Why managed print will never be the same again (and what resellers are doing about it)

With print volumes expected to drop by as much as 30 per cent post-pandemic, how are managed print players recovering lost business?

Like many industries, the managed print sector has been shaken by the Covid crisis.

In the middle of national lockdowns last year, IDC forecasted that four hundred billion fewer pages would be printed in 2020 than previous years - the equivalent of seven football fields-worth of pages every single minute.

Office-based printing effectively ground to a halt as stay-at-home guidance was issued by the government and employees moved to remote working en masse.

But, unlike other industries such as hospitality or tourism which are set to bounce back once Covid restrictions are lifted, the demise of print has been predicted by analysts for years.

IDC believes that print volumes declined by 1.2 per cent CAGR between 2015 and 2019 before falling by 13.7 per cent between 2019 and 2020 due to Covid.

Volumes will settle at a 4.8 per cent CAGR decline between 2019 and 2024, claims IDC.

The picture painted by IDC puts the future of the UK's managed print services (MPS) industry in serious doubt. Managed print providers are readying themselves for a sizable drop in print volumes as a long-term consequence of the Covid pandemic.

CRN spoke to business leaders at several major managed print providers in the UK - from Apogee, ASL and SCC Document Services to French print reseller C'PRO, to find out how much volume they're likely to lose post-pandemic - and how they're adapting their business models to meet these challenges.

The general consensus is that managed print resellers will permenantly lose around 20 to 30 per cent of their volumes from mid-sized and corporate customers post-Covid.

These customers are most likely to adopt remote working policies in the future because they have more employees, a more distributed workforce and the capital to invest in new technology.

SCC Document Services, which serves mainly corporate and public sector customers, is forecasting to permanently lose around 25 per cent of its print volumes post-pandemic.

Speaking to CRN, MD Damien Baker said that during the latest national lockdown which came into place in January, print volumes were down around 35 per cent on what they usually are.

By his estimations, SCC will only regain 10 per cent more print volume once things get "back to normal".

"I think that's realistic - I genuinely do," he said. "At the beginning of Covid I always thought we would lose volume, but I thought it was going to be five to 10 per cent. As we've progressed through it, I don't think I'm far wrong at 20 to 25 per cent."

It's a similar story for UK-based managed print provider Apogee. Owned by HP, a "significant part" of Apogee's business comes from public sector and strategic corporate business, according to its COO Mark Smyth.

He told CRN that he's expecting between 20 and 30 per cent of print volumes to disappear for some time in the immediate aftermath of Covid.

"The typical model a lot will end up going to will be a hybrid model. It's suggested by many organisations that they'll end up requesting their employees to come to the office one or two days a week and then work remotely the other days," he said.

"That inevitably is going to see an impact on the traditional volume levels we were at prior to March 2020."

But Smyth added that he believes print volumes could mount a comeback in the years after Covid and gradually creep past 80 per cent in the long-term.

"It might take two or three years and I still don't think it will come back to 100 per cent of what it was in February or early March 2020, but maybe it will return to a stronger 80 per cent or slightly above 80 per cent. But I think it will take a few years to correct itself," he said.

However, for those managed print providers that are more active in the SMB customer segment, the future of print volumes looks a little brighter.

Cambridge-based managed print firm ASL, which serves around 7,000 customers in the UK, believes that their volumes could reach up to 90 per cent of pre-Covid levels.

ASL director Nigel Allen said that SMB customers generally returned to their offices during the second national lockdown in November, and volumes have remained high even throughout January when the government issued new stay at home guidance.

"Lockdown one [in March 2020] was quite severe because no one went out anywhere. Volumes did return to probably about 80 per cent of normal business in July onwards. It got to around 85 per cent and it actually started to grow after that," he said.

"Prior to this lockdown, education came back and was full steam ahead which was fantastic. A lot of SMEs, even during the mini lockdown in November, were still working. They had spent a lot of money and time making their offices socially distanced with one-way systems through their offices and hand sanitiser stations etc."

ASL isn't the only SMB-focused reseller that has already seen volumes bounce back after the first lockdown in March 2020.

For French provider C'PRO, which claims to be Europe's largest multi-vendor print partner with revenues of €600m, business is booming following a short period of inactivity during the first national lockdown.

It tells a story of two halves for the print industry - while SMB volumes are meeting and in some cases exceeding pre-Covid levels, a large slice of corporate volumes are set to disappear for good.

The UK's leading print suppliers began diversifying their business models early enough to adapt to a post-Covid slump where volumes are significantly lower.

Establishing an outsourcing division to handle the mailroom operations, printing, distribution and delivery of documents on behalf of clients is one way firms like SCC and Apogee are creating new value for their customers despite the expected lower volumes.

Other clients are looking to print providers to digitise their paper-based documents and migrate them onto cloud-based environments.

These kind of services fall under a rapidly growing segment for SCC and Apogee called document lifecycle services.

Baker said that SCC is working towards document lifecycle services becoming 50 per cent of its print revenues within the next few years.

He added that SCC's document services revenues grew by 180 per cent in 2020.

"Fundamentally it is a different skill set in the business. You're talking business analysts, process analysts and new technologies like RPA and AI. They've got to come into it," said Baker.

"We're already doing small pieces of RPA for clients that have outsourced processes and using the RPA to stitch it to some of the legacy infrastructures. So what COVID has done is rapidly accelerated that."

Similarly, Smyth said Apogee has seen its document services business accelerate as clients left their offices and adopted remote working.

"We've seen many of our clients on board with that model. Some already had it and have now accelerated it's utilisation. It's one of the ways we're mitigating some of the reductions we're seeing in managed print services," he said.

But shifting to document services isn't the only way that managed print resellers are diversifying their businesses to cope with flagging print volumes.

