Managed Print Services: Document Solution or Cash Cow?

Managed Print Services (MPS) is becoming mainstream. Ever since a large IT research organization published a "study" a few years ago in which it estimated that organizations spend 1 percent to 3 percent of total revenue on printing, an entire sub-industry has evolved to tap into this market. The researcher called it a "gold mine" but failed to address the fundamental issue: Is 1 percent to 3 percent too high, too low or just right?

Effective decision making, especially in the printing, mail and document management arenas, must be data driven. A large part of the decision to buy or lease a particular piece of equipment, or an MFD fleet, needs to be based on quantitative analysis—on numbers. Historical volume at each location, numbers of copies per unit of time, percent of capacity used, average run length and average cost per copy are meaningful metrics that have value in understanding the cost effectiveness of digital equipment operations.

In my experience, organizations may have good data on the devices in the production (copy) centers but they usually have limited data on use factors of distributed copiers and multi-function devices and even less on desktop (single user) inkjet and toner-based printers. I've worked on close to 100 projects involving document management systems, and few organizations know the location of all of the non-production marking engines, let alone their costs and production volumes. In the absence of relevant data on existing equipment, how can management make an informed decision on replacing it?

Enter the MPS Vendors.

Rather than address the validity of the "research," copier/MFD vendors, office supply companies and some customers embraced it as legitimate and built sales strategies on the assumption that it was correct. At this point I'm not speaking of a single company. Indeed, many copier/MFD representatives understand our situation and are happy to provide worthwhile support—support focused on a common goal and recognizing the in-plant managers' role as the organization's document expert. Said differently, they understand and are happy to take on the role of "partner."

Rather, I am referring to companies that present themselves as document experts but, in reality, make decisions focused on sales and profits. These are the guys that view distributed printer and MFD fleets as cash cows. They argue to your bosses that printing is not one of your organization's core strengths and the organization should "partner" with the vendor. Statements like "We can cut your copier costs by 25 percent," or "Printing is not your core business function," or "Let us do an analysis of your current system" should be a red flag of caution to print/document managers.

I am also referring to the companies that bypass the organization's print/document management and procurement professionals and call directly on upper management. These folks paint pictures of savings that (1) management can't ignore and (2) cast aspersions on the competence of the organization's print/document manager for not coming up with the plan on her/his own.

The Surprise MPS Proposal

A practice currently trending is to include MPS proposals in responses to organizational procurement requests. In this model the customer organization prepares a Request for Proposal (RFP) that includes a more or less complete picture of current document production capabilities. The RFP may include production equipment in the copy/print center, but it will most likely not include desktop laser and inkjet devices. The vendor's response includes an MPS proposal that promises to do a complete analysis of the existing fleet environment, including desktop devices, and recommend ways to optimize investment in this type of equipment.

One problem with this approach is that it is based on criteria that may or may not be accurate. For example, one of the most frequently used arguments for moving prints from desktop devices to centralized toner-based MFDs is cost. The per-copy cost of desktop equipment frequently used by MPS vendors to justify the elimination of desktop printers is in the $0.10 to $0.25 per copy range for black prints. MFD costs per copy are much lower. The cost per copy for a fleet of multiple MFDs in my experience is in the $0.02 to $0.03 range. Clearly, moving 25¢ prints to 3¢ prints makes sense. Or does it?

The Cost Conundrum

As I've stated numerous times, organizations often don't understand their costs per copy for desktop and fleet inkjet and laser devices because tracking the operating costs of these devices is complicated and yields little immediate value. Users aren't concerned about whether a print costs 3¢ or 30¢; they care about whether the device was conveniently located and whether it produced pages quickly and at appropriate levels of quality.

Furthermore, cost data may be difficult to identify. The nature of many accounting systems and the growing use of procurement cards often hide the true nature of individual expense items. Is a toner cartridge classified as a printing expense, an office supply, a repair or something else? And many P-card purchases are broadly categorized as "Office Expenses" with little attempt to categorize their actual use. It's no wonder that customer organizations are attracted by vendor claims of being able to make sense of the available data.

The problem is, if the customer organization has not designed a cost system to track specific and relevant data elements, the likelihood of a vendor being able to extract relevant cost data is low as well. Some vendors counter this by claiming to have access to extensive use data from similar equipment in similar organizations. The argument seems to be that your use should be similar to that of others using identical equipment.

Exactly 500 Copies per Month

I once worked on a project in which the vendor performed a copier/MFD analysis for a fairly large university. The vendor was to use actual data, but if, for any reason, use data was unavailable, the vendor was to substitute volume information from its database of similar machines. The analysis showed that roughly 25 percent of devices included in the analysis made exactly 500 copies per month, and another 15 percent made exactly 1,420 copies per month. The likelihood of 40 percent of the machines in an analysis matching volumes is somewhere between slim and none, and yet the vendor was totally comfortable submitting the report as part of a justification to use its MPS solution.

The Benefit of Good Data

On the other hand, when actual data is available, the results can be illuminating. I worked with another large university where the procurement director was also responsible for the copier and desktop fleet, and she had accurate data going back a couple of years. In that case we were able to show that the actual cost per copy for the monochrome desktop laser and inkjet printers, including three-year depreciation and all service and consumables, ranged from a low of $0.018 to a high of $0.040. The average cost per copy was approximately $0.035. Clearly, in many cases it makes sense to use the desktop printer.

Moreover, giving a vendor carte blanche to optimize a fleet based on her/his professional experience may not make much sense either. I am presently working on a project where the vendor appears to have over-sized each machine to the extent that the minimum capacity of the fleet (based on totaling the minimum recommended volume for each installed MFD) is 2.5 million pages-per-month—but the aggregate monthly historical volume is 350,000.

Experience Trumps Usage Data?

When challenged, the vendor fell back on his 20 years of experience, claimed that he was putting the customer's need for fast production ahead of "published guidelines" and that he recommended 65-cpm machines for installations with historical volumes of 10,000 copies per month or more. However, an analysis of historical use showed that 95 percent of the machines in place made fewer than 10,000 copies per month and about half made fewer than 5,000 copies per month. More than half of the installed machines fall into the 65-cpm category. This is not unusual in MPS agreements and appears to be a case of the vendor putting sales and profit ahead of meeting customer needs.

This begs the question: Is MPS the solution, or is it a problem to be avoided? Is a vendor analysis something to be trusted, or is it a Trojan Horse to facilitate vendor entry into the records of the customer? It would be irresponsible for me to generalize about all MPS vendors and/or their actions based on the few that I have personally seen.

But I have seen enough to feel comfortable recommending caution when an MPS proposal suddenly pops up in an unexpected place. Device vendors are facing more bottom-line pressure, and in-plants are an attractive target. As managers we must learn to think critically about unsolicited offers, especially when they claim huge savings.