This Month's Spectrum Summary:

(The following is an excerpt from the August 2008 issue of Spectrum, a proprietary monthly briefing published exclusively for the clients of I.T. Strategies, Inc. © 2008)

After the New Wears Off
The Post-Sale Conundrum

New digital presses are masterpieces of complex engineering that have specific care and feeding requirements if they are to live up to the hopes and expectations of owners. Manufacturers must support the machines in a manner that ensures they will deliver the performance-and profits-required to provide the necessary return on investment. This is growing more complicated as the relationships between vendors evolve, more new equipment is rolled out, and market demand shifts to take advantage of new technologies.

"Equipment manufacturers are focused on developing new products and rushing them to market," explains Marco Boer. "They see the wave is cresting and, like surfers trying to catch the big wave of the day, don't want to miss the opportunity for a great ride."

There will still be room for firms whose products come out later, but market recognition will go to the companies with products in the market today. And because no vendor can possibly develop products for every market, partnering and OEM agreements are becoming commonplace. For instance, Kodak's NexPress is sold by Ricoh, but Kodak also sells two presses made by Canon. Ricoh InfoPrint gets its InfoPrint 5000 ink jet printer from Dainippon Screen (the TruePress 520), but also competes with Screen in bringing the device to market. Océ and Konica Minolta sell a couple of each other's printers and even compete for customers. Meanwhile, Xerox, Agfa and Océ are selling Mutoh large format ink jet devices, and Océ is selling HP large format systems in Europe.

In the bigger picture, though, the story is really about what happens after the sale, which is why post-sale support is a key element in equipment purchase decisions. The big companies commonly handle everything from the moment a call comes in to dispatching service technicians to performing post-mortems on failed parts to find ways of improving the parts and the product. They also provide a wide range of technical and application support services.

Smaller companies with narrower capabilities are still able to deliver the service and support customers require and can often develop closer relationships with their customers. Some OEM arrangements can actually help mitigate this. For example, a company without the market or service reach to sell its systems as widely as it would like can partner with a larger firm that has the reach and support required. The larger firm benefits from having a product to sell without a major investment in research and development, and can apply its go-to-market strengths to roll out the device. The smaller firm has already done the R&D and can ramp up manufacturing to meet demand and backstop the bigger firm for support. This is especially effective when a larger firm wants to address a market that is fragmented or specialized.

Such arrangements work well in developing markets. Here again, larger companies have effectively financed other companies' products or helped bring them to market. They get a financial return, and there is always the potential for doing more business. The smaller firms don't get quite as big a piece of the total business as they would like, but they are still able to enter a market and extend their global reach.

This all ties into another element, which is something of a wild card. "Smaller companies with innovative products are increasingly absorbed by large companies, often retaining their original branding," notes Marco. "This tends to improve distribution and service and grow that brand even more. This eventually spawns more start-ups, and the circle of life continues. All we can say for sure is that it's going to keep changing."