In life, most things are cyclical. Clothes come in and out of fashion (and back in again), TV shows and films of yesteryear get remade for a modern audience and bands reform to cash in on the nostalgia surrounding their halcyon days (The Police, Sex Pistols, Take That and even the Spice Girls have all travelled this well trodden path recently).
Business is no different. A few years ago, the major trend for businesses was offshoring, but now companies use the fact they are UK-based as a marketing tool to win new business. The timescale for these life cycles differs greatly. In some cases, things can go full circle in the space of a few years, whereas others might take decades.
One business sector that has enjoyed a fair old innings to date is print management (PM). Some doom mongers have been predicting their demise for the past decade, suggesting corporates would eventually see sense and bring their print-buying function back in-house. Yet, despite the odd blip (most notably Vodafone’s retreat), the PM firms continue to go from strength to strength.
With some of the larger PM contracts entering their third or fourth generation, and corporates showing little sign they are dissatisfied with the service they are receiving, the sector looks relatively safe, in the short term at least. But how long can this status quo last and where will the biggest threat to PM firms’ dominance come from?
According to Webmart managing director Simon Biltcliffe, there are many different groups circling the PM bandwagon at the moment.
Multiple threats
“The traditional print managers have threats coming at them from all sides,” explains Biltcliffe.
“Suppliers who are fed up with their unreasonable demands; clients realising what they give them isn’t worth what they are paying them; and printers moving into the market with their own offer.”
Taking Biltcliffe’s last point first, it was only a matter of time before the printers got their act together and launched PM-lite models C offshoot divisions from the main business, offering a fairly basic PM service. Some of these divisions have managed to secure contract wins. However, this is merely a small drop in a very big pond and the limited service offer will in turn limit their ability to grow this side of their business, according to Polestar Applied Solutions’ category director Tim Smith.
“Printers are finally raising their standards and offerings and the in-house versus outsource cycle will no doubt continue. But, you have to add more value to buying and selling print. This includes technology consolidation, as well as process improvement.”
Another factor that could limit the growth of printer-launched PM models is the fact that many printers count PM companies among their best customers.
“Most of our print suppliers see us as an extension of their sales force, rather than an unnecessary middleman who could be cut out,” explains Patrick Auer, co-owner of Colchester-based PM firm Leanprint.
He adds that printers tend to be very cautious and protective of their customer base when dealing with other printers, which would be a further obstacle to launching an outsourcing division.
So, perhaps a greater threat C although, for the moment at least, this is highly theoretical C is the prospect of a corporate buying its current print partner. Indeed, rumours are circulating that discussions have taken place about this kind of arrangement. However, most PM companies are highly sceptical about this approach. “Why does a retailer want to own print equipment?” asks Polestar’s Smith. “Outsourcing to specialists can give you the creative and manufacturing capabilities without the overheads.”
Cost-effective option
Access Plus chief executive Jason Cromack agrees. “Why do companies outsource in the first place? It’s all about cost. If they bought a printer, they would have a lot of assets to manage the peaks, but then they wouldn’t have enough work to feed the equipment throughout the rest of the year. As a result, it would become a massive cost to an organisation.”
While Webmart’s Biltcliffe admits this approach would provide a great exit for some of the print managers struggling financially at the moment, he doesn’t see the point.
“As a client, the cheapest way would be to head hunt their account management team, as it is this that adds most of the service and quality for them anyway,” he added.
Individual approach
Despite such damning assessments, not everyone is completely dismissive of the suggestion. Charterhouse commercial director David Fincham feels you can’t generalise and that each opportunity should be considered on a case-by-case basis.
Dean Smith, group business development director at TPF, is even more open-minded. “It all comes down to whether the supplier is offering something unique and acts as a key differentiator on a product or service that helps the corporate increase revenue or reduce churn. Look at DPW with Williams Lea. It suited their supply chain/sector and offering to the market. Will Royal Mail go down the same route and buy St Ives? I do potentially see this happening in the digital sector, as the range of print and non-print services (data, SMS and email marketing) is very broad.”
The general consensus C based on a quick straw poll of PMs C appears to be that the greatest threat to the survival of the sector comes from within, with increased competition from more professional PM companies.
More professional operators will, in turn, inevitably offer greater efficiencies and cost savings; the twin benefits that all corporates look for in an outsourcing arrangement. But the trick will be whether firms and the new pretenders to the throne are capable of selling the message convincingly about the value of the services they bring to the table.
“It is inevitable that any threat to the PM sector must come from the bottom-line cost of print,” says Charterhouse’s Fincham. “The attraction of using a printer’s PM-lite service, or of bringing print back in-house, is mostly driven by the bottom line. What is less clear, however, is how much the service element provided by PM companies is valued. I think it is our job to highlight the expertise and service values the PM companies bring.”
Growing sector
The sector has matured significantly over the past five years and, while it is inevitable that there will be the odd exception where corporates will bring their print-buying function back in-house, or even consider acquiring their existing print partner, these look set to be the exception rather than the rule.
“From the conversations and interest we receive daily from marketing procurement managers, and from what I am reading in procurement journals and hearing at procurement events, corporate procurement strategy is about driving out cost, managing decentralised structures in a centralised solution, improving service, having access to leading technology and people,” says TPF’s Smith. “All of these drivers point fairly and squarely to outsourcing and anyone who thinks differently is kidding themselves.”
The current economic climate will increasingly play into the hands of the PM firms, with more and more companies cutting their budgets and outsourcing. So it looks as if PM’s future is secure C for now at least.