With the financials for the quarter ending June now reported. The harsh realities of sub 30% declines in revenues, and evaporation of profits have opened the window into the Document Imaging Channel's future.
The Channel's leaders have experienced what massive declines in service revenues look like firsthand. They can also visualize how the deep dips in hardware revenue will challenge the sales structure, along with the channel's entire go to market business model.
One can easily visualize that even as the industry returns to a post virus world, the revenue will continue eroding as service volumes continuing declining, and the lower cost A4 hardware replaces A3. The A4 momentum will erode the A3 placements in record numbers over the next few years.
For decades, print equipment manufacturers relied heavily on the Document Imaging Channel's dedicated resellers to sell, supply, and service print/copier equipment to its SMB and Enterprise end-user customers.
Of course, there are alternatives for end-users to acquire print equipment, supplies, and services outside the Document Imaging Channel. These alternative actors have been delivering the future of print for over a decade. These alternative providers will gain substantial market share as the industry consolidates and realigns its supply chain to equalize supply and demand.
Alternative providers such as IT Vars, Office Products Resellers, Managed IT Service providers, brick and mortar retailers as Staples and Office Depot, and of course, Amazon. Does anyone in The Document Imaging Channel believe that Amazon didn't sell any of its customers, both print hardware and supplies, in the last few months? They did, and they have been for a decade, along with all those others mentioned. There are billions of dollars in print equipment, supplies, and services delivered to end-users through these alternative actors in the supply chain.
The Document Imaging Channel is rapidly becoming out of alignment with its end-users. The commoditization of any product or service is caused when its end-users accept that the lower price aligns closer to how they value the means to their desired outcome.
The industry's end-users will determine the industry's value. Anytime some of the industry's actors double down on delivering to end-users out of alignment in value; Other actors in the supply chain will seize the moment to add those customers to their portfolios.
Ironically for over a decade, we watched some in the supply chain focus on getting the alternative providers to deliver in the ways of The Document Imaging Channel. I think about the obsessions to provide all printers their supplies, and services through a contracted means MPS as example.
Today we realize there are millions of devices, supplies, and services delivered outside contracts. The alternative providers were emulating what many more customers will do as the deliverable continues to shift from A3 to A4.
Pre-Virus, being out of alignment by a lack of understanding or misunderstanding from customers, had a longer tenure. However, once end-user awareness gains momentum being out of value alignment with them will be crippling. The Pandemic is and continues to bring that awareness to bear.
The End-users of The Document Imaging Channel will not remain customers through an outdated means just because its actors insist, they do. The majority of the Document Imaging Channel's End-users will instead align with those who deliver through a means which aligns in expectations based on market realities.
Here are some coming changes caused by End-users the industry must prepare to address quickly.
First, The manufacturer's direct business model is extremely vulnerable to extinction. Unless it goes through a massive overhaul and must deliver additional services just as the dealers must. A manufacturer's cost to maintain a direct to an end-user business model built to sell products and its services based on growth cannot survive as their products and services sold are rapidly declining in cost while commoditizing.
The A4 Printers and MFPs will replace a massive population of A3 equipment. The industry's actors must get past arguing against this reality.
Leasing and contracted A3 equipment with services will shrink dramatically as more end-users purchase much less expensive A4 through a transactional method. The practice of premature buyouts and contracts designed to keep the mystery of the margin are fading fast.
The Business Color A3 MFP will not be required in ways of the past as more information is consumed behind glass, and as business processes demand less hard copy color. Think about all the churches who have not printed their bulletin over the last six months instead they posted them online.
The B/W MFPs will also be reduced in quantity and replaced with print-only devices as end-users reduce in need to input paper as a business process function. Today's business processes are eliminating scanning and faxing. Think of all the documents which were once printed just to be signed and scanned as an example.
Both SMB and Enterprises will shrink and eliminate their populations of walk-up MFPs as the WFH movement increases.
Enterprises and SMB organizations continue ramping up digital processes, keeping the structure to information digital and cloud-based, replacing paper-based input, and output. The need for paper-based business processes will still exist. The only question is, at what level will it decline from those per-virus volumes?
The WFH user will purchase sub 300.00 MFP's, and there will be no excitement or movement from end-users either enterprise or SMB to provide any MPS programs to these WFH workers. Yes, of course, there will be applications, but one-offs are not a scalable deliverable.
My friends, the convergence of reseller channels, and providers' consolidation through all the supply chain. Will cause significant shifts to all resellers that deliver services and products to both the SMB and Enterprise End-users.
The Document Imaging Channel must replace the declines of print and its services with diversification or completely realign to deliver print equipment and its services in a much less expensive way. As the vast populations of walk up A3 devices are eliminated what remains will not sustain the Document Imaging Channel dealer in the comfort of their pre-virus circumstances.
Those who can replace the mindsets to save something with mindsets to create something different in ways that align with the end user's expectations will win.
"Status quo is the killer of all that will be invented."