The idea of having an all-in-one printer that includes scanning, faxing and copying functionality appears to be a good one.
The advantages are clear, especially now that they have become more affordable than the individual devices they are intended to replace. So selling them through the channel to businesses should be fairly easy.
Here's a product that takes up a tiny bit of precious office space, replicates the output of four individual devices, is cheaper to buy, easy to network and can save you money in the long run.
But sometimes it's just not that straightforward. The multifunction device (MFD) or multifunction peripheral (MFP) market is a maze, with enough product variations to make any reseller's head hurt.
It is not helped by the fact that MFDs can mean many different things. For instance, when you say MFD are you referring to models based on printer or photocopier technology, inkjet or laser models, black and white or colour models, or those with 'business' colour functionality or high-end graphics colour?
This is before ever discussing models designed for consumers, home-office workers, SMEs, corporate departments or, at the very high end, the ones referred to as 'copier killers'.
And did we mention the advanced software coming online that transform MFDs into document management hubs, capable of hosting workgroup sessions over the network or the internet?
These days, MFD manufacturers sit in two camps. Most devices sold are MFDs based on printer technology from the likes of Hewlett-Packard (HP), Lexmark, Epson and so on.
The other camp, though, resides in the copier world (Ricoh, Kyocera Mita), a market that has been hurt badly by the onslaught of high-end printers but which is staging a strong defence in the MFD arena.
MFDs based on copier technology tend to be digital copiers with the added functionality built-in. The bulk of their business remains in the high-end MFD sector, but some, like Kyocera Mita, will introduce mid-range products (£1,000 and over) in the coming months.
It is not that long ago that MFDs were a niche market, but booming consumer sales and a growing awareness of the advantages they offer have made them a mainstream technology.
That said, economic conditions have taken their toll, with many vendors reporting either slow growth or flat market conditions in the corporate arena. However, this has not dented market predictions that MFDs have a rosy future.
Shipments of all-in-one printers in 2002 grew by 172 per cent over 2001 to roughly 4.4 million units, according to Gartner Dataquest. The analyst expects about eight million units to ship by the end of 2003.
In the UK, research firm IDC claimed that 1.65 million MFD units will ship this year. Phil Sargeant, senior research analyst at IDC, said: "The total UK market is experiencing a compound annual growth rate of 20.3 per cent year on year, and that's quite conservative."
Things are still quite slow in the corporate space. Before looking at the issues facing resellers and vendors in the business sector, it is important to note that the consumer market, incorporating the small office/home office (SoHo) user, is a frenzy of activity. Low-end, inkjet-based MFDs are flying off the shelves.
Entry-level systems that offer printing, copying and scanning now come in at under £80, the same price as a decent inkjet printer a year or so ago. With such prices, many consumers see no reason to buy different devices.
For SoHo users, one device in the workplace makes a lot of sense and the performance issues of the past are no longer a concern.
Earlier generations of MFDs suffered from high prices and a trade-off in performance against their individual cousins. In most areas this is no longer the case, especially at the low end.
"The consumer end of the market is quite buoyant and the feedback from the vendors indicates that this segment is the most active," explained Mary McCormack, head of printers at Ingram Micro.
"Products are getting better and cheaper. The sub-£80 offerings are actually good now and people are no longer too worried about the overall quality."
Neil Shuttleworth, UK and Ireland business manager for MFD products at HP, said: "In the business market we are seeing 100 per cent growth year on year, but overall the market is fairly flat, and that includes the market for digital [copier-based MFDs].
"On the consumer side, though, unit growth is very strong and we have even seen some revenue growth in the ink-based MFD market." For HP, the biggest growth market is the sub-£100 MFD space.
"In the consumer ink-based sector, which takes in SoHo and some SMEs, there is a rapid transition from single-function printers to MFPs," said Sargeant.
"The growth in digital camera sales has played a key role. One of the other important factors is that there has not been too much difference in the price between printers and MFPs, so people feel they are getting good quality photo printing with copying and scanning thrown in.
"[Last year] the two bigger players, HP and Lexmark, were leading the way here with second-quarter market shares of 45.7 per cent and 35.1 per cent of the market, respectively."
Despite the small price tags, the technology in this arena has been changing rapidly to drum up new business and cater for new kinds of customers.
The latest MFDs in the consumer/SoHo space are referred to as all-in-one photo printers or photo MFDs.
These often boast card readers and even little screens that allow storage cards from a digital camera to be slotted in, the photos transferred, viewed and then printed, all without needing a PC. Entry-level systems here cost as little as £150.
Hot on their heels are those with in-built wireless technology, which is expected to prove attractive to SoHo users and SMEs wanting to reduce cabling clutter.
Outside the consumer space, there is the SME sector, where products can cost anything from £150 to £500. These are made up of inkjet-based MFDs and entry-level laser-based offerings.
As in other IT sectors, SMEs are proving to be more flash with the cash than their corporate counterparts. A lot of this is down to different expectations, a simpler buying route for resellers and the lack of legacy equipment.
For many small firms, an MFD is a simple solution to four technological challenges.
"Vendors are starting to do a bit more business within the SME space now because there are some very good mid-range offerings in the £1,000-£2,000 range," said McCormack.
