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Is It Time to Ax the Fax?

16 Mar, 2005 By: Bob Sostilio imageSource

Is It Time to Ax the Fax?

Don’t believe everything you hear, especially when it comes to the facsimile
market. Before you assume the fax machine is no longer worth your time and you
remove it from your product portfolio, consider some of the market trends and
conclusions from my most recent workgroup user study. The results will likely
surprise you and just may have you second-guessing your thoughts of halting fax

A Perspective of Today’s Fax Market—The
U.S. facsimile machine market is currently facing difficult challenges and a
transformation as connectivity and the Internet invades the workgroup space.
Surprisingly, however, it still generates sales in excess of 4.5 million units
per year. That figure may be a decline of 29 percent from its peak of 5.6
million units in 1999, but it is still a decent source of revenue and annuities
from after sales supplies.

It is my belief that as the Internet continues to gain acceptance as a delivery
method for scanned documents; facsimile resellers will have to compete with most
of the copier-based MFP units that incorporate faxing with network capability,
especially in workgroup models.

Facsimile resellers must be ready to face stiff competition from PC-based fax
applications, fax servers and scanners on copier models. With all these
variations of  “send and receive” technology many facsimile manufacturers are
offering units with Internet capability able to receive image files via phone
lines and send scanned documents to email addresses.

In spite of the fact that 90 percent of faxed documents are generated on a
computer, faxing hardcopy is still quite popular. It seems to be most prevalent
in insurance, legal, banking, and real estate workgroups where delivery of time
sensitive documentation is essential for business processes involving immediate
review and/or response.

Fax Market Topography—
there are over 40 million facsimile units in use within the U.S. on a daily
basis. Numerous studies have shown that among fax users there are sufficient
numbers of individuals who prefer to hold and read from paper documents rather
than read from digital screens. Additionally, 90 percent of Fortune 500
companies still prefer faxing from stand-alone fax machines rather than the
Internet for security reasons.

Historically, faxing was always linked to the cost of a phone charge. But those
once dreaded “transmission time” phone charges, along with monthly fees to
maintain separate telephone lines, have been reduced significantly with the
installation of fax servers within corporate America. These servers not only
reduce the number of phone lines needed to send and receive, but also take
advantage of the Internet to deliver the fax, thereby circumventing the long
distance phone charge.

At under $199, fax MFPs do offer ample flexibility for  less demanding small
groups or personal users wanting color printer output, scanning and faxing
capability. These low cost copier/printer facsimile units with color capability
utilize inkjet technology and operate at slower speeds compared to higher cost
laser-based models. With enhancements to input and the addition of finishing
options and value-added software, especially for printing, scanning and copying,
most of the low cost facsimile units can be an attractive alternative to higher
cost copier-based MFPs for small workgroups.

The Survey Says…
Sostilio & Associates International, Inc. (SAI) anticipates the continuing
decline of standalone facsimile purchases. By 2005, shipments may well level off
at just under three million units. After achieving a shipment value cresting at
almost $2.75 billion in 1998, we expect the total fax market to be at $1.2
billion by 2006. Although that is a significant fall, a billion dollar market is
not something a manufacturer or reseller should abandon.

The fax market is far from relinquishing its space, however. Rather, it is
right-sizing to find equal footing with the vast amount of options available to
anyone wishing to send or receive a document. To validate just how much drift
there is toward alternatives to faxing, SAI asked workgroups in a number of
paper-intensive environments about their fax and scanner population and future
intent to purchase either.

Sixty Three percent of respondents had one or two fax units and only 13.5
percent had more than two. The use of scanners appears to have caught on with 30
percent owning at least one scanner. My experience tells me that this is a
significant innovation from past studies, and I anticipate seeing more interest
within workgroups in purchasing scanners and less towards facsimiles. It is
obvious that low-cost scanners under $400 and the Internet can erode some of the
traditional methodology of faxing from the desktop.   

