Predicts 2009: Print Technologies
Enable Cost Savings and Revenue Growth

As the economy struggles, organizations must manage their IT expenditure while helping to grow the enterprise. Fortunately, print technology is helping to simplify complex document processes, reducing the costs associated with paper-intensive workflows and creating new and better ways to increase organizations' revenue.

• Environmental and financial pressures will drive an increasing number of documents from paper to strictly digital formats.
• Digitized workflows enable print technology buyers to reduce paper and consumables consumption while also improving business processes.
• Application-enabled smart multifunction product (SMFP) installations will deliver value-added services to users who have complex but essential paper-based business processes.
• Economic conditions dictate the use of cross-media campaigns that incorporate print advertising that is targeted, personalized and relevant.

• For customers:
• Look to print technology providers to help you print smarter and in the most environmentally friendly and cost-effective way possible.
• Examine your labor-intensive paper-based document processes to determine where SMFPs will improve efficiency within those processes, and then install or upgrade your print devices to reduce the material costs associated with paper-based transactions and improve worker productivity.
• Implement the document composition and output management tools and Automated Document Factory 2.0 (ADF 2.0) workflow software that enable the dynamic, printed customer communications that increase sales and reduce customer churn.

• For technology providers:
• Assume that your print hardware and consumables revenue will gradually decline, and, in response, evaluate digital document software solutions and related services as alternative means to generate revenue.
• Permit your customers to rise above simple yet ineffective messages by enabling customers to create targeted, relevant and revenue-generating communications with integrated hardware and software offerings.

By 2012, 75% of all printed bills and statements in the U.S. will have advertisements for related products or services, generating more than $2.8 billion in advertising revenue for the billers.

By 2012, 30% of enterprise customers with document-intensive business processes will use applications or custom workflows deployed on SMFPs to lower paper process costs and improve knowledge worker productivity.

By 2012, 70% of businesses with more than 250 employees in North America and Western Europe will acquire printers, copiers, MFPs and associated supplies as part of a managed print service (MPS) contract.

By 2012, office paper consumption in the mature markets of Japan, Western Europe and the U.S. will decrease by 10%.

By 2012, the use of fax servers in the enterprise space will increase by as much as 80%.

1.0 Background

The global economic malaise has increased organizations' focus on making every cent spent count. This has resulted in more attention paid to properly aligning the print fleet with organizations' true needs, reducing consumables use, greater acceptance of digital communications and a mandate to pursue "green IT" initiatives wherever feasible. For print technology providers, this is a double-edged sword. Customers are cutting consumption just as providers roll out improved hardware and software that produce more cost-effective and compelling prints. Customers cannot simply eliminate print, so while most will work to be more judicious with office output and fleet management, they will also have greater incentive to ensure that internal and external print communications strategies are as relevant and targeted as possible. These are the realities that print technology buyers and providers must take into account when formalizing their strategies for 2009.

Strategic Planning Assumption: By 2012, 75% of all printed bills and statements in the U.S. will have advertisements for related products or services, generating more than $2.8 billion in advertising revenue for the billers.

Analysis By: Pete Basiliere

Key Findings: Economic conditions dictate the use of integrated cross-media campaigns, of which print remains a viable part.

Messages on transaction documents, such as invoices and statements, were once limited to delivering the same message to every recipient. Today, software and hardware providers enable businesses to merge ERP and CRM to create truly relevant, customized and targeted print communications. The convergence of easy-to-use document composition and output management tools, laser and inkjet printers, and ADF 2.0 workflow software enable even more-dynamic printed customer communications. The technology convergence results in dynamic, contextual printing, which employs CRM data to "microsegment" prospective, current and former customers and to deliver targeted, printed marketing, sales and transaction information based on the recipients' requirements.

Market Implications: Printed transactional documents are sent on a regular basis and then opened and read by the recipients. The advertising they see complements and coordinates with content in the other media, yet unlike broadcast advertising, it is targeted, personalized and relevant. The market for "transpromo" printing will grow through the inclusion of paid advertising that complements basic product messaging.

