Konica Minolta IDC Solutions White Paper
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Konica Minolta is transforming itself from a print and copy solutions provider to a provider of document solutions and services by: 1) Creating a vertically integrated solutions and services organization called EnvisionIT that provides targeted software and solutions. 2) Offering a software portfolio that targets key areas like security, document management, and workflow. 3) Providing managed print and IT services through acquisitions and programs like Optimized Print Services Enterprise Edition. 4) Finding success in both traditional print markets and new software and services markets.
Konica Minolta IDC Solutions White Paper
- 1. WHITE PAPER Konica Minolta Broadens Its Market Reach as a Transformed Document Solutions and Services Technology Provider Sponsored by: Konica Minolta Keith Kmetz Global Headquarters: 5 Speen Street Framingham, MA 01701 USA P.508.872.8200 F.508.935.4015 www.idc.com October 2013 IDC OPINION While the traditional print market matures, customers' need to manage the massive amount of paper and digital business information is becoming increasingly critical. We anticipate that the future market success of print providers will stem from the ability to provide a more comprehensive set of solutions and services that cater to a range of requirements in the document life cycle. Konica Minolta is an example of a vendor that has been undergoing a series of transformative changes to best serve these evolving market needs. Over the past three years, we have observed a number of substantial moves that signal a new Konica Minolta, including: Creating a vertically integrated solutions and services organization. Konica Minolta's EnvisionIT brand puts together specifically targeted document software and solutions for key vertical markets. Today, this includes initiatives for the legal, healthcare, and education markets, and more is expected soon. The company is strategically planning for key growth areas that align with its EnvisionIT value proposition. It will continue to provide unique document and information solutions that focus on addressable workflow opportunities in these markets and tailor a distinctive set of solutions for each one. Offering a software portfolio that targets key document management requirements for a transforming market. Many document challenges — such as security, document/enterprise content management, job tracking, and general workflow — are horizontal in nature. Konica Minolta is focusing on these key areas that apply across industries and providing unique solutions within many of them as part of the EnvisionIT industry initiative. Providing managed services. The creation of Optimized Print Services (OPS) Enterprise Edition and the All Covered acquisition offer clear signs that Konica Minolta is moving quickly into managed services opportunities. This effort not only includes traditional print opportunities but also extends this capability into a broader managed IT services program. Additionally, Konica Minolta has built this infrastructure so that it can extend such offerings into both office and commercial environments.
- 2. Finding success in both traditional and new markets. Konica Minolta not only has managed to grow its embryonic software and services business at an exponential rate over the past three years but also has increased its share of the U.S. copier MFP business from 12.6% to 15.1% during the same period. This means that Konica Minolta is effectively managing the traditional and new business opportunities by growing its presence in both markets simultaneously. IN THIS WHITE PAPER IDC analyzes how Konica Minolta is transforming itself from a provider of print and copy solutions to a provider of new document solutions and services technology to address its customers' business information needs. SITUATION OVERVIEW Companies such as Konica Minolta have historically thrived by addressing the basic copy/print needs of their business customers. With a focus on satisfying customers' requirements for printed output, these companies have realized revenues and profits primarily from a business model based on equipment sales, print supplies, and break/fix service contracts. However, these print industry revenue and profit pools are changing at an accelerated rate. In recent years, we have witnessed the transformation of many customers' business information needs, particularly in an IT market that is increasingly offering solutions that shift users further away from a reliance on paper-based output. In fact, IDC has determined that this market is in the midst of a seismic "once every 20–25 years" shift to a new technology platform based on mobility, cloud, big data, and social technologies. This means that suppliers and customers will need to exploit this "3rd platform" to drive future growth and innovation. In fact, we anticipate that the "3rd platform" will drive the bulk of IT industry growth over the next dozen or so years. Millions of new apps and services will be built on this emerging platform and spread to a broader range of users inside and outside organizations (see Figure 1). 2 #243471 ©2013 IDC
