By Scott Dunham; with input from Photizo Senior Consultants and Analysts

The end of the year is a time for reflection — how did we grow, what were our best experiences, and what do we look forward to next year? We can make some resolutions, and learn from challenges.

For managed print services, 2011 has been quite a year. Let’s take some time to think about what kinds of things we saw in the industry in 2011, and what those things might tell us about what’s to come. While we’re at it, why not make some resolutions as well?

Photizo examined this year’s biggest industry happenings and trends regarding customers, competition, market structure, the channel, and technology.

Emerging Markets are Developing Quickly

For the global market, the biggest news came in the continued growth of quickly developing emerging markets. Our forecast predicts a global growth rate of 20 percent through 2015, with all regions showing strong revenue gains over the period.  Competition between the top-tier vendors intensified, the channel saw some variable growth and is set to pick up speed, and the shift towards a services-based model led to some significant changes in the market structure.

Customers are gaining power

This past year saw end users becoming more savvy and experienced as the market matured. The value that customers are demanding is becoming greater, placing an even higher level of importance on the advanced stages of MPS. Manufacturers are offering more value through process optimization, and an increase in end-user awareness is causing a demand for advanced solutions. The MPS customer is constantly looking for better, faster and cheaper. The provider that can offer them more value for less is going to convert those sales opportunities who may not have had a great first-time experience with an engagement.

We have also seen a change in attitude brought forth by the increasingly mature market. The shift from early adopters to mainstream consumers has decision makers taking fewer risks. The early adopters of MPS were more daring, ready to jump into uncharted waters in the hopes of realizing savings. As things have developed through the end of the year, we are seeing more reserved decision makers who are more interested in benchmarking with their peers, in search for the best perceived value.

The market as a whole is becoming more informed, less headstrong and more demanding. As more and more decision makers gain experience with a first-time MPS engagement, they will begin to become more selective with who they trust their print environment to. This gives the advantage to those providers who can both understand the challenges customers may have had in the past, and those who can differentiate themselves with value-added services that will further build on cost-savings for their customers that have already been realized in previous engagements.

Customer’s New Year Resolution: Continue to empower yourselves! By using the experience from a first-time engagement, it can help drive innovation and continue to advance the industry. For those who haven’t yet taken the plunge into MPS, you owe it to your business to pursue profitability by becoming leaner and more efficient.

The strong are getting stronger

This year has been a busy one in the competitive landscape, with new competition emerging from outside the traditional market as a convergence of managed services continued to take place. The market space is becoming crowded, and while many have seen growth, a fracture in the market is coming. There is not enough room for everyone –the investment is simply too heavy to sustain. Meanwhile, the rich have gotten richer while the poor may be getting poorer. Xerox, HP and Lexmark all made major acquisitions to strengthen their MPS strategy; Xerox with NewField IT, HP with Printelligent, and Lexmark with Pallas Athena. You can expect some manufacturers to have to pick their battles within the market place in coming years, while still others may drop out entirely. OEMs, in general, are expanding their presence in emerging markets like China, India, Brazil and Russia with global account growth. These initial large accounts have the potential to expand and give an early advantage as these markets grow to be regional leaders.

Overall, this consolidation caused some growing pains. Those in the most advantageous positions are the big players who continue to focus on the topic, as well as the new players that emerge who see an opportunity to use MPS as a leverage point to break into. Konica Minolta acquired All Covered, an IT and network service provider for small to medium business clients as a way to further penetrate the SMB segment, as well as to advance offerings into Stage 4 of MPS. Additional evidence of the emergence of Stage 4 was seen in the recent OKI Data Americas and Agiliant, Inc. partnership. Office supply companies, facilities management companies and it managed service providers are all entering the arena through these types of mergers. Will this create a space for large, truly independent and vendor neutral MPS sector?

OEM New Year Resolution: Make strides to differentiate yourself from your competition through new value-added services. After all, customers are becoming more demanding, why shouldn’t you demand more from yourselves as well? The payoff will be building market share as new competition enters the market.

The Ecosystem is consolidating

Let’s get one thing out in the open; the days when it was acceptable for three or four (or more) companies to provide pieces of the engagement – from hardware, service, support, monitoring and more – are quickly coming to an end. This is partly due to mergers and acquisitions in the market, which allow big providers to increase the scale of their offerings, but also due to increased functionality of products through development of new technology.

There can be no doubt that the ecosystem is consolidating, as 2011 saw a great volume of acquisitions. Whether or not these acquired companies can continue to thrive as part of a much larger whole has yet to be really tested.