Recommendations:

Customers:

• Leverage existing printed customer communications by adding compelling messages and relevant third-party advertising.
• Investigate and implement software document composition and ADF 2.0 software tools to pull together disparate sources of customer information into a cohesive document.
• Implement color digital printers when targeted customer communications dictate the use of color text, graphs and/or images.

Print technology providers:

• Enable your customers to create targeted, relevant and revenue-generating communications with integrated hardware and software solutions.

Strategic Planning Assumption: By 2012, 30% of enterprise customers with document-intensive business processes will use applications or custom workflows deployed on SMFPs to lower paper process costs and improve knowledge worker productivity.

Analysis By: Don Dixon and Malcolm Hancock

Key Findings: Gartner research has identified SMFPs as one of the best ways for enterprises to streamline paper-intensive business processes, such as resume workflow management, invoice processing, expense report delivery, healthcare document processing and forms management. We estimate that the average company's costs associated with searching for and managing documents are more than 100 hours per year per employee. Workflow software and applications from third-party technology providers not only boost the value of SMFPs beyond the four functions of scan, print, copy and fax, but also enhance multifunction products' (MFPs') importance in organizations.

Market Implications: Organizations are finding better ways to manage paper-based documents using SMFPs with open, developer-friendly architectures. The decision to employ SMFPs often comes from line-of-business professionals outside IT who seek to improve their various document processes, while responsibility for managing the networked print fleet tends to fall under IT. Many IT departments responsible for managing print fleets have grown wary of software and applications that float across their networks without the IT department's direct control, while concerns about memory limitations and security breaches have limited adoption. SMFP installations, in some organizations, are fighting an uphill battle for acceptance.

Nevertheless, cost savings and process improvements derived from the resulting streamlined document workflows and the ease of custom application development have proved SMFPs' value to top-line decision makers. Business unit managers and senior managers insist on installing SMFPs to improve the way their knowledge workers interface with documents.

Recommendations:

Customers:

• Examine your organizations' labor-intensive paper-based document processes to see how SMFPs can improve process efficiency and improve knowledge worker productivity.

Printer manufacturers:

• Seek partnerships with application providers that offer solutions for the many document problems that organizations struggle with today.

Strategic Planning Assumption: By 2012, 70% of businesses with more than 250 employees in North America and Western Europe will acquire printers, copiers, MFPs and associated supplies as part of an MPS contract.

Analysis By: Cecile Drew

Key Findings: Gartner research consistently finds that CIOs have a strong focus on optimizing the business for growth while cutting costs. In the meantime, MPS has redefined the printer purchase process within the office environment. MPS enables enterprises to improve their document-related processes, thanks to output management software and better use of SMFPs. As a result, CIOs increasingly approve of efforts to enlarge the scope of their MPS to maximize cost savings and process improvements.

Our research finds enterprises are evaluating print management offerings against their current procurement models and moving to MPS:

• In 2003, 18% of businesses with more than 250 employees that purchase printers using a cost-per-page contract in the United Kingdom, France and Germany indicated that their printer consumables were part of a service contract – up from fewer than 5% in 1999. By 2005, that number had doubled, as 43% of businesses with more than 250 employees in those regions were outsourcing some or all of their office printing, or actively evaluating service providers for outsourcing.
• When businesses in the United States, United Kingdom, France and Germany were surveyed in 2007, 44% of organizations with more than 250 employees had an MPS agreement in place.

Market Implications: By allowing an MPS provider to manage the printer, copier and MFP fleet, businesses can save up to 30% of their printing costs.

Technology providers and dealer channels that do not develop an MPS offering risk losing existing business to competitors that do.

Recommendations:

Enterprise customers:

• Understand your output usage to better negotiate MPS contracts, and use office assessment tools to identify and determine the scope of output problems.
• Develop a strategy that includes the measurement and tracking of output usage, as well as the regular review of user output needs (the types of documents they produce, comparisons of monochrome versus color output and paper output compared with electronic presentment).
• Centralize equipment purchases to reduce the cost of managing output devices, and gain efficiency in the support, maintenance and engineering for these devices.

