Add-on Software for MFPs:
Giving Printers the Intelligence They Deserve

From the beginning, printers functioned as computer "peripherals," as second-class citizens. At long last, with the emergence of ever more sophisticated add-on software, printers are becoming equal links in today's networked world. This means software is becoming ever more important, a window of opportunity at least for some sectors of our industry. So this month seems the right time for at least a quick overview.

Today we focus on software targeted at the mid-range (30-50 ppm) MFP. However, this is of interest to the whole industry on a number of levels:

I.T. Strategies has been recently focusing on the topic and I.T. Strategies Consultant Liz Ziepniewski recently has been deeply immersed in it. With that we open our discussion, looking at how several leading MFP vendors are structuring their software offerings and dealing with an imposing level of complexity.

Mark leads off, advising caution. "These guys now talking the most about software are stuck in the market somewhere and they saw software as a way out. But it hasn't really proven to be very simple; that's what's really going on here. Vendors in highly supplied markets are always looking for new things to do. Sometimes they come across good things, sometimes things not so good."

"We're not saying these software offerings are not so good, only that it's all in the very early stages," Liz suggests. "So it's received a lot of hype. We've researched three leading vendors, Canon, Xerox and Ricoh and find these vendors and others now partnering with a lot of software companies. The payoff is more and more functionality for their office market machines. One motivation is to differentiate their product. They also believe it helps them penetrate more vertical markets, such as the healthcare, government or the legal market."

Diverse Applications
Actually, networked MFP software addresses a variety of functions which can be grouped into five general areas, of which vertical market penetration is just one:

1. Administration-related to the host MFP such as cost accounting, bill-back software, routines that might tally color vs. mono prints, remote driver distribution, and the like;
2. Graphic Arts-for print production personnel, printing formats, variable data printing, brochures or books;
3. Document Management-the capability to store and retrieve documents anywhere on the network, scan a hardcopy document into the system, convert to text from a pdf, and store documents automatically into the network;
4. Print Function Enhancement-including functions such as scan to fax, scan to email, load balancing, and advanced finishing functionality;
5. Customization Software-specialized software tailored for specific groups or vertical markets such as hospitals, or to meet the needs of a specific user company.

The more or less open-ended functionality today's software brings to the networked MFP has been an incremental process over the past 20 years or more. Until recently, much of this activity was initiated by resellers or sophisticated users working with independent software vendors. In 1993 the MFPA (Multi-Function Products Association) was founded to sponsor and develop open standards to help users upgrade single function machines to multifunctionality.

"This activity first related to only specific verticals and the printer vendors were not paying much attention to it," Liz notes. "The energy would come, for example, from certain resellers who were very in touch with, say, the healthcare market, or the banking market…they would be taking third-party software and putting it together with the MFPs, creating solutions for those markets. This was how it went five years ago. Then, more recently, the MFP vendors realized this was a road to adding value, differentiating from competitors and possibly increased sales, so now we have them offering this kind of software themselves, developing it internally or working with third party software partners."

Partnering
Canon, who was said to have invested a lot in developing software, has now turned more to software partners, listing around 20 partners at this point. This over the past year or so has expanded, as the vendors took stock of the many opportunities and found they could best serve their customers by partnering with outside software developers.

Now, for example, looking at "output management and document accounting," Canon names Equitrac one of its Solution Allies. Equitrac offers a third generation document accounting program that lets users track each MFP in terms of volume of copies, printed pages, and fax activity, then allocate the costs to specific individuals, departments and groups.

Looking at the software offerings of three leading MFP vendors, each offers their own branded solutions, plus software from a growing list of partners. Some software partners, such as EFI, Computer Associates and SAP are large (>$350M), but many more are relatively small. Relationships between the partners and the printer vendor can take many forms. A few software companies are linked with multiple partners. Users may buy the software from the software partner, from the MFP reseller, or in some cases from the printer vendor. Either way it looks to be win-win for all of them. If sold by the software partner, there is less direct revenue for the printer vendor, but the potential for expanded functionality in theory will drive MFP demand.

"The key thing is to remember how many partners and solutions are out there," Liz continues. "The major motivations for the printer vendors are product differentiation and access to vertical markets rather than direct revenues from software sales. It's in its early stages, however, and looking at the big picture, we haven't seen significant successes. It's tough for anyone to track, but we estimate currently around nine percent of all mid-range MFPs sold have third party software installed today. Canon says that less than four percent of their products have customized software at this point, although it's only been promoted for a year or two. In any case, the volume is pretty small, obviously, compared with the standard drivers that come with the printers, and no doubt less than revenues from the printer vendors' own branded software."

MEAP/Java
Printer vendors are encouraging the development of third party software by making available versions of their programming platform, based on the well known Java platform. For example Canon has MEAP, its Java-based Multifunction Embedded Application Platform. This is said to allow any programmer the ability to "easily" design customized printer functions by writing to J2ME, the Java 2 MicroEdition by Sun Microsystems. It allows applications that until now could run only on an external PC to be embedded in the MFP.

Ricoh also uses this platform. Late last year they announced SDK/J, an addition to their "Embedded Software Architecture" and expansion of their developer program for both MFPs and laser printers. Other vendors, whether or not they use Java, generally do not use open platforms for either users or developers to access.

