A4 as the future. “[Copier company] executives are starting to realize that A4 is going to happen and will push A3 almost to the point of extinction. If I were a dealer I’d be looking at ways to make money with A4.”
Industry Analysts’ research reveals that about 25 percent of a dealer’s revenue on average is coming from A4. The odds are good that number will continue to grow.
IDC’s Kmetz isn’t so quick to bury A3. “The transitions we’ve seen in the traditional equipment marketplace have been gradual,” he opines, citing the monochrome to color transition where color is still slowly inching upwards in market share.
“With A3 and A4 we see a couple of percentage points changing here and there,” says Kmetz. “If you’re a legacy copier company you’re not trying to change [customers] over to A4 unless there’s pressure to do so. Many customers aren’t saying, ‘We don’t produce a lot of letter size output on our devices so why do we have big machines?’ Most times they stick with what they have. With A3 devices expiring it’s, ‘let’s bring in the latest and greatest.’ The secret is you sell what you have. If you’re a Samsung or a Lexmark you’re pushing A4. If you’re a Canon, Ricoh, or Konica Minolta, you’re still pushing A3.”
Meanwhile, Bissett sees an A4 battle brewing. “It seems like it’s shaping up to be a bigger fight between Samsung and Lexmark over becoming the preferred A4 vendor. I think Lexmark has the upper hand in terms of the consistency and completeness of its product line and its growing expertise working with dealers while Samsung is still on a learning curve.
Apps and Android-Based Control Panels
Bissett finds the free apps offered by the likes of Kyocera and Konica Minolta a trend that will continue in 2015. He’s also watching the emergence of Android-based apps on control panels. “Samsung and Ricoh are doing it and others are talking about it,” states Bissett.
Ink-Based Page-Wide Array Technology
In the coming year ink-based page-wide array technology will continue to gain ground and put stress on the relationship between HP and Canon, according to Photizo’s Stewart. “We’re thinking some other players in the market will be coming out with a competitive page-wide array [device] as well. Either Canon or Epson, or perhaps Funai, who took over the inkjet business from Lexmark.”
Continuing on the inkjet theme, Kmetz has been watching inkjet grow in the production market and wonders whether or not it will move into the office in the coming year. “Can inkjet move into higher speed opportunities in the office? We see inkjet gaining traction in the production market and that bears watching from a technology standpoint.”
Charlie Brewer
Supplies Wise
One of the biggest stories of last year in the supplies world was the strategic merger between MSE and Clover Technologies. According to Charlie Brewer of Actionable Intelligence, the MSE acquisition should add somewhere in excess of $100 million in revenue to Clover’s coffers. Not a bad addition, considering Clover is doing more than $1 billion worth of business annually. “Beyond the added revenue, I think the real value of the merger will be revealed over time,” adds Brewer. Clearly, this is something that the entire document imaging industry will be watching closely in 2015.
Outside of that, things aren’t exactly looking rosy on the supplies side of the document imaging industry if you ask Brewer.
“Everyone across the supplies industry, the whole supplies value chain—the cartridge manufacturers, the OEMs, the drum manufacturers, the toner manufacturers—are all wrestling with a declining market. There have been for decades now an excess of capacity, maybe not so much on the OEM side, but on the reman side there has been a ton of consolidation happening for 15 years. I think that’s because of overcapacity.”
He adds that the OEMs have too much capacity as well. That, compounded with the fact that everybody is printing less, makes for a challenging environment. “The rise in MPS is driving print volumes down,” adds Brewer. “In addition to that people are printing less anyway. That is a key trend and will be a key trend going forward.”
After years of consolidation, including the aforementioned acquisition of MSE by Clover, Brewer expects things to slow down from a consolidation perspective. “We kind of hit the limit on how much consolidation can happen in the remanufacturing industry because there aren’t that many companies left.”
He also predicts a continued influx of new build cartridges. “These are brand new cartridges that are totally infringing on patents and intellectual property (IP),” states Brewer. “They’re just knock offs, clones, that are sold without regard for IP. They’ve been a huge problem in overseas markets—Europe, Asia, and Africa—and they’ve kind of penetrated Western European markets and for the last five, six, seven years we’ve seen more come into the U.S.”
Most of these products are predominantly sold online, but because of the quantities available, he wouldn’t be surprised if some of them are leaking into the dealer channel. “The proliferation of that type of product has been and will continue to be a problem,” he predicts.
As a result he expects the OEMs to be even more aggressive than they’ve been in the past about catching companies infringing on their patents and not respectful of IP.
