Why is Stage 4 Important for Vendors?
Stage 4 marks the coming together of the document management solutions developed by vendors for Stage 3 with the broader BPO offerings of the system integrators and IT managed service providers. This is a natural and logical confluence, as documents, in the broadest sense, lie at the heart of most business processes. In this stage vendors move beyond just providing a solution to manage the documents involved in a business process, to offering outsourced management of the complete business process.
One of the biggest unanswered questions about Stage 4 concerns the likely impact of MPS on vendors’ total revenues from printing and imaging. Today, market penetration for MPS is still quite low, estimated to be below 25 percent worldwide. From this still relatively low base, MPS revenues are forecasted to grow at a compound annual rate of 22 percent over the next five years, which means that by 2013, MPS should account for more than half of the total printing and imaging market.
Over this period, the majority of MPS implementations will be first or second contracts for end users. This is the stage when the biggest savings are realized, with 30 percent as the standard reduction cost.
If MPS penetration increases from 25 percent to 50 percent over the next four to five years, and if the organizations adopting MPS reduce the cost of printing and imaging by 30 percent, simple arithmetic suggests that there will be a 7.5 percent drop in total market revenue. Of course, it could be argued that there is simultaneous underlying growth in the market, to offset this reduction.
Although the printing and imaging market has not shown significant growth in recent years, it is possible that there may be an upturn driven by the explosion in Web content, with an associated growth in color and easier access to output from a variety of devices through mobile printing solutions. However, according to a recent presentation by HP, mobile printing may change the way in which documents are printed but it will not increase the total output volume. In addition, there is also pressure in the opposite direction from organizations trying to reduce the number of pages printed, by re-engineering document-intensive business processes.
The issue for vendors is that increasing adoption of MPS will result in a reduction in the traditional imaging and printing market revenue streams from hardware and consumables. To maintain or grow their revenues, vendors will be battling in a diminishing and increasingly competitive arena, unless they can find new revenue streams. That is why Stage 3, and now Stage 4, of MPS are so important for vendors.
Stage 3 represents the first step towards building new revenue streams from value-added services. However, while Stage 3 tends to initially generate attractive revenues from designing and implementing document management solutions, it is more difficult to see how it can provide regular annuities of the type which vendors have traditionally enjoyed from consumables and maintenance. That is where Stage 4 comes in, because by taking a further step into managing complete business processes, vendors not only broaden the scope of their engagement, they also derive a regular stream of high value ongoing revenue as outsourced providers.
Steven Swift further explores Stage 4 opportunities and capabilities in his article Moving Into Stage 4: Why Is It Important and How Are Vendors Addressing it. This article is available to PRO subscribers and includes information on:
- Why Stage 4 is a growth opportunity
- Who will be the Winners in this opportunity
- HP Capabilities
- Xerox Capabilities
- Ricoh Capabilities
- Canon Capabilities
- Stage 4 Implications for Vendors and Customers
Subscribe to MPS Insights PRO today to access hundreds of managed print articles like this one.
Learn more about MPS Insights PRO benefits.
Connect
