This Month's Spectrum Summary:

(The following is an excerpt from the December 2005 issue of Spectrum, a proprietary monthly briefing published exclusively for the clients of I.T. Strategies, Inc. © 2005)

2005 IN REVIEW
Subtle signs of an evolving industry;
Vendors work to cope with limits to growth

This month we sit down with I.T. Strategies consultant Marco Boer for his overview of this rapidly closing calendar year. We first talk about what he sees as the overall problem: that our industry, as presently defined, is experiencing very little growth. So, for companies to grow, they are faced with some hard choices. These include stealing share from competitors, converting copier users to MFPs, converting analog printing to digital, or developing new, perhaps non-print applications. Merger and acquisition activity this year is up a lot, with significantly higher premiums being paid.

2005 has seen significant technology advances, most notably breakthroughs in manufacturing technologies to lower unit costs-but only if volumes are high. There has been spectacular growth in UV-curables for the flatbeds. More significant is that it will yield the resources to expand applications. In laser printers, the major breakthrough has been greatly reduced pricing for color capable printers. Finally, expanded software has appeared, such as data mining to support more and more personalized promotional printing.

Creative pricing is seen as another way vendors have been responding to maturing markets. Among the tactics have been balloon payment plans, offering plans geared to the individual customer, minimizing up front cost in order to seed the installed base to build the supplies annuity.

Too much reliance on income from supplies, however, is seen as a problem, because installed base cannot be counted on to last forever in the face of ever shorter model lives, less brand value, and multiplying competitors. To get the most from their existing installed base, larger companies work to track models through product-specific cartridges so they can push the models that yield the most supplies revenues. But this year has seen more competing private label cartridges. One response could be for printer vendors to bypass retail distributors and sell direct.

Developing new applications bypasses a lot of these challenges. This year has seen expansion of plastic electronics and other non-print applications, but these have a long way to go before being widely commercialized.

2005, on the up side has seen significant gains in efficiency including ever more revenues per employee. Because the year has not been unprofitable, vendors have gained breathing room to respond to longer term planning issues. On the problem side, things continue to become more complex and accelerating decision windows. Cycle times are accelerating with low-end model life often down to six months in some cases. At the same time investment cycles remain long. This tension puts ever more pressure on decision-making. But in sum, it looks like 2005 will go down as not a bad year.