As prices fall, demand for color MFPs picks up
Susan Avery -- Purchasing, 9/16/2004 2:00:00 AM
Color multifunction products are starting to replace monochrome MFPs in the office. Manufacturers of multifunction products report that while overall demand is rising, corporate buyers are increasingly purchasing devices with color capability.
"Demand for MFPs continues to be strong," says Steve Rhorer, director of product marketing at Toshiba America Business Solutions Inc. "An MFP combines copiers, fax machines and printers into one unit, which means less hardware and lower cost per copy (CPC) for buyers. So, a company can save money by combining all functions into one device."
Rising sales of MFPs indicates a sea change in thinking among corporate purchasers, says Cathy Lewis, senior vice president of marketing, IKON Office Solutions. "Until recently, users were fighting to hold onto their printers. Now, they are almost to the other side of the fence. They're telling us that they have to get rid of printers in an effort to reduce cost. We suggest they re-examine their use of printers as well as fax machines and copiers so they can fully leverage MFP capability." IKON Office Solutions is a large independent distributor of copiers, printers and MFPs.
"Customers are becoming more comfortable with MFPs so we see demand declining for single function fax machines and copiers," says Joy Lipari, manager of product marketing at Xerox Channels Group. "Strongest growth is in color. New color-capable devices are feature rich, provide excellent performance and are priced at a minimum premium to their monochrome counterparts."
Easy-to-use publishing tools from software companies Microsoft and Adobe help drive demand for color MFPs, says Lipari, ticking off a list of reasons for businesses making the move not only to MFPs but also to color devices. Many people use color printers or MFPs at home and are starting to expect to use it in the office. Color also leaks into a lot of organizations through low-cost inkjets. (People are buying these machines without permission from their corporate purchasing organizations. They have a high cost per page.) These users eventually look to upgrade to higher level devices. At the same time, the price of color MFPs is dropping dramatically, she says, and is approaching 30% of a typical monochrome product and closing the gap rapidly, while cost per page (i.e., supplies) has dropped dramatically as well.
A report on the MFP market published recently by Gartner shows that while demand is rising, it's more robust in some segments than others. Much of the growth in sales of MFPs for the office is for printer-based units, which are taking volume away from single-function printers. Demand for color-capable MFPs is increasing as well with especially strong demand for devices in the 31-40 ppm segment. "In the past two years we've seen an explosion in the number of color MFPs for the office," says Don Dixon, principal analyst. "Within this market is a new group of color-enabled or color-capable MFPs. These monochrome MFPs are designed specifically to produce color copies. This is causing meteoric growth."
According to the report, manufacturers shipped 1,662,000 monochrome copiers/MFPs in 2003. The researchers expect shipments to grow 3.2% in 2004. At the same time, they forecast a 5% decrease in spending. By 2008, manufacturers will ship about 1.8 million machines for a compound annual growth rate (CAGR) of 2.11%. During this period, spending will fall 5%.
In 2003, manufacturers also shipped 77,706 color MFPs. "We are anticipating this figure to grow by 54% in 2004 for a total 119,787 units," says Dixon. "User spending during the same period is expected to decline by 31%, as prices of the units decline. By 2008 we're expecting to double our numbers to 201,292 machines, which results in a CAGR for five years of 20.9%, while end user spending will grow 10.8%. By that time we believe pricing of color MFPs will have a positive impact on spending."
No troubles
Despite increased demand for MFPs, supply is plentiful and there are no issues with delivery. Spot delays, manufacturers say, are due to spikes in demand. Popularity of Canon's imageRUNNER 8500 is one example. "We were forecasting significant sales, but we've been overwhelmed in the past several months," says Dennis Amorosano, director and general manager of Integrated Business Systems at Canon USA Inc. "We will work through that over the course of the next month or so. Meanwhile, we allocated inventory we had available. We're supplying inventory to the channels equitably so they all have access to product based on current run rates."
IKON's Lewis sees that manufacturers like Canon are making investments in their supply chains. "Products seem to be readily available once they've been formally launched," she says. "Leadtimes, at three to five days, are normal. We keep a very small inventory of core products on hand that ensures we are not at the whim of supply and demand issues. In the past several months there have not been any issues."
Same holds true for color MFPs. "Color products are running at a two to four week delivery, due to sheer volume," says Kevin Kern, vice president of product planning and development, Konica Minolta Business Solutions USA. "We are air freighting some product right now to fill the demand for color."
There were some problems with business color class products when they were first introduced, acknowledges Gartner's Dixon. "Because prices were so aggressive customers went bananas and there were some back order situations but that's all been taken care of now. Manufacturers are now up to speed in terms of supplying them. There are some new hybrid products (black to color conversion products) introduced about a year or so ago. These products will emerge as strong competitors and may trigger more demand than anticipated."
No issues with supply means pricing remains favorable to most corporate buyers. In an effort to maintain—or gain—market share, manufacturers continue to aggressively price MFPs. As with most technology-related buys, customers are able to purchase MFPs with more functionality and improved capability at prices similar to those they were paying in the past. For instance, a 32 pages per minute (ppm) MFP priced at $10,000 used to cost $60,000-$70,000 four years ago. The same holds true for production MFPs. Konica-Minolta is launching a 105 ppm machine, which has a capacity of about 1.5 million pages per month, for less than $100,000. Two or three years ago, a similar device cost $300,000.
"Prices are fairly stable but they are constantly being challenged downward," says Lipari of Xerox. "If you look at the entire family of MFPs (from 10 to 100 ppm) prices have come down in the past three years. We are seeing an increase in demand of segment two MFPs (21 to 30 ppm), and I would suspect with all the competitive pressure prices will come down. Customers will be able to purchase faster, more productive products at prices comparable to what they were paying for 10 or 15 ppm devices."
Toshiba's Rhorer agrees. "Average Selling Prices are decreasing very quickly as manufacturers get more aggressive in the competition for market share. Because our market for the most part is flat the only way manufacturers can differentiate themselves is on price, program, promotion, and possibly, some software offerings. We've witnessed significant price declines. We're expecting monochrome MFPs to decline anywhere from 7%-10% and on the color side even more, from 7%-15%."
What's new
Manufacturers are incorporating more features into MFPs than ever before. Buyers can expect manufacturers to introduce additional high end MFPs (more than 91 ppm) with color capability and MFPs with improved scanning functionality (for moving hard copy documents onto the network) as manufacturers refresh their product lines.
Toshiba's e-STUDIO350 and 450 with e-BRIDGE board controls copy, fax, print and scan functionality, simplifying the faxing, copying and scanning processes. New e-STUDIO 3511 and e-STUDIO 4511 print, copy and scan in black and white or color. The company has plans to integrate technology into controllers of its MFPs, enabling users to print, copy and scan wirelessly.
As companies increasingly integrate MFPs into corporate networks and application systems, Canon's Amo-rosano says that more purchasers will be looking to customize implementation of the technology to internal workflow. Canon's Multifunctional Embedded Application Platform ( MEAP) technology addresses these requirements. At the same time, he says that buyers should watch for innovation in software for document management, document distribution, cost accounting recovery, document publishing and other applications.
And to help clear clutter of standalone printers, copiers and fax machines, Xerox's new WorkCentre M20/M20i multifunction device handles letter and legal-sized documents and is available in three black-and-white configurations, each offering print and/or copy speeds to 22 ppm.
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