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Workgroup Color: The Next Frontier

27 May, 2003 By: Rick Clayton imageSource

Workgroup Color: The Next Frontier

all know that color growth has been explosive in both the production environment
and the personal environment as evidenced by the fact that there are virtually
no monochrome ink jet printers and very few single color offset presses sold
today. The next big frontier for the adoption of color is the office workgroup.
CAP Ventures believes the next major change in the workgroup will be the
adoption of universal copier/printers that combine a "color" device
with a digital monochrome multi-function device.

Ventures forecasts that this "universal copier/printer" market is
poised for significant growth over the next five years. We are already seeing
the introduction of color products that are targeted at the office instead of
the graphic arts market. The big question is, how can the hardware and software
vendors position themselves to take advantage of this tremendous opportunity?

first step is to understand the requirements of corporate workgroups and
understand the dynamics that will result in the movement of black/white
documents to color. There also needs to be a better understanding of how they
value the "universal" copier/printer. In order to better understand
this dynamic market, CAP Ventures embarked on a landmark research project/survey
entitled "Workgroup Color: The Next Frontier." The goal was to provide
an analysis of the trends and strategies that will allow vendors to tap this
critical segment of the market. By conducting an extensive survey of end users,
we sought to provide answers to questions such as:

  • What
    value do buyers place on a "universal" device?

  • Which
    applications would benefit most by adding color?

  • What
    prevents users from copying and printing more documents in color?

  • What
    would the cost per page have to be in order to shift black/white documents
    to color?

  • What
    is the feasibility of using one device to run both black/white and color? o
    What type of quality is required for the office?

  • How
    much color work is being outsourced that could be brought in-house.

Importance of Color in the Office

A workgroup device is a shared resource, with which individual users produce
documents on their own. The device is not usually under the control of a single
individual. Workgroup devices are found in organizations, both large and small.
They may support an entire small business or groups within larger businesses.
This environment may be further divided into larger and smaller workgroups. CAP
Ventures defines a small work group as a workgroup with from 5 to 25 workers and
a large workgroup from 25 to 100 workers.

the end of the decade, CAP Ventures is forecasting annual paper growth of only
one-half of one percent a year. In order to grow revenue and profits, office
equipment vendors must find a way to obtain more value from the pages being
produced. Future profit growth for those in the office copying/printing
equipment business is reliant upon the adoption of color in the office. The
migration of even a small number of pages from black/white to color will
generate substantially more revenue. Given market dynamics, this is one of the
only ways that revenue will increase. As an example, if only 12 percent of the
monochrome pages in the workgroup migrate to color, this represents increase of
$1.06 billion increase in service and supply revenue - an increase of slightly
over 100 percent.

overall page growth will remain relatively flat, CAP Venture forecasts a
Compounded Annual Growth Rate (CAGR) of 5 percent from 2001-2006 in the
workgroup environment.

reason for this is that documents are moving closer to the end user. This trend
was initiated by the fact that users want to view first and print if necessary.
Consequently, more work is being printed at the point of need. This has driven
volume from centralized environments to decentralized environments such as the
workgroup. An example would be inventory reports that were once printed in the
data center and delivered to departments and users. These consisted of large
stacks of "green bar" that were bulky and difficult to use and store.
Now using Enterprise Resource Planning (ERP) systems, reports are viewed online
and, when required, printed out on a workgroup multifunctional copier or

recently all color technology has been developed to meet the needs of the
professional market. The workgroup was, by and large, not a target because of
several factors:

  • Too
    expensive (capital cost & operating cost)

  • Too
    complex to operate

  • Lack
    of any color copier/printer work flow in the office

  • Lack
    of functionality such as stapling and sorting thus making it difficult to
    print multiple sets of documents.

vendors realized the importance of the office, they had little success because
they were trying to market products that did not fit. As a consequence, most
placements to date have been in manned production environments. Color has been
used by professionals and for "higher value" external business
communication - documents that users were willing to pay a premium for. All of
this has caused a perception in the office regarding color that must be overcome
before users will embrace the use of color in most of their documents - just as
has happened in the personal environment with inkjet technology. Unfortunately,
this legacy of color has left the user with the perception that color is
expensive, complex and, in some cases, unreliable. As a consequence, the use of
color has been restricted in the office environment.

order to be successful, vendors must deploy a strategy that focuses on
overcoming these perceptions. The good news is that CAP Ventures' studies
indicate that application owners believe that 30 percent to 50 percent of all
applications printed in B&W would benefit from the use of full color.

Is Driving Positive Change

The market is heading toward the universal copier/printer, a device that can
print color and monochrome at competitive prices with full functionality. Over
the past year, we have seen the emergence of new technologies that are improving
speed, cost and functionality thus enabling these products to be positioned as
workgroup devices. These changes include:

  • Tandem
    drum technology, which has resulted in higher speeds and lower equipment

  • Chemical
    toner, which has lowered the cost per copy, created more consistent quality
    and provided better substrate handling.

