Sizing the MPS market…may be a problem for others

Sizing the MPS market…may be a problem for others

Recently Photizo Group released its third annual market sizing and forecast report for the managed print services market, the 2010 MPS Market Size, Share and Forecast Report™.

Some significant data found in the report:

• 2009 market reached $24 billion (USD) on a global basis
• The market is forecasted to become a $68B market by 2014 (22% CAGR 2009-2014)
• Asia is the fastest growing market
• North America is the largest market
• Europe will be the largest market by 2014
• HP and Xerox are neck-and-neck for first place, with Ricoh making solid gains as the No. 3 vendor globally

For more information about findings from the Photizo market sizing and forecast report you can view a 1-hour presentation/Webinar here (it’s free).

In this blog, I really wanted to answer questions regarding our process for these findings, because today the market sizing and forecast numbers vary significantly from analyst firm to analyst firm. There is debate about whose numbers are ‘right’, and how the market sizing and forecasts compare to one another.

Market Challenges

In the past, forecasting was relatively (and I say this smiling) simple. A researcher only needed good connections with the OEM vendors, a few channel partners and the supply chain in order to develop reasonable forecasts. With an adequate estimate of product shipments, product placement lifecycles and usage levels, the researcher could develop a reasonable sizing and forecast for the hardware market. This is not to minimize the excellent work that has historically been done by analyst and research firms tracking the industry–it is simply to say, there was a relatively proven methodology with a wide acceptance of volume estimates by the industry.

YourMPSA.org

In the world of services, and managed print services in particular, this has become significantly more complicated. It is no wonder there is so much debate and uncertainty. The challenges in sizing and forecasting managed print services are numerous. The first issue is definition–it was not until recently that the industry even had a standard definition. This standard definition has impacted both the sizing and the forecast of this market. There is still a need to further define the scope of the definition, i.e. do the market sizing numbers include both the centralized and decentralized MPS market? Does it include software revenues in addition to services, supplies and hardware revenue. Clearly, the first challenge is defining what you are measuring and forecasting.

The second challenge: the traditional approach of relying upon vendor reporting does not work. Many of the vendors have difficulty even determining what their MPS revenues are. There is internal debate on what even constitutes an MPS contract. Then there is the challenge of comparing the different definitions held by each vendor. This is a lot easier with imaging devices–it is either 10 PPM or it is not.

The third challenge: in a rapidly growing market, the individual vendor’s perception of their growth rate vs. the market can be incredibly misleading. For example, almost every vendor claims a win rate in excess of 60 percent, but how can this be? In a rapidly growing market, it is possible that firm will only see a fraction of the total opportunities, and as a result have a skewed perception of their win rate.

So given these complexities, how do we proceed to measure the market? Is it possible to develop a definitive market sizing and forecast. Yes and here is how…

Photizo’s Approach and Methodology

We utilize the MPSA definition as the foundation for what we measure and forecast. We believe this means you must include all three stages in addition to including hardware, services, supplies and the software used to deliver the MPS solution (regardless of the stage). In addition, we take a holistic view and include both centralized and decentralized devices in our sizing and forecast.

Photizo uses an ‘annualized contract revenue approach’ for measuring the market. This means we take the revenue for a contract in a given year and apply it to that year’s market sizing. So, a $5 million contract taking place over five years (if allocated evenly) then the revenue counted per year is $1 million.

Our process begins with estimating historical vendor revenue, devices under contract (DUCs) and channel revenue. To do this, Photizo uses a combination of the primary research studies conducted with corporate decision makers, country-level macroeconomic analysis, license data from software vendors, and more than 19 different categories of market data to triangulate on historical revenue numbers. In fact, Photizo uses a total of 134 different data vectors from around the globe–the entire process takes over eight months.

Photizo does not begin by capturing vendor reporting, but rather validates our own findings after we have developed our market sizing and market share numbers. Each vendor receives our estimate of their revenues and has the opportunity to weigh in.

While this approach requires significant work and a large number of data sources, we believe it does the best job of representing the total managed print services market opportunity. It leverages our position of working with the imaging manufacturer community, resellers, software and other infrastructure providers, and research corporate decision-makers around the globe. Frankly, without this level of 360-degree insight into the total market, we have difficulty seeing how any vendor could develop a reasonable market sizing and forecast.

A key part of our approach is to use a consistent methodology to avoid creating large number swings due to fundamental changes in approach. Of course, each year we enhance the number of data sources (they have more than doubled from last year), the rigor of our analysis and research, and the process for validating the data.  In a complex and evolving market such as this, continual improvement is a must.

While developing this market sizing and forecast analysis is one of our most challenging tasks, it is also one of the most rewarding. It provides us with a unique opportunity to demonstrate our market understanding and insights, while providing the opportunity to share these same understandings and insights with our clients. And this is what we thrive on.

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