It’s paper, but not as we know it

It’s become a cliché to say that the paperless office is a myth, and that office printers will still be with us for the next decade. But that doesn’t mean there is room for complacency in the printer industry. In fact, it faces as much disruption as any industry overturned by the proverbial “Uber of (insert industry sector here).”

The best known office equipment supplier in South Africa, Nashua, has quietly changed its positioning from being an office automation supplier to being a provider of “managed document services and digital office automation printing products”.

“If we’re only going to sell office automation products, we’re dead,” insists managing director Mark Taylor. “We’ve got between three and 10 years to make the shift, depending on the pace of change and ICT players modifying their businesses to compete with us.”

The challenge lies more in how to make the shift than in what shift to make. The rise of software-as-a-service, where software no longer has to be installed on site but is used via the cloud, points the way: “Our thinking is that you now get software-as-a-service and hardware-as-a-service. How do we offer you office-as-a-service?”

This sounds like a massive threat to a business like Nashua: one look at its products catalogue confirms how much still revolves around machines. But if Taylor has his way, it will look very different within just a few years.

The company’s business will move to managed services, cloud-based services, network services, desktop services, location-based services, and device management. The implications for revenue are massive, he says, but manufacturers are already facing the new reality.

“HP and Xerox have sold off their hardware businesses. Ricoh has made an acquisition in the software space. I wonder how companies like ours will transition effectively when we no longer have the cashflow we get today from office equipment. We have to transition from typically making our three-year profit upfront today, to making nothing upfront.”

The cost of running an office automation business, he says, will plummet. And that is as much of a threat as it is an opportunity.

“In future you will need far less cash to start a business like this, meaning more competitors, but economies of scale become an issue. Margins become really good when you get to scale but, if you don’t have scale, you cannot exist.

“The barriers to entry to sell other people’s products drops because you don’t have to have stock, you just need to find customers and connect them to the service.”

Ironically, however, cloud-based services could boost printing output. Taylor gives the example of production print – in-house printing of books and magazines – moving to “mass customisation of one”.

“In the past you had to print at least 300-400 books to get economies of scale that made sense. Now you can do one book at a time. There are trials at airports where you put money in a vending machine, select a publication, and it prints the latest magazine. You don’t even need storage.”

Production print is growing at 10 per cent a year, and is now becoming accessible to small business. And that gives paper yet another new lease on life.

“For at least the next 10 years, paper will still be a dominant medium. Roughly 80 000 machines are being sold in South Africa every year, and that won’t change for the next five years.”

• This column first appeared in Business Times in the Sunday Times on 21 August 2016.