MULTI FUNCTION DEVICES: Falling Prices To Increase Sales

It
is not without reason that IDC calls MFD the ´inthing´ in an otherwise dull IT
market. Both the inkjet and laser variety of MFDs saw exponential growth in a
market when everyone was talking slowdown.

And what truly makes this product category a hot favorite is the fact that
this upward trend is expected to continue. IDC expects a growth of 150% for the
inkjet and over 70% for laser MFDs in the year ahead.

Such high growth rates might not be a true indicator of the market. But it
definitely points to the fact that Indian enterprises, whether small, medium or
large, are rapidly recognizing benefits in convergence of functionalities.

The growth that is being witnessed in the market, of course, is a result of
buying that large corporate houses and the government have engaged in. Even SME
and SOHO segments have started to adopt the product. Says Gurjeet Singh,
Director, OA Compserve, "We have seen a lot of buying happen in the SOHO
segment. And we have also seen the product move in the home segment in some
cases. This is because of the integration that the device offers and the low
initial cost of acquisition."

"The
integrated device offers immense value proposition for smaller
organizations," says Pankaj Sharma, Head-Channel Sales, Sharp India. And it
is this value proposition that is being clearly communicated to the right target
audience.

Says Tarun Goswami, Marketing Manager, Xerox India, "Some of our
products are designed in such a manner that they gel well with the environment
of smaller offices."

Start-ups are also among big buyers of this equipment. Laxmi of Canon
explains this trend, "They don´t have to worry about legacy equipment
while purchasing a MFD."

BUYING
SEGMENTS

While smaller workgroups typically buy the inkjet variety, bigger
organizations go for the laser version. Therefore it comes as no surprise that
the inkjet variety outsells the laser version by a huge margin.

"An important factor for such big inkjet numbers is also the low initial
cost of acquisition," says Pankaj of Sharp. And with a market as price
sensitive as India, low cost is a strong attribute in purchase decisions.

The other important reason for the success of inkjets is ease of maintenance
and the fact that color printing is offered as against the predominantly black
and white laser printing. "Even though color usage is low, color can become
an important criterion in a customer’s buying decision," says a
Delhi-based reseller.

The
skew in favor of inkjets is unlikely to remain for long. Though there is no
immediate and imminent threat, the writing on the wall is that laser will
prevail.

"Globally inkjet is a dying technology," says V Balakrishnan, GM,
Gestetner India. The one single factor that will tip the scale in favor of laser
will be operating price.

With operating costs as low as 40 paise per print, the total cost of
ownership becomes very affordable for smaller enterprises too. "SMEs are
now picking up the laser variety too," informs Canon’s Laxmi.

Companies have started to launch products in this domain, that typically
appeals to this kind of audience. "We have 12 to 14 ppm machines running on
the laser engine," says Tarun of Xerox.

Small footprint, greater reliability and low operating costs together are
able to deliver an unmatched value proposition. "This makes even more sense
in a smaller environment where printing and copying dominate other
functions," says Sharp’s Pankaj.

And it is to capture markets like these that Xerox has an MFD that only
copies and prints. "Faxing is not integrated," says Tarun. The
customer however has the option to upgrade the machine for faxing with add-on
cards.

So, the modularity of a PC is now available in an MFD too. While the initial
cost of acquisition is lowered, the smaller enterprise is protected against the
risk of obsolescence too. "Investment protection is a key issue that is
effectively addressed," adds Tarun.

"The narrowing gap between analogue copiers and digital MFDs in terms of
price and operating cost is one of the key drivers for the MFD market in
India," explains Leslie Lean, Managing Director, Ansata Computers.

EVOLUTION OF MFD

At a time when everything in the world from cars to cell-phones to PDAs are
getting smarter, then why should MFDs be left behind? Of course, it copies,
scans, faxes, and prints.

But
in addition to this, it can also e-mail, send faxes over the Internet or i-fax,
and comes equipped with virtual mail boxes for users. The device has now become
an important component of the workflow process rather than just a gadget that
could do more things than one.

Says M Lakshmi Narayan Rao, Assistant Director-Marketing, OSS Value, Canon
India, "The MFD has evolved to be the communication hub and is now handling
the entire data communication in an office."

A common myth about the MFD is that if one of its function goes down, the
machine stops working. That is no longer the case.

Most devices available in the market today come with some level of redundancy
built in, which translates to the fact that if one function of the machine is
down, it still continues to perform other tasks.

Says German Gennady, Marketing Director, Xerox India, "Customers
sometimes feel that the multi-functional feature in a MFD is a disadvantage.
There is still a presumption that these devices will fail if one or more
functions stop working."

Mrudul Desai, GM, Triune Marketing waves aside this feeling, "It is not
true. This myth has become a bottleneck in the growth of MFDs."

Interestingly, these devices now come with the ability to perform more than
one function concurrently. So while one user may be faxing a document, it can
parallely scan a document for another user.

And vendors in the MFD space are in an overdrive to ensure that the value
proposition of the product is communicated well to the end-customer and the
channel. States Mrudul, "We have to educate the customer." He adds
that the customer feeling that it is risky to have ‘all eggs in one basket’
is slowly but effectively being addressed.

CUSTOMER CONCERNS

Though the going is good for MFD, like any other product, this segment too
has its concerns. Different buyers have different issues.

