Ashwin Venkatchari, Research Director, Imaging Printing and Document Solutions, IDC Middle East, Africa and Turkey, urges channel partners to move up the value chain to be a true solutions provider for customers.
With the macroeconomic outlook looking relatively pessimistic for the Gulf region in the short to medium term, it is now more important than ever to look for ways to maintain a competitive advantage. In the Middle East and Africa (MEA) hardcopy peripherals market, shipments declined 16.3 percent in volume and 16.6 percent in value year-on-year in 2015 to total 5.39 million units worth $1.99 billion. Despite this overall decline, the two largest markets in the Middle East – the UAE and Saudi Arabia – were relatively resilient.
One of the trends emerging out of the data for 2015 was the robust year-on-year growth in both units and revenue seen in the UAE’s A3 laser segment. This segment is important as it is not only the one that is most closely linked to print services contracts, but is also an overall indicator of continued growth potential within the country’s business sector. That said, projections for relatively low oil prices mean that the prevailing macroeconomic trends across the wider region do not favour substantial unit and value growth over the coming years.
While hardcopy documents remain at the core of business, necessary for everything from the drawing up of contracts for large deals to printing receipts for every day purchases, the trend towards the digitisation of documents and processes is leading to a slow decline in the volume of pages being printed.
The hardware offered by vendors has also become progressively more reliable, and with very little innovation taking place in the market (especially in the laser technology), the hardware refresh rates for printers and copiers have been slowing in recent times. This all means that end users are keeping their devices for longer, choosing to continue buying consumables and servicing their existing equipment rather than purchasing new machines.
Accordingly, IDC’s forecasts relatively pedestrian growth for the MEA print hardware devices market over the next five years, with shipments increasing at a compound annual growth rate of just 1.37 percent for both volume and value through to 2020. The growth in hardware will primarily be led by the region’s more developing economies, such as Egypt, Kenya, and Nigeria, with the more mature markets experiencing slower unit and value growth. This is consistent with the global trend; as markets become more mature, the portion of total IT spending on hardware declines as the focus shifts to software and services.
This trend is already evident in the print ecosystems of the UAE and Saudi Arabia. While there has been a slowdown in overall hardware shipments in these two countries, we are seeing substantial growth in their print services markets, with revenue up 10.4 percent year-on-year in 2015 to total a combined $282.63 million. There is great scope for continued growth in this regard, as the penetration of print services compared to the total print hardware market is still much lower in MEA than in Western Europe and the US.
Print vendors and the channel should take this period of market consolidation in hardware sales as a signal to make an important decision – whether to remain a player in a hardware market that has limited growth prospects or move to a rapidly growing market that is embracing a more solutions-oriented approach. End users in both the private and public sectors have begun to demand print services as the acceptance of managed services for IT infrastructure accelerates. The reasons why this solutions-based approach is becoming increasingly popular can be found in the benefits that organisations accrue in terms of cost savings, reduced downtime, and the reduction in support staff required to service hardware.
This trend is not confined to print services, as the move towards the third platform sees the convergence of Big Data, cloud, mobility and social business driving end-user purchasing patterns as firms look to technology in order to maintain a sustainable advantage. Print services can form part of this strategy; for example, integrating mobility solutions with the existing print environment enables employees to become more efficient.
In practice, the shift from providing standardised hardware to a fully customised solution is a costly exercise. The channel – which is already operating on fairly narrow margins – cannot be expected to singlehandedly invest in the training and capacity required to enable the provision of print services. Training the salesforce and hiring/retaining a pool of skilled engineers and consultants to service clients all requires significant commitment from channel partners wishing to provide print services. As such, the OEM print vendors will be required to support their channels, and while certain vendors have already implemented strategies to enable this support, there is still room for significant improvement.
Aside from this vendor support, the channel also has a role to play by providing feedback on the local market conditions. At the beginning of the sales process, the channel is in the best place to influence the market and buying decisions. It can be an active participant in pushing a solutions-based approach, highlighting the benefits to potential clients that may be lacking information in order to make the decision best suited to their needs. As the partnership develops between the print services client and the provider, the channel is once again best placed to understand the requirements of the businesses they service and must be able to communicate these needs back to the vendors, as technology is continuously changing the way business is conducted.
This evolution will ultimately shift the market’s perception of the print channel from being a provider of a commoditised piece of hardware that was increasingly competing only on price, to being a solutions provider that is necessary for the efficient functioning of any business. This is in line with the global trend that is seeing the print environment evolve towards providing businesses with solutions so that they can focus on doing what they do best. Given the relatively flat outlook for print hardware growth in the MEA region (in contrast to projections for the growth in services), the time to move up the value chain is rapidly approaching.