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Print services pressing on Printer, copier industry betting on nascent Chinese market to expand

By Chen Limin (China Daily)
Updated: 2010-11-01 11:20

Various Hewlett-Packard printers are put on display at a Staples office supply store in Shanghai. [Wu Jun / For China Daily]

Printer, copier industry betting on nascent Chinese market to expand

SINGAPORE - A well-established market is a must-go for companies, but one not yet up to speed is also being favored by many. China's printer and copier industry is betting on managed print services (MPS), rather than traditional hardware sales, as the next big thing.

To increase their presence in the industry, major printer and copier makers are doubling their investment in MPS, a mainstay of outsourcing that frees users from choosing and buying machines and daily maintenance.

Vendors providing MPS manage the customers' office document production by offering the customers machines, designing a cost-efficient way of using them, and charging on a page-by-page basis.

"China is getting there (the wide adoption of MPS) but not fast enough, and this is where the opportunity is," said Pierre Mirlesse, vice-president of managed enterprise solutions at Hewlett-Packard Asia Pacific Pte Ltd (HP).

He added that the way for hardware makers to differentiate is to move from machine transactions to a service-led model, in which MPS is a key element.

According to HP, its MPS business registered a compound annual growth rate (CAGR) of 35 percent from 2006 to 2009 in the Asia-Pacific region, where China is the third-largest market.

The company, like many other printer and copier makers, wants to boost MPS revenues as competition in the printer market intensifies and the growth of China's printer industry slows over the second half.

According to research firm IDC, shipment of printers in China over the first half reached 5.8 million units, a year-on-year increase of 36.4 percent, because of the economic recovery. Yet the annual growth rate of the market is expected to be dragged down to 14.6 percent, as demand for printers tapered over the first half.

Though the MPS business is only just beginning in China, where selling services is less widely accepted by people than selling machines, it is forecast to grow rapidly in the years ahead.

China's MPS industry totaled $248 million last year, and it is expected to increase to $1.72 billion in 2014, with a CAGR of 47 percent, higher than the forecast 22 percent CAGR globally over the same period, figures from US-based research company Photizo Group show.

Market players, therefore, say they need to make a great effort to educate the market and expand their footprint.

Office equipment maker Ricoh China Co Ltd, which began its MPS business in the country in 2006, will adopt an aggressive market approach to boost shares.

"We have to move before the market, although it is still quite small at the moment," said Sam Sun, a senior sales manager in the business solution and service department at Ricoh China Co Ltd.

The company plans to double its direct sales force to 200 people in China by next year to strengthen its in-house MPS team in addition to offering the service via partnerships.

Ricoh China generated revenues of between 5 million yuan ($747,379) and 8 million yuan from its MPS business last year, according to Sun. Though the business recorded a 60 percent growth from 2008, it accounted for less than 1 percent of the company's total revenues in China, of which machine sales took up the majority.

The company hopes to increase the MPS business proportion to more than 10 percent by 2013. To achieve that it will reach out to customers such as State-owned enterprises (SOEs), which are a less-explored MPS segment, from this year on.

Chinese homegrown players are also stepping up efforts to cash in.

Beijing Lanxum Technology Co Ltd, the largest Chinese MPS provider, has established as many as 19 subsidiaries, with total investment of 180 million yuan, around China since October 2009, when it went public on China's Nasdaq-style second board, ChiNext.

"With foreign counterparts dominating the multinational corporation segment, our focus is on governments, SOEs, and public institutions, in which local MPS providers have better expertise," said Ma Liyang, vice-president of Lanxum.

The company currently has more than 100 customers for its MPS business, including some defense and military departments, courts, and major SOEs.

"We are not seeing yet a lot of MPS around the small and medium-sized enterprises or the governments in China, but it is one of the markets with greatest growth potential," said Edward Crowley, chief executive officer and founder of Photizo. He added that the main challenges in the MPS market lie in people's awareness of the benefits of the service.

China Daily