"It depends on who you are selling to," answers Tarun. While the IT
manager of an organization looks for seamless integration with the network, ease
of manageability and minimal compatibility issues; the concerns posed by an
end-user in the same organization might be different.

The end-user wants the device to be user-friendly, reliable and have the
ability to multi-task simultaneously. For example, the device should have
concurrency built in. "Users also value features like collating and
duplexing," adds Tarun.

But the concerns as expressed by the head honcho of the same organization are
strikingly different. A CEO or CFO looks for ease of asset management from the
investment standpoint. "He is worried about the risk of obsolescence,"
explains Tarun.

"The main financial concern is that the investment should be
future-proof and upgradability of such machines effectively addresses
that," opines Laxmi of Canon. "The best part of buying an MFD is the
ability to be able to plan for the future," says Balakrishnan of Gestetner.

However, one concern that seems to be on everyone´s mind is service and
support infrastructure. "Success of MFDs in the long run will depend
heavily on service and support," says Pankaj of Sharp.

SUPPORT: A CRITICAL SUCCESS FACTOR

Since the MFD has evolved to take up the more mission-critical tasks under
its fold, the need for instant service and support has also become greater
therefore.

The challenging task in building an effective support infrastructure is to
enable the service engineer to make a transition from a copier mindset to an IT
mindset. "We have to ensure that the engineer is as good in using e-tools
as he was in using mechanical tools," puts Laxmi rather eloquently.

And in such a situation training the existing workforce becomes a critical
part of smooth functioning. Most organizations are investing heavily in training
their technical workforce.

Gestetner, for instance, has made it mandatory for engineers to attend
training for at least eight days per annum. Even Sharp has trained its partners
to address the first level of support.

Canon undertook a massive training program for its engineers last year.
"The very same training is being extended to our partners´ engineers this
year," says Laxmi.

IMPORTANCE
OF SALES TRAINING

With so much focus on technical training, can sales workforce training be
far behind? And you get no points for guessing that one!

With the MFD becoming more complex and the integration of IT, telecom and
office automation becoming tighter, sales cannot be achieved through just a
spiel. It is only possible through proper understanding of business applications
that the machine can deliver.

The Canon sales force, for instance, has been trained not only in concept
selling and product skills but also in strategic account management skills.

E-learning has also been contributing to the effort being made by
organizations. "The completion of e-learning modules is a part of our sales
force´s KRA," says Balakrishnan of Gestetner. Xerox also has continuous
programs running for its sales force.

PRODUCTION PRINTING

With most issues addressed, the MFD market has opened doors of opportunity,
often referred to as production printing. Like any other peripheral category,
MFDs also come in variants that are typically referred to as entry-level,
mid-size and high-end.

But in addition to these three segments, there are different models in
varying sizes that deliver printing solutions and are therefore referred to as
the production segment. These printing solutions are delivered in sectors that
have to undertake an enormous amount of transaction-based printing for
transactions reporting.

A client for such a solution is a telephone service provider, for instance.
Such an organization prints a lot of bills every month. Points out Laxmi of
Canon, "The growth in the services industry presents a huge opportunity for
such solutions."

Machines for this segment have powerful RISC processors built in them making
them capable of handling a large amount of variable data. "In layman terms,
the machines have a high-end computer built in them," adds Laxmi.

These products typically are not box sales but call for a lot of interaction
with the client and a sound understanding of business process. Says Balakrishnan
of Gestetner, "The need to map business needs is critical." Adds Tarun
of Xerox, "We have a separate software cell that does a lot of development
for high-end solution delivery."

Due to the nature of tasks accomplished by these solutions, a certain amount
of contingency planning has also to be incorporated into the solution.

The order of the day is that printing within an organization is becoming
organized and has come a long way from the days of the network printer. Says V
Rajendran, GM, HCL Infosystems, "Most of the time, we end up developing
something new for our clients." HCL Infosystems incidentally is the
national distributor for Toshiba machines in India.

And these solutions have been able to deliver results that would amaze the
most hard-nosed negotiator. Citing an example, Balakrishnan of Gestetner says,
"We helped an organization lower its operational costs for a year by as
much as Rs 14 lakh."

Adds Rajendran of HCL Infosystems, "In some cases organizations end up
saving as much as 50 percent on maintenance costs alone."

Explaining the productivity advantage, Canon’s Laxmi says that the benefits
are both hard and soft. Hard benefits include aspects like savings due to lower
print and maintenance costs. Softer issues include things like enhanced
productivity benefits because of centralized printing and saving on real estate
costs because of a much smaller machine footprint.

He points out, "The total cost of ownership model that we employ,
factors in a multitude of such issues." And with such benefits accruing the
initial high cost of acquisition then no more remains that much of an issue for
a prospective customer.

FUTURE OUTLOOK

While IDC expects the inkjet MFDs to grow faster, industry observers feel
that it is just a matter of time before laser MFDs become predominant. As
awareness grows and finer points of the technology are appreciated and valued by
the customers, lasers will win hands-down.

The question today in tech-smart organizations is no more about the purchase
of MFDs, but which technology solution to adopt.

MOHIT CHHABRA in New Delhi

with inputs from NELSON JOHNY in Mumbai and SUNILA PAUL in Bangalore