Canon's MEAP program is new, previewed last year at CeBIT and at the General Services Administration Expo. Its value is that it uses a standardized, well-known platform so that any programmer who knows J2ME can customize the interface and functionality of the networked MFP. The first commercial MEAP-based application was eCopy's ShareScan OP (Open Platform).

This product gives organizations open access to scanning from a MEAP-enabled Canon ImageRUNNER that connects to e-mail, fax, document management and other networked enterprise applications. An application such as ShareScan allows the ImageRUNNER user to manage multiple eCopy-enabled MEAP devices in one central location from the control panel of the MFP. This is said to set a standard that allows resellers to create unique applications for their own customers and licensing to others.

At this level, MEAP-equipped devices can interact, but there is no platform common to printers from different vendors. In this sense, these capabilities have good marketing cachet in that users continue to be locked into networked hardware from a single vendor. But within a given application area, this is slowly changing. For example, MicroPress, developed by T/R Systems (now EFI), is billed as a software product for prepress and workflow management that can talk with all "industry leading" black and white and color printers.

True, in that an MFP can scan and send the document to an overseas sales office or customer. But there is no way to assure that the receiving PC has software that will enable it to print out exactly the same format as the original scanned document. "That doesn't matter for you and me," Mark explains. "But it might matter for someone in engineering or the medical profession. They might want exactly the same form, or access to the same dynamic information to build that form. Through an MFP, you can not only print, you can also access data."

The customer can normally buy MFP software directly from the third party developer or from the printer vendor. In some cases the vendor offers these programs under their own name; in other cases they just refer customers to the third party software developer.

Canon Developers Pay
Can any user who knows Java programming plug custom programs into their own printer? "In theory it would be possible for printers to be customized out in the field," Liz says. "But in practical terms it is tightly controlled by the MFP vendor. In the case of Canon, its proprietary software developer support program is required. This requires a non-disclosure agreement, a specific license separate from Canon's existing developer support, and a fee-an upfront fee and annual renewal fees thereafter. Considering the cost, this will most often apply to resellers and third party software vendors rather than users."

Developer fees, however, are not the main hurdle slowing this market, Liz notes. "From the end user/or reseller's point of view, it's an extremely complex thing to understand. So I wonder if they are going to be able to sort through which solutions will work best for specific problems. Sometimes I wonder if even the vendors and the salespeople understand it. Right now it is very complex.

"Basically, it all comes back to the resellers in the case of Ricoh, Canon, and others, or direct sales in the case of Xerox. With resellers under tight pressure from shrinking margins, software sales and support offer a way to counteract their shrinking revenues. It's becoming a very price-competitive industry, with vendors lowering dealer/reseller margins. This is an opportunity for resellers to increase their profits by adding value. But because it is so complex, and because there are so many different solutions, resellers could either become a true value in terms of understanding and recommending solutions or they could be the primary barrier to software success. There are so many software solutions resellers, someone will need to buckle down and sort through the various software components. Those resellers who are successful will be those who do this, focusing in on a specific vertical industry. We're starting to see that happening today. Rather than focus on the general office scene, resellers are beginning to focus in on, say, the healthcare industry-they don't have the resources to serve every industry."

From the vendor's point of view, will these add-on software programs really make a difference?

If they can leverage good relations with the reseller, Liz feels, it could make a difference. If Xerox, with its direct sales, could take its people and really train them to know the specific verticals, and know these solutions really well, they could go into a customer and say 'I know your problems and here are our solutions that address them.' But this is a bit more complex when selling through resellers, as you have less control over the channel.

Know Your Customer
"This speaks to the wisdom of buying dealers," Mark posits. "It implies you can't do it yourself. To sell something like this successfully you really need to know what you're doing, and the further away you are from your customer, as you are going through independent dealers, the harder that will be. A lot of these vendors, Canon, Ricoh and others have bought dealers, so they now have direct access and are better able to compete with Xerox.

"Xerox has always been a direct sales organization. But now they are beginning to leverage the benefit of having that direct relationship with the customer, especially at that enterprise level. So in a sense, although the MFP may look like a fairly small scale piece of equipment, in fact the software knits together all the print and related functions inside the enterprise. It becomes a kind of decentralized enterprise sale, and that's a new phenomenon. Before you had an enterprise sale which consisted of primarily large copiers and you had dealer sales which were small printers. Now the software allows you to knit the smaller MFP machines together and potentially turn it into an enterprise sale through a direct relationship. In selling, the direct relationship brings you high volumes and greater customer awareness because you understand the customer better. You can sell value, not just price. These are the benefits that software could potentially bring."

Enough for now. Liz summarizes with some key take-aways.

The resellers will become more focused on specialized groups and will be upgrading their level of software expertise. More and more software will become available thanks in part to the open systems movement supported by Sun and others. This will be strengthening the position of the MFP within the enterprise network and offering at least the potential to drive growing MFP sales. Direct contact with users is essential due to the complexity of the offerings. Sales growth will be slow, blocked by too many products, too much complexity, so there remains a long education curve. We estimate that currently only around 2% of the worldwide installed base of mid-range MFPs have customized or packaged third party software.

It takes a highly sophisticated sell, Liz emphasizes, "The seller whether it be a reseller or a direct sales person needs to simplify the software solutions and complexity for the end users. To achieve that you need educated sales people, not the Wal-Mart type of approach." As a value sell rather than a pure price sell, today's software soup holds lessons for all of us.