Competing technologies: No match for fax

By By Bob Mueller -- Purchasing, 2/22/2001

At a time when e-mail is dominating written communication and Internet documents are replacing hard-copy forms in business, facsimile can seem like a technological atavism, a throwback to a time when everything was hardwired and nobody had heard of e-commerce. In fact, fax technology goes back more than a century; yet, it has proven to be remarkably resilient. In 1999, after a year in the doldrums, fax sales jumped 33% to 4.8 million units, according to Virginia Higgins, image communications consultant for Cap Ventures, an analyst firm in Norwell, Mass. The numbers aren't all in yet for 2000, but Higgins expects to see growth for last year as well.

What's keeping fax not merely alive, but lively, in the face of competing technologies is a diversified approach to the market. Low-end fax equipment, which currently uses thermal-transfer printing technology, today costs less than dinner and a movie for two. Even fax machines equipped with laser print engines cost about what a basic thermal machine went for 10 years ago. At those prices, the market has expanded to include more home office and even personal users, as well as business users who want the convenience of receiving occasional faxes at their desks.

At the other end of the market, manufacturers are treating fax as a feature of machines that also print, scan and tie into computer networks. Arguably the hottest trend in these multifunction products, or MFPs, is something called Internet fax, aimed at preserving some of the simplicity of fax while acknowledging the importance (and low telephone costs) of Internet communications.

Hardware and pricing trends aside, the sheer number and pervasive use of fax machines is likely to keep the market growing for the time being, according to Higgins. E-mail and the Internet probably will erode fax volume in the U.S., she says, but that's not the case elsewhere. "Fax is absolutely exploding in Latin America. Fax usage in Europe is extremely strong and shows no sign of slowing down because Internet access is not nearly as available there and it's still very expensive."

Just as international trading once required companies to keep Telex machines long after that technology had been eclipsed by fax, so today companies must keep fax equipment if for no other reason than to communicate with their foreign trading partners, Higgins adds. "There are millions of thermal fax machines in South America and Mexico," says Rory Fox, product manager for facsimile and color products at Toshiba in Irvine, Calif. "If we want to attack that market, if we're going to do business with them, we have to have a facsimile product that can communicate with them."

MFPs dominate the business market. "It's getting to the point where you almost can't buy a machine that's not multifunction," says Higgins. "In 2000 there were very few single-function machines even introduced. So whether you use it as a multifunction device or not, you're going to end up having one. You're going to buy a fax that comes bundled with printer software or scanner software, or it's going to have a platen on it, or some other configuration that makes it multipurpose."

Even office equipment that's not designed for multifunctionality can often be modified to perform additional tasks. Dealer-installable boards can be added to some copiers to give them fax capability, and some can also be kitted to serve as network printers and fax machines.

In the past, says Chris Sedlacek, senior product marketing manager for the MFP Division of Canon's Imaging Systems Group in Lake Success, N.Y., MFPs were often optimized for one function or another-copying at the expense of printing, for example. Today, she says, users don't have to sacrifice performance for multifunctionality, and she points to a new fax/laser printer line from her company that runs at 17 pages a minute and 1,200 dpi (dots per inch) and has paper-handling options. The line offers "anything you can get on a standalone printer-either parallel or network-you can get in this device, and it's also a great fax machine," she claims.

Fox notes the same trend. "If you want something that's going to be primarily used for fax, then we'll steer you to our fax line. If you want something that's primarily a copier/printer with fax capability, we'll steer you in a different direction. But the two aren't as far apart as they used to be." The differences, he continues, tend to be minor-a bit more memory on the fax-oriented machines, for example, so they can hold more pages in the print queue.

Among copiers equipped with fax boards are some truly robust machines. Most operate in the 20-45 copy-per-minute range, says Higgins, but Xerox offers a copier with fax functionality that turns out 65 pages a minute. "Buyers are saying, 'For the dollar difference, why not just add that fax function and have an additional fax on ramp in the office.'"

The appeal of MFPs is, of course, the savings on equipment costs and the smaller footprint. Why own separate print engines for copying, printing and faxing when one can do the job for all three? Why buy another scanner when there's already one on your fax machine? The savings, says Sedlacek, could add up to between $500 and $1,000. And there are other savings-one maintenance contract instead of many, a single supplier rather than several, fewer supplies to inventory, and so on.

At the top of the MFP line are network fax/printer/scanner devices that serve workgroups or even whole departments. That may seem like a step backward for users accustomed to private fax lines, but there are advantages. Overall costs are lower, since multiple phone lines aren't needed, and cost accounting is easier, points out Fox. Privacy issues that might arise from a more centralized network fax can be handled through a standard, but as yet little-used, technique called subaddressing: The sender enters the fax number, then a subaddress-something like a telephone extension. The receiving machine recognizes the subaddress and sends the incoming fax to the addressee's PC.

Similarly, each fax message is required to have information that identifies the sender, Fox says. It's that line-usually a company name or a phone number-across the top of incoming messages. Network fax machines can be programmed to recognize the information, forward it to an individual on the network, and print it on his or her local printer.

Higgins suggests that as e-mail and other types of communication cut into fax volume, greater centralization of fax equipment could occur. "Faxing is certainly being used in much smaller workgroups now," she says. "Fax machines are just so affordable, why not? And, fax volumes have dictated that they be dispersed in that manner. But as fax volume declines, we'll probably see things become more and more centralized again."

