The true price of print

Today’s printers are cheap and easy-to-use.But many firms fail to set a budget for printing costs — a situation that could hit their bottom line

  • E-Mail
By  Caroline Denslow Published  December 18, 2005

Awareness of the hidden costs|~|printlead-55306.jpg|~|Many firms do not budget for consumables, maintenance, paper and electricity when purchasing a printer.|~|Look around your office and count the number of printers you have — from the multifunctional devices installed in common areas, to the colour printers in the marketing and sales offices, to the inkjet printers some of the senior managers have sitting on their desks — and you might be surprised by how many of these devices are scattered in your office. Often overlooked, the number of printers an organisation has does tend to multiply quite rapidly over a period of time. But what companies should really be more concerned about is the amount of money they spend every year running them. Analyst firm Gartner estimates that companies spend about 1% to 3% of their revenue annually on costs related to printing and other output functions such as copying, faxing and scanning. Pharos Systems, a US-based resource management solutions vendor, believes that the overall document output costs of an organisation each year can be calculated by multiplying the number of employees it has by US$2000. For any company, that amount can be quite a significant sum; what is more alarming, however, according to Forrester Research, is the fact that the output in a typical office is growing at 21% each year. And there seems to be no sign of it slowing down. But despite the magnitude and the impact the cost of printing has in overall operating expenses and profitability of the organisation, most enterprises largely let them go unchecked. Calculating the true cost of printing is something that most companies do not do as the cost of document output is more often bundled with other departmental expenses. Such is the case of one of Xerox’s customers, a large bank that was seeking to make a 5% saving on its printing expenses. “We asked the bank to tell us how much they are spending at the moment and the bank’s chief financial director could not answer it,” says Ben Gale, general manager, sales and marketing, Distribution Operations, Xerox International Group. Even the IT manager was not aware how much the entire organisation is spending on document output, he adds. The problem, according to Gale, is that most of the bank’s printing expenses, such as ink cartridges and other consumables, were bought using petty cash or other local budgets. “It was impossible to provide that 5% saving that they are looking for, because we didn’t have a base figure to work on,” he says. Such practice of not keeping tabs on overall printing operating costs is quite common in many organisations. In fact, most of them do not even seem to give as much time to examining printer purchases — other than one-time acquisition costs — as they might do when buying a PC or a laptop. Most of the time, companies are not even aware of the various hidden cost items associated with running printers, such as consumables, maintenance, paper and electricity. That kind of purchasing mentality bodes well with the printer manufacturers’ so-called razor-and-blade strategy — a business model made popular over a century ago by King Camp Gillette, the inventor of the first disposable blades for safety razors. Under the strategy, printers are sold at, or below, cost while high-margin profits are made on the inexpensive consumables. For instance, if you buy a US$100 inkjet printer that uses a US$20 black ink cartridge, you will probably realise that in just over six months, you have spent more for the ink than for the printer. And if consumption of printing supplies is not monitored, which is often the case in most companies, then imagine how much you’ll spend over the lifetime of the printer. Vendors admit that they are aware of the TCO (total cost of ownership) issue companies face with running their printers, and are trying to address the problem by helping companies change their buying behaviour. “Running cost should be a very important part of the purchase decision,” says Maki Nagao, product manager, Kyocera Mita Europe. “However, many people do not realise or accept that the running cost of printers can easily be three times the machine price,” she continues. “It is our challenge and opportunity to make end users aware of the importance of running costs so that they can make an informed decision and purchase the right device,” Nagao adds. At Canon, customers are made aware of the various direct and indirect costs associated with the day-to-day running of printers. “We try to explain to all our customers what cost items they can see and what they can’t see,” says Gautam Chakrabarty, senior product manager, Business Solutions, Canon Middle East. As a standard procedure, all of Canon’s distributors are given an Excel-based TCO template that the local partners can use as a tool when explaining to customers how to calculate all the labour- and supply-related costs of document output. It even takes into account the impact of machine downtime to companies. And so far, Chakrabarty says the template is proving to be effective.