The Future of Print & Mail in the Transaction Market · 00000000 1 CAP Ventures, Inc. T600 Cordwainer Drive T Norwell, MA 02061 T Phone 781-871-9000 T The Future of Print & Mail in

CAP Ventures, Inc. 600 Cordwainer Drive Norwell, MA 02061 Phone 781-871-9000 www.capv.com00000000 1

The Future of Print & Mail in the Transaction Market

Charles A. Pesko, Jr.

Managing Director

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CAP Ventures & InfoTrends

InfoTrends Joined CAP Ventures Team in May 2002

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What Makes CAP Ventures Unique?

Focus

Depth

Experience

Largest consulting and research firm in the Business & Visual Communications Industry

Highly experienced staff:

average 15+ years

Global presence: United States,

Europe and Asia

Low client to analyst ratio (10:1)

in the industry

Direct access to analysts

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Practice Areas

Services

Digital ImagingDigital Photography TrendsImage Scanning TrendsInternet Imaging Trends

Workflow andContent Management

Dynamic Content SoftwareNetwork Document solutionsProduction Workflow Solutions

On Demand Printing & PublishingDigital Peripherals SolutionsVisual Communications Technology

Output

Supplies

Services Production Workflow Solutions (Document Outsourcing)

Communication Supplies

Teams of industry analysts that track the market and help clients with their product and business strategies

Consumer Corporate

Office Production

xxx

x

xxx

x

x x

x

x

x xx

x

x x

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Multi-Client Studies

The New Corporate Print Customer: A Profile of a Market in Transition

The Future of Paper

The Future of Photoprinting

European Digital Camera End User Study

The Future of Mail and Transaction Documents

Print On Demand Quarterly Market Data Tracking Program

Narrowcasting in Public Spaces – The Outlook for Digital Signage

The Next Generation Digital Color On Demand Printing Opportunity

Just Announced

Just Announced

Just Announced

Just Announced

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Private-Client Research Services

Combining industry expertise with market research services

Working with individual clients on specific assignments

Market opportunity assessmentBusiness plan developmentProduct/service concept testingCustomer requirementsBrand awareness

North America, Europe and Japan

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April 7 to 9, 2003 in NYC

The world’s premier event for digital solutions in printing and publishing


Does a Data Center and Transaction Print Market Exist in the Future?

Charlie Corr

Group Director

Xplor 2002

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The “Data Center” Environment

Data processing in the CAPV forecast specifically refers to the digital printing functions that support computer-based information processing tasks

Most of this printing is for “mission critical” functionsEstablishments include in-plant data center print departments, data center service bureaus and direct mail firms

These processes take advantage of printers with the primary function of printing host/mainframe data

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CAP Ventures Forecast Category Overview

Direct-to-Press

ProductionProcess Color

ConvenienceCopier/Printers

ProductionSpot-Color

Color

High-Speed

Mid-Range

Black & White

Print-on-DemandSystems

Color

High-Speed

Mid-Range

Data Center/MIS Printing Systems

Segment 570+ cpm

High-SpeedCopiers

Production Copying & Digital Printing

ProductionSpot-Color

ColorServers

Black & White Black & White

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The “Data Center” Environment

Predominantly B&W outputA high level of “roll-fed” equipment placements

The only real current market for digital spot/highlight color

Historically lower print output resolutions

Historically higher implementation of automation

The province of pre-printed forms

A market controlled by 3 vendors IBMOcéXerox

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Recent News

At Xplor Océ announces a common brand for products that will be sold into the POD & Data Center environment

End of “DemandStream” and “PageStream” brandingXerox is focused on a “common controller”IBM is providing technology applicable to both markets

The Data Center market is in rapid decline while the POD market continues to grow

Growth in the POD market is due to the decline of analog copying, offset printing and the convergence of applications

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The Print On Demand Environment

The print-on-demand environment includes devices with the primary function of printing page description language (PDL) files or scanning a document and outputting multiple originals

Print and deliver:WHAT you wantWHEN you want itWHERE you need it

Digital automation of the graphic arts printing process

Convergence of computing, communications, color, and printing

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What Does the Future Hold?

The base technology has been the same for some timeEnd user requirements in both environments are similar

600 dpi, support for PDF, PostScript

Sales productivity requirements may force vendors to consolidate selling effortsTraditional margins in Data Center environments for equipment providers are under stress

Mid-range & light volume equipmentEntry of new players (e.g. Heidelberg, Konica, SDP, etc.)

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“Where there is mystery, there is margin.”

CAP Ventures

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Why Will the Data Center Environment Remain Viable?

