Cutting A Fine Print

Print RoI-a new trend likely to gain momentum in the days ahead

Ten years ago peripheral devices were "just an output device". True
to their name, they remained in the periphery of things and found it difficult
to break into the perimeter of its bigger cousins like software, and storage.
Well, that step-motherly treatment is now history, going by the peripherals
market during FY 2004-05. According to an IDC Global report on peripheral
devices, "Just as enterprises spend much time studying, optimizing, and
managing many elements of their IT infrastructure like network bandwidth,
servers etc, they have begun to pay similar attention to their imaging, printing
and document distribution environments. After years of inattention and lack of
coordinated management, the imaging and output infrastructure in most
enterprises are now fraught with high costs. These include the high cost of
maintenance, expensive spare parts, and supplies associated with aged models and
employee productivity costs due to frequent device downtime and inefficient
document workflows."

This in a way sums up the evolution of peripheral devices, such as printers,
over the years and the critical dimensions they have achieved in the last two
years. Most of the trends the industry has been talking about in the past has in
fact become a reality. For one, the all-in-ones (AIO) or MFD market saw good
escalation in the print value chain. Similarly, on a much lower scale though,
digital cameras, with their falling prices, pumped the photo inkjet category
volumes and kick-started a trend-shoot and print. In all, FY 2004-05 saw the
peripherals market further entrenching itself firmly in the IT hardware space.

DMPs: Going Strong

The Dot Matrix Printers (DMP), a niche category in the printer space, is
dominated by vendors like TVS Electronics, WeP Peripherals, and Epson. All of
them had another good year. At the higher end of the spectrum is Lipi. DMP
printer products over the years have developed and manifested themselves in
different products. For instance, apart from the conventional DMPs today, one
can find their applications in point of sale counters, passbook printing in
banks, etc. While in the West DMP has faded in favor of inkjets and lasers, the
Indian market is showing continued traction for the DMP products. The biggest
driver that kept the DMP market going year after year was the issue of TCO and
costs in running the printers. In both these parameters, DMPs consistently score
higher against non-impact printers. As an industry expert puts it,
"Choosing a printer is not simply a matter of picking the first available
machine and forgetting about it. It is important to select one that will provide
the optimum, most cost-effective service over its lifespan, significantly
reducing printing costs and the amount of user intervention required to keep it
running."

The key verticals that drove the DMP numbers during FY 2004-05 were banking,
government, and retail. Industry experts said that for printing
transaction-related documents like bills, receipts and invoices, dot matrix
printers found many takers during the year.

A closer look at the vendors shows the dominance of Chennai-based TVSE,
seeing good growth for its DMP products, which contributed Rs 188 crore. The
company attributes the growth to its three-pronged strategy adopted over the
years: emphasis on high quality printers and consumables, low running cost
of consumables, and quick, efficient and wide support network. Product
ruggedness is also one major USP for TVSE printers.

At the other end of the competition is WeP, which also has a slew of products
in the DMP space. WeP continues to dominate in the 24-pin DMP segment and during
the year it pitched hard its LQ DSI range, which the company claims is the only
Unicode ready printer. Meanwhile, it also witnessed good growth in the 80-column
category with its LX 800 DX offerings. Epson also saw good movement of its
impact offerings. During FY 2004-05 Epson decided to change its focus from a
volume to value strategy. The company says the value is not just for the company
but for its business partners and customers as well. This move paid rich
dividends as Epson saw its turnover and profitability increase substantially, as
did its service levels and dealer loyalty.

On the impact side, the year demonstrated the changing needs of the
enterprise and a specific print solution satisfying the need. Hence, vendors
talked about various technologies and its dividends. For instance, if an
enterprise intends to opt for an impact printer it has various options like 9
pin to 24 pin technologies to choose from. Retail verticals should ideally
choose the 9 pin narrow model, and government, the 24 pin. Companies like WeP,
TVSE, and Epson have made many innovations in impact printer technology over the
years. Given that, the earlier noisy and bulky impact machines have been
replaced by sleek and silent ones.

