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VIDEOXerox, HP Learn to Share
By
Scott Reeves Feb 24, 2009 11:05 am
Jointly managed print services boost bottom line.
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Xerox (XRX) has developed a winner: Buy fewer pieces of equipment, and let us manage your document production.
It’s a reversal for Xerox. For decades, the company has urged customers to buy more office equipment that would -- behold! -- require more ink and toner, plumping Xerox’s bottom line.
But now Xerox and rival Hewlett-Packard (HPQ) are moving into managed print services. The companies generate consulting fees by coordinating and managing an array of equipment - often including that of their competitors, the Wall Street Journal reports.
The companies recommend eliminating many of the individual desktop printers and replacing them with a handful of larger, multi-function machines that copy, print and fax, which can cut printing costs as much as 30%.
The number of individual pieces of new equipment purchased decreases under the new plan, but margins are larger on the new, multipurpose equipment. Consulting fees more than make up for the loss of all those small desktop printers.
The vendors don’t force customers to buy hardware with their logo, but note that exclusive use of a brand helps cut costs.
In many large companies, the facility manager purchased the copiers, the IT department managed the printers, and office managers handled the fax machines. This resulted in multiple service contracts and what could charitably be called a total lack of coordination. Xerox and Hewlett-Packard say their new service can correct this.
Japanese companies have noticed the successful move to consulting more than offsets declining unit sales. Ricoh, Sharp Electronics, and Lexmark (LXK) have increased efforts to match Xerox and Hewlett-Packard.
The Journal reports that many large companies are eager to outsource their document production in an effort to cut costs, including Procter & Gamble (PG), 3M (MMM) and Dow Chemical (DOW).
Under the new managed service program, Dow says it's cut the number of copiers, printers and fax machines to about 6,600 from 15,000. P&G reports that paper consumption has been cut about 40%, and costs have been reduced 20% to 25%.
Meanwhile, Hewlett-Packard says its managed print service division has grown at an annual rate of 38% since 2004.
It’s a lesson worthy of Sesame Street: Sharing is good. But it’s one up on Big Bird, because the new sales pitch is profitable, too.
No position in stocks mentioned.
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