Technology providers:

• Better communicate the cost-saving advantages of MPS.
• Be prepared to present demonstrable business value outcomes from MPS projects.

Channel partners:

• Demonstrate how MPS enables customers to manage output costs within a wider service portfolio that encompasses output assessment studies and alternative billing approaches, such as pay per print, as well as print management, maintenance and service contracts.

Strategic Planning Assumption: By 2012, office paper consumption in the mature markets of Japan, Western Europe and the U.S. will decrease by 10%.

Analysis By: Sharon McNee

Key Findings: Paper and the supplies needed to print on paper are at the core of internal and external business communications. Print technology providers currently derive the bulk of their sales and profits from hardware and consumables (ink and toner) revenues. However, the environmental and financial spotlights are shining brightly on efforts to reduce paper production and consumption. These pressures to reduce carbon footprints and to cut print hardware and consumables spending, combined with the increased use of SMFPs to streamline workflows, are driving an increasing number of documents from paper to a strictly digital format.

Market Implications: Decreasing paper usage benefits enterprises by enabling them to spend less on the purchasing, management and disposal of consumables while advancing their progress to green IT. The conundrum is that significant and growing reductions in paper consumption seriously reduce print hardware and consumables revenues, which ultimately have a negative impact on the print industry. Print technology providers that fail to prepare for the paradigm shift in paper consumption and evolve their business model face dire consequences.

Recommendations:

Print technology providers:

• Assume your print hardware and consumables revenues will gradually decline, and evaluate digital document software solutions and related services as alternative means to generate revenue.
• Nurture client relationships, and help customers navigate the accelerating transition from paper to digital formats.

Customers:

• Look to print technology providers to help your organization print smarter and in the safest, most environmentally friendly and cost-effective way possible.
• Digitize the workflow and shift volume away from the printed page to the digital format to reduce paper and consumables consumption and improve business processes.

Strategic Planning Assumption: By 2012, the use of fax servers in the enterprise space will increase by as much as 80%.

Analysis By: Tosh Prabhakar

Key Findings: Many organizations assume the sending and receiving of facsimile messages is a dying technology and employ other methods of communications, such as e-mail, to replace fax. However, fax remains as indispensable as paper, with fax the closest application to written communication, and several industries (such as banking, healthcare and legal) continue to use fax for daily, often-critical communications. The demand for fax is not changing, but the technologies around fax are changing – and the migration toward network fax servers is a viable means of retaining the best features of both digital and fax communications.

An increase in fax over Internet Protocol (FoIP) server deployment and the integration with network scanners and MFPs will create virtual fax machines in the office environment and boost the use of fax servers in the enterprise space from this point on. Organizations under pressure to find new ways to cut costs will look at alternative technology solutions, such as fax servers, as a productive communication alternative.

The integration of a fax server onto a voice over IP (VoIP) network eliminates the need for traditional hardware-based, intelligent fax boards. This solution provides users with lower network management and maintenance costs by implementing fax, voice and data over a single joint network. Connecting all-in-one (AIO) devices and SMFPs to a fax server will further boost the fax server market, as millions of fax-enabled AIO and MFP devices are sold annually worldwide, therefore enabling more users to have access to fax. The integration of a fax server solution with a network MFP enables the devices to become virtual fax machines and, therefore, eliminates the cost of and need for dedicated phone lines and fax modems.

Market Implications: The fax technology market will continue to live on as a recognized means of business communication. However, as the technology evolves, enterprise fax servers will be the primary migration path that organizations adopt to improve day-to-day business processes and cash in on the fax-saving opportunities. By moving and/or migrating fax volumes from fax-centric devices connected to phone lines to enterprise fax servers, and by consolidating fleets of personal devices to centralized MFP solutions, businesses can cut faxing costs as much as 50%.

