All-consuming costs

Pro

The prevailing orthodoxy for some time about the costs of any aspect of IT in an organisation has been Total Cost of Ownership (TCO), a handy notion that originated from the Gartner Group. And a Very Good Thing it is too. You look at the big picture, factor in all of the associated costs, including the hidden or at least obscure elements, to get a detailed account of what the hardware, software or other IT investment actually costs you. Or will cost you. Or should cost you. Or can be forecast to cost you. It is regularly applied to printers, printing and ‘the print function’ and undoubtedly has a real value in financial management. But let’s be just a bit heretical here. As we all know all too well, printing consumes paper, ink, toner, etc plus ‘duty cycle’ items to be replaced, notably the
drum in laser printers. Colour printing gobbles toner and ink, because each page is now drawing on four cartridges, even before anyone starts considering how necessary colour is to any particular
print job or class of output. So let’s look at those simple and obvious ongoing costs – keeping the beasts fed with their consumables.

Manufacturers can calculate figures for specific printer models and configurations and happily come up with average cost per page figures, which are then often used in TCO calculations. But the
problem is that these are global, large scale averages. They are also based on the historic industry standard or convention of 5per cent page coverage of the printable area of the page, a throwback to
the early days of fax – think of the short, conventional business letter printed in black only. There is also an ambiguity about what is a ‘page’ – US letter 8.5ins or the larger A4 – and guess which most
printer manufacturers use? There are no standards for colour, so just adding a colour logo or trademark would instantly transform any such measurement in the real world of today. But we also
print a much wider variety of types of business document, including photos, graphs and charts, typographical variations, etc. That means that in almost any organisation today that somewhat
idealised 5 per cent page coverage of the printer sales literature is now irrelevant, whether the bulk (or indeed all) of your printing is mono or whether you have ventured into the wonderful world of
colour.

To be fair, it has a value as a yardstick in comparing performance specifications of different printers. It is in forecasting likely costs that it is almost worse than useless. An A4 page with a
couple of bar charts, for example, could easily raise the actual coverage (i.e. toner or ink usage) to say 20-30 per cent. So a mono cartridge rated at 5,000 pages would only deliver perhaps 1,000-
1,500 pages at that rate! Most such ‘ordinary’ letter/invoice/report/spreadsheet document printing will consist of a mix that would keep the average down so that a mono toner cartridge rated 5,000 will actually deliver maybe 2,000-3,000 pages. When colour comes into the equation it naturally becomes more complex, but it is worth pointing out, for example, that printing half-tones (photos) actually uses much less toner/ink than a solid of any colour.

Lab tests by manufacturers (usually to pep up the comparisons with rival vendors) and some independents show that the cost per colour page can vary from 12c for a newsletter style page with
one photo to 21c for a full page photo to over 31c for a PowerPoint slide with solid colour background and a bar chart. These figures, taken from one comparative test, are in US cents and
purely indicative – but they do serve to show that a senior exec trying out various creative variations on a sales pitch for audience impact may be wasting far more toner/ink than more
obviously personal jobs! 

Watch those consumables
The basic point is that every organisation has a different set of business needs, characteristics and prevailing ethos in regard to smaller scale economies. The TCO calculations are all very well, but it is – as we always instinctively understood – the consumables that are the really variable element and most often the one that needs to be controlled or at least carefully watched. So the true costs of
printing are affected by the type of organisation or department – advertising agencies and business consultants and sales people going for the colour and quality top end, it is to be presumed, just as state bodies like health boards or accounts departments generally are (we trust) keeping things cheap, cheerful and mono. Other users can control printing costs by centralising much of it and
exercising control thorough smart print management software over the network. But that will not work for organisations with multiple small sites.

Managements in most smaller Irish firms, it is generally agreed, take the attitude that so long as there is no large scale waste or abuse ‘it is just not worth the hassle’ to police the detailed usage and
costs of print consumables. On the other hand, in a large organisation a very modest consistent saving could easily save, for example, the cost of a full-time clerical employee. Astute purchasing can further contribute to the reduction of print costs by really significant sums. Several trade sources conceded off the record that in recent years the sheer competitiveness of government tender
processes for supplies – and the pressure to gain such cast iron contracts to help stay in business – has meant that many state organisations are now purchasing their print consumables for about the reseller’s purchase price. Some resellers are selling consumables below cost as part of more comprehensive contracts. ‘A tiny margin comes from annual volume rebates or early settlement
discounts,’ says one source.

That particular technique for lowering the costs of consumables is hardly available to SMEs – although large commercial organisations are also screwing their suppliers down to the tightest
margins. But it does illustrate Lesson No. 1: since you have to purchase consumables anyway, buy in bulk from a single source and negotiate the best deal you can. ‘It’s still astonishing the number of
organisations that let their people buy consumables ad hoc from local outlets,’ says John Purdy, managing director of Ergo Services, a leading Dublin print specialist that combines printer sales
with managed print services and distribution of the LaserPlus range of compatible toners and inks.
‘Apart from multiple sources, we have also found when doing a print audit that one department might be buying consumables in small amounts as they ran out while another could be over-stocked
with spares of exactly the same items.’

Compatibles
So rationalised purchasing is the first element in directly cutting the costs of consumables, according to John Purdy, who accepts completely that internal disciplines actually come first but
reckons they are much more difficult for managements to tackle. Understandably, given his firm’s interest, he is a strong proponent of the use of ‘compatibles’ to cut the purchase costs of toner and
ink with savings of up to 40 per cent obtainable. Third party consumables as an alternative to OEM supplies have greatly matured in recent years. Some are ‘re-manufactured’ from used originals but
straightforward alternative brands are leading the market, sometimes even produced at the same plants from which well known printer manufacturers outsource their consumables. The presence of
the venerable NCR and other brands like Verbatim and Hitachi (Dataproducts) ensures the respectability of a parallel consumables sector that is far removed from the garden shed ‘drill and
fill’ operations of a decade ago.

