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Gap Intelligence’s 2011 Printing Industry Year in Review

As we wind down the year, I think it is safe to say that 2011 was an interesting one for the print industry.  Between the impact of currency, natural disasters, recessions, and civil unrest, it was hard at times to not view the market as snakebit, but in my opinion all of those hopefully short-term events took second stage to some very interesting technology and channel trends.  And the opportunities provided by these transitions suggest that 2012 will be a fun one.

With that, and in honor of the SportsCenter Top Ten List, which reminds us each night that it doesn’t matter if you win or lose, it’s how you look in the highlights, I give you the top ten printing themes, trends, and events of 2011.

10# Inkjet Technology

Yes Inkjet Technology. While some readers with a strict office focus may be surprised to see inkjet technology crack the top ten, it had a major impact on the 2011 printing market from a variety of angles and promises to do the same for years to come.

It wasn’t more than a week into 2011 that I stumbled upon my first Memjet printer, quickly snapping photos and jotting down specs before the Chupacabra of the printing industry ran off into the Nevada desert.  But this time, the page-wide array freak of nature was here to stay.  The debut of Lenovo’s Memjet-based RJ600N at CES was really the first in a procession of partnership announcements and product launches throughout 2011, targeting a variety of uses with a focus on smaller and emerging markets.  And although Memjet’s 2011 impact was not as big as the buzz it created, the company and its technology showed plenty of potential for 2012 and beyond, especially as it partners with larger vendors and begins selling into established markets.


2011 also brought the second generation of Xerox’s solid ink-based ColorQube series, providing modest spec changes, but interesting adjustments to its hardware cost and highly-touted CPC structure (in opposite directions).  Although the ColorQube series hasn’t changed the game yet, this year brought the first evidence of electro photostatic vendors testing their own hybrid billing capabilities, suggesting that the line’s tiered billing plan certainly captured competitors’ attention.

Inkjet technology continued to have a huge impact on the production market in 2011, as inkjet systems increased in number and brand, while approaching size and pricing levels that made the technology applicable to more mainstream commercial printers.  We also saw the printing industry’s household names bring inkjet technology further into their strategy, as Ricoh finally began its integration of InfoPrint, Konica Minolta signed on a Screen Trupress reseller, and Canon’s Oce portfolio expanded to include everything except continuous feed, but its new VPS imagePRESS models at least allowed them to sell into the same Prismasync environments.  Last but not least was Xerox’s new waterless ink-based CiPress 500 system, which touts an interesting value proposition based on its ability to print on lower-cost plain paper, and drew a heck of a crowd at Graph Expo.

Meanwhile the “enterprise” inkjet AiO segment continued to shine as a bright spot for inkjet vendors.  Although the inkjet players’ definition of “enterprise” is a bit different than my friends’ in the MFP or MPS worlds, these SOHO-class devices were a bright spot for vendors.  Enterprise inkjets still make up a relatively small piece of the inkjet pie and face some challenges sneaking their low ink yields and paper capacities past IT managers.  However, there is no doubt that the segment offers both steady revenue and profit growth now and in the coming years, making it a potentially disruptive force for low-end color laser technology.

 

#9 The Yen

Like my 2010 list the nine spot is devoted to the strength of the yen.  And like last year, most manufacturers would agree that the yen had as big of an impact on their financial performance as any other event or trend.  Although out of mind for many, the strength of the yen has impacted almost all of us including the Japanese manufacturers selling to the West, the US subsidiaries that have to negotiate with Japan, the many Western vendors who source engines from Japan, and the dealers and end-users that pay more because of it.  Now more than ever, it’s a global economy.


In fact, with the yen at 77 to the dollar, the 84 yen to the dollar days of 2010 are looking pretty good right now.

 

8# Global Imaging Gets Aggressive

Xerox’s Global Imaging Systems subsidiary has arguably been the most active direct sales organization in recent years, executing a number of high-profile acquisitions throughout the recession, but 2011 brought some moves that made previous years seem quite conservative.

Like previous years, GIS proved to be the most aggressive US sales subsidiary, acquiring six dealers between April and August.  However, it was during this acquisition spree that Global began pursuing a new avenue for growth.  In early August gap intelligence learned that Xerox had begun transferring a number of its smaller direct accounts to GIS branches in 15 metros in a move that was intended to right-size its direct sales client base, while expanding the footprint of the targeted GIS branches.  Xerox has since colored this transition as the first step towards a new reorganized direct sales structure that will allow its direct operations to focus on larger GDO (Global Document Outsourcing) accounts and GIS branches to serve clients on a more intimate local level.

