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Ten years ago peripheral devices were "just an output device". True to their name, they remained in the periphery of things and found it difficult to break into the perimeter of its bigger cousins like software, and storage. Well, that step-motherly treatment is now history, going by the peripherals market during FY 2004-05. According to an IDC Global report on peripheral devices, "Just as enterprises spend much time studying, optimizing, and managing many elements of their IT infrastructure like network bandwidth, servers etc, they have begun to pay similar attention to their imaging, printing and document distribution environments. After years of inattention and lack of coordinated management, the imaging and output infrastructure in most enterprises are now fraught with high costs. These include the high cost of maintenance, expensive spare parts, and supplies associated with aged models and employee productivity costs due to frequent device downtime and inefficient document workflows."

This in a way sums up the evolution of peripheral devices, such as printers, over the years and the critical dimensions they have achieved in the last two years. Most of the trends the industry has been talking about in the past has in fact become a reality. For one, the all-in-ones (AIO) or MFD market saw good escalation in the print value chain. Similarly, on a much lower scale though, digital cameras, with their falling prices, pumped the photo inkjet category volumes and kick-started a trend-shoot and print. In all, FY 2004-05 saw the peripherals market further entrenching itself firmly in the IT hardware space.

DMPs: Going Strong
The Dot Matrix Printers (DMP), a niche category in the printer space, is dominated by vendors like TVS Electronics, WeP Peripherals, and Epson. All of them had another good year. At the higher end of the spectrum is Lipi. DMP printer products over the years have developed and manifested themselves in different products. For instance, apart from the conventional DMPs today, one can find their applications in point of sale counters, passbook printing in banks, etc. While in the West DMP has faded in favor of inkjets and lasers, the Indian market is showing continued traction for the DMP products. The biggest driver that kept the DMP market going year after year was the issue of TCO and costs in running the printers. In both these parameters, DMPs consistently score higher against non-impact printers. As an industry expert puts it, "Choosing a printer is not simply a matter of picking the first available machine and forgetting about it. It is important to select one that will provide the optimum, most cost-effective service over its lifespan, significantly reducing printing costs and the amount of user intervention required to keep it running."

The key verticals that drove the DMP numbers during FY 2004-05 were banking, government, and retail. Industry experts said that for printing transaction-related documents like bills, receipts and invoices, dot matrix printers found many takers during the year.

A closer look at the vendors shows the dominance of Chennai-based TVSE, seeing good growth for its DMP products, which contributed Rs 188 crore. The company attributes the growth to its three-pronged strategy adopted over the years: emphasis on high quality printers and consumables, low running cost of consumables, and quick, efficient and wide support network. Product ruggedness is also one major USP for TVSE printers.

At the other end of the competition is WeP, which also has a slew of products in the DMP space. WeP continues to dominate in the 24-pin DMP segment and during the year it pitched hard its LQ DSI range, which the company claims is the only Unicode ready printer. Meanwhile, it also witnessed good growth in the 80-column category with its LX 800 DX offerings. Epson also saw good movement of its impact offerings. During FY 2004-05 Epson decided to change its focus from a volume to value strategy. The company says the value is not just for the company but for its business partners and customers as well. This move paid rich dividends as Epson saw its turnover and profitability increase substantially, as did its service levels and dealer loyalty. Epson was number three in DMPs less than two years ago and, interestingly, held on to the first and second positions for two consecutive quarters in FY 2004-05, finishing marginally behind traditional market leader TVSE by the end of the year

On the impact side, the year demonstrated the changing needs of the enterprise and a specific print solution satisfying the need. Hence, vendors talked about various technologies and its dividends. For instance, if an enterprise intends to opt for an impact printer it has various options like 9 pin to 24 pin technologies to choose from. Retail verticals should ideally choose the 9 pin narrow model, and government, the 24 pin. Companies like WeP, TVSE, and Epson have made many innovations in impact printer technology over the years. Given that, the earlier noisy and bulky impact machines have been replaced by sleek and silent ones. WeP, for instance, introduced a new category of 40-column receipt printers, ideal for receipt, ticket, and transaction printing. It also expanded the languages available on DMP to now include Chinese, Turkish, Thai, and Arabic.

Inkjets: More Blues than Pink
Inkjets in the single-function category did not see much traction during FY 2004-05. HP took on the mantle, with other players following suit. Though the vendors were able to sustain the volumes, in value terms the market is growing thinner by the day, with decline in end-user price points: the entry-level inkjet offerings retailed at an average price point of Rs 2,800 during the year. With SMB moving towards lasers, SOHO was the market that saw volumes-where home PC consumers went in for a peripheral device as part of their PC buying decision. Meanwhile, on the enterprise side, the mid-end inkjets came in wherever there was need for a standalone printer requirement. In the inkjet space, Epson's market share showed a marginal decline, hovering in the high tens, down from the low twenties in the previous year. The company blames this dip in market share to its channel revamp exercise undertaken in 2004. In line with the revamp, Epson changed its inkjet channel from a national to a regional distributor model.

