By Paul Fridrich
I have seen the next disruption of the reprographics business, and it will be here soon. What is this disruption? The HP PageWide XL8000 Printer.
The XL8000 is the first high production wide format equipment that I know of designed to wipe out entirely the cost of production differences between black-and-white and color prints. The XL8000 produces 30 D/A1 size prints a minute and it doesn’t care how many colors of what density it prints. The speed is the same either way. HP informs us that the cost of acquisition, inks, and maintenance will be competitive with comparable equipment manufactured by other companies. For a chart comparing the specs of the XL8000 to other high production wide format equipment, click here.
How much more do you charge today for a color CAD print versus a monochrome print? Five times? Ten times? Whatever the multiple, it doesn’t take much imagination to realize that the XL8000 will threaten that practice. As soon as one of your competitors starts charging the same price for color as monochrome, your multiple is out the window.
My fellow reprographers, what are our options and how should we prepare ourselves in order to survive yet another technological disruptor to our revenues? Over the past eight years, all of us experienced drastic reductions of hard copy demand. Charging additional fees for digital services and premium prices for color prints partially offset some of those lost revenues. In order to generate additional revenues, most of us diversified our services away from the sole dependency on AEC markets. Those steps have kept us in business.
But the loss of the extra revenue from CAD color will hurt badly.
At the ERA/IRgA Convention in Atlanta two weeks ago we learned that our European members print more color CAD than we do. They reported that their mix of color versus black-and-white ranges from 35 percent to 50 percent color. Based on the recent survey conducted by Joel Salus, consultant to the reprographics industry, the average North American reprographer prints only 6.7 percent of CAD prints in color. You might think that European reprographers are in more danger to lose future revenues, but the spread between color and monochrome prices in Europe is much smaller than in North America. They charge about three times as much, while the North American practice is to charge at least six times more.
Do you think charging six times multiples for color prints is going to be a predominant practice a year from now? The following is my personal prediction: In less than two years it will be a common practice to charge the same price for monochrome and color CAD prints. No more counting how many prints were printed in color versus black image, no switching between equipment, no collating, no separate billing line items – all that will fade into history.
So the extra revenue we make from color will be gone, but all of the expense of running a modern reprographics business will remain. We all know that to produce a CAD print involves costly IT infrastructure, new equipment, and much more sophisticated and higher paid employees who make it all happen.
How do we face the challenge of vanishing color margins? Obviously, one option is to narrow the margin between color and monochrome by increasing the price of monochrome. If we’re charging a realistic price for monochrome, a smaller spread between color and monochrome is less of a problem. Of course, raising prices is not easy, especially in a competitive market, but it’s not impossible.
What we need to do is de-commoditize our product and start charging for the full value of our services. Two panel discussions at the convention touched on this. One discussed charging for the wide range of digital services – scanning, archiving, document management – that many of us already provide. The other discussed the advantages of charging for prints by the sheet rather than by the square foot.
So the answer is clear: We cannot continue running our businesses based on generating revenue from a commodity called a square foot of paper. Our services are more valuable than just paper! Ignoring that fact is a road to certain oblivion. We better pull our heads from sand and face the reality.
No association of any kind can suggest to its members how much to charge for products and services. We have anti-trust laws against such practices. This article is purely unfolding the issues you as a reprographer need to be aware of, because you need to decide on your own what the best strategy for your business is going to be. Therefore, I encourage you to use the comments portion following this and all articles published in IRgA Today. I am confident that an open exchange of ideas will contribute to better understanding of the challenges we must face in the upcoming months.