As technologies converge, so do supplier strategies

By Staff -- Purchasing, 12/10/1998

Until recently, big OEMs were focused largely on "speeds and feeds." That is, on making copiers and facsimiles that produce documents at ever-increasing rates. Now that corporate buyers are starting to demand "value" from the office equipment they acquire, OEMs are turning to "solutions" selling to help solve problems of purchasing's internal customers.

"User expectations have changed the direction of the deliverable," says Bob Sostilio, director, Converging Digital Peripherals, CAP Ventures, Norwell, Mass. Sostilio was one of a number of speakers on hand at the Converging Digital Peripherals/Integrated Office Conference '98 held recently in Boston. The conference, sponsored by CAP Ventures and the Multifunction Peripheral Association, was geared primarily toward an audience of office-equipment manufacturers.

As Sostilio points out, there is quantifiable data that supports the evolution in the industry. For one thing, OEMs are making fewer analog copiers (those that use a light-lens technology to produce copies). Now, OEMs are introducing new copiers that use digital technology to reproduce documents.

In 1997, analog models made up 94% of the total number of copiers sold in the U.S, according to research from CAP Ventures. In just five years, that figure is expected to fall to 35%. "The dealer channel is purging itself of analog products," says Sostilio.

To further gauge the fact that the industry is embracing digital technology, Sostilio describes recent activities of several copier OEMs: In introducing its "Imager" series this summer, Sharp's strategy shows that the OEM intends for its copier line to be completely digital by 2001. Minolta has launched a second digital copier in 1998. Toshiba has introduced new copier models at the end of 1997 and mid-1998. Lanier, a reseller that picks "the best of breed" copiers from Ricoh, Sanyo, and teco, could be 100% digital before its suppliers. Panasonic has fax models, but no digital copier platforms. Mita, which had some problems earlier, is now a subsidiary of printer OEM Kyocera.

Connected solutions

Other evidence: Facsimile manufacturers, for their part, have been making multifunction machines (models that perform such other functions as copying, scanning, and printing) for five years now. Starting in 1999, each manufacturer is expected to have a fax unit that can copy as well.

In analyzing a number of printer manufacturers, CAP Ventures finds this sector still to be largely single function.

New digital copiers increasingly have capability to be connected to a computer network. "The value of digital is connectivity," says Sostilio. "Users will pay for efficiency." Placement figures that show the shift from analog technology to digital also indicate a move toward connectivity.

Connectivity helps to improve efficiency and document flow. In 1997, there were 12.3 million computer networks installed in the U.S., with 27.5 million people exchanging e-mail with one another daily. There were 8.7 LAN servers and 4.9 PC servers as well. To office workers who communicate regularly by e-mail, copying appears almost cumbersome compared to printing a document off a computer network. U.S. companies, as a result, are buying printers at a faster rate than copiers.

What all this means is the coming convergence of the office-equipment industry. "We are coming to a more profitable market, one that is value-driven," says Sostilio.

Figures from CAP Ventures show a shift from buyers purchasing copiers direct from OEMs to dealers or resellers. In 1997, direct sales fell to 21% from 24% the year before. Dealers and retailers picked up some of these sales. (Sixty-six percent of dealer sales were of digital copiers.)

Supplier strategies

Also on the conference agenda were representatives of office equipment OEMs and resellers speaking of the coming convergence. "Old channels cannot deliver total solutions," says Mike Stramaglio, president, Dataproducts. As he sees it, the winning formula is made up of suppliers who can provide solutions selling, network support, product installation and integration, software installation and support, and onsite repair services.

However, no channel has all these capabilities. "A hybrid reseller is evolving," says Stramaglio. "This is a dealer that develops solutions orientation and technical expertise, a VAR that develops outbound sales and service capabilities. These resellers are uniquely positioned to provide the total solution."

For its part, Lanier is shifting its focus, says Paul Anderson, vice president of marketing. "The industry is undergoing a true transformation from analog to digital. Product is one small component of what we are selling. Since we don't manufacture products, we have to bring in value added. We provide consultative training to companies without a digital strategy in place who are looking for someone to partner with."

And James A. Firestone, president, Xerox Channels Group, says, "only the strongest suppliers will survive. We firmly consider digital technology to be disruptive change. Customer requirements are increasing, and there are fewer yet stronger brands. In the next 3-5 years, corporate buyers can expect to see overlapping products and merging retail shelves."

Of copier OEMs tracked by CAP Ventures, Canon has announced that its new distribution strategy is "to go after" Xerox's market. Ricoh has reorganized and has a new chairman, but has yet to form relationships with VARs. Konica should be a benchmark for companies launching new products. As for Hewlett-Packard, it needs alliances to sell multifunctions to corporate buyers.

Product distribution trends

(By channel 1997)

1997

Direct copier sales 21.2%

Dealer copier sales 39.7%

Retail copier sales 39.1%

IKON 9%

Danka 5%

Dealer digital copier sales 66%

Direct fax sales 4%

Dealer fax sales 16%

Retail fax sales 72%

1996

Direct copier sales 24%

Dealer copier sales 39%

Retail copier sales 37%

IKON 11%

Danka 6%

Direct fax sales 4%

Dealer fax sales 14.5%

Retail fax sales 76%

SOURCE: CAP VENTURES