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The Earth Moved & Few Noticed

Major Changes Seen at Industry Shows

By Steve Aranoff & Robert FitzPatrick

At this year’s international graphic arts show, IPEX, a seismic shift was seen, heard, and felt by many, but overlooked perhaps by many more. The extraordinary change was that printing and office imaging has converged at a new level. While graphic input in the printing and office imaging industries—text and images, color, design, and data storage—had intersected many years ago, production of each sector remained essentially apart.

For example, two publishers, one producing a document for a color printer and the other for an offset press may have sat in front of identical computers with identical software but how the final documents were output still defined the two industries separately. This separation of technologies at the output stage has allowed many in the printing industry to believe their lives were not changing.

In the past, the worlds of Agfa and Fuji were in different planetary systems from Canon, Hewlett-Packard (HP), and Xerox. Printers had ink in their veins; office imaging was about toner; quality of color output was a concern for printers; and office imaging was only about documents.

No more! The excitement at IPEX was focused, as always, on production but was no longer limited to offset presses. The stars of the show were mid range production printers from Canon, HP, Konica Minolta, Océ, and Xerox. The color digital printer was finally treated as a press, and the print world would never be the same.

When and Why?
One reason that this change has been ignored by many in the printing industry is that the raw economics of this shift have been hard to document. Certain sectors of printing appeared to be disappearing but no one was sure where they went. Recent data published by Dr. Joe Webb from Strategies for Management Inc., for example, shows that total print for pay output in 1999 was $101.5 billion. In 2005, it was down to $88.4 billion, unadjusted for inflation. Where did all that printing go?

It was well known that certain kinds of printing, such as parts catalogues, were not going on paper any more. They were produced on CDs or just posted on the Internet. But many other types of printing seemingly vanished. Many in the printing industry refused to consider that it had simply moved over to so-called office imaging technology.

One way of maintaining the state of denial was to redefine any printing that had obviously moved to that other domain. B&W printing, for example, as it was lost to Xerox Docutechs and Océ high speed printers, was no longer called printing, but copying. This way, many in the graphic arts/print community convinced themselves that few documents were still being printed in B&W. Before they knew it, though, almost all B&W print was being produced by copying—digital print and the print industry had lost any opportunity to fight back.

However, we now know that much of the color printing did not go away either. It has just been taken in-house by the producers—corporations, government agencies, churches, and the like. They have the equipment now to print on their own.

One UK-based sales executive we interviewed at IPEX had recently migrated his job from a major graphic arts distributor to a major office imaging equipment sales company. He expressed amazement to rediscover the B&W and color printing that had disappeared from his printer customers’ work.

This printing was done by dedicated, but relatively unskilled, operators at a print production center. He notes that these in-plant digital printers have the extraordinary advantage of interfacing seamlessly with company divisions, branch offices, and dealerships, and the straightforward ability to gang large numbers of short-run jobs. Thus, the seemingly high cost machine had become economical in printing a multitude of small jobs.

The commercial printer that invests in the newest digital printing presses must similarly find economy with many short run jobs. This may require the printing company to market itself as a facilities manager for large customers, rather than as a stand alone printer.

The Salesmen
Beyond the extraordinary changes that are coming to printers are the similar adaptations that will be made by graphic arts suppliers and distributors. Who will sell production printers to commercial and in-plant printing companies?

Many years before today’s eruptions were witnessed, we had written about the coming convergence of printing and office imaging channels. The office imaging channels in both the U.S. and Europe consolidated far more rapidly than their graphic arts counterparts. The shift from analog to digital printing drove out the old copier sales companies and aggregated them into far more sophisticated and larger firms that could connect front-end information technology to digital output equipment.

These consolidated office imaging distributors, unlike the graphic arts dealers, already had a culture based upon service and training and consumables. In the faster changing digital imaging world, these two products, both of which are knowledge-based, would be in even greater demand. Many of the new digitally-oriented office imaging dealers acquired service companies and IT companies.

The office imaging dealers also understood and had adapted to click-charge economics. The graphic arts channels, meanwhile, stayed focused on selling commodities—plates, film, and proofing materials—and heavy iron that included plate makers.

At the IPEX show, one announcement signified the coming change to the graphic arts world. Agfa announced a large sale of computer-to-plate equipment and large volumes of Agfa plates to News International, one of the largest newspaper publishers in the world.

To our knowledge, this is the first time that a major graphic arts supplier has used the click-charge and facilities management model for a major print customer in plate production.

The click-charge model removes capital equipment from the customer’s books, freeing up much needed credit for other business investments. It also allows for rapid acquisition of new and more efficient printing technology. While printing companies historically depreciated their machinery in terms of decades, companies that use digital printers more likely view their equipment in terms as short as two or three years.

Channel Shift
As technology converges, so must channels. The separate worlds of graphic arts dealers and office imaging distributors may be coming to an end as the customer bases of the respective channels begin using identical output equipment. In fact, three of the largest dealers in North America, Cascades Resources, Enovation Graphic Systems, and Pitman, all have started digital printing divisions.

The channels will not be able to sustain themselves purely on service, training, and click-charge fees. They will want to sell paper, toner, and inks as well. And, they will find suppliers able to sell it to them. The lowered pricing of consumables will force further major consolidation in the digital printing market place. Currently, many longer-term costs have been buried in the higher price of toner and ink. And the major suppliers have been able to control the high priced sales as proprietary goods that are required to operate their machinery properly under warranty.

As a result, success for the consolidated dealers that survive will require the same investment in vertical solutions, as before, but with a wider bag of tricks to meet market demands, more integrated than ever before.

Sep2006, Digital Output

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