Multiple Choice
A single device which can print, scan, copy and fax is becoming the corporate market's preferred option. Martin Lynch reports.
Is it a printer? Is it a scanner? No, it's a multifunction device (MFD). As peripherals go, MFDs have carved out a unique niche by becoming the uber peripheral.
Not content with one function, these all-in-one products combine printing, scanning, copying and faxing, and are the closest thing the IT industry has to the popular kids' toys Transformers.
And, appropriately, until recently they were viewed as little more than complex and expensive toys.
A year ago MFDs were stuck in a rut, consigned to the fringe of mainstream office technology. They were generally seen as too expensive when compared with the cost of buying a separate printer, copier, scanner and fax machine.
Many of them, particularly the low and midrange models, also suffered from compromised performance.
Such an MFD might have had a laser printer, but it tended to under-perform compared with an equivalently priced stand-alone laser printer.
The same Achilles' heel tended to apply to the in-built copier and, to a lesser extent, the scanner and fax. So, despite the cost-saving benefits, high prices and lacklustre performance were holding MFDs back.
In fact, MFDs were often labelled as 'all hype and no sales' by certain channel representatives. Have things changed?
Keith Whittle, channel manager at Lexmark, said: "There was the argument in the early days that individual devices offered superior performance and that, if you bundled products into one device, you compromised. This is not the case any more, because there is no compromise."
Mary McCormack, head of category for printers, peripherals and supplies at distributor Ingram Micro, agreed.
"MFDs have definitely shed their old image. A lot of the major manufacturers are projecting serious growth and are looking to add from six to 12 new devices to their portfolios in the next year," she explained.
"From the pricing information we have seen, spanning the past two years and up until 2003, price is not a barrier any more.
"Even where MFDs work out a bit more expensive than four separate devices, the other advantages - ease of use, management, size and others - outweigh a slight cost advantage.
"There are also no performance trade-offs any more. We are looking at fully fledged products - printers and scanners - in one device, particularly in the higher-end models."
Nick Shuttleworth, UK category manager for MFP products at Hewlett Packard (HP), added: "The old theory that MFDs were more expensive is not true any more.
"In fact, some models are noticeably cheaper than the individual devices. There is also no performance or reliability trade-off."
Price/performance
Like all technologies hoping to break into the mainstream, the price/performance argument has to be very strong.
The major players have obviously taken this onboard, since many of the products now available boast high performance levels and prices to tempt people to swap their old separates for an all-in-one.
It should also be remembered, however, that not all MFDs are created equal. The consumer market is gobbling up cheap, inkjet-based MFDs, but in the business sector laser-based MFDs are the order of the day, and there is already a vast array on offer.
From entry-level models in the £1,000 to £1,500 area, to so-called 'copier killers' for £10,000 and above, MFDs are being pushed as devices suited to all company sizes and budgets.
Just how much things have changed at the high end of the market can be seen by looking at copier pioneer Xerox.
Last year it merged its copier and printer divisions in a bid to create merged products for a market that no longer needs or can afford expensive, dedicated copiers.
The notion of traipsing across a building to the dedicated copier/printer room to pick up your work is foreign to people working in many modern offices.
In fact, surveys have shown that people don't like shifting their butts across the aisle to pick up a print copy, never mind going on an expedition to the copy room.
The days of 'copier versus printer' arguments are no more, thanks to the arrival of MFDs. When companies from both the copier and printer worlds are rolling out these devices, there's a good chance that MFDs have a significant role to play.
Digital imaging boom
Outside the technology, though, a number of factors have had a direct impact on the current rise of MFDs. The digital imaging market has essentially gone berserk. This is especially true in the consumer sector, where inkjet-based MFDs are going down a storm.
With digital cameras crammed into Christmas stockings and bundled with PCs, the market for digital output devices has gone off the scale.
Inkjet-based MFDs with prices in the £150 range are flying off the shelves. Even the big players admit that consumers are leading the way.
"We've had great success with the inkjet-based MFDs. Most consumers simply don't have the space for four separate devices," said Whittle.
"This way they only have one connection to the wall, one connection to the PC and none of the usual drivers and cabling headaches."
According to Shuttleworth, MFDs captured the consumer imagination first. "So far, it has been more of the consumer side driving things," he explained. "The consumer and home office worker have been driven to them by space requirements, cost and ease of use."
Targeted consumer offerings now play a big role for all of the key players, with price and style high on the agenda.
"The average price of inkjet-based MFDs is lower, so they are more attractive to consumers, but there is also the design factor," said McCormack.
"A lot of manufacturers are designing very trendy products, with aluminium or coloured tops, for instance. A lot of the smaller MFDs are very good looking, a tactic that Apple has proved works."
The HP effect
One of the other key drivers for the whole MFD sector was the arrival of HP into the fray last year. If anything was going to boost a technology's credibility and shake things up in terms of competition, this was it.
Last year more than any other saw all the key printer and copier manufacturers beefing up their MFD offerings and slashing the prices.
So, have better-performing and better-looking products, along with more attractive pricing, been enough to get things rolling in the business sector, in a period dogged by economic woes?
Andy Shepperd, general manager at distributor Computer 2000, said: "The main players have dabbled in the past but now there is a real market emerging.
"It is a growth sector now with fresh impetus, particularly with non-printer companies such as Xerox, which are coming from the copier side of the coin.
"Overall, there is a lot of interest in output devices for digital content. The growth areas we are seeing are in small to medium sized enterprises [SMEs] and retail."
