HP’s Bullish About the Future of Its Printers and Print-Services Business
Despite the ongoing move worldwide away from hard copy to electronic media, Hewlett-Packard predicts strong growth in digital printing markets into the foreseeable future. Kindles and iPads be damned, the folks in HP’s Imaging and Printing Group (IPG) expect hundreds of billions of additional pages will be printed digitally over the next couple of years across market segments. The firm says that the increase in all that digital printing will also drive demand for new services, which IPG will happily provide.
I recently had the opportunity to meet with members of the IPG management team in San Diego. While I’m skeptical about some the growth numbers they quoted especially in the consumer space, the IPG people I spoke with are quite certain that the future of digital hard copy is bright. IPG executive vice president, Vyomesh Joshi estimates that the worldwide digital hardcopy market including, hardware, consumables, and service will be worth about $292 billion next year and that number will grow in the future. Joshi says by 2015, approximately 1 trillion more pages will be imaged digitally than the number currently printed with a digital device.
There are several key factors fueling all this growth, says the HP execs. First, the amount of printable content is exploding. Manny Kostas, IPG’s senior VP overseeing worldwide marketing and strategy says people have access to more printable materials than ever before. He concedes that people print less of the total printable materials they have but he’s confident overall print volumes won’t drop. “There is so much content now, and it’s growing,” he explains. “Even if the percentage of printing comes down, print volumes will be sustained as people access the exploding amount of content they value and want to print.”
Kostas says that people are also discovering new ways to print as new technologies emerge, which further drives print volumes upward. Currently, mobile devices and the so-called cloud are providing new printing opportunities, he says. Thanks to the growing ubiquity of technologies like HP’s ePrint, which enables mobile printing, Mr. Kostas says more and more consumers are learning how to access and image content using an expanding array of gadgets like smartphones and tablets.
Many of the IPG executives I met with in San Diego are particularly bullish about the commercial space, which will be another growth driver for HP going forward. Billions of pages once imaged using analog processes like lithography are now migrating to digital devices. While some areas of the commercial print space such as design and photo processing have largely adopted digital technology, other segments including publishing and packaging remain dedicated to analog presses and flexographic devices. Going forward, IPG aims to move more of that analog printing over to its high-volume digital equipment, which includes the firm’s line of Indigo machines and its new HP Inkjet Web Press units.
To move more pages through SOHO and enterprise digital devices, IPG offers a wide variety of services including managed print services, which I’ll discuss in a minute as well as others HP’s Snapfish online photo service alone currently has 100 million subscribers. The firm plans to add more services and has an installed base of over 10 million web-enabled printers that it can leverage to support new offerings. On October 12, HP announced that it had partnered with the giant publisher Condé Nast to distribute content from well-know magazines such as Allure, Glamour, Golf Digest, Wired, and others directly to the subscribers’ personal printers.
Growing MPS
Along with the Condé Nast partnership, HP also launched an interesting new pilot program that really amounts to an MPS offering for SOHO users. The new HP Instant Ink service provides consumers with cartridges for a monthly fee of between $5.99 and $10.99 depending on the device. Officejet Pro machines will presumably print more so the plan costs more for these units. Subscribers receive two sets of cartridges when they purchase their inkjet machine so they have replacement cartridges on hand if required. After the device is installed, it uses its ePrint technology to monitor and order ink supplies as needed. The firm says it will work with certain retailers in the northeastern United States to initially offer HP Instant Ink. No additional details were available regarding the program except that it should be available by the end of the year.
In the office space, HP’s more traditional managed-print services appear to be doing well.. Currently, HP’s MPS business is rather significant. According to Coughlin, HP has some 575,000 machines under contract that are generating 23 billion pages each year. He says HP has over 3,000 MPS clients including 8 of the top 10 insurance firms and 7 of the top 10 healthcare firms.
HP is using a three-pronged strategy to grab more of the MPS market. The firm aims to optimize multi-vendor fleets and maintain all the various devices. Using the cloud and other technologies, the firm also plans to provide a range of connectivity and storage solutions to manage large and diverse print environments. Lastly, HP will improve the workflow for its clients to enhance overall productivity. Coughlin estimates that workflow represents 75 percent of the total lifecycle cost for a typical printing environment. Expanding workflow solutions and improving productivity is critical to HP’s MPS growth strategy.
Transforming what Coughlin calls “inefficient paper-based processes” to streamlined digital workflows is key to improving productivity, which puts the focus on HP hardware. Multifunction devices are seen as the on and off ramps to these optimized digital workflows and the firm will bring to market more LaserJet MFPs loaded with productivity and document management tools.
According to Kostas, HP’s hardware and solutions allow its clients to efficiently “manage the [scanner] glass.” He maintains that long-term success is all about “converting atoms to bits” as clients digitize and archive critical business documents such as invoices, contract, and other enterprise content. Equally important is providing the secure off-ramps that allow companies to safely and seamlessly “covert bits to atoms,” as Kostas puts it.
I expect that HP’s MPS business will continue to make great strides. The firm has executed on its MPS strategy and has managed to take market share from copier vendors and other printer OEMs. Most of HP’s success has come through its direct sales force team working with enterprise customers. Like other vendors, HP will find it more difficult as it works with partners to market MPS to small to medium sized business. It remains to be seen how successful the Instant Ink program will be. Some consumers may welcome the convenience of paying a flat fee for their cartridges. I bet, however, bargain hunters will eschew the program in favor of purchasing less expensive third-party supplies. Only time will tell.
Posted on 11/14/2011