‘The most used consumable is the black toner cartridge for mono printers,’ says John Purdy, ‘ and there is simply no reason why any organisation should hesitate to use compatibles – there will be no
impact on quality of print and mechanical quality is comparable to originals these days. But there will be an impact on the bottom line.’ Ergo uses its compatibles range in most of its managed print
contracts, including the prestigious Microsoft European Business Campus in Sandyford. On the other hand, he does concede that colour laser print is a newer technology and the toners are not yet
commodity items: ‘Quality results do depend on genuinely complicated chemistry and interaction between the colours.’

This is the standard and broadly convincing rationale put forward by the printer manufacturers for using their supplies exclusively and also in justifying the relatively higher costs of OEM
consumables. ‘The key to the constantly improving quality and reliability of our printers and their output is the technology,’ says Richard Baylis of Epson. ‘In colour, as in all laser printing, the
quality and uniformity of the micro particles is all-important in creating a sharp, vivid and consistent image on the page. In recent years the introduction of polymers has improved print
quality and reduced the load on the fuser and drum. In inkjets, our new Durabrite inks ensure long life waterproof images as well as top quality. But also the printers and their toners or inks are
designed to work together – reproducing colours accurately, for example, depends on the precise interaction of all of the elements.’

Paper quality
All of this is certainly true, especially as applied to those printing tasks where faithful reproduction of colour images is required – photography being the top end example. So Epson’s use of six
colours for photo quality inkjet printing undoubtedly improves image quality. But in photo printing the paper also makes a great contribution to best quality results. Colour laser is still not comparable for photo reproduction but again, for smart business documents – presumably the primary reason
for the investment – the quality of the paper has a major bearing. So quality colour printing, whether by inkjet or laser, demands paper to match the potential of the printer. Economising on any
of the elements may well defeat the object of the exercise, just as in photo printing it certainly will.

Plain old mono laser, on the other hand, produces perfectly acceptable results for routine jobs on cheap copier paper using compatible cartridges. Any output quality differential, as generally
claimed by the printer manufacturers, is going to require comparison on best quality paper to be discernible to ordinary users. As with other consumables, negotiated bulk purchasing will certainly
save money

Jamie Gryce, head of supplies in the Hewlett Packard Imaging and Print Group for these islands, makes another point for OEM consumables that does bear serious consideration: ‘It’s not just the
output quality, although we certainly claim best performance when HP printers are matched with HP supplies. Reliability is an issue, because toner cartridges for example have mechanical elements
that demand strict QC measures in manufacturing. Think about it – one failure leading to a service trip by an IT person could simply negative all of the notional savings by using third party products.’
Even accepting as he does that HP products can – very occasionally – have a failure, his claim that the likely incidence is much lower is pretty hard to refute. ‘It’s not that we are ‘against’ compatibles, apart from obvious market considerations. It’s simply that our products are scientifically designed and manufactured to work in combination and their quality is guaranteed, so
to get the performance you paid for it is logical that you should follow the specifications.’

This is a view that is endorsed wholeheartedly by David Laird, managing director of Datapac, an Irish solutions company with a particularly strong business in printer and supplies sales but also in
print management through its Printpac service. ‘The real costs arise when something goes wrong.
‘We stick to the OEM supplies for our managed service and advise our customers generally to do the same. I agree that it may be conservative, but we believe that in the longer term it is a better policy with fewer problems and more output from any given volume of consumables. It really is not so much an issue of print quality as of maximum uptime and minimum intervention required. Put it
this way – there are enough problems in business already without risking any more for a money difference that is really not all that great.’

It is understandable that the international market leaders in printer manufacturing like HP and Epson are the most targeted by compatibles – you can buy an alternative supply for HP models almost as soon as they are released. Oki is less bothered by compatibles as an issue, particularly in Ireland where it holds a higher market position than in most other markets. Sales manager Martin Deignan says: ‘It’s up to the consumer at the end of the day. Our experience has been that customers tend to come back to OEM, partly because the same quality really is not there – and also because in our case we are happy to claim that any price advantage is just not that significant.’ 

Shop around
His advice to consumers echoes others: ‘Shop around for the best price, negotiate, remember that many models allow for higher capacity cartridges – which do make a difference in keeping down
the cost per page.’ Like the others we spoke to, Martin Deignan points out that the first point of control of consumables is administrative – controlling who prints what and on what. Colour laser printers are a potential worry: black printing on them is no more expensive than on comparable mono printers but users’ enthusiasm for colour can run away with costs. Like HP and others, Oki offers network print management software to help in controlling usage. One simple solution is that with a shared colour laser, the printer driver installed on most PCs can be a mono version so that only authorised users have a driver to access the colour capability. This is a much simpler approach than PINs or swipe cards or other more elaborate controls.

Knowing what to be aware of is clearly important in controlling the costs of consumables, but it has to be accepted that the most significant factors actually begin much further back. It is not particularly to do with which models you invest in or the appropriate TCO calculations, although making comparisons is always good. Cost control really depends on the whole management approach to the print function, the choice of strategy (which covers equipment and how it is deployed) and above all in the daily disciplines and controls on printing. This year, the sale of toner cartridges world wide will top US$19.8 billion, according to imaging industry specialists Lyra Research. Good luck to the vendors of printers and consumables (OEM and compatibles) but let’s not give any of them any more revenue than we need to.

31/05/04

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