Printers That Pay

As razor-thin hardware margins plague the printing market, vendors continue to seek new ways to unlock profit from consumables, software-enabled solutions and services.

On the hardware front, that means solution providers can expect to see more consumable-guzzling color printers and do-it-all multifunction printers (MFPs) hit the market this fall.

Among the vendors leading that drive is Hewlett-Packard, which reported a 196 percent increase in MFP shipments and a 70 percent increase in color-laser shipments for its third quarter of FY '06. On the whole, HP's printing revenue was up just 5 percent for the quarter, but analysts expect HP to cash in on supplies for those machines in the coming quarters.

While the cost of printing hardware has declined about 20 percent in the past three years, the cost of printing has actually increased because of the rising cost of consumables, says Washington, D.C.-based market-research firm Current Analysis. The firm found that since the first quarter of 2005, the cost of color printing increased 15 percent and the cost of monochrome printing jumped 9 percent. One reason for the consumables cost increase is that many printers are shipping with toner cartridges with decreased yields, shortening the time before users have to refresh supplies, says Ian Hamilton, an analyst with the firm.

"Many vendors started to decrease hardware pricing to the point where you can get great printers for $400 to $500 that were $1,000 a year ago, and they're looking to make that up in toner," Hamilton says.

Vendors are especially targeting their color-printing wares and marketing efforts at the small-to-midsize-business (SMB) market, touting them as a way to help smaller shops save money by producing marketing materials in-house instead of sending those jobs off-site. And many vendors are looking to reach the SMB market through solution providers, which generate the bulk of their peripherals revenue from SMBs. In fact, solution providers surveyed for the VARBusiness 2006 State of Technology report said that 87 percent of their peripherals revenue comes from SMBs, with the bulk of that money coming from companies with fewer than 100 employees.

Also this fall, vendors will ramp up their efforts to sell more MFPs, which they position as a way for businesses to consolidate devices and as a vehicle for users to get paper documents into electronic repositories, such as document-management systems. Among the vendors set to refresh their MFP lineups this fall are HP and Xerox, ranked by solution providers in the State of Technology report as the top two innovators in the peripherals market.

NEXT: New from Xerox, the company that's also become a verb.

Earlier this month, Xerox launched the WorkCentre 4150 MFP Series. The new device, which Xerox is positioning to compete against such products as HP's 4345 and Lexmark International's 644 and 646 lines, is designed for SMBs or enterprise workgroups and branch offices.

At the low end of the line is the 4150s, which prints at 45 pages per minute, as well as copies and scans. It costs $2,499. At the high end is the 4150xf, which adds faxing capabilities, finishing options and additional paper-sheet trays, and is priced at $4,999. The devices include such features as two-sided printing, the ability to copy two sides of an ID card onto one side of a sheet of paper, and password-protected printing for sensitive documents. The printers are now available through both direct-sales agents and channel partners. Xerox is also offering its WorkCentre 7132 color MFP through the channel.

Along with color printers and MFPs, vendors also continue to roll out new services and solutions.

Among those new offerings are cost-per-page services, in which solution providers can offer their customers monthly billing plans that are based on usage. Xerox and Oki Data Americas are among the printing vendors rolling out such services this fall. Xerox took the wraps off its PagePack program last week, and Oki Data is set to roll out its own program later this fall.

Under Xerox's new PagePack program, solution providers can supply contracts based on how many pages their customers print each month, giving end users visibility into their costs and relieving the reseller of the task of stocking up on supplies. That monthly cost covers hardware, supplies and maintenance.

"It provides predictable costs for users, and it allows me to present an entry-level solution that still has a warranty. One of the problems we have with marketing to SMBs with the multifunction devices is that the quality of under-$1,000 multifunction devices is just not there, so there's a lot of maintenance that goes on, and sometimes they get disposable," says David Lawrence, president of Smart Technology Enablers, Ojai, Calif., who has been pilot-testing Xerox's new PagePack program for several months with his customers. "One of the issues we had was that entry pricing got too expensive with the warranty. And a lot of times the warranty is only available in the first 90 days, so if you don't sell it from day one, it's hard to sell."

Xerox provides a customized Web-based portal for each end user, branded with the reseller's logo, where a user can track usage and order supplies directly from Xerox. A thin-client device is installed at the end user's business to track peripherals usage.

"They can order supplies right off the application, and it takes them to a Web site that's customized just for them. Xerox branded it for me with my name and logo as a link I can click on to get supplies. So I keep the relationship with the customer as mine, yet my customer can order supplies for his machine with the click of a button," Lawrence says.

Xerox also provides resellers with sales and marketing materials for the program, including a printout that shows how much a page will cost to print, according to Lawrence.

"It really allows me to be able to have an intelligent conversation with my customers," he says.

"We're real happy with the program. The best thing about it is that the warranty is included; the warranty alone can cost $800 to $900 a year," says Trent Jones, a realtor with Ask Now Investments, a real-estate sales firm in Ventura County, Calif. "I want to be covered all the time--these things just break. Just last week I had a part break and I called tech support. They sent me a whole new top and it's working perfectly now. That alone would have cost me $1,000."

Jones has been using the program for about four months, along with Xerox's WorkCentre C2424 MFP, and says that the cost runs about $180 to $300 per month, depending on usage.

HP also offers a program for channel partners called Smart Printing Services, which bundles products, supplies and services in a monthly payment.

"It's great for a partner that doesn't have the infrastructure to deliver service. What we're looking for partners to do is to lead in selling and managing the relationship with the customer," says Tami Beach, manager for HP's Smart Printing Services business. "We definitely think the sweet spot from the product perspective is MFP and color devices, and there are a lot of partners out there not selling those product lines because they don't have the infrastructure and ability to sell that way."

In addition to services, vendors this fall will also woo resellers with software-enabled solutions that tap printers, scanners and copiers to move paper documents into electronic repositories.

Brother International, for example, will join the fray with the launch of what it's calling a "turnkey document-management solution" for cost-conscious smaller businesses. The printing vendor teamed up with software provider Omega Docs, which sells software that lets users create bar-code labels for paper documents that, when scanned, will route the documents to predefined electronic repositories.

Brother plans to unveil a bundled offering that combines a bar-code printer, scanner and software license for under $500 per user.