- 3. FIGURE 1 The 3rd Platform Trillions of Things Billions of Users Millions of … Intelligent Industry Solutions CIOs Apps LOBs Enterprises SMBs SPs Consumers Emerging Markets Hundreds of Millions of Users 3rd Platform Mobile Broadband Big Data/Analytics Social Business Cloud Services Mobile Devices and Apps Services Information Content Experiences 2nd Platform LAN/Internet Tens of Thousands of Apps Client/Server PC Millions of Users 1st Platform Thousands of Apps Mainframe Terminal Source: IDC, 2013 While this significant market transformation does not eliminate customers' need for print anytime soon, it does change how businesses use and manage data, documents, and other types of business information. Although print will continue to play a critical role in future business operations, it is expected to mature and decline slightly over the next several years. Even though IDC's latest U.S. page volume forecast projects a -1.5% CAGR through 2016, it is anticipated that a robust 1.1 trillion pages will be produced at that time. It is clear that paper-based document technologies will still be significant years from now, even as obvious market maturity sets into this segment. On the other hand, digitally based content is exploding. According to IDC's top 10 IT predictions for this year (see IDC Predictions 2013: Competing on the 3rd Platform, #238044, November 2012), the "digital universe" (a measure of all digital data created, replicated, and consumed in a single year) is expected to expand by almost 50%, ©2013 IDC #243471 3
- 4. reaching 4 zettabytes (or 4 trillion gigabytes). This is nearly a quadrupling of the 2010 volumes. Given the rapid emergence of new data capture and generation technologies and solutions, it's almost certain that we're underestimating the volume and growth. Obviously, these figures represent massive changes in how businesses will adequately create, manage, and distribute the increasing amount of content (i.e., data, documents, business information) in both paper and digital forms. Additionally, this transformational effort needs to be conducted in a fashion that drives cost savings and improved worker productivity benefits that ultimately create a positive bottom-line impact. How Konica Minolta Is Changing to Better Meet Customers' Business Information Needs Technology suppliers must cater to this transformational customer demand in order to remain successful and viable in the future marketplace. We expect that rather than being print or device focused, the current printing and imaging market, as defined today, will be reinvented into more of a solutions and services market opportunity. The truly savvy print technology providers are already in the midst of this metamorphosis, while others may be just embarking on this journey. Konica Minolta is an example of an organization that correctly assessed the market's pending changes and initiated its own transformational process a few years ago. Its Enterprise Services Strategy starts with a "four pillar" infrastructure as the building blocks to this initiative (see Figure 2). FIGURE 2 Konica Minolta's Enterprise Services Strategy Source: Konica Minolta, 2013 4 #243471 ©2013 IDC
- 5. As a result, this document analyzes a transformed Konica Minolta offering a new set of value propositions in categories such as software integration and professional services, document management and enterprise content management, vertical market software deployment and integration, and managed IT services. Certainly, this is an impressive array of new capabilities that extend beyond the printing and copying that the company has long been known for. The following sections take a closer look at each of the four pillars Konica Minolta is building in response to the market's transformation. Services & Solutions In early 2011, Konica Minolta launched a new branding position to signal its solutions and services initiatives for select vertical markets. EnvisionIT was created to provide these industries with the ability to work smarter and more efficiently with integrated workflow solutions from Konica Minolta. The initial offering was aimed at providing managed print services, managed IT services, integrated software (Konica Minolta and/or third party developed), professional services, and hardware under the EnvisionIT brand umbrella and tailored for each industry. The current EnvisionIT roster includes: EnvisionIT Legal EnvisionIT Healthcare EnvisionIT Education EnvisionIT Print Production In the near future, Konica Minolta is expected to expand this roster to include EnvisionIT Government, EnvisionIT Financial, and EnvisionIT Manufacturing. The company's bizhub MFPs and software solutions are core to this strategy. Konica Minolta's bizhub Extended Solution Technology (bEST) MFP platform is the architecture on which software solutions can be integrated into the company's family of bizhub MFPs. The software portfolio focuses on six key opportunities: Security and compliance Cost accounting Document management Enterprise content management Variable data Workflow for office and production environments Depending on the opportunity, Konica Minolta will work with third-party providers and partners for these solutions (e.g., NSi's AutoStore for Healthcare for scanning applications; Prism Software's document management suites for the education, healthcare, and legal markets; Hyland Software for enterprise content management) or will integrate its own solutions (e.g., Dispatcher Pro for the legal market, bizhub Secure for security and compliance needs across industries). ©2013 IDC #243471 5