Expect to see that with the chip manufacturers too, including HP who recently sued the Chinese chip maker Apex who makes chips for inkjet cartridges. “HP has indicated that they are concerned about chips used on laser cartridges because of some of the code that’s in there that are infringing their trademark rights,” says Brewer. “It could be HP getting more involved on the toner cartridge side. They remain as aggressive as they’ve ever been on the inkjet side and that’s going to continue.”
Other companies that he sees taking greater strides to protect their intellectual property, whether it’s toner and inkjet cartridges or chips, are Lexmark, Canon, Konica Minolta, and Samsung.
“Samsung has several cases pending in several countries in the European courts,” says Brewer. “They haven’t done anything in the U.S. yet and I would not be surprised to see Samsung get involved in the U.S. too. They have larger market share in Europe, a bigger brand, and so many product categories that they have a much bigger presence in retail in Europe than the U.S. so that’s a better place for them to initiate lawsuits. A lot of times what happens is these guys start a lawsuit and go through the discovery process and then lawsuits follow in other regions. In the past U.S. lawsuits result in European lawsuits. Now I wonder if the opposite holds true and will lead to cases in the U.S.”
Security Alerts
Remember a few years ago when security was the hot topic? That theme may be returning in 2015. “Security is going to be a big issue and this industry is finally going to wake up and figure out how to monetize it,” observes Stewart.
He wouldn’t be surprised to see physical security providers such as ADT Systems and Brinks Home Security move into print management. “I think security vendors are going to be interested in the print space. Customers are going to ask them, ‘Manage my infrastructure,’ and IT and print is part of IT. We have some clients investigating that now and that looks to be a viable channel.”
David Ramos
Channel Consumption
Infotrends’ Ramos doesn’t think we’ve seen the end of channel consumption. “That’s OEMs consuming channel as well as channel consuming channel,” he says. “That’s something to watch and you’re going to see more activity in 2015.”
More Companies to Watch
We’ve already referenced a number of companies throughout this article, although there’s probably not a company in the document imaging industry that’s not worth watching in 2015, even if some will be watched more closely than others.
Take HP, please.
The MFP Report’s Brian Bissett cites the breakup of HP as a story worth monitoring and whether or not that’s going to have a good or bad impact on the market.
Similarly, Infotrends’ Ramos asks, “How is the HP split going to play out and what impact will that have from a channel perspective? Channel participation in HP direct programs is not as high as HP would want it.”
“As far as the movers and shakers in the industry I don’t think that necessarily changes all that much,” says IDC’s Kmetz. “It’s what we’re seeing from the likes of the big players like HP and Xerox, and the one everybody gets nervous about, Samsung. There are some inherent challenges in what Samsung is trying to do in this market. Do they have the channel? They’re great manufacturers, but as the market moves from software to services, that’s a new area for Samsung and something they need to get up to speed on.”
Photizo’s Stewart likes what Office Document Consulting is doing with its DOCassess current state mapping app. “I’m bullish on those guys,” says Stewart. “They’re a small upstart company and Mike Lamothe is driving that group. I like where he’s taking things and they have some good technology behind them.”
He’s also impressed by how Supplies Network is providing end to end solutions. “There’s going to be some players who break out beyond the industry and Supplies Network is doing this with their distribution,” adds Stewart.
He sees this as an opportunity for Supplies Network and others with this approach to compete against the likes of Amazon. “These players must continue to provide value in other lines of business,” states Stewart. “I still like Print Audit and have them high on my list in terms of disruptive players.”
Bissett views this as a make or break year for OKI. “They’ve come back from the abyss and are investing in the business,” he says. “They fell further and harder than anybody during the recession, but they seem to be doing much stronger now and have to accelerate that momentum this year.”
Ramos places Samsung high on the list of companies to watch as well. “They’re doubling down on the BTA channel. They will not be going direct and they will derive 80 percent from the BTA channel and 20 percent through the IT channel. That’s good for the channel. They’re ultra aggressive with their programs (portfolio beyond their own product lineup) and pricing structure.”
Another company to keep an eye on is LMI. “If you look at LMI as a company, what they have done with their portfolio and their services offering for the channel is unique,” says Ramos. “You have a cartridge remanufacturer that offers e-learning to enable the dealer to be more effective in MPS, and marketing resources and services. That’s one of the reasons they’ve doubled in size over the last three years. Their rapid growth will continue because of that. In the long run they have some manufacturer direct relationships through Samsung, Konica Minolta, and Toshiba, so they’re uniquely positioned as an aftermarket provider of toner cartridges.”
Finally, he references MWAi, particularly what they’re doing with FORZA, as another player with potential to become a game changer in the coming year, by suggesting that FORZA may start taking market share away from ECi.
