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Solutions and MFPs: Fueling the Office Equipment Market

26 Feb, 2008 By: Infotrends Infotrends imageSource

Solutions and MFPs: Fueling the Office Equipment Market

In years past, InfoTrends has written documents regarding the adoption rate
of solutions within the office equipment market. At that time, solutions were
really in the early stages of adoption, and OEM vendors and ISVs were in their
initial posturing stages, as they were trying to determine how best to take
advantage of solutions and how they would eventually fit into their overall
marketing and sales strategies.

While solutions are still in the early stages of technology adoption today,
we have seen significant growth in this category over the years, and we believe
that solutions have yet to reach their full potential for penetration within
this market.

Although many dealers understand that solutions should be an integral part of
their strategy, most are still in the process of figuring out how to incorporate
them into their range of offerings, and their propensity to fall back on the
hardware products that they are used to selling is hindering them from migrating
to the next level and fully embracing the true solutions sale.

Nevertheless, within the office equipment market, hardware is becoming more
difficult to differentiate; it is becoming more of an easily replaceable
commodity, and vendors are dropping their margins at a consistent rate to remain
competitive. In addition, other disruptive technologies and printer-based
products are driving traditional laser-based MFP prices down, making it more and
more difficult for equipment vendors and dealers to achieve a profit. Therefore,
solutions and professional services have become the Holy Grail for the office
equipment market, as they can be a huge differentiator in a hardware sale.

A solution can be customized to fit within a customer’s workflow or
environment to solve a problem or facilitate a task. It can improve a business
process and increase the user’s productivity, and it can also create new
business opportunities that can improve a company’s bottom line. Lastly, a
solution can help a company achieve compliance and maintain undisrupted business
operations. These attributes make solutions much more difficult to replace than
a nondescript piece of hardware, and we think this is something that customers
are willing to pay for.

Case in Point

There are dealers today that have been very successful selling solutions and
have incorporated a solutions strategy into their overall business.
Interestingly, dealers of large as well as small software installations have
been able to achieve substantial hardware sales along with the sale of the
solution. In a case study with Prism Software, the company sold $65,000 of
software as well as $3 million of hardware. The university chose this vendor
because of the solution it provided. Remarkably, Prism was able to displace an
industry leading incumbent OEM that did not have a

comparable solution.

There are even some dealers on the bleeding edge that have stopped selling
hardware to focus on a “solutions only” strategy to raise profit margins. These
dealers have been able to maintain a sustainable revenue stream selling
professional services along with the installed solutions. We don’t necessarily
recommend going to that extreme yet, but we recognize the potential of solutions
to be profitable and also to be disruptive in the early stages of this market,
as can any new technology or strategy that has the capacity to change the
dynamics or landscape of an industry.

Companies who have adopted solutions have a stronger basis for engaging
customers, and customers are more willing to work with companies that can help
improve their business rather than simply sell boxes.

Customized solutions, along with services wrapped around them, are much more
difficult to replace than hardware, but when paired with the right solutions,
hardware can help drive a solution to its fullest potential. With hardware comes
consumables and with consumables one attains an additional, sustained stream of

A solution that solves a particular problem, improves a process, makes a
company more profitable, or helps a company maintain compliance is a solution
that is hard to replace and can secure a lifelong customer. Solutions of this
kind make it nearly impossible for competition to steal customers. Those who
continue to sell only hardware can expect their customer base to diminish over

Today's MFPs

Today, MFPs are being used for ad-hoc (general purpose) scanning, and to enable
users’ personal efficiency. They are most often used in low-volume environments,
and are typically used for scan to e-mail, scan to folder, or scan to network
fax. In fact, one of the most popular uses of MFP scanning is to replace fax
machines. Many companies find these activities fulfill most of their ad-hoc
scanning needs, and individual users can be trained quickly on the distributed
products in the office. In the environments where MFP scanning makes sense, it
can greatly contribute to individual productivity. However, using MFP scanning
for work-process improvement has been more difficult to accomplish, since
training and compliance can be challenging, and enabling MFP scanning to
integrate with systems and processes requires some effort.

MFPs vs. Scanners

Analysts at InfoTrends believe that over time, MFP manufacturers will begin to
close the performance gap between MFPs and scanners, making more MFPs capable of
even a wider variety of scanning applications. Each type of product will
continue to have its advantages, but there will be increasing convergence of the

Many office-products dealers in particular may see opportunity in entering
the scanning market. These channel participants have traditionally been more
focused on aftermarket supply sales and service contracts – which are not
lucrative in the document-scanner market – so many have not been selling
scanners. Very few have been selling high-end scanning solutions. However, as
customer demand for distributed scanners and for MFP scanners continues to
increase, office-products dealers that sell MFPs should consider gaining
knowledge of document scanning and document-management systems to position MFPs
for increased scanner usage, and possibly to sell standalone scanners.

Conversely, VARs may also decide to start including MFPs as an option in
their portfolios.

For both dealers and VARs, these increased capabilities will help to
differentiate them from their competitors, positioning their organizations to
offer a wider range of abilities. As customer demand in document scanning
continues to rise, increased ability in these areas will be a competitive

It’s important to note that future prospects in this market will continue to
be much more fruitful for those capable of installing more robust solutions.
Although scanner hardware sales will be a source of revenue, a key piece of
scanner sales will continue to be software-related. The focus of most scanning
implementations begins with the software, and most of the resulting value lies
there. VARs and systems integrators report that they typically sell a majority
of their scanners with additional software, which increases their revenue per
order. (In general, Workgroup scanner sales will be accompanied by additional
software at lower rates than Departmental and Production scanner sales). Dealers
and VARs who can only sell scanners without implementing a broader
document-management solution will be relegated to working with customers that do
their own integration using their internal IT resources. The true driver of
increased hardware sales and incremental revenue will increasingly be driven by
knowledge of software, document-management, integration, and the ability to
perform workflow analysis.

InfoTrends is the leading worldwide market research and strategic consulting
firm for the digital imaging and document solutions industry.

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