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We have been talking about the cannibalization effect in the peripherals space for some time. But some of the analysts debate that it's a kind of misnomer and not a reality, at least for now. But skeptics need to have a second look when it comes to Scanners. On the face of the cannibalization effect-single function inkjet printers and entry-level scanners being eaten by All-in-Ones (AIO) would sound Utopian now but it has started happening. In the West the trend is gaining momentum like the CRTs, being challenged by the TFTs and Desktops being challenged by Notebooks. While it will take a while for this trend to catch up in India, one segment that has already come into sharp focus is the Scanner market and the direction it will take as a standalone product in the peripherals space.

According to market intelligence reports, scanner shipments stood at around 137,000 units in 2002 and grew by 30% and reached 180,000 units during 2003. And the industry believes that during 2004, close to 175,00 units' were shipped into the Indian market valuing Rs 112 crore. These estimates only drive homes the beginning of the decline of the standalone scanner market. Analysts estimate a sharp 20% decline in scanners by end 2005 with MFDs and high mega pixel digital cameras denting into the scanner pie. With entry level scanners stagnating with dull sales, most of the vendors are concentrating on the mid and high-end scanner requirements that are driven by verticals like BFSI, publishing and the government.

Source: IDC India

A typical case of product obsolescence, entry-level scanners would soon become history, but at the same time mid and high-end segments will offset the void and will continue to grow. The drivers that will enable organizations to look for high-end production scanners would be-the need to bring paper based knowledge into their eContent, and the need for quicker turnaround of business processes.

Changing Market Dynamics
While both entry-level scanners and single function inkjet printer volumes are expected to decline dramatically during 2005, new technology enhancements will bring in the much needed volume stabilization of standalone devices. For instance, USB 2.0 is getting into the mainstream. Scanners with version two of USB will bring in greater benefits to the customers in terms of data transfer from their PCs. This will lead to more enterprises overhauling their old scanners, mostly entry level, and migrating to faster and more functionally rich scanners. While this will hasten the high-end scanner market, it will also lead to a market for used scanners. For instance, an entry-level scanner was costing around Rs 6,300 in 2000. The resale value of the same now is a mere Rs 1,000 and going down by the day. While a far more technically advanced scanners, even on the entry level space, are available at Rs 3,500, cost-conscious first time SOHO consumers will opt for used scanners instead of newer ones. Hence vendors, in order to drive higher end scanners, should launch innovative buy-back programs, enabling customers to migrate to new imaging technologies.

A major trend during 2004-05 was the entry of production scanners. HP upped its ante by bringing new product lines targeted for the large enterprise demands. Meanwhile, one player who needs a closer look is Kodak India. The company offers state-of-the-art production scanners in India. These scanners are typically meant for scanning huge demands on any given day. For instance, production scanners are used in demand scenarios like 1,000 to 60,000 pages per day. These are unlimited duty cycle scanners with prices ranging from Rs 50,000 to Rs 60 lakh. Speeds may range from 35 images to 640 images per minute. Vendors like Kodak also saw good traction for its production scanners with good demand from verticals like BFSI, government, transportation, hospitals, and educational institutions. Industry experts are bullish about the departmental and workgroup scanner market. These Scanners, priced between Rs 50,000 to Rs 3 lakh, with daily duty cycle of 1000–3000 and speeds of 20 pages per minute to 50 PPM, form the departmental, and workgroup scanner market.

Source: IDC India

When we take stock at the end of the fiscal and look at the road ahead for scanners, the pointers are obvious. The scanner market in the country is signing out of its stable times of the past. Up ahead looms an upset year where, in MFDs, average selling value is expected to slide further and, by mid 2005, most vendors will see significant decline in their entry-level scanner offerings. Meanwhile, to offset the volume decline, vendors will resort to price cuts in the mid end and high-end scanners that will secure the scanner market growth in the days ahead.

The only silver lining for the standalone scanner devices is the value proposition they bring to the table. For instance, while we take a closer look at the cannibalization effect of MFDs, which sure are a value proposition, we have to realize that those enterprises which have good volume of to be scanned images and documents, opted only for standalone scanners, not MFDs. Some industry analysts say that MFDs' functionality in many cases was not optimally used. For instance, some consumers predominantly used MFDs for printing only and very little for copying and scanning. To avoid situations like that standalone devices, in unique demand situations, will yield optimal benefits as against the converged ones, say experts. So, per day demand patterns for copying, printing, and scanning has to be ascertained for informed output device buying decisions. Hence, it is still a debatable decision if an enterprise opts for MFDs (just because it does many things for a price of one) in lieu of standalone scanners if its needs are primarily scanning. Moreover, if we look at the vendor strategies for MFDs, the all in one capability is the core USP they pitch on. And, similarly, their scanner market strategies are heavily dependent on SMBs and large enterprises. Both the MFDs and mid/high-end scanners are targeted at the SMBs, and this creates a very ambiguous market out there and puts SMBs in a dilemma of choosing the right size, right fit imaging products. In the end though it does tilt in favor of MFDs-as the growing print and copy volumes put MFDs in a sweet spot. But standalone scanners sure have their place under the sun with serious imaging demands continuing to drive sales.  

The government is a big target vertical for scanners. With almost every state fancying a slew of G2G and G2C services, there is a huge demand for scanners. Enterprises have also acquired a lot of unstructured data in the form of paper. The best method of recycling them is scanning, which will digitize them and free physical storage spaces.

But standalone scanners at the entry level are on their way out, as Susheel John, business development manager, document products services and commercial imaging group, Kodak India points out: "The MFDs and digital cameras have definitely had a major impact on the scanner market, especially the personal desktop scanner market. Since MFDs are becoming cheaper by the day, end users prefer to buy these products instead of plain vanilla scanners. Definitely this will remain a trend into the future, so much so that I believe over a period of time the personal desktop scanner market will be wiped out."

Shrikanth G in Chennai

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