When we looked at fax unit ownership across the various market segments, 80
percent of the education sector owned one to two, while only 37 percent of the
healthcare market claimed the same. The healthcare sector responded that about
25 percent of its workgroups owned three to five facsimile units. We thought
that it would be good to know how many of the reported units were connected to a
network. Our research found the facsimile connect rate was 18 percent.

As I theorized at the start of this article, scanning would be generating
significant interest in some workgroup environments. Scanner ownership was
fragmented across the responder base, but showed that those workgroup users who
where light on fax ownership were purchasing scanners at a higher rate. Overall,
31 percent of all respondents said they owned just one scanner per workgroup.
However, almost an equal number owned more than two scanners.

Within the government sector, 54 percent of its respondents own at least one
scanner, while education had just 21 percent owning two or more. Not
surprisingly, the healthcare sector embraces the use of more scanners over
faxing given the connected environment they work in as well as new federal
regulations that force them to manage digital files.

When it came to brand name recognition and ownership of fax machines, Brother
captured the largest share with 18 percent. Canon was the second most popular
brand, capturing 13 percent market share within workgroup users. Canon was
followed by Sharp, which has a 10 percent market share.

Because our survey did not cover the universe

of fax users and focused just on small companies
and workgroups (50 percent had 10-50 employees), companies like HP and Panasonic
were underrepresented. HP was mentioned just 8.3 percent of the time and
Panasonic was among “others” whose total was also 8.3 percent.   

Overall, only 2 percent of those surveyed purchased fax units in 2004, none did
so in 2003, and 13.5 percent said they purchased some in 2002. Fifty-nine
percent did not answer. Surprisingly, the government sector surveyed has not
purchased any fax units since 2001 and workgroups in the education market
indicated that 21 percent had not purchased any units since 2002.
Only a small percentage of the healthcare and insurance and real estate
sectors purchased facsimile units in 2004 (Figure 4).

Another area of benchmarking was to ascertain just how many users had access to
the installed base of facsimile units. Approximately 23.4 percent of respondents
were in workgroups of 10-20 users. Fifty percent of finance and banking
respondents were in workgroups where their facsimile supported 21-35 workers,
while 38 percent of government responders were in clusters of 1-5 users.

It was interesting to note that the education market had the greatest number of
facsimile usage in the survey and that its users were concentrated in groups of
10-20. The educational markets are not maximizing a single technology as fast as
the private sectors of insurance and banking, where both fax and scanning

One of the last pieces of the puzzle we wanted our respondents to provide was
throughput volumes on fax machines, and whether individual workgroups would be
doing more faxing or less in the coming year.

The insurance and banking sector had the highest utilization at 41.4 percent,
faxing more than 500 pages per month. The next highest sector was within the
education market where 21 percent said they too fax more than 500 pages per
month. The healthcare market had the least number of page transmissions.

Then we asked
if the volumes were more or
less than last year. The overwhelming majority of those transmitting 500 pages
or more said their monthly volumes were the same. The total sample said that
50.9 percent were making the same amount of facsimile transmissions, while 12.9
percent said more. The good news is that no one said less, and 14 percent said
they were considering purchasing a facsimile unit within the next 12 months.
Within the insurance and real estate
sector, 35 percent said they would be buying at least one new fax unit in the
next 12 months.

Do Not Ax the Fax—
was a lot of good news in our survey for those who sell fax machines. It
reaffirmed that there is a future for those office equipment dealers who market
the machines into workgroups in the finance and banking, insurance and real
estate, education, and healthcare industries.

Granted, the workgroup market may be smaller and more complex with embedded
filing, indexing and retrieval solutions, but it is still one viable segment of
the document imaging market that generates sales revenue and has a healthy and
ongoing annuity stream that is so important when growing a business. I believe
the fax market has changed, but is not yet ready to be eulogized. 

Bob Sostilio is President and CEO of Sostilio &
Associates International research and consulting firm with over 37 years
experience in the OE industry. Anyone interested in learning more about his
services and resent studies is encouraged to contact him in Ocala Florida at
352-624-2625 or fax: 352 624 0910 or sostilio@flash.net

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