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Managed Print Services – Where Do We Go from Here?

1 Mar, 2011 By: Randy Dazo, Director, InfoTrends

Managed Print Services – Where Do We Go from Here?

Managed Print Services (MPS) engagements are becoming increasingly popular
among companies of all sizes as a way to better manage print and save money.
This has resulted in explosive growth of the market segment. But, have we hit
the tipping point?

According to our latest forecast data, the market for MPS will experience
high levels of growth over the next three years, but it will approach market
saturation in 2014 and the growth rate of new business will decrease

So, what does this mean for service providers in the MPS space? Should you
just give up and abandon your MPS strategy? No!  There are still many
opportunities in this market. The key to success will be moving your customers
upstream to higher value engagements and targeting key business sizes.

Breaking Down the MPS Revenue Stream

Before we can break down the MPS revenue stream, we must first understand what
MPS engagements are. InfoTrends defines MPS as:

Managed Print Services are services-led offerings that help companies solve
their pain points (typically surrounding management costs and/or document
processes) by delivering continuous improvements, particularly related to an
organization’s print, copy, and document environments. Due to the variable
nature of MPS contracts, InfoTrends breaks our MPS revenue forecast into three
levels or tiers of MPS contracts: supplies only, hardware optimization, and

Breaking the market down into these three tiers provides an interesting
perspective of how the nature of MPS deals are shifting and will continue to
shift for the next five years. Currently, hardware and supplies agreements make
up the majority of MPS offerings, but we predict that workflow and solutions
agreements will be the only type of MPS still growing by 2014, as well as having
the largest revenue than any other segment.

Total U.S. Managed Print Services Market by MPS Segment (charts available)

Tier 1 – Supplies Only

These engagements typically include supplies only or supplies and services
(break/fix) contracted agreements. Examples of Tier 1 agreements include
OfficeMax’s contracted supplies and break/fix programs (which are sold directly
to customers) and packaged supplies programs from vendors like HP, Xerox, and
Lexmark. Tier 1 engagements generally do not focus on hardware sales, but they
usually include the maintenance or servicing of hardware devices under a
supplies contract. Hardware optimization is minimal and is usually only
performed at the beginning of the contract as the primary focus is on
maintaining supplies delivery.

Revenues for Tier 1 MPS engagements are expected to have a compound annual
growth rate (CAGR) of 10% over the forecast period. This represents the lowest
CAGR of the MPS segments. This slow growth, and actual negative growth in 2014,
will be attributed primarily to two things:

  • As businesses continue to move up the market to more sophisticated MPS
    agreements, the revenue for Tier 1 services will become part of the Tier 2
    or 3 revenues.
  • As MPS programs become more efficient and begin to reduce printing cost
    and output volumes, the predicted MPS savings of 20%-30% will come to
    fruition, and most of those savings will be coming from supplies spending.

From 2009-2013, supplies revenues will still be increasing because the
decrease in supplies purchased will be offset by the constant influx of new MPS
deals. As the market slows down, there will not be enough new business to offset
the reduced revenue coming from cheaper supplies. Therefore, even though new
business will not stop coming in, the addressable revenue for Tier 1 MPS will
decline due to the cost efficiencies MPS provides.

Tier 2 – Hardware Optimization

These programs take Tier 1 agreements a step further by providing customers
with continuous improvements and recommendations about their hardware and
supplies programs over the contract period. These optimization programs are
focused on reducing costs within the print and output environments. Quarterly
reviews of current infrastructures are typically conducted to provide the cont
ontinuous improvements” portion of the service. Tier 2 engagements utilize some
type of tracking solution to enable the reporting and monitoring aspects of MPS.
Vendors are then in a position to provide their customers with recommendations,
and may use advanced service alerts to automate the service aspect of the
customer’s environment.