- 6. The true value of this initiative to bring software and solutions to key target markets is in the integration of the technology with Konica Minolta's bEST-supported MFPs. Through integrated connectors at the device level, Konica Minolta users can access any of these solutions directly from the MFP control panel. This full integration brings simplicity to the process and is seamless to the user. The customer benefits from both the cost efficiencies and the productivity gains resulting from replacing paperintensive workflows with digitally based workflows. Managed Print Services Integration is also an important step in the next phase of the Konica Minolta transformation strategy — managed print services (MPS). According to IDC's most recent forecast, the U.S. managed print services market is expected to reach $17.29 billion by 2017, representing an 8% CAGR from 2012 to 2017. In preparation for this market growth, Konica Minolta's OPS offering is positioned to target the MPS requirements in the SMB and enterprise markets with four important components: Fleet management. Rightsizing the fleet to ensure an optimized printing environment with sensitivity to cost of ownership and environmental concerns Worker efficiency. Maximizing business process efficiency on all business workflows Financing. Offering a range of financing options under one financial plan Security. Ensuring security of all information-related solutions Of course, this all sounds typical of most MPS programs that focus on cost-saving opportunities for customers that implement such a program. The true success of any MPS initiative is to ensure that the MPS provider and customer dialog makes certain that customer cost and productivity gains are ongoing. The Konica Minolta OPS offering continues to evolve. The latest development is the creation of the OPS Enterprise Edition, designed to begin the customer's migration toward a "less print" environment. It has all the usual elements of an MPS program for large companies (e.g., meter reads/alerts, usage data, print behavior, floor mapping), but the key piece of this program is establishing a system in which customer usage data is integrated with Konica Minolta's SAP system. This means that usage data is collected directly from customers' print servers into a Konica Minolta repository to effectively monitor machine activity. Konica Minolta's OPS Enterprise Edition, which launched on October 1, enables the essential ongoing management of the customer's print environment with an established system of using this data to proactively manage these customer accounts. For example, as part of OPS Enterprise Edition, customers' print usage data is integrated with Konica Minolta's call centers. Based on this data, Konica Minolta service providers can predict when supplies will run out or when parts will wear out and need replacing. Rather than losing productivity due to the conventional initiation of a service call by a customer and waiting for the tech's arrival, Konica Minolta service providers can use data analytics to proactively respond to a pending customer 6 #243471 ©2013 IDC
- 7. need prior to the customer even noticing it. Downtime is virtually eliminated because the process to initiate machine service occurs before any breakdown. This predictive maintenance aspect of OPS Enterprise Edition potentially sets a new standard in how managed services accounts will operate under a usage data set made available to the provider. The Konica Minolta software platform is the toolset that will enable the vendor to deliver the necessary data and reporting to clearly identify the opportunities for cost consolidation. Perhaps more importantly, this software database platform of actual customer usage data will help Konica Minolta sales teams and channel partners rapidly assess and more efficiently identify ongoing cost and productivity efficiencies for end-user customers. OPS Enterprise Edition is not for all Konica Minolta customers. The company admits that the account should have a significant number of devices (75 machines and up) to make it a worthwhile venture for the customer. While the offering is targeted at large enterprises, we believe it could extend into the upper end of the SMB market where some smaller companies may have a large number of devices to adequately address their high level of document traffic. In subsequent phases of OPS Enterprise Edition, Konica Minolta will address MPS for the production/CRD and external print management environment. The intent is to develop a platform that links all print elements for Konica Minolta customers to assist with decisions related to the transformation of their print infrastructure. Managed IT Services As an extension to managed print services, managed IT services is a key component of the Konica Minolta transformational strategy. In early 2011, Konica Minolta acquired All Covered to be the delivery vehicle to tie managed IT services (e.g., data backup, security, cloud, call centers, training, vertical expertise) with Konica Minolta's MFP and print