A look at the emerging players in the fray puts Lexmark in the pole position. It was a good fiscal for Lexmark in India, which secured market traction through some key inkjet models it launched during the year. The company unveiled four cutting-edge photo printers that it claims will change the home photo printing experience as well as cater to the SMB segment. The Lexmark P315 and P915 home photo printers and the P6250 home photo center all-in-ones were designed keeping in mind the home segment user. Looking at the market dynamics during FY 2004-05, inkjet, as a segment, became more defined with market going towards mid-end single-function inkjets and photo printers. Entry-level volumes will start declining in the days ahead. While single-function inkjets go niche, vendors will focus their energies on the inkjet MFDs.

The MFD Juggernaut
The shift is impressive, driven hard by HP. Printers and scanners are giving way to all-in-one (AIO) devices, also called multi-function devices (MFD)-which combine printer, scanner and copier into a single device, for little more than the cost of a traditional printer.

The vendors' enthusiasm is understandable. In the initial run-up, the difference in cost itself means better margins. But that becomes less significant as competition drives prices and margins down. What's more interesting is that the MFD increases utilization. Sitting by the desk, it's used for prints and copies rather frequently, especially the latter, which means more printouts per month...and more consumables (ink cartridges and special papers). Remember, consumables are where printer makers like HP make their margins, and not the printer hardware.

On one hand, competition forced the inkjet-based MFDs down below the 5K pricepoint. On the other hand, the top end of the market saw some different dynamics. Over the course of the past two years, copies have gone digital, and have added a network interface, and printing capability, making them MFDs too. However, at the high end they're still usually called digital copiers, distinguished by a separate drum and refillable toner, while the lower-end "laser MFD" uses an integrated disposable cartridge, a la laser printers. So you now have inkjet MFDs, laser MFDs, and digital copiers-all of them different forms of multifunction device.

Canon too evangelized MFDs and came out with an MFD RoI calculator that let users take an inventory of the existing print setup, and evaluate the returns a Canon MFD would bring. Lexmark also launched new MFDs, with photo-editing software bundled.

IDC says the global MFD market could grow 82% a year between 2004 and 2006 with laser-MFDs taking the larger value share.

Lasers: Value for Money
HP continues to dominate the laser printer space with 75% market share. But in this fiscal it will face greater competition as many new players enter this segment. Xerox forayed into this space towards the end of last fiscal. Interestingly, Epson, which was not present in the laser printer segment, came in with a slew of products. Epson is the only printer company operating in all three segments: Inkjet, DMP, and Laser and is aiming for a 20% market share in the color-laser segment with its Aculaser brand, for FY 2005-06.

In terms of competition, Brother entered the market with a slew of models. Meanwhile, Lexmark's new laser printer models aimed at the small workgroups in large enterprises also impacted the market positively. On the entry-level space, Lexmark attacked the market with its E230 laser printer. Further escalating the competition in the laser space was Xerox, which until now had a negligible share in the laser space. It announced its intention to capture the potential of the laser printer segment through its Phaser range of products. Though the Phaser range has been there for sometime, last fiscal Xerox appointed Ingram Micro and Redington as distributors for its Laser offerings, in a significant move.

If one takes a macroscopic view of the laser printer market, the bigger market out there currently is in the mono lasers, but color is gaining momentum in niche areas. Meanwhile, the ongoing year would also see price wars that would be kick-started by players like Brother, Epson, and Xerox to challenge HP's domination.

The Road Ahead
Up ahead looms mixed fortunes for the printer industry in India. The impact and the non-impact space face different challenges. Inkjet MFDs will escalate in volumes, cannibalizing on single-function Inkjets. At the same time, Inkjet photo printers will gain more market credence during the ongoing year. However, some industry watchers foresee competition from within the MFD segment, with Laser MFDs challenging Inkjet MFDs and single-function lasers. A look at the year that went also showed huge shift in vendor strategies.

During FY 2004-05, vendors took to the CIOs concepts like evolving an output device management strategy for getting peak RoI out of print investments, and choosing the right printer. Print outsourcing also became a big business with players like WeP and Xerox Global Services ushering in new ways of cutting down on print costs and optimizing productivity. Similarly, HP went aggressively on their balanced deployment strategy and Canon came out with industry's first RoI calculator. As the current fiscal progresses, the battle for greater market share will further intensify-with focused marketing campaigns and product offerings.

Shrikanth G

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