This has raised some conversation on the relationship between parent companies and their newfound partners. Some believe that the innovation and creativity seen in software development over the last year was driven by the flexible environments of these smaller companies. But many of these smaller developers have benefitted greatly from the large parent company that has the means to take their solutions and use resources to apply them to a much larger customer base. This has led to a win-win situation that has been referred to as the “David and Goliath” relationship. One instance where we have seen this success is with Lexmark and their acquisition of Perceptive Software in 2010. The challenge in this relationship going forward will be nurturing and expanding offerings without stifling creativity.

OEM New Year Resolution #2: Leverage acquisitions to develop industry-specific solutions to achieve success across vertical industries, and take special care to nurture the relationship with subsidiaries for mutual benefit.

2012: The year of the channel

Whether or not you think that the “Year of the Channel” began taking place in 2011 or is set to take place in 2012, there was undeniable channel activity across many markets this year, and that trend is only going to get stronger. In European countries and in Australia, the awareness and demand is starting to pick up, but there are still opportunities for manufacturers to offer more flexible and reseller-friendly programs to the market. A number of OEMs have realized the opportunity here and have begun working on developing new programs.

This has its challenges, as manufacturers are going to have to provide ongoing support to their partners as they navigate the transition to a services-based business model. Those who cannot provide this support in a timely manner face being locked out of the market once resellers make and investment in a competitors program. Keeping a consistent selling theme through the channel will also be critical. Manufacturers may also move to ‘new media’ marketing approaches to increase reach without a dramatic increase in associated costs.

If anything, we could also call 2011 the “Year of Dealer Acquisitions”, as many major providers bought up dealers in addition to software and solutions developers in a global shopping spree. In an effort to acquire more small to medium business customers, Xerox and its partners alone made eight dealer acquisitions this year including United Business Solutions and Midwest Business Solutions in North America. This trend wasn’t confined to one region, however; acquisitions from multiple vendors were made in North America and Europe.

Many major manufacturers were focused on continuing to establish flagship channel programs in 2011. Ricoh offers its “ChaMPS” program to Ricoh Family Group dealers, Xerox provides a continuum of offerings through Xerox Partner Print Services, and HP is offering HP Partner Print Services as a result of their acquisition of Printelligent.

OEM & Channel New Year Resolution: Manufacturer’s need to continue to support their family of dealers by helping them transition to a services-led model. Channel partners should resolve to maintain their small business roots while operating as part of a much larger organization.

Technology is continuing to drive innovation

From “Smart MFP” capabilities and advanced monitoring software, to advancements in mobile print apps and cloud platforms, technology in the marketplace is marching forward faster than ever. Offerings continue to build supporting capabilities into manufacturer’s products.

In 2011 we have seen that software providers need nothing more than a problem to solve, and the solution will be there before the industry can blink an eye. Efforts to bring these software offerings into attractive display-based formats are going to encourage widespread awareness and use of relevant workflow solutions. This is going to become especially important with the exponential increase in smartphone and tablet sales this year, which is creating a growing need for mobile print apps that can function across multiple brands of devices.

One of the biggest tech trends that had everybody talking in 2011 was cloud computing. It is rapidly becoming the go-to architecture, and is currently being used in MPS for device management, assessments and document management. There are still some security concerns here, but as time goes on there will be more private and public clouds to choose from. This type of platform is ideal for the smallest business segments, but is scalable through enterprise levels. Look for more of the cloud approach for MPS in 2012.

We have also observed some barriers to entry for IT managed services providers to get into document management from a technology standpoint, where there is a gap for integration of smaller managed print software providers to come up with a dedicated service platform. This could be a big opportunity going forward.

New Year Resolution: Constantly check the pulse of technological advancement to stay on the cutting edge of offerings to customers across all business segments. There is a real opportunity here to develop a solutions platform that can be scaled and offered to all clients.

Putting it all together

The realization that the industry is shifting towards services gained ground in 2011. That idea is here to stay. This has profound implications on the industry, some that many companies are becoming increasingly aware of. Many are rapidly adapting to try to keep up with the market, and this is creating a whirlwind of activity within the global marketplace.

Despite all the challenges to broad adoption of MPS, the “old and neglected” printing and imaging industry is transforming itself quickly and quite successfully, making it a leading example for the rest of the electronics and IT industry. For most, it’s no doubt been a very busy year; let’s all take some time to reflect on our successes, learn from our challenges, and seize opportunities.

Scott Dunham is one of the newest additions to Photizo’s Information Services team, collaborating with senior analysts and senior consultants to provide additional research and analysis. A recent graduate from the University of Kentucky with a Bachelor’s of business administration in marketing, Dunham looks to add value to major information services reports.