Smyth said that Apogee has been growing its managed IT services division as a way of complementing its original managed print offering.

He said that now being part of HP as enabled Apogee to deliver managed services that encompass IT and print together.

"IT services will be a significant growth area for that over the coming years. Because organisations want to be able to have a services partner that can fulfil the technology requirements and the support, and our managed IT services offering deals with all of those pain points within organisations," he said.

"Organisations are demanding managed print services are more included within a whole digital transformation strategy. Typically all of those services fall under the responsibility of IT, and IT is asking us to deliver the same level of service we do for managed print, but for PCs and laptops as well. And eventually, why can't the two be combined?" he said.

While SCC and Apogee are making up lost volumes in the corporate sector through new services and offerings, SMB-focused print providers are also diversifying what they do.

ASL director Allen said his firm first began investing in a unified communications division around three years ago. The firm now offers unified comms services to help with its customers that are remote working.

"Will print get back to normal? We hope so, but we've taken steps to try and ensure that we're looking after more than just the managed print. So if it doesn't, then we've got other parts of the business that are growing as well," he said.

"The unified comms part we sell is all cloud based and people are, particularly with lockdowns, realising that's the way to go. SME's don't always understand it properly, so we have a job explaining why offering unified comms in the cloud is the best way forward even for a 15-person company."

While Covid has massively accelerated the document lifecycle services side of SCC's business, it has also side-lined managed print as a standalone business.

"Covid has forced us to do three years' work in nine months," said Baker.

"People are no longer prepared to just talk about print; print on its own is no longer a conversation. It was less of a strategic conversation over the last five years and it's not strategic at all now. It has to be part of the document lifecycle and involve print to hybrid to digital.

"Just trying to plug the gap with more MPS isn't the strategy. If you knock on the door of a sizeable mid-market corporate then you're not getting in. If you're not able to strategically link print to hybrid and digital services you will not be relevant."

Baker said that SCC has massively restructured its managed print business over the years to be more efficient and streamlined - employing AI on its service desks and embedding RPA into its own sales and order processing systems.

"Managed print will always be a key part of the business, but if you do not invest in the service delivery model and make it hugely efficient then you're going to struggle," he said. "It also needs to be integrated into the document and digital lifecycle."

This spells trouble for any print resellers that has its business rooted in the corporate sector and relies on print volumes to retain their margins.

For these firms, the pandemic could put their business in serious risk.

"Some of the smaller dealers out there just rely on their customers being in the office, and if they're not pressing the green button then they've got big problems," said Allen.

"Eventually they will have to make some tough decisions - whether they want to continue to carry on at far lower levels of revenues and returns on margins and EBITDA levels, or if they want to make a change," added Apogee's Smyth.

"Either they've got to enter new markets and sectors where volumes and annuity revenues remain strong - however that requires investment and scalability.

"And it's really tough to just start an outsourcing business and the investment that requires. And it's the same with setting up a managed IT services business and the scalability it requires."

It's not just print resellers that have looked to pivot their business and invest in new areas of IT. Big names in the UK such as Apogee, Alto Digital and Annodata have all been acquired by HP, Xerox and Kyocera in recent years.

Meanwhile, Ricoh acquired MTI Technology in October last year in a bid to bolster its IT capabilities across Europe.

And fellow Japanese vendor Sharp has also been moving into the IT space as a way of navigating a steady decline in print over recent years.

The vendor made an important move into IT managed services in August 2019 through its acquisition of managed services firm Complete IT.

Speaking to CRN, MD of Sharp Business Solutions, Stuart Sykes, said that the acquisition was a big step in the firm's ambitions to become a fully-fledged managed IT provider in the UK .

"We are turning ourselves into a managed IT provider in the UK, and we see that as being a big part of our future," he said.

"Now that we've acquired the last piece of the jigsaw with the Complete IT acquisition, its time to show the market through action that Sharp is a managed IT provider of which print is part of that."

Sykes said the plan is to expand High Wycombe-based Complete I.T. into a national provider, and has since grown its presence into new regions of the UK through opening the business up in SBS' offices in Birmingham and Warrington.

"A lot of the new wins we've had have come from SBS UK clients in the Midlands and north of England," he said.

"There's a lot of investment going in. We've also got an ERP team that we've been investing in based on an acquisition Complete I.T. made a few years ago and we plan to take that out to a wider client base."

While working from home will undoubtedly mean lower print volumes for the foreseeable future, Smyth believes that there are some encouraging trends emerging outside of the UK market that suggest print volumes could return in a better shape than many believe.

He said that Apogee has seen a spike in print activity across its other operations across Europe and the rest of the world. Italy, Spain and Germany are returning to much higher print levels, claims Smyth - at around 90 per cent of their volumes pre-Covid.

Meanwhile, French print reseller C'PRO is actually seeing more activity now than it did before Covid.

C'PRO shared data with CRN on figures ranging from the number of on-site technical support visits, number of customer support calls received, number of machine deliveries and the number of ink cartridge shipments.

The figures are for a business segment that represents around one third of C'PRO's print business.

The data shows that all activity has actually increased since January 2020. In November 2020, ink cartridge shipments were six per cent higher than the reference period of January 2020. Support call volumes were 35 per cent higher in November compared to January. On-site visits fell by five per cent in November 2020 compared to January 2020, but were five per cent higher by January this year.

"Large accounts have a big decrease because everybody has been sent home," said Gilles Perrot, director of C'PRO.

"For our clients it's back to normal or even a bit better than normal," he said.

"As long as the overall economy isn't too weak, business will be good. The main cause of a decrease of print volumes is home working. But home working in France is not so big for SMEs - they're working more or less normally. People are back to the offices and back to the clients."