Inkjets: More Blues than Pink

Inkjets in the single-function category did not see much traction during FY
2004-05. HP took on the mantle, with other players following suit. Though the
vendors were able to sustain the volumes, in value terms the market is growing
thinner by the day, with decline in end-user price points: the entry-level
inkjet offerings retailed at an average price point of Rs 2,800 during the year.
With SMB moving towards lasers, SOHO was the market that saw volumes-where
home PC consumers went in for a peripheral device as part of their PC buying
decision. Meanwhile, on the enterprise side, the mid-end inkjets came in
wherever there was need for a standalone printer requirement. In the inkjet
space, Epson's market share showed a marginal decline, hovering in the high
tens, down from the low twenties in the previous year. The company blames this
dip in market share to its channel revamp exercise undertaken in 2004. In line
with the revamp, Epson changed its inkjet channel from a national to a regional
distributor model.

A look at the emerging players in the fray puts Lexmark in the pole position.
It was a good fiscal for Lexmark in India, which secured market traction through
some key inkjet models it launched during the year. The company unveiled four
cutting-edge photo printers that it claims will change the home photo printing
experience as well as cater to the SMB segment.

The MFD Juggernaut

The shift is impressive, driven hard by HP. Printers and scanners are giving
way to all-in-one (AIO) devices, also called multi-function devices (MFD)-which
combine printer, scanner and copier into a single device, for little more than
the cost of a traditional printer.

The vendors' enthusiasm is understandable. In the initial run-up, the
difference in cost itself means better margins. But that becomes less
significant as competition drives prices and margins down. What's more
interesting is that the MFD increases utilization. Sitting by the desk, it's
used for prints and copies rather frequently, especially the latter, which means
more printouts per month...and more consumables (ink cartridges and special
papers). Remember, consumables are where printer makers like HP make their
margins, and not the printer hardware.

On one hand, competition forced the inkjet-based MFDs down below the 5K
pricepoint. On the other hand, the top end of the market saw some different
dynamics. Over the course of the past two years, copies have gone digital, and
have added a network interface, and printing capability, making them MFDs too.
However, at the high end they're still usually called digital copiers,
distinguished by a separate drum and refillable toner, while the lower-end
"laser MFD" uses an integrated disposable cartridge, a la laser
printers. So you now have inkjet MFDs, laser MFDs, and digital copiers-all of
them different forms of multifunction device.

IDC says the global MFD market could grow 82 percent a year between 2004 and
2006 with laser-MFDs taking the larger value share.

Lasers: Value for Money

HP continues to dominate the laser printer space with 75 percent market
share. But in this fiscal it will face greater competition as many new players
enter this segment. Xerox forayed into this space towards the end of last
fiscal. Interestingly, Epson, which was not present in the laser printer
segment, came in with a slew of products. Epson is the only printer company
operating in all three segments: Inkjet, DMP, and Laser and is aiming for a 20
percent market share in the color-laser segment with its Aculaser brand, for FY
2005-06.

In terms of competition, Brother entered the market with a slew of models.
Meanwhile, Lexmark's new laser printer models aimed at the small workgroups in
large enterprises also impacted the market positively. On the entry-level space,
Lexmark attacked the market with its E230 laser printer. Further escalating the
competition in the laser space was Xerox, which until now had a negligible share
in the laser space. It announced its intention to capture the potential of the
laser printer segment through its Phaser range of products. Though the Phaser
range has been there for sometime, last fiscal Xerox appointed Ingram Micro and
Redington as distributors for its Laser offerings, in a significant move.

If one takes a macroscopic view of the laser printer market, the bigger
market out there currently is in the mono lasers, but color is gaining momentum
in niche areas.

The Road Ahead

Up ahead looms mixed fortunes for the printer industry in India. The impact
and the non-impact space face different challenges. Inkjet MFDs will escalate in
volumes, cannibalizing on single-function Inkjets. At the same time, Inkjet
photo printers will gain more market credence during the ongoing year. However,
some industry watchers foresee competition from within the MFD segment, with
Laser MFDs challenging Inkjet MFDs and single-function lasers. A look at the
year that went also showed huge shift in vendor strategies.

During FY 2004-05, vendors took to the CIOs concepts like evolving an output
device management strategy for getting peak RoI out of print investments, and
choosing the right printer. Print outsourcing also became a big business with
players like WeP and Xerox Global Services ushering in new ways of cutting down
on print costs and optimizing productivity. Similarly, HP went aggressively on
their balanced deployment strategy and Canon came out with industry's first
RoI calculator. As the current fiscal progresses, the battle for greater market
share will further intensify-with focused marketing campaigns and product
offerings.

Shrikanth G