Revenues for Tier 2 MPS engagements are expected to rise at a 12% CAGR.
Currently, Tier 2 agreements have the highest revenue of the three MPS segments,
but will be overtaken in 2012 by Tier 3 Enhanced MPS engagements. Currently, the
market is focused on getting the best printers and the best supplies
arrangements. However, consumers will become more interested in complete
solutions that handle all elements of the print environment.  As this happens we
will see a leveling off and slight decline of Tier 2 agreements by 2014 because
of that.

Tier 3 – Enhanced

These programs offer all of the services mentioned in Tiers 1 and 2, but
also include advanced solutions and or services. These solutions and services
can include: security, environmental, change management, and
workflow/optimization solutions that can help streamline business processes and
cut hardware/supplies costs. In some cases, Tier 3 solutions may not include the
hardware and supplies services as these are more secondary to security or
compliance managed services engagements. In many cases, advanced solutions will
evolve out of engagements that initially focus on hardware and supplies.
Revenues for Tier 3 MPS engagements are expected to show the highest growth with
a 21% CAGR. In addition to experiencing the highest growth rate of all the
Tiers, Tier 3 engagements are predicted to be the only ones with continued
growth into 2014. With the addressable market for MPS becoming more saturated,
MPS will be less about finding new clients and more about providing additional
services to existing clients. As this happens, the total revenue for Tiers 1 and
2 will diminish and be phased into Tier 3 agreements. Tier 3 will continue to
grow despite the MPS market being near its expansion threshold.

Size Does Matter: Medium-Sized Business a “Sweet Spot” for MPS

Large companies with 1,000+ employees accounted for the largest share of the
total U.S. MPS market in 2009 and will continue to be the primary business size
for MPS throughout the forecast. However, despite large companies having the
greatest market share, medium-sized companies represent the largest opportunity
and the highest compound annual growth rate at 22%.

Total U.S. Managed Print Services Market by Company Size

The growth of medium-sized MPS deals will be directly related to the growth seen
in the indirect channel (BTA, supplies, and resellers). The indirect channel has
a long standing relationship with medium- and small-sized businesses, having
sold equipment and supplies to this market segment for years. It makes indirect
the natural choice for selling MPS in these markets.

InfoTrends forecast numbers offer support showing indirect channels with strong
growth rates across all tiers of MPS engagements over the forecast period. As
this channel continues to grow and become more sophisticated with MPS we will
see more penetration into the medium-sized market. This will translate into
increased revenues for those companies with a clear MPS strategy for this market


  • Move up the value chain – the real growth is now coming from solutions.
    Revenues for supplies are eroding, so it is important to move up the scale.
    The higher tiers are less cutthroat and service providers have more of a
    chance of turning a profit. Shifting to Tiers 2 and 3 will also give service
    providers a leg up on competitors who have not yet expanded into these
  • Blend services - companies that can blend MPS with other managed
    services will have a huge advantage in delivering value to customers and
    will be on the leading edge of MPS in the coming years.
  • Don’t ignore the “sweet spot” – develop a strategy that targets
    medium-sized businesses. Medium-sized businesses are a largely untapped
    market, and are predicted to be the highest area of growth for MPS through

This article is an excerpt from InfoTrends Managed Print Services Forecast.
To learn more about the report, contact Robyn Wuori at +1 781 616 2100 or visit
us online at

Randall Dazo is Director of InfoTrends’ Network Document Solutions (NDS),
Professional & Managed Print Services (PMPS), and Image Scanning Trends services
(IST). With over two decades of experience, Mr. Dazo leads InfoTrends’
continuous information service practice in this area on a global basis. Mr. Dazo
is responsible for all forecasts, research reports, consulting, and client care
concerning these topics.


About InfoTrends

InfoTrends, a Questex company, is the leading worldwide market research and
strategic consulting firm for the digital imaging and document solutions
industry. We provide research, analysis, forecasts, and advice to help clients
understand market trends, identify opportunities, and develop strategies to grow
their businesses. Additional information about InfoTrends is available on the
Web at www.infotrends.com.

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