Considering that servicing any size account costs 10 to 12 percent more through a direct organization than through a dealer-style organization (like Global) and that SMBs do not provide the scale to offset these costs, this move makes a lot of sense.  Xerox of course did not invent this strategy, as similar economic motivations drove HP EMEA to transfer numerous direct accounts to its partners in preparation for its 2010 QuickPage launch, and will cause it to do the same with its acquired Printelligent accounts.  However, Global’s positioning as Xerox’s SMB-focused direct organization provides the vendor with a unique ability to shed less-profitable smaller accounts from its enterprise direct division, while still keeping the business in the family.  That said, I’d bet Xerox’s partners and agents would prefer HP’s version.

Global also proved that it is willing to invest in talent in addition to dealerships, as the sales subsidiary landed recently-departed Kyocera Mita America CEO Michael Pietrunti in August, appointing him to the position of senior vice president responsible for acquisitions, corporate service, and marketing.  And given Pietrunti’s experience at Kyocera Mita and Sharp, the new GIS executive arrives with a unique knowledge of where some hidden opportunities exist and should be motivated to take advantage of a level of acquisition funding that was not available to him in his previous role.

 

7#  March 11, 2011

In addition to the terrible human impact, the earthquake and tsunami that hit Japan on March 11, 2011 served as arguably the most significant outside influence on the printing market this year.  The immediate impact of the earthquake and tsunami were quite visible as manufacturing plants quickly shut down due to structural damage from the earthquake and stayed closed as power, workforce, and infrastructure challenges lingered.

While initial levels of transparency regarding the impact of the disaster varied by manufacturer, nearly all vendors eventually admitted that inventory shortfalls were expected.   Before long, dealers began experiencing these shortages first hand and messaging from the manufacturers shifted from maintaining a steady flow of new MFPs to keep pace with demand, to a more pragmatic goal of keeping sufficient inventories of key supplies and maintenance items in stock to ensure support for their current install bases.

Unfortunately, despite impressive efforts to get plants up and running, shortages of key parts kept many manufacturers from producing complete MFPs for some time, impacting inventories of specific product lines for as long as six months.  While inventories of more sophisticated MFP systems were most impacted, we also identified significant shortages of laser printers and inkjet MFPs, as many “active” products were listed as backordered by May 2011, and by June 2011 channel inventories were nearly 70 percent lower than levels at the same time in 2010.

Looking back, vendors were able to successfully support their current fleets, and although the financial impact was still severe, by the start of the fourth quarter it appeared everything was back on track.  I will leave it at that, and hopefully won’t have to include the impact of the Thailand flooding in my 2012 retrospective.

 

#6 – It’s a Long Way From the Top

To the delight of early Occupy Wall Street protesters, 2011 proved to be a bad year for the print industry’s leadership, as top US executives from Sharp, Kyocera Mita, and Ricoh vacated their respective offices between June 1 and July 25.


Sharp led-off this trend as Ed McLaughlin stepped-down after nine years as SIIC’s CEO in June.  While Sharp made a number of management adjustments in the weeks preceding McLaughlin’s resignation, perhaps in preparation for this move, the vendor became the last to actually fill its executive vacancy, when it named former American Express and Samsung executive, Doug Albregts, to the role in late November.

July brought the departure of Ricoh U.S. President and CEO Jeff Hickling.  However, rather than naming a replacement, Ricoh Americas Chairman and CEO Kevin Togashi eliminated the position, assuming control of all U.S. sales and operations.  This move both followed and preceded a number of other executive announcements and departures at Ricoh, that initially brought an influx of IKON’s leadership into Ricoh’s executive ranks, but has since evened out.

By late July, Kyocera Mita America President and CEO, Michael Pietrunti resigned to pursue other interests.  Kyocera Mita was able fill KMA’s president role with Kyocera Mita veteran Norihiko Ina within three weeks, but by late August Pietrunti emerged in a senior vice president role at Xerox’s Global Imaging Subsidiary, suggesting that this may be the one departure that was voluntary.  Or at the very least, Mr. Pietrunti was the most successful at landing on his feet.

 

#6b – Leo and Tito’s Summer to Forget

Going into the 2011 season, things were looking-up for my favorite baseball team and one of my favorite vendors.  The Boston Red Sox tore a few more pages out of its checkbook during the offseason, compiling one its strongest teams in years and emerging as an early title favorite.  Meanwhile, HP began the year with significant momentum, under the leadership of a new CEO and touting a new ecosystem strategy, intriguing cloud and tablet roadmaps, and enjoying a big head-start in the MPS and mobile printing arenas.

However, neither Red Sox manager Terry “Tito” Francona nor HP CEO Leo Apotheker would be around to lead their respective teams into 2012.  And their exits were not pretty.  So unattractive, in fact, that they are best communicated in a timeline.