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PurchasingB2B

Pitfalls and pointers on print

When it comes to printers and related services, an RFP means greater savings


November 14, 2016
by Phil Downe
Phil Downe is an IT negotiations contractor and president of Relations Management Group Inc. based in Toronto. he can be reached at 416-920-2228 or Phil.Downe@ITnegotiations.com

Phil Downe is an IT negotiations contractor and president of Relations Management Goup Inc. based in Toronto. he can be reached at 416-920-2228 or Phil.Downe@ITnegotiations.com

From the October 2016 print edition

Ask any print vendor how they’ll help you lower your print costs and they will try to sell you some type of smart-print technology with a panoply of print management features called managed print services. It would be refreshing to hear the salesperson say, buy fewer devices, get them cheap, get the lowest possible cost per page (CPP) and print less.

With sales commissions at risk that’s not going to happen any time soon. The rhetoric will continue but basic print technology advances have plateaued and are now at a commodity level with historically low profit margins. There also isn’t much room to improve on the CPP service models so I expect you’ll be hearing a lot more about MPS going forward.

The amount of printing that still goes on in this, the ‘digital age’, its impact on the environment and its associated costs are high. With the exception of companies in the high-volume print business, newspapers, publishing and so on, it’s been suggested that others spend from three percent to eight percent of their total IT budget on printing.

To cut costs you must be ready to go to tender and change vendors if necessary. Two things I can attest to are that competitive RFP strategies produce the greatest savings and no amount of unleveraged bargaining with an incumbent will come close to fair market value pricing when trying to renew your initial print deal.

If you’re in the market for a printer fleet up-grade or a service agreement re-negotiation then a little up-front work in creating an effective, well-timed RFP will pay big dividends. No surprise to anyone, but if you want the best deal be prepared to negotiate several issues simultaneously. It’s also amazing how big the discounts get on combined hardware, features and service deals when the volume gets into the three and four-digit range.

Pricing models
Print vendors promote their software and steer away from the simple device sale combined with a CPP to cover the services. That dynamic just isn’t profitable anymore so their focus will be on recurring software license revenue combined with constant upselling and imperceptible constant CPP increments for every imaginable deviation of product mix, impression volumes and feature additions.

The other problems I can see developing, and there’s more than these, but what happens to CPP pricing when the initial device warranty expires or one department requires newer, faster or more functional devices? Does the cost of every impression increase? The seller is always going to try and increase revenue and I don’t fault them but it has to be proportionate, fair and completely transparent.

Split charges
I prefer the simplicity and flexibility of a two price-point model; an associated charge for a specific device, plus a CPP charge for the services. The first charge, (either the purchase price or a monthly lease charge) gives the buyer complete flexibility on hardware selection and the second charge, related to the actual usage, covers all the consumables and services. The CPP charges may vary depending on the device type, monochrome, color, MFD, wide-format and so on.

Your alternatives may depend on whether you prefer CAPEX or OPEX for this type of expenditure. Both have their implications for the balance sheet, KPIs and taxes. Leasing just adds a benefit at the end of the term when you can return the device and get an updated replacement with a new warranty. Whether you RFP it at that time or not is up to you.

I prefer lease terms that coincide with the end of the hardware warranty period. These are typically 36 months but like everything else, it’s negotiable. There’s a two-fold advantage, first the CPP charges don’t increase to cover the additional parts & service after the warranty expires and second, the end user gets a newer device with an even lower CPP and the customer satisfaction scores tend to stay high.

You’ll want to keep your leasing options flexible especially at the end of the term to facilitate returns and replacements. Leasing works great for the lessee when you return the equipment at the end of the lease and it works out great for the lessor when you extend the lease or buy it out. Do the former and “ever-green” the fleet.

New equipment will be required periodically but please don’t be overly concerned about non-coterminous leases. Odd or shorter lease terms tend to cost more. Treat each device as if it’s on a separate lease so even if you add devices well into the initial term just make sure you have your residual values and competitive lease rate benchmarked, and add the new equipment to the fleet for a similar term. Even if you change vendors and service providers in the future, they are all quite adept at maintaining one another’s equipment until it eventually gets replaced.

The print RFP
The hardest part of the RFP process is defining your needs to the prospective vendors. It all depends on how mature an asset management process you have but you need to produce data on what you have, where it’s located, what it does, how much it does, (print, scan, fax, copy, staple) and that will enable the vendors to propose comparable, ideal replacements.

The needs analysis can get as complicated as you really want to make it. You can get into detailed floor plans and count the volumes per device function per department and even create rules to cut down on the number of devices, like acceptable distances for employees to walk to pick up a print job.

I don’t think you have to over analyze it. You can probably poll network-connected devices to get a print count on most within your organization. Those who do so should be able to tell what has been underutilized, where upgrades are required and where additional features would add to employee productivity. The good news is if you do get it wrong it’s an easy fix—just move the device to a more efficient location or add another.

Replacement device selection isn’t all that complicated either. Recently a client with over 60 different printer and MFD (multi-functional device) models replaced them all with just four standard devices. Just pick some standards for each device and set the minimum specifications, split them into bronze, silver, gold and platinum categories with the minimum specifications for each and have the vendors bid the net lease charges. Ask for all the hardware pricing details, list price, discount percentage, net price and volume clip levels. Transparency means everyone can calculate it. Set the mandatory specifications and then allow for every possible feature with the optional, additional monthly lease charges for each.

The CPP price point, several in fact depending on the device, covers the cost of all consumables and services. Depending on your company size and needs you can work in other recurring charges that can be quoted separately. These might include full or part-time vendor personnel to perform the services and one-time charges for additional implementation tasks like assessments, installation, training and “wiping” or destroying internal hard drives and disposal of or packaging and returning replaced equipment.

Print costs, like all technology costs, come down and although it’s not always easy to find time to test the market every three or four years there are significant savings for those who do. A final suggestion is be aware of minimum monthly print volumes or minimum contract value terms. Customers who have adopted a departmental charge-back system, combined with a digital storage philosophy and increased end-user environmental awareness have reported significant reductions in print costs. It would be a shame to continue paying for printing that isn’t taking place when the other benefits of reducing print are so significant.

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