For the foreseeable future, the application mixes are still very differentEffective selling for vendors requires vertical market knowledge It benefits the incumbents to continue to focus on the specific needs of this environment

It will mean lower margins or lower market shareAll knowledge has a price

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Data Center Print Volume by Applications

Source: CAP Ventures, all technology in Data Center, B&W in POD

Other business correspondence

7%

Statements & invoices with no

checks23%

Checks9%

Policies or contracts

11%

SYS Out 18%

Direct Mail20%

Manuals/Directories/Other Pubs

12%

Books/Course Material

21%

Business Correspondence

13%

Financial/Legal15%

Manuals/Tech Docs13%

Direct Mail11%

Forms6%

Reports4%

Directories4%

Other4%Statements &

invoices with no checks

5%

Newsletters4%

Data Center POD

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TIME

IntroductionIntroduction GrowthGrowth MaturityMaturity DeclineDecline

The Changing Print Technology Market

Data Center Print Data Center Print B&W Print On DemandB&W Print On Demand

Production Digital ColorProduction Digital Color

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The Future of Print & Mail

Transaction documents are moving more quickly to the webDirect Mail remains a growth application that the Data Center and POD will vie for

What skill set best delivers the requirements for data and graphics?

The decline in transaction volume and SYS OUT will force a higher level of convergence

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Conclusions

The two markets are distinct enough in terms of installed technology and applications to still be considered separate environments

Increasingly the technology will be positioned as common for both environments

The commonality of technology and the movement towards “Super–Efficiency” can profoundly change the competitive equipment market

Existing vendors must cut margins and offer common solutions

New vendors must learn what makes this particular vertical market tick


Thank you!


Forecasting Print in Data Center Environments

Ron Gilboa Director, On Demand Printing & Publishing

Service

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Data Processing Market Trends

Remains a large market opportunity but with limited growthPrint volume is declining, but still substantialDisplacement of aging installed base

Continued margin pressures

Limited penetration of full color solutions

Few new establishments

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Data Processing Market Trends (continued)

Equipment capabilities outstrip market growth

Distributed printing and electronic viewing capture pages though the bulk of pages are still produced in data centers

Growth applications support PostScript/PCL as new applications require support for graphically rich document components

Vendors’ resources are spent on improvements in existing product lines, workflow, and integration with feeding and finishing solutions

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Data Processing Challenges

The information “explosion” will not generate enough additional volume to offset pages lost to distributed printing and viewing

Technological improvements will be limited

If business models don’t adjust, volume and business will decline

As work becomes more graphically complex, skill sets must change

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Data Processing Market Summary

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2001 2002 2003 2004 2005 2006$0

$1

$2

$3

$4

$5

$6

Placements Retail Value of Print Total Annual Revenue

Total Annual R

evenues ($ Billions)

Retail Value of Print

Ann

ual U

nit P

lace

men

ts

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U.S. Market Forecast, 2001-2006Data Processing Growth Trends

1%

11%

5%

0%

3%

2%

-2%

-2%

-4%

-3%

5%

3%

10%

5%

5%

-10% 0% 10% 20% 30% 40%

Placements

Year End InstalledBase

Annualimpressions

TOTAL annualrevenue

Retail value of print

DC MR BWDC BW HS DC SPOT

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Data Processing Average Installed Base by Product Class

0

10,000

20,000

30,000

40,000

50,000

2001 2002 2003 2004 2005 2006

DC Spot Color High Speed Roll Fed 80+High Speed Cut Sheet 80+ Mid Range B/W 40-79

Ann

ual U

nit P

lace

men

ts

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Annual ImpressionsU.S. Data Processing Production By Product Class

0

50

100

150

200

250

300

350

400

2001 2002 2003 2004 2005 2006

High Speed Cut Sheet B/W High Speed Roll Fed B/WSpot Color Mid Range B/W

Impr

essi

ons

(Let

ter)

in B

illio

ns

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Data Processing Mid-Range B&W Data Processing (40-79 ppm) Trends

Decentralized printing and electronic report distribution continue to impact this market

New products benefit from print engines with:Duty cycles between 200,000 and 500,000 impressions per monthAggressive equipment pricing

Xplor showingIBM Infoprint 70 Plus

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Data Processing Production High Speed B&W (80+)Trends

Placements in this class continue to drop, but it still remains a large market for supplies and service

A new generation of ultra-high-speed products enters the marketLow page costOptional process or spot-color capability

New players with mid- to low-volume cut-sheet printers are successfully entering the market

Xplor showingHeidelberg MICR for DigiMaster productsHitachi new technologies based on the 92 ipm engineIBM Infoprint 4100 with 1220 ipm (2-up Duplex)Océ new product lines

VarioStream 7000 up to 1273 ipmOcé VarioStream 6100 Océ VarioPrint 5115 and 5160

Xerox DocuPrint 500, Xerox 1010 (pre Xplor)

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Data Processing Spot Color Trends

New product that support hybrid printing of spot colors will boost placements during the out years of the forecast

Ability to upgrade monochrome equipment is important

The limitations of the technology make this a niche market, despite interest in spot color output

Most vendors with roll fed systems enabled Spot color using interchangeable developer