McCormack added: "The market is buoyant. All the vendors we have spoken to are very enthusiastic about 2003, all quoting 16 to 20 per cent growth rates.
"It is a massive growth area, helped greatly by the average cost of units coming down in the past year.
"Vendor prices have really come down. Companies such as Canon are being really competitive, lowering their prices significantly and being proactive in selling the concept of the all-in-one device."
Even the analysts are optimistic. Gartner said in a recent report that MFDs are finally entering the mainstream.
"The trend to combine copier functionality with printing, faxing and scanning is a result of the digital revolution," the report said.
"Moving from three or four devices to one device that does it all can result in significant savings for the small and midsize business.
"The opportunity to save on maintenance costs, supplies and better-quality output is enough for corporate enterprises to demand multi-functionality."
In fact, the MFD benefits list is as long as your arm, the most obvious being one device instead of four. The saving of space, particularly in small companies or overcrowded departments in corporates, is considerable.
Also, the costs have been driven down significantly, as vendors try to push the devices into the mainstream.
With no real gap between the cost of an MFD and the four standalone devices, the other benefits become much more attractive to customers.
Network considerations
There are a number of practical benefits, particularly for IT managers faced with the choice of adding one device to the network or four separate devices, with all the associated cabling and driver software.
"MFDs usually work out cheaper than four devices, and the footprint is tiny," explained McCormack. "Four devices is four security problems and four service warranties, whereas one engineer can support an MFD.
"It's also easier on the network. From an IT point of view, MFDs are easier to handle than four separate devices on the network."
Whittle added: "These products are presented with a very good cost-saving message, which is good for businesses that are looking to become more efficient in their processes. There really are a lot of benefits, not least of which is the consolidation of four devices into one.
"No more banks of printers, copiers or faxes means a lot more floor space available to use for something else, and consumable costs are lower, too.
"There is also the convenience factor: instead of people walking to different parts of a building to do copying, printing and faxing, they can do it all from one place."
Shepperd agreed that the changing way that an office works has had a positive effect on how MFDs are being received.
"Traditionally, the copier and fax have been office services, and printers have been an IT resource," he stated. "With MFDs, responsibility has changed, and all those separate functions can be managed by the IT resource."
Who are the biggest users?
There is some debate over whether the SME or corporate sector is driving the market, but all recognise that businesses in both sectors are now more aware of MFDs and the benefits that they bring to the table.
"Currently, we are seeing more business coming from large corporates," said Shuttleworth. "They all have copier contracts but the copier volume has been decreasing rapidly, since people are copying less."
Whittle added: "Two months ago the answer was corporate but, since we began our SME push, the area we are getting asked about by our resellers has been the small-business market."
Both Lexmark and HP are working hard to crack the SME market, a huge sector that has managed the economic conditions a lot better than the corporate arena and has been shown to be the only sector doing any steady IT spending.
A few months ago Lexmark launched its first ever push into the SME arena, a segment it had admitted being weak in.
As well as a multimillion-pound advertising campaign, with all leads going to resellers, it introduced its SME reseller programme, called 100 Per Cent Partners, specifically aimed at value-add resellers (VARs) that wanted to sell its MFDs.
"We needed to target this area if we wanted to grow the business, and at the last count we had 891 resellers registered for the programme," explained Whittle. "There is now an SME-dedicated website and a dedicated SME team for dealing with resellers."
The scheme is encouraging VARs by offering marketing funds, rebates and special promotions.
Value-add opportunities
The channel seems genuinely excited about the future of MFDs. This has less to do with the technical benefits than the opportunity of selling a device with more margin, more complexity and, therefore, more chance of generating further value-add through support and maintenance contracts.
The vendors also know that in order to get to the SMEs, they have to go through the channel.
"Printers are so cheap now that there is a lot to be said for selling a more complex, expensive multifunction device," said Shepperd.
"If you are selling a more sophisticated solution, the capital outlay is greater and the margin opportunity is better. There is also a value-add opportunity on the support side."
Shuttleworth added: "Selling MFDs is a lower-volume business than printers, but the margins are good. Most of the channel can see that they can make more money out of MFDs.
"Resellers that think they can sell it like a printer, however, usually find they don't make any extra margin. Resellers are no longer selling a printer; they are selling a solution."
Whittle agreed. "People are realising the business benefits of MFDs. There is more of a business focus on these as opposed to the ways of selling printers on speed; it's a solution sell," he explained.
"There is still a lot of education to be done on the customer front, and this is where the channel comes in. The channel has proved time and again how good it is at doing this.
"We are starting some programmes early next year that will help it focus on selling solutions. With these products there is a great opportunity for additional margin in the areas of consultancy, installation, maintenance and warranties."
McCormack, too, believes that support is the key to the MFD market. "There's not really a massive margin opportunity but it is slightly better than your standard printer or scanner," she said.
"Most resellers are realising that the strengths they offer are not in selling the products, but in selling solutions and supporting the customer during and after the sell."
Margins are not everything and, since vendors are desperate to shift these products in bulk, those sales margins will be squeezed further as they reduce prices again and again over the coming year.
But MFDs are not just printers. They have a lot of advantages that resellers will have to explain to potential customers.
And with companies like HP putting together advanced software bundles from Lotus, the humble MFD can now be sold as a document management solution. After all, there's mileage and money in solutions.
CONTACTS:
Computer 2000 (0870) 0603 344
www.computer2000.co.uk
Hewlett-Packard (01344) 363 000
www.hp.com/country/uk/eng
Ingram Micro (01908) 260 422
www.ingrammicro.com
Lexmark (08704) 440 044
www.lexmark.co.uk