Don Cummins, vice president of marketing at Brother International in Bridgewater, N.J., warns that centralized, network fax, at least when it occurs on a fairly large scale, could cause some backlash among fax users. "There are companies that are promoting centralized fax as a network device. But the reality is, those companies are not doing as well as they thought they would in terms of forcing people back to centralization. Why? Because people don't want to give up what they already have. It's a lot easier to manage and work in a small workgroup area than it is to share central resources with 50 people."

Networked MFPs, since they hang off LANs or WANs, teeter between office equipment and IT (information technology) domains. In fact, says Fox, a network installation might very well involve someone from MIS, an electronic mail administrator, a dealer technician and perhaps others. Improved network standards have made the job easier in recent years, "but it might be fair to say that networked fax is turning into an IT product."

It's not unusual now to see fax equipment coming under PC control, and some manufacturers are enhancing their equipment with software or enabling users to dial fax numbers from e-mail address books like Outlook. Ultimately, fax equipment could become an e-mail accessory through a technology the industry calls Internet fax. Strictly speaking, the technology isn't new-services already exist on the Internet that can convert fax messages to e-mail. What is new is the ability of the fax equipment itself to make the conversion, and buyers can expect to see a flurry of product introductions that incorporate Internet fax in the first part of this year.

Essentially, Internet fax works by attaching a TIFF image-the graphic standard used by all facsimile machines today-to an e-mail message. Recipients can view the message using Microsoft Imaging or some other graphics software. The technology offers several advantages. Since it uses the organization's server or an Internet service provider like MSN or AOL, telephone charges are never greater than the cost of a local call. Since the message arrives electronically, it can be stored, retrieved and forwarded electronically-there's no need for paper filing. And, the message goes directly to the recipient's desktop.

In the past, says Maria Krawsek, product marketing manager for MFP facsimile at Minolta in Ramsey, N.J., before software that could read TIFF files came bundled with Windows, Internet fax was problematic because users had to buy separate graphics software in order to read their messages. "Today, most people who have even Windows 95 have Microsoft Imaging. You don't have to go out and buy some kind of viewer in order to read the TIFF attachment."

Fax manufacturers certainly are making a commitment to Internet fax, but whether users will buy into the technology is still an open question. Sedlacek, for instance, thinks serious demand for the technology is still 18 to 24 months off. Some makers, like Brother and Ricoh, offer Internet fax as an option on their higher-end machines, says Higgins, but she expects it to become standard on business fax equipment over the next few years.

Networked and Internet fax aren't the only technical changes in the fax market, though they seem to be generating most of the buzz. Color fax, though still rather specialized, is also starting to make some inroads. Cummins of Brother International notes that color catches people's attention and it's beginning to catch on in the marketplace. "I believe usage will be relatively low," he says. "I don't think there's going to be a huge application for color fax all the time, mainly because people won't want to spend so much money on consumables for their daily corporate business work. But color makes some special applications much easier. The machine may be used 90% of the time for black printing, but the fact that it can do color creates a lot of special applications-faxing between marketing departments and advertising agencies, for example."

Higgins notes that a fairly new standard from the International Telecommunication Union, the group that sets fax technical standards, supports color fax, and that color inkjet printing technology has migrated to the fax world. The trend, she says, emerged in the market's low end and is working its way up into the workgroup environment.

Supply costs can be an important factor in equipment selection. Some high-volume users of plain-paper inkjet machines, for example, have been dismayed by the need for frequent cartridge changes. Generally, the lower the cost of a fax machine the higher the cost of the consumables that go with it. Higgins reckons thermal-transfer faxes cost upward of 30¢a page. Cummins thinks that's high; he puts the figure at around 13¢for low-end machines, less for pricier models. Inkjet, he says, runs 3¢-4¢and laser printing, costliest in terms of equipment price but cheapest in terms of consumables, runs as low as a penny-and-a-half per copy.

But there are some subtleties in those figures, Cummins adds. "When you start getting into differences of one or two cents per copy, other variables come into play. With thermal transfer, it doesn't matter how much is on the page. Your cost is the same every time because you're using a certain amount of film every time. A full, black sheet costs as much as a page with just a few words on it." With inkjet technology, he continues, cost per page is related to print density. Unusually heavy density could drive per-copy costs up significantly. Laser costs are also density-related, but the per-copy cost starts so low that density doesn't make much difference.

Cummins points out that the low-volume machines likeliest to use thermal-transfer technology might only print 30 to 50 faxes a month, and at that rate it could take years for supply costs to add up to a significant amount. Higgins notes that from the vendor's perspective, the fax aftermarket can be quite lucrative, but she notes that the inverse relationship between supply costs and equipment cost also applies to fax volume, and fax users are likely to switch to a cheaper technology if volumes increase and consumable costs become burdensome.

What should buyers look for when they consider new fax equipment? All the manufacturers interviewed for this article put flexibility at the top of their lists-the ability to upgrade standalone equipment to network fax or network fax to Internet fax. "Fax equipment rarely breaks down," says Sedlacek. "Chances are, you're going to keep a fax machine for some time, unless you lease it. So you want to be sure you can add things like additional paper cassettes, more memory or a second phone line."