The Price of Managed Print in a Virtual World

The pandemic forced companies to behave differently and pivot to virtual forms of communication. One segment that suffered as a result of this shift was the Managed Print Services technology sector. Working from home got many of the people still hanging onto paper documents to fully let go and embrace virtual presentations and reports for conducting business.

To illustrate the impact that this has had on Managed Print suppliers, we consolidated the percentage of change in total revenue year-over-year since 2018 in the chart below.

Print Revenue is Falling - Percentage Change in Revenue of Major Print Suppliers

To counteract this decline in revenue, Managed Print providers are scrambling to cling to business. As a result, many of these providers are holding fast to their contractual baselines in costs, regardless of whether or not the customers are printing anything on their rented units.

Managed Print Services contracts are typically priced on a “Cost Per Page” basis, where every print executed charges a variable cost to the customer. However, many customers are beginning to find that their contracts require a minimum commitment to certain spend levels. These baselines are continually accruing costs, even though organizations are not necessarily printing anything in their offices.

Our deal data emphasizes this point, as the average deal spend on managed print dramatically decreased over the past three years:

Planning Managed Print Costs Going Forward

Organizations need to think about their long-term plans regarding managed print contracts. These contracts should be adapted to map to your business initiatives that support either an on-premise workforce, hybrid, or completely remote workforce.

At the same time, businesses should not assume they will be able to exit their managed print deals seamlessly. Most have long-term, large contracts in place, and may currently be contractually stuck with cost commitments for the foreseeable future.

Marketplace and behavioral trends indicate that customers should be decreasing their spend on print. But, with print companies no longer earning on the variable “page print” costs, they will use aggressive efforts to prevent organizations from scaling back any contractual commitments.

To stay alive and promote growth, Managed Print Suppliers are diversifying and expanding capabilities to meet as many consumer needs as possible. Print companies have been expanding their business into web-to-print and increasing offerings for formatting to include a larger variety of graphics and materials. They have also been expanding into packaging -- one of the few industries that has grown during the pandemic. Customers should expect that Managed Print suppliers will try and force growth in these areas to justify the cost baselines that are established in their contracts and promote renewals.

Preparing for Your Managed Print Renewal

There are three options for customers to consider regarding managed print deals:

1. Stay as is, and reassess need for managed print contract in the future

The upside: the current agreement may be comfortable, given that the budget is laid out and the customer knows how to calculate variable fees. Customers do not have to change anything or worry about predicting the future of their business needs until it’s time to evaluate their renewal.

The downside: you forfeit the ability to improve functionality and reduce unnecessary recurring fees.

2. Decommission or change contract with MACR/D rights

MACR/D means Move, Add, Change, Remove/Delete. Customers should look for these terms in their contract to determine if there is any way to reduce their fleet size. This language is usually either in its own section or is tied to pricing or location and transfer rights. There are a few caveats to note:

  • Many print companies do not include these terms.

  • If these change clauses do appear in the contract, the customer must have a clear understanding of their ownership and usage, and a roadmap showing how their device need and usage will change in the future.

3. Initiate an Accelerated Renewal with Refresh

The final option is to accelerate your renewal for this year and increase the deal size since print companies are desperate for business and may allow customers to get more from their deals. Clients that take the time and effort to understand different scenarios have experienced success with an accelerated renewal refresh. They have achieved better SLAs for services, better unit costs, and higher functioning devices. However, this deal set-up involves some heavy lifting: the customer needs to analyze and map their usage data and start early in the contract cycle. There are also possible risks where customers may see higher device fees that outweigh reduced print fee and difficulty with switching from CAPEX to OPEX.

Overall, customers can get better deal outcomes with their managed print providers if they are knowledgeable about their needs, understand how their individual supplier may react, and start building leverage long before negotiations begin. This means guarding information from the supplier so they are not sure if they can count on your business, introduce competition in the process, and use deal timing to your advantage.

This topic will be covered in greater detail during our webinar Optimizing Managed Print Deals on May 19th 2021. In the meantime, if you would like more information on this topic, download our blog titled Leverage: The Key to Every Deal from our website, or contact your ClearEdge representative.

- Kevin Betts and Alex Haukness are Analysts at ClearEdge Partners.