“At least five years back, TCO used to be among the bottom priorities before deciding on a machine, but now, it’s one of the top three factors for deciding a machine, for deciding a purchase,” he notes. One of the more crucial aspects of TCO calculation relates to toner and ink cartridges, as these are the main contributors to print operating costs, says Nagao. “The major cost of running a printer is the toner cartridges, which can easily end up costing four-to-ten times more than the price of the machine,” she says. The most common way for vendors to measure how much is being spent on toners and inks is cost per page, which is based on the recommended retail price of a branded ink or toner refill and the assumption that a page gets about 5% ink coverage. ||**||The 5% solution|~|print2body.jpg|~|Main: Printers are a vital part of a busy office.|~|Cost per page, like any other TCO formulas, does not ensure that companies would get the exact results, according to Abdulrahman Almoayed, printing solutions and services manager, Lexmark Middle East. “We can make calculations but we don’t guarantee that they are 100% accurate, although they will give an indication as to how much the cost for printing is using Lexmark products in comparison to the market and other manufacturers,” he explains. Indeed, in most cases, the 5% rule does not apply, as ink coverage per page is dynamic — and that means that the cost per page also varies. Kyocera Mita’s Nagao estimates that at 5% coverage, monochrome (or mono) laser pages could cost from about 0.5 US cents to 3.7 cents. Other documents that are more complex and require more coverage could raise that cost from 1.4 cents to 11.8 cents per page. In order to give individual companies a closer approximation of what their cost per page is like, Brother has installed an electronic meter in its laser printers that keeps track of pages produced by the printer. “With a push of a button the printer automatically prints out a configuration report,” says Ranjit Gurkar, general manager, Business Machines, Brother International. “The report will provide the actual consumption and yield. For example it will tell you the number of pages that can still be printed using the current drum installed in the machine and the number of pages printed out on the current drum on the machine,” he says. “It also gives a cumulative count of the number of toners that has been used on the machine over its life,” he states. “In the case of multifunction printers, it includes the number of pages printed in the printing mode, the number of pages printed in the copying mode, and so on,” he adds. The electronic monitoring feature, Gurkar says, can help users match the actual yield of the machine with the rated yield and give them an exact idea of the running costs that they are incurring on the machine. TallyGenicom, on the other hand, provides site surveys and analysis of print samples from customers to determine their TCO figures. “For many users the 5% industry standard does not apply,” says John Spreadborough, director, International Sales, TallyGenicom. “It can be between 7% and 8%, or it can be lower than the industry norm. It really depends on what sort of coverage the user is doing, which is why we offer analysis service because within a corporate office it’s very difficult to predict.” Xerox also does a similar approach with its Office Document Assessment (ODA) service, but further extends that service to include third-party printing and imaging products in the evaluation as well, says Gale. ODA measures and analyses a company’s current document production infrastructure in granular detail — evaluating the exact costs of the ways an organisation manages printing, copying, faxing and scanning functions. “We have a document consultant evaluate the organisation using the Six Sigma methodologies, and then we install software in the network, which will track everybody’s print, copy and faxing consumption,” explains Gale. “It will not only help us understand the cost printing but the cost of documents as they flow through an organisation,” he goes on to add. Xerox claims that ODA can achieve specific cost savings and productivity increases of 10% to 20%, and reduce print and copy costs by 20% to 40%. Gale says a number of multinational corporations, including Microsoft, Sun Microsystems and Lloyds TSB, have deployed ODA worldwide. “Microsoft, for instance, uses our print technology to understand what they are printing and where they are printing,”Gale goes on to add. One of the trends that came of late in the business world is the introduction of affordable colour printing. Previously targeted only at the graphics design and publishing sectors, colour printing has long been perceived as complicated and expensive to operate and cannot cope with the heavy-duty print runs enterprises normally require. But lately, as vendors push cheaper and easy-to-use enterprise-focused colour printers in the market, these perceptions are starting to change. In the UAE, IDC has seen shipments for colour laser printers last year grew by 38.4%, and expects the trend to continue. “Colour laser printers will stay hot for the foreseeable future,” affirms Naser Sha’sha’a, senior analyst, Office Automation Group, IDC CEMA. But as adoption of colour printing picks up, the risk for companies to escalate the operating costs of their printers runs high. For one, colour laser printouts have an even higher cost per page than mono laser documents, Nagao says. For example, a typical document that has coverage of 15% cyan, 14% magenta, 16% yellow and 7% black could cost from 15.1 cents to 50.9 cents. “The TCO of colour printers is higher than that of monochrome printers because of the higher initial cost of the machine as well as higher running costs,” she explains. Nagao says there are two major reasons for the high cost of colour printing: the fact that colour printers uses four