  • Monochrome
    copier-like features and functions that include high capacity feeding trays;
    better and faster scanning; and multiple finishing options that include
    online stitchers and booklet makers.

dramatic example is illustrated in the following table showing how these new
technologies have changed the product metrics in just a short period of time.

1. Old Technology vs New Technology
$106,000 $30,000
30 ppm 35 ppm
30 ppm 35 ppm
Page Operating Cost
Color $.14 $.09
Mono $.045 $.01

Technology New Technology Capital Cost (Equipment + RIP) $106,000 $30,000 Color
Speed 30 pages per minute 35 pages per minute Mono Speed 30 pages per minute 35
pages per minute Per Page Operating Cost (Service and supplies. 20% toner
coverage) Color $.14 $.09 Mono $.045 $.01

that the technology is in place to tap the workgroup market, CAP Ventures
conducted a research project in December 2002 that consisted of responses from
107 companies that represented a variety of sizes and vertical markets. CAP
believed there needed to be both a subjective and quantitative evaluation of the
behavior of workgroup members as related to the use of color and color capable

Color Strategies

1. Customer Education The perception that color is expensive and complex and
needs to be restricted will inhibit growth unless there is a focused marketing
and sales approach that is aimed at educating the customer about the new color
devices. This approach should be one that helps dispel some of the
misconceptions about color by contrasting previous functionality and cost to
current functionality and cost. It should be the goal of vendors and
distributors to have color printer drivers installed on every desktop when a new
color device is installed. This can be accomplished through education and close
monitoring/reporting of usage and cost.

Sell Both Business Quality and Graphic Arts Quality From the research findings,
we see that most companies need a combination of business and graphic arts
quality. The marketing message should be aimed at each area emphasizing the
ability to successfully address both areas of need. Manufacturers should focus
on developing products that deliver both levels of quality and lead with the
message that their products can address both ends of the spectrum

Promote the Printing of Office and Mixed Color Documents The key to building
color in the workgroup is promoting the use of color on documents that have
typically been run in black/white. This would include spreadsheets, memos, or
other general office documents. The approach should be to focus on documents
that contain multiple types of black/white and color pages. Marketing messages
should be focused on the benefits of creating this type of document that uses
all types of color and functionality such as finishing and a variety of

Shifting Monochrome Pages to Color and Bringing Outsourced Work In-house In
order to migrate pages from black/white to color, the vendors and distributors
must identify and show end users and decision makers the value of creating mixed
color documents and the associated economics. Without thoroughly understanding
the cost premium and with no value proposition, end users will balk at the
proposition of running more color work. In other words, the perceptions about
color being too expensive and devices lacking functionality must be changed.

increased cost of running pages in color must be offset by the second part of
the justification strategy, bringing work in house that is being run on color
copier/printers and offset presses. We have seen from the survey that companies
send work outside because they lack machine functionality and internal
resources. Most responded that they were unhappy with the cost and turnaround
time associated with outsourcing. Therefore given the right type of product and
pricing, it should not be difficult to convince users to bring work in house at
a considerable savings.

Develop the Universal Copier Printer We found in the research that as long as
monochrome and color devices are sold separately, color volume will not grow as
anticipated. Manufacturers will have to create products that are neither
monochrome nor color but rather universal devices that print both black/white
and color without a conscious decision by the user. Price plans need to be
developed that address both running cost and equipment acquisition.

the workgroup color market represents a significant revenue and profit
opportunity for vendors and distributors, it is not the pot of gold at the end
of the rainbow. Revenue can only be realized through the implementation of
strategic planning that includes educational programs, marketing programs, sales
programs and product planning. The approach of "if we will build it-they
will come" does not apply in the case of workgroup color. Simply providing
the product and pricing will not be enough because there are preconceived ideas
about color that need to be overcome. This can occur through strategic planning
in the areas mentioned above.

addition, the development of the workgroup color market is not going to happen
overnight. If we look at the evolution of the MFP market, we can see that in the
early days of market development there was very little acceptance of this
concept. Users were confused as to what the product really was and the
associated benefits. Questions were asked, "Is it a copier, printer or
fax?" and "Why would I want to consolidate three devices and have only
one?" It was only after these questions were answered through focused
marketing and sales approaches did the concept of the multifunctional device
take off.

message here is that the same thing can happen if vendors do not put the proper
plans in place that clearly defines the product and the benefits. No single
vendor will come out with the magic formula that will capture this market.
However, those vendors that follow the steps of strategic planning on how to
capture this market will reap the benefits of increased revenue and profits.

- -

document has been abstracted from CAP Ventures' research study entitled
"Workgroup Color: The Next Frontier" which provides analysis on
innovations and technology standards for color workgroup applications. For more
information about this and other CAP Ventures white papers, contact Rick Clayton
at (781) 871-9000 or rick_clayton@capv.com.

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