Shuttleworth agreed that SMEs are starting to invest in MFDs. "In the SoHo and SME arenas customers want ink-based, entry-level devices because they tend to cost less and they replace three separate devices with one. It's a rationalisation thing," he said.
The corporate question
HP is planning to announce an SME package soon with Microsoft, bundling the HP 4100 MFD with SharePoint Portal.
This, according to Shuttleworth, will allow companies to reduce the paper mountain by scanning in routine paper documents and accessing and routing them through the software.
But while consumers, SoHo workers and SME customers are investing in the technology, things are quieter in the corporate space.
"It's quite slow in the IT channel now and the MFD market in the business sector has undoubtedly been hit by the economic slowdown," commented Neil Thomas, MFD product manager at Kyocera Mita.
McCormack is more forthright. "MFPs have failed to take off in the corporate market for a couple of reasons," he explained.
"MFP suppliers at the high end want to get companies to migrate from the traditional copier, but it's more difficult to get a company to move away from that model in hard times, especially to make the higher initial outlay for an MFP."
Ricoh, from the copier MFD camp, has been finding things a bit easier, managing to fight its way to the top of the copier market in the UK, thanks in part to MFDs.
Richard De Lay, head of marketing at Ricoh, said: "Seven years ago we were a small player in the copier market. We are now number one in the UK, with 30 per cent market share. Copier-based MFDs are now the main part of our revenues."
In terms of market conditions, De Lay claimed: "The economic conditions have not affected sales too much. Sales of copiers are flat, but if you look at the copier MFP market it has been going through a period of sustained growth."
McCormack believes the reseller's task is made more difficult by the different purchasing cultures in large companies.
"You just have to look at the technology in those companies and you find that IT devices like printers are managed by IT, and copiers by facilities or office management," he said.
"Also, the average IT manager in the corporate environment probably finds a big MFP a bit much to take on, especially if it is to replace the old copier. IT managers are happier if the copier manager minds his own section."
And here is one of the key problems for resellers. High-end MFDs, where the real margins and value-added cash can be made, are designed to replace the old copier machine, which was bought/leased by someone in office services, not IT. This confuses the purchasing route.
"An IT manager doesn't really want to have to manage MFPs; the whole copier thing was handled by someone else, not IT," said Thomas. "There is also the problem that the IT channel doesn't know how to deal with copier-based MFPs."
Shuttleworth believes that there has to be a meeting of minds for the market opportunity to truly open up.
"It's a more complicated sales process in the corporate environment. The sales process starts with a consulting meeting and then an audit. In the corporate environment you have to work with both the facilities and IT departments," he explained.
"The facilities guys have to feel they are getting value for money and IT needs to know how easy the MFP will be to integrate and manage."
Despite a slow start in the corporate space, MFDs are expected to take off once the money starts to flow and the benefits of MFDs are better understood by customers.
"The MFD vendors are not hanging their hats in any one area, though," said McCormack. "They have not given up hope on the corporate side but are looking at different ways to crack vertical markets. A lot of second-tier manufacturers are looking to see what HP is doing in that space."
To date, the copier manufacturers still control the high-end arena, thanks to their ability to develop digital devices with added functionality to replace their old copiers.
In the 50-page-per-minute (ppm) segment and higher, players like Ricoh, Canon, Xerox and Kyocera Mita have managed to reinvent themselves and their technology to stave off the printer camp.
According to Sargeant: "This is where the big revenues are made and, in the colour MFD sector, the big copier suppliers totally dominate.
"It is easy for copier suppliers to add in multifunction since copiers always offered more than one feature.
"Firms with analogue copiers are now replacing them with digital devices that offer a lot more functionality at far better prices. If fact, a lot of copier manufacturers no longer sell single-function devices."
HP knows this, which is why it recently did a deal to buy copier engines from Konica, which it will use to produce a series of high-end MFDs. The company is expected to introduce 55ppm and 65ppm MFDs in the coming months.
The move by HP shows that lines between the printer- and copier-based MFD markets are starting to blur. Copier supplier Kyocera Mita is planning an entry-level 18ppm device for early this year.
In the end, customers will not care what engine is under the hood as long as the productivity gains are clear. At the moment, they are not.
Copier MFDs tend to be leased on one-year contracts, so are cheaper to invest in and promise better running costs when used for large volumes. Printer-based MFDs have high up-front costs but running costs can be lower for lower volumes of work.
One thing both camps agree on is that software is the place where MFDs can be differentiated. The emphasis on selling many business MFDs is as much software functionality as the print speed.
This has transformed many MFDs into document-management stations and workgroup centres. Most models now place a lot of emphasis on electronic storage, and are being promoted as devices that can save money and boost productivity by taking paper out of circulation.
Which camp will win is no longer relevant as players in both camps invest in both copier- and printer-based technologies. What is relevant is that the market is growing strongly and will represent a great channel opportunity.
"There is plenty of room for everyone in the market. Even smaller players can do well because the market is increasing all the time," said Sargeant.
"As time goes on it will be harder to distinguish where MFDs have come from: the printer or the copier space."
HP (01344) 360 000
IDC (020) 8987 7100
Ingram Micro (0870) 166 0422
Kyocera Mita (0118) 931 1500
Ricoh (020) 8261 4000
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