types of ink or toner (cyan, magenta, yellow and black) cartridges and that the cost per page for black toner cartridges within colour printers is generally higher than the cost per page for black and white printing in mono laser printers. While colour printing is generally much more expensive than mono printing, TallyGenicom’s John Spreadborough argues that introducing business colour printing should not be deterred by the TCO factor. “As an organisation, we do not present the user with the cost of ownership argument. While TCO is important, what is even more important for a user is getting what he needs from that product,” he says. “If you were using the printer to handle colour printing in text and some graphics in an open environment that has a variable set of users, then yes, colour printing can be very expensive,” he further explains. “But if you are a user whose colour laser technology is vital to your business because you are sending out mail shots or sending out bills and advice notes in colour, then the biggest cost is in not using the technology to do that when you can,” he states. “The right technology and the right product for the job is far more cost beneficial to the user than the cost of some toner in the machine,” stresses Spreadborough. To help organisations minimise the TCO for printing, printer manufacturers have developed a number of features that come as standard in their product offerings. Like many vendors, TallyGenicom has included a device management software in their printers that allows an IT manager to manage the machine remotely. For instance, he can assign certain users who can use the colour printer, or decide whether or not a user can use the colour function of a printer. “There are some simple features that enable you to analyse what the user is printing, to inspect the print jobs and make sure that what they are printing are business print jobs and not their children’s homework,” Spreadborough says. Increasing the page yields for ink and toner cartridges is another way of reducing the costs of printing as higher output would mean lower cost per page. “If a toner cartridge yields only 3500 pages and there is another toner cartridge that can yield 7000 pages, the cost of the cartridge that yields 7000 pages is not twice as much as the smaller cartridge, although the yield is double,” reveals Gurkar. “The incremental cost is only about 60%; on average it works out to be 15% less expensive for customers who purchase the high-yield cartridges,” he goes on to explain. Lexmark is offering cartridges for its T-series of single-function monochrome laser printers that offer three different print capacities: 6000 pages, 21,000 pages and 32,000 pages. Presenting options, Almoayed says, gives companies the flexibility to choose what would suit their needs better. “While the 21-000- and the 32,000-page cartridges, compared to the low-yield cartridges, give a much better cost per page in the long run, the 6000-page cartridge is more cost effective for smaller organisations that do not print as much and, hence, do not really require the pricier high-yield toners,” he adds. To ensure higher page yields for its colour printers, Xerox has developed what it calls solid ink technology. The imaging proc- ess for solid ink works in a similar way to offset printers. It uses solid, polymer-based ink instead of powdered toner. The solid-ink technology uses fewer consumables, is cleaner and generates less environmental waste than toner-based printers, according to Gale. “When you turn on an inkjet printer, sometimes you have to replace the cartridge because the nozzles have clogged up. So even if you have a lot of ink left, you can’t use it because the nozzles have become jammed,” he notes. “What Xerox’s solid ink technology does is it remains solid right until the minute you need to print. By doing that, you don’t clog the nozzles, and you can leave it for, say, a week and come back to find it still fine and ready to use,” Gale explains. “We also managed to reduce the amount of toner that is put down on the page. Before, multiple layers of toner were put down on the page to make up the image, but because of the accuracy of the laser printers now, we were able to put the dots down right next to each other so we don’t have to have this multiple layer effect,” he claims. Similarly, Canon’s innovation involves changing the way toners work, says Chakrabarty. “Our toners are much finer and have a wax coating inside, which gives you a glossy looking output. Glossy output is particularly popular in the Middle East. So by combining the wax coating with the toner has reduced the running costs of our printers,” he reveals. ||**|||~|print3body.jpg|~|The pricing of consumables is a major concern for many customers.|~|The high costs of ink and toner cartridges have seen many customers lured to buy the mu- ch cheaper third-party substitutes. The popularity of these low-cost alternatives has seen the replacement cartridge business become a very lucrative one, so much so that even companies like Xerox and TallyGenicom have a division that sell compatible toner cartridges for their competitors’ printers. “People will produce compatible cartridges. There’s nothing against the law in producing compatible cartridges,” Gale comments. Apart from grey marketing and counterfeiting, the compatible cartridge industry is generally legal, but major vendors disapprove of such practices, especially those of lesser-known brands that offer consumables at prices that are up to 75% lower than what major vendors charge. “It’s a problem not only for customers but for us,” Chakrabarty says. “Any of these products are not tried or tested by us, the original vendors. When we design a machine in our laboratory we do it with our own consumables. The third-party vendors do everything independently in their own factories,” he reveals. Chakrabarty likens the compatible cartridge business to car spare parts. “You definitely have an option of buying parts from an outside vendor, but at the end of the day, you pay higher for the maintenance,” he says. Gurkar even believes that compatible toner cartridges are not even compatible to the printers at all. “We do not recommend customers to use third-party brands of consumables, only for one reason. We know how much great difficulty we experience in producing our toners and drums; it’s not an easy job. It is extremely difficult for a third party to make it exactly compatible,” Gurkar reasons. “Using third-party toners can lead to components being damaged or output quality suffering,” Nagao claims. “This would eventually cost the user much more than any saving they would have made because of having to pay out for maintenance, servicing or even replacing the device,” she says. Compatible cartridges are especially damaging to Kyocera printers, she says, because it can be a threat to the lifespan of the drum and developer in the machine, “Matching the toner with the drum is vital to preserve the long life of components and ensure optimum performance and quality,” Nagao stresses. To discourage customers from buying third-party replaceme- nts, printer manufacturers have started putting chips in printer consumables that prevent compatible cartridges from working. To get around the problem, third-party vendors have devised their own chips that allow their products to work on the printers. The use of smart chips in supplies has spawned a significant amount of controversy and lawsuits between the two parties. In January 2003, Lexmark sued US-based Static Control Components (SCC), claiming it had infringed the Digital Millennium Copyright Act by circumventing its technological copy protection device. This led to SCC voluntarily stopping the sale of its replacement cartridges that use the contested chips. Singapore-based Inke, a company that is also in the consumables business has managed to get around the issue. Instead of selling ink and toner cartridges, the company has created a low-cost cartridge refill system. “The issue between original vendors and third-party supplies vendors is primarily because patents have been infringed,” says Tan Kon Cheok, president of Inke. “When we are talking about ink, we are talking about design of the cartridge. With inks we can find substitutes that can be of the same quality, or close to the formulation, and get the same excellent printouts because colours have no benchmarks,” he says. “What is very wrong in the market is if people were to infringe the patent design of the cartridge,” he states. “We got around all that by offering a refilling service. We don’t even have to design our own cartridges. All we do is we take a customer’s old, empty cartridge and just refill it,” Cheok goes on to add. Inke’s self-service refilling pac-kage, so far, has been receiving positive response, claims Cheok. Two weeks after it was launched in 2003, the company was able to sell 5000 units in Singapore. The product, which Cheok claims can guarantee between 60% and 70% savings for each cartridge, has also been gaining grounds in other parts of Asia as well as in Europe. “This has been quite successful in Singapore, Thailand, the Philippines and Malaysia. In Singapore we already have 25 outlets,” he claims. “In Thailand we are in the process of opening 300 shops; the same number will be opened in the Philippines and Malaysia. We expect to hit 1000 shops in the next year,” Cheok says. He believes that the product will get a similar response in the Middle East once it is available in the market. Cheok is currently looking for partners to set up refilling stations in the region. “The market for refilling cartridges in the Middle East is huge but it is still in the stage of infancy because not much is known about this,” he says. “Whereas in Europe, the US and Southeast Asia this is catching on very big because of the tremendous amount of savings, good quality and excellent printouts,” Cheok notes. And to show just how confident Cheok is with the product, Inke is offering warranty on the printers it is compatible with. “A lot of printer manufacturers say to customers that their printer warranty will be void [once they buy third-party consumables] so what we do is we give warranty to the printer,” he says. The battle between major brands and third-party companies in the consumable space is expected to heighten even further as the market becomes more competitive. Gartner estimates that by the end of the year alone users will spend US$59.7billion in printers and copiers. For many customers, pricing of original consumables would remain as their primary issue, but while replacement cartridges do promise affordability, sometimes, just like disposable blades, cheap supplies do not always mean a bargain, as companies run the risk of low-grade print quality output and affecting the reliability of their printers. To trim down the cost of printing, it will take more than affordable supplies to achieve. Smart management of devices and users, along with proper budgeting techniques, can also help do the job.||**||

Add a Comment

Your display name This field is mandatory

Your e-mail address This field is mandatory (Your e-mail address won't be published)

Security code