Recommendations:

Customers:

• Organizations must move their fax traffic from conventional fax machines to enterprise fax server solutions to cash in on the cost-saving opportunities.

Fax technology providers:

• You must enhance and develop your strategic partnership with print and copy output providers to capitalize on the synergies of connecting SMFPs and network scanners to fax servers. These efforts will also further boost the fax server market.

In response to your requests, we are taking a look back at a few key predictions from previous years. We have intentionally selected predictions from opposite ends of the scale – one where we were wholly or largely on target as well as one we missed.

By 2008, one in four office MFPs purchased in the United States will have color print capability.

Color MFP shipments in the first half of 2005 accounted for approximately 10% of all office copier MFP shipments in the U.S. We stated that "vendors are narrowing the gap between the operating costs and speeds of color and monochrome MFPs. In the new designs, known as ‘black-to-color,' a color-capable MFP or printer can print its black pages at nearly the same speed and cost per page as on a black-only printer or MFP. This vision carried to fruition would consolidate color and monochrome pages on a single MFP or printer, rather than separate designs for each."

The prediction came to fruition, as hardware prices have been a major factor driving the adoption of color page MFPs. In 2005, the average selling price (ASP) was $12,474, and through December 2008, ASPs are $8,582, which is down 31% since 2005, representing a 12% compound annual rate decline since the same year. The downward trend in ASPs is more dramatic when compared with 2003 (a 59% decline). The A4 devices have helped drive the color MFP market forward, as has the homologation of costs per copy.

The U.S. traditionally lags behind Japan and Europe in color adoption, and the current economic environment is showing some signs of a slowdown in the color market as organizations seek to curtail costs. As a result, we expect technology providers will increasingly offer tier-pricing models to make color more affordable. Also, organizations should implement color controls (such as device restrictions and user profiles).

By 2008, 50% of workgroup printers shipped will be color-enabled in the United States.

For 2001 and 2002, we had correctly predicted the growth in color page printers at an approximately 25% compound annual growth rate. These devices were being used in small businesses to help them project a professional "larger than reality" image. Many midsize companies were using these devices for external-facing documents, such as proposals, presentations and contracts.

The migration from monochrome to color was gaining momentum, with color page printers expected to continue strong double-digit growth through 2008, as their ASPs dropped and print speeds increased. We forecast low single-digit monochrome growth in 2004 and onward, as the market declined through 2008. Competition from color page printers and MFPs were expected to slowly erode the monochrome market share. As a result, we predicted that by 2008, 50% of workgroup printers shipped would be color-enabled in the United States.

As it turns out, color page printers currently account for 35% of the U.S. market. Three factors account for the difference. First, new monochrome printer models with low ASPs took share as buyers realized the higher color cost per page was significant enough to cut back on color printing. Second, the latent green IT movement – experienced first in other geographies – finally took hold in the U.S., compounding the situation by requiring fewer devices as fewer pages, and especially color pages, were printed. Third, MFPs and SMFPs took an increasing market share. These devices not only readily replace both monochrome and color printers, but also serve as powerful on-ramps to back-end applications and business processes. As a result, buyers purchased MFP and SMFP color devices and, for internal workgroup and personal use, inexpensive monochrome printers.

Recently, Gartner conducted an independent survey of its clients. Your direct feedback is underpinning the activities we have under way to continually improve our research. This year's Predicts report is one example of those changes.

You told us to simplify the number of different terms we use. In the past, we used two different terms to identify our most important statements about the future. We have standardized on one term – Strategic Planning Assumption (SPA) and we continue to use this nomenclature.

You told us that you value our research most when we are direct. Your confidence in our advice comes from the facts and assumptions we provide in supporting our positions. The numerical probabilities we used with SPAs outlived their usefulness last year and we will no longer use numerical probabilities.

You told us that you wanted us to be open about tracking the accuracy of our predictions. In this report, as in last year's, we are taking a look back and highlighting where we were on target – and where we were not – and why.