hardware. As the market moves toward more cloud-based services, we believe that IT services will play an increasingly important role in customer support, so this acquisition was and continues to be a good move by Konica Minolta to establish itself in this category. While the traditional All Covered target market has been SMB, Konica Minolta expects to take the All Covered managed IT services model to the enterprise market and utilize it under OPS Enterprise Edition engagements. The expectation is that the company will leverage All Covered's SMB successes to continue growth in this segment while significantly expanding its presence in Fortune accounts with a select set of All Covered services for that market segment. In preparation to create a more national IT services organization, Konica Minolta has been diligently augmenting this organization with several acquisitions under the All Covered division (see Table 1). ©2013 IDC #243471 7
- 8. TABLE 1 All Covered Acquisitions Made Since the Konica Minolta Purchase Who When Where Vertical Specialties United Computer April 2013 New Jersey Financial, government InterTech December 2012 Phoenix WaveTwo August 2012 Dallas Compuquip August 2012 Miami Thinsolutions April 2012 Cleveland PC Solutions April 2012 Minneapolis Covisia Solutions March 2012 Boston Service Assurance February 2012 Memphis ColdCypress October 2011 Pittsburgh Vertical IT Solutions September 2011 Tampa Financial, real estate, staffing, construction, nonprofits PMV Technologies September 2011 Detroit Education, financial, healthcare, legal LAN Associates September 2011 New York Legal Techcare May 2011 Chicago Education Healthcare Financial, manufacturing, legal Note: Konica Minolta acquired All Covered in January 2011. Source: IDC and Konica Minolta, 2013 Konica Minolta is expected to broaden and expand upon this initial All Covered foundation for its managed IT services play in a number of ways: Geographic expansion is anticipated until the company feels it is adequately covered on a national basis. As shown in Table 1, Konica Minolta has acquired 13 companies under the All Covered family since it made the purchase over two and a half years ago. Konica Minolta has given every indication that it is not finished with such moves. Product portfolio expansion will also come in the form of new skills and new services built upon the already established All Covered organization. Konica Minolta's EnvisionIT offering will evolve to include managed IT services as a core component. It is anticipated that during this time, cloud services, security and compliance, and document management will be the solution areas of concentration and will be tailored for each EnvisionIT vertical offering. Services will be provided in conjunction with this solutions development. The predictive element of customer service for OPS Enterprise Edition extends nicely into the broader IT market opportunity. As Konica Minolta launches this latest MPS offering in the market, we expect these data analytics to be offered in any Konica Minolta customer service engagement, whether for print or general IT. 8 #243471 ©2013 IDC
- 9. Commercial Print Management Konica Minolta is also transforming its approach to the production print market opportunity. At the end of 2012, Konica Minolta acquired Charterhouse PM Limited, a European marketing services production company. The acquisition gave Konica Minolta entry into the commercial print management market in Europe, but these skills and capabilities (e.g., digital services, data management, studio services, promotional merchandise, point of sale, and print management services) are expected to expand to other geographies. The value proposition is that Konica Minolta now provides a comprehensive suite of services, solutions, consulting, support, and hardware under a single management platform. The company is in the process of evaluating this growth opportunity in the United States to support the expansion into commercial print management. Challenges While Konica Minolta has made significant progress over the past three years, all other traditional print/MFP competitors are moving in this direction as well, and some have been at it longer than three years. Konica Minolta will need to position itself as having learned from early-adopter mistakes and plan accordingly versus competitors with more direct experience over a longer period of time. The general market consensus is that printing and imaging is moving quickly to a solutions and services platform. We expect the future market will be crowded as all market participants build and refine their services offerings. Konica Minolta will need to continue to demonstrate that it can execute at a level that is above the industry norm and expectations. At this point, the results show that the company is effectively doing so, but momentum needs to continue. Konica Minolta needs to continue gaining legitimacy in new evolving adjacent markets. Obviously, the company is well established in the print/copy arena, but the market's perspective that Konica Minolta also has legitimacy in the management of both paper and electronic business content domains may not always be readily apparent to the buying audience. In fact, some customers may believe that these new core competencies that Konica Minolta is building come from suppliers outside the traditional print/copy and document technology sector. The challenge in this reinvention is to convince customers that Konica Minolta not only has print/copy and paper document expertise but also can bring this same credibility to the digital information arena with unique value-added services. Lastly, slow-to-move channel partners and end-user customers will need to be convinced that this technology path is the right one to take and that Konica Minolta is the best technology supplier to provide for this transformation. ©2013 IDC #243471 9
- 10. FUTURE OUTLOOK Ultimately, no one vendor can alter the changes taking place in the printing and imaging market — the market will do what the market will do. What that means is that the transformative wave hitting the traditional print market will not be stopped and that change is inevitable. In response, vendors will need to make significant changes to keep up with the market's new direction. One thing is clear: Customers will continue to expect more from their technology providers, including vendors and their channel partners. In part, customers expect providers to help them manage the transformative factors that are changing the shape of their businesses. This means having a substantive knowledge of the customer's business (or vertical industry) and offering a range of products (hardware, software, and services) that help customers better compete. The good news is that such offerings are rooted not in low pricing but in the perceived value provided and lead to potentially higher-margined sales. As a result, this transformation is creating new opportunities for vendors and channel partners to assist end-user customers with tailored document solutions and services essential for their business. This includes: Vertical markets (e.g., customized solutions will differ considerably among industries such as healthcare, legal, education, financial, government, and manufacturing) Software (e.g., document management that requires cloud, mobile, security support) Managed services that include print as well as the IT environment overall The successful print providers of today and tomorrow cannot rely primarily on the old sources of revenue (e.g., hardware, supplies, break/fix) to drive the business forward. While hardware continues to lead most current customer engagements, we believe that software and services will figure more prominently in an increasing number of future sales opportunities. Nevertheless, hardware will still be important for the foreseeable future, and vendors should continue to invest in both established (hardware) and emerging (software and services) markets to drive future success. With all these changes taking place, Konica Minolta has artfully managed the tricky navigation of a gradual transition from hardware to services. The company has not abandoned its printing and imaging roots. The proof lies in Konica Minolta's continuous demonstration of year-over-year hardware unit shipment growth and market share increases. IDC research shows that Konica Minolta's market share of the U.S. copierbased MFP market grew from 12.6% in 2010 to more than 15% through 2012. In software and services, the company's revenues have grown exponentially since the beginning of this initiative three years ago. While some of the industry is struggling with making the transition, Konica Minolta's positive accomplishments in both established and new business opportunities are rare and notable. So what does this mean for the broader market as well as all participants in the Konica Minolta ecosystem (e.g., company, channel partners, and customers)? 10 #243471 ©2013 IDC
- 11. Konica Minolta has made several acquisitions to make itself relevant in the printing industry's transformation. In the process, it is hiring expertise in vertical markets, services, and software. Hardware is not being abandoned, but it is not the only offering for Konica Minolta's customers. The company is taking the appropriate steps to reinvent itself in order to carve its piece of the market and to grow its future business. For Konica Minolta channel partners, there are more profit pools available by representing a vendor offering a greater array of technologies and services, particularly where there are growth opportunities. Most importantly, end-user customers get more than just a printer or MFP hardware solution. Instead, their vendor or channel provider can offer a comprehensive set of technology and capabilities that appropriately address workflows and processes that are key and essential to that specific business. It is not a general "one size fits all" approach with a generic hardware device but a "business hub" that enables efficient business information processing. Copyright Notice External Publication of IDC Information and Data — Any IDC information that is to be used in advertising, press releases, or promotional materials requires prior written approval from the appropriate IDC Vice President or Country Manager. A draft of the proposed document should accompany any such request. IDC reserves the right to deny approval of external usage for any reason. Copyright 2013 IDC. Reproduction without written permission is completely forbidden. ©2013 IDC #243471 11