Photizo group mps white paper

Hidden Savings – A White Paper Photizo Group (C) 2009 All Rights Reserved Page 1

The printers, copiers, multifunction devices, and faxes which reside in most organizations represent the last bastion of uncontrolled corporate spending. These devices, collectively referred to as the hardcopy fleet, do not appear on a corporate expense sheet as a line item, nor do they typically appear as a key corporate asset on the company’s annual statement. However, the hardcopy fleet represents one of the single largest on-going expenses for most organizations (up to 3%1 of a company’s revenues), they provide the day-to-day transactional and information content that fuels the company’s revenues, and they represent one of the largest users of corporate energy. This white paper addresses the benefits companies can achieve from the implementation of a Managed Print Services engagement which ‘outsources’ the hardcopy fleet to an external vendor. The white paper utilizes research from a large number of assessments and surveys to provide an objective, quantitative evaluation of the opportunities.

HIDDEN ASSETS

REDUCING COST, IMPROVING PRODUCTIVITY, AND PROTECTING THE ENVIRONMENT. HOW TO ACCOMPLISH ALL

THREE WITH MANAGED PRINT SERVICES.


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INTRODUCTION Hardcopy devices (printer, faxes, copiers, and multifunction devices) are present in every department of every organization across the globe. These omnipresent devices print our memos, presentations, bills, invoices, spreadsheets, business cards, and every conceivable type of document. The widespread adoption of modern print, copy, and fax devices has been a tremendous boon to productivity by giving individuals the freedom to produce (and reproduce) the printed page with astonishing ease and thereby enhance the flow of communications within and across organizations. In fact, they have become an extension of the individual’s working environment and even an extension of their own ‘corporate persona.’ Gaining access to a personal printing device is not only convenient, but it also says something about the individual’s status within the organization hierarchy. Hardcopy capabilities can have a meaningful impact on an individual or a department’s potential output. For example, having access to color output allows the individual to enhance their communications and become a ‘printing press’ of one. Like any technology innovation, hardcopy fleets were embraced for their many advantages and have generally been allowed to grow without significant management or focus by the executive suite. Costs were perceived to be low and the benefits of these fleets were generally expected to far outweigh any costs. At the same time the performance and capabilities of individual hardcopy devices have been growing at an astonishing rate. Workgroup multifunction printers (or MFP’s) have speeds exceeding 50

pages per minute and can fax, copy, and scan documents in addition to performing the classic function of printing. As such, many devices are utilized at a mere fraction of their capability and spend much of their time in an idle mode. As a result of these dynamics, the hardcopy fleet has had a significant impact on the modern organization. This white paper will examine three aspects of the hardcopy fleet’s impact on the organization. The first aspect is the significant cost that can be associated with printing and imaging devices. The second aspect is the impact on productivity for the information technology (IT) organization which supports the hardcopy devices. The final aspect is the significant environmental impact of the fleet. By examining the facts behind hardcopy fleet cost, productivity, and environmental impact, our intention is to provide executives with the insights they need to make informed decisions regarding this significant investment. The white paper will also address how utilizing an outsourcing strategy (commonly called Managed Print Services) can positively impact the cost, efficiency, and productivity of the fleet and of your overall organization.

PHOTIZO FACTS: The average cost of a hardcopy fleet for a firm with 750 employees is over $700,000 per year. This fleet will require over 3,700 hours of IT support. The fleet will use over 33,000 kWh of electricity and generate over 189,000 pounds of carbon (CO2) emissions. (This is equivalent to the total CO2 output for 16 cars – for an entire year!)2

“I never imagined the passion individuals would show towards their printers… until I tried to take them away.” CIO of a Fortune 500 Company3


THE HIDDEN COST OF HARDCOPY Today there are over 100 million printing devices installed in business, education, and government organizations worldwide. Take a minute to look around your office. In most cases, you can identify several hardcopy devices within just a few yards of your desk. These devices have become ubiquitous. At the same time, the cost of maintaining these devices, keeping them supplied with toner, providing staffing to answer questions about drivers and other issues, and supplying the energy to operate the devices has become an increasing and undetected drain on the organization’s bottom line. According to industry research firms, the cost of purchasing, maintaining, and operating these devices has been identified as representing up to 3% of the typical organizations revenues. This is almost as large as the typical organization’s research and development budget! However, most executives have little insight into the significant impact these devices have on their organization’s bottom line. Profit and loss statements don’t have a line item for ‘hardcopy.’ Balance sheets do not list printers, copiers, multifunction devices, and faxes as assets. Instead, hardcopy devices are often purchased on an individual basis. There may be an IT ‘approved device’ list, or some other standard, however in most cases hardcopy device acquisition and operations take place

at the department level, with supplies being ordered by the administrative assistant out of an office supplies catalog. As a result, the true cost of operating the fleet is hidden, and largely forgotten.

Drivers of Hardcopy Cost There are four primary drivers of hardcopy cost: having too many devices, deploying the devices in an inefficient manner, supplies mismanagement, and sub-optimized service. Too Many Devices: Perhaps the largest driver of hardcopy cost today is having too many devices. Based upon a study of 105 organizations in North America, there was an average of two employees for each hardcopy device. In most cases, this represents a significant over-distribution of devices and as a result, significant underutilization of individual printers. Typical network printing devices today are capable of supporting upwards of five to ten users each. Deploying Devices in an Inefficient Manner: Another significant driver of cost is deploying devices that are light-duty which are being used too heavily, or heavy-duty printers which are not being used enough. A classic situation is a large group of users printing volumes of documents to a small local, high cost per page, networked printer, while the higher performance / low cost per page MFP device down the hallway sits idle. The price variance between these classes of devices can be as much as 2 cents per page. This doesn’t sound like much until you realize that many organizations are printing millions of pages per month, and at 2 cents per page, equates to hundreds of thousands of dollars in operating cost. Suboptimal Service: Unlike many other IT infrastructure devices, such as servers, hardcopy devices are not purely electronic. They are electro-mechanical, with literally thousands of moving parts. Even though extremely reliable, they occasionally require service and repair. Many organizations simply call local vendors or they subscribe to extended warranty/repair contracts which can be expensive, in order to obtain service for devices when they fail. A compounding problem is many organizations have too many devices, resulting in excessive service costs for the entire fleet.


Supplies Mismanagement: The responsibility for supplies ordering often falls to the administrative assistant closest to the hardcopy device. Lacking proper technical training, they are prone to order the incorrect supplies. Too many uncontrolled departments purchasing and stocking supplies have resulted in closet ‘landfills’ containing toner cartridges which are not actually empty, or have been ordered for the wrong printer. While this may seem inconsequential at the department level, it can represent a significant expense at the corporate level.

AN EXPENSIVE PROPOSITION The net effect of these cost drivers is significant. By cost, we mean actual hard cash outlays, not ‘soft expenses.’ As the following table shows, annual costs for a company as small as 200 employees can be almost $100,000, and for large organizations can reach millions per year. Again, since these costs are highly distributed throughout the organization and typically buried in departmental budgets, few organizations know the true cost of their hard copy fleet.

IT PRODUCTIVITY CHALLENGE Supporting hardcopy device fleets represents one of the most significant challenges for IT support organizations. In fact, typically more than 10% of IT’s time is spent supporting printers. The larger the fleet, the greater the amount of time spent supporting fleets. In today’s environment, most IT organizations are being challenged to bring enterprise-wide systems on-line which will result in business process improvements and productivity gains. Taking time away from this mission-critical task to support hardcopy fleets is frustrating, and frankly, a suboptimal use of a scarce and valuable resource.

"Typical" Cost Company Size

Hardcopy

Devices

Annual Device

Cost

Small 199 90 93,213

Medium 749 340 350,838

Large 2,499 1,136 1,170,554

Global 9,999 4,545 4,683,623

Photizo Group Analysis Using Primary Interviews and MPS Assessment Data

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4,000

6,000

8,000

10,000

12,000

14,000

0 500 1,000 1,500 2,000 2,500 3,000

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Annual Hours Spent Supporting Print Devices

Hours Spent Supporting Printers

As the chart above indicates, for large organizations, hardcopy fleet support can require literally thousands of hours of IT support on an annual basis. Even for a small organization, it can be a burdensome task.

THE GREEN FACTOR Increasingly, organizations are under scrutiny to enact practices which are environmentally friendly. Little thought is given to the hardcopy fleet, which actually has a significant environmental impact. As the following graph shows, the impact of the fleet is directly proportional to the size. In most organizations, there are two to three times the numbers of devices versus the minimum requirements. As a result, electrical usage and carbon dioxide (CO2) emissions grow dramatically as the size of the company grows.2

“My company is a small bank with 200 employees and seven locations in seven different towns. Our IT department consists of three people including myself. We handle telephones, networking, desktop devices, and printers / copiers. Frankly, we just didn’t have time for printer support, but at the same time, they were critical to running our bank.” IT Manager for a Small Bank3


Photizo Group Analysis of 105 Organizations representing over 187,000 devices

Analysis of 105 Accounts: Typical

Savings• $1M in cost

• 30% of total cost

• Devices reduced by 60%Optimized

Service

Intelligent Deployment

Device Consolidation

Supplies Optimization

Cost Savings: The Facts

Source: Photizo Group Analysis, Printer Operations Group

MANAGED PRINT SERVICES

Controlling and Optimizing the Hardcopy Fleet in Order to Enhance the Firm’s Business Processes There is an answer to the hardcopy fleet challenge. The answer is Managed Print Services (MPS). This is the term used to describe outsourcing all (or a significant component) of the hardcopy fleet management. There are three essential components to any MPS engagement.

The first component is planning. This planning should address setting objectives, obtaining top management buy-in for these objectives, and identifying the goals which will measure the level of objective attainment.

The second component is to assess your

firm’s existing position by rigorously auditing your firm’s current status and to select a vendor who can meet your firm’s unique requirements.

The third component is implementation of

the outsourcing strategy including the on-going vendor management and gap analysis to ensure the program stays on track.

By implementing an MPS program, organizations are finding that they can reduce costs by an average of 30%, free up scare IT resources, and reduce their hardcopy fleets environmental impact by up to 60%.2

ADVANTAGES OF MPS As firms strive to outsource non-core areas and focus on core competencies, the hardcopy fleet becomes a logical choice for outsourcing in the form of an MPS engagement. By utilizing an external resource that specializes in optimizing hardcopy fleets, a firm can free up critical resources to focus on those tasks which represent truly mission-critical activities, and leverage expertise, instead of trying to manage the program internally, saving hours of frustration and mistakes.

Quantifying the Benefit So just how significant is the benefit? The Photizo Group has analyzed data from over 100 MPS engagements in order to understand the full impact of MPS on an organization’s cost structure. The results

THE ACID TEST Is your fleet under control? Ask yourself these three simple questions:

1. Can you state, with confidence, exactly how many hardcopy devices you have in your organization and how much it costs to operate these devices?

2. Do you know how much time your IT organization spends supporting your hardcopy fleet?

3. Have you measured the environmental impact of your firm’s hardcopy fleet?

If you can answer these questions, do you know how you compare to the rest of the industry?

were dramatic. As the following graphic shows, the average savings were $1M in cost, or 30% of the total hardcopy fleet costs. Firms were able to reduce the number of devices dramatically reducing IT support requirements and the fleet’s environmental impact by up to 60%. The MPS engagement will leverage all four key cost drivers: device consolidation, intelligent deployment, optimized service, and supplies optimization in order to achieve significant savings for your organization.


1STAGE

FIRST ENGAGEMENT

2STAGE

SECOND ENGAGEMENT

Financing

Equipment

Assessment

Customer Objective:

Control the Fleet

On-Site Support

Asset Management

Customer Objective:

Optimize the Fleet

Document Mgmt

Consulting

Industry Expertise

Customer Objective:

Enhance

© 2008 Photizo Group, LLC

3

THIRD ENGAGEMENT

STAGEMPS Customer Adoption Process

A Key Metric In analyzing the benefits provided by MPS engagements, one of the key metrics to use is to examine the employee per device ratio. This ratio identifies, in a very rudimentary way, how effective your organization is at distributing the fleet and is often the foundation of significant savings through device consolidation (i.e. replacing a fax, copier, and printer with a single multifunction device capable of all three functions).

"Typical" Cost Company Size

Hardcopy

Devices

Annual Device

Cost

Typical

SavingsSmall 199 90 93,213 27,964

Medium 749 340 350,838 105,252

Large 2,499 1,136 1,170,554 351,166

Global 9,999 4,545 4,683,623 1,405,087

As the chart above shows, prior to implementing an MPS engagement, most firms have a ratio of 2.2 employees per hardcopy device. However, once an MPS engagement has taken place, firms are averaging almost six employees per hardcopy device, clearly a dramatic improvement. In turn, as organizations implement an MPS program and reduce the number of devices, they achieve significant savings from reduced maintenance and support fees (which are typically bundled with the MPS engagement). They also reduce their carbon footprint in direct proportion to their hardcopy fleet reduction effort. As the following table shows, this savings can reach into millions of dollars.

Additional Benefits In addition to dramatically reducing costs by rationalizing the fleet, an MPS engagement can set the stage for significant improvements in both regulatory compliance and business process improvements. As the diagram above shows, organizations typically go through three stages of MPS adoption. At each stage, organizations will engage in the three basic activities with the vendor: planning, assessing, and implementation. As the diagram indicates, it is important to ensure that your vendor is able to meet the requirements for that stage. The first two stages focus primarily on cost and productivity savings in addition to achieving environmental benefits. The third stage is the point at which most organizations can begin to achieve significant business process enhancements. The Photizo Group has surveyed over 700 MPS engagements in North America and Western Europe. In this survey the respondents validated that the top benefits of MPS engagements were related to cost reduction and productivity improvements. This is shown in the graph on the following page.


0% 10% 20% 30% 40% 50%

Lower printing cost

Reducing maintenance cost

Reduce staff time related to imaging devices

Improve the level of support to end users

Introduce new imaging or workflow

Improve security

Reducing the number of imaging devices

Avoid adding more devices

Focus on other business priorities

Mitigate risk

Other

2008 MPS Decision Maker Tracking Study™ – Purchase Report What Are The Key Benefits Obtained from the MPS Program?4

The second requirement for the vendor is to ensure they have the ‘geographic scope’ to match your requirements. If you require a global MPS program, but you are looking at vendors with only local coverage, the vendor must be able to form partnerships and alliances to deliver a global program or your program will fall short of its goals. In addition, it is critical to understand the vendor’s depth in terms of the number of services they offer. A ‘one size fits all’ program may not be right for your specific needs and requirements. If you have unique requirements can the vendor deliver? Have they shown this ability in the past? An MPS engagement is an IT outsourcing engagement. As such, it is critical that your vendor understands that delivering hardware, maintenance / service, supplies, and supplies monitoring is only part of the solution. They must also be able to deliver advanced services such as end user training, help desk, deployment planning, and advanced deployment support such as customer end-user ‘hotlines’. The vendor’s willingness to partner and support your requirements is critical. Are they willing to work with your existing fleet in order to provide you a seamless transition path to your stated objectives? Does the vendor have a ‘win-win’ approach or is their objective simply to sell more hardware? Finally, after the vendor has built and implemented the solution, what next? There should be ongoing follow up to ensure your goals are being met in your dynamic and changing environment.

WHAT’S NEXT? Our goal in this white paper has been to provide you with the facts you need to consider your organization’s hardcopy fleet status, and whether Managed Print Services may be a solution for your organization. Clearly there are many considerations as you move forward. However, if your firm has not implemented a hardcopy fleet strategy, you are probably missing out on significant cost, productivity, and environmental benefits. There are many resources available for further reference and to assist you in your analysis of your next steps. We have included several of these resources in the appendix of this white paper.

Hidden Savings – A White Paper 8 egaP devreseR sthgiR llA 9002 )C( puorG ozitohP

THE WHITE PAPER SPONSOR Ricoh Americas Corporation sponsored this white paper. Ricoh is a leading provider of Managed Print Services globally.

Managed Print Services (MPS), the foundation of Ricoh’s Managed Document Services (MDS), is a powerful way to streamline your organizations document management environment. MDS enables CONTROL of output-related costs and assets, OPTIMIZES the fleet and ENHANCES your company’s document management environment. Through on-site and off-site services we improve workflow, productivity and the end-user experience.

THE PHOTIZO GROUP The Photizo Group is the leading strategic resource for corporate decision makers, resellers, and vendors who need to understand the Managed Print Services market. The firm is the thought leader in MPS and is the leading provider of MPS market research and consulting to the technology industry. The Photizo Group conducts on-going studies into the adoption of MPS, key decision maker requirements, key market trends, best practices, and distribution channel trends. The firm hosts the MPS Conference series and publishes a quarterly journal (MPS Insights Journal) covering the industry. This report was developed by the Photizo Group team which included Ed Crowley (Sr. Partner), Mike Huster (Sr. Partner), Rob Sethre (Sr. Consultant), and Scott Hornbuckle (Market Analyst).

Photizo Group 209 N. Main, Suite H. Versailles, KY 40383 Phone: (859) 873-4518 Email: [email protected] WEB: http://www.managed-print-services.com

Ricoh Americas Corporation Fay Latimer

Services Marketing Manager Strategic Marketing Office: (973) 882-2046


APPENDIX I – ADDITIONAL RESOURCES Ricoh Corporation: http://www.ricoh.com Photizo Group: http://www.managed-print-services.com

APPENDIX II - RESOURCES USED IN DEVELOPING THIS REPORT 2008 MPS Purchase Decision Maker Study™ is an on-going survey of over 700 decision makers in North America and Western Europe. This study tracks decision makers and brand dynamics. Survey of 105 MPS implementations in North America, which include over 187,000 devices. The Photizo Group has conducted over 50 in-depth one-on-one interviews with organizations who have implemented MPS in order to define key issues facing these organizations. Environmentally Friendly Hard Copy: The Environmental Impact of Managed Print Services – A White Paper by the Photizo Group.

APPENDIX III - ENDNOTES 1 Research firms IDC and Gartner estimate document production and distribution costs can be equal

to up to 10% of a firm's revenue. The Photizo Group estimates this number to be close to 3%. 2 Environmentally Friendly Hard Copy: The Environmental Impact of Managed Print Services – A

White Paper by the Photizo Group. 3 Interviews with MPS decision makers and channel members conducted by the Photizo Group. 4 2008 MPS Decision Maker Tracking Study™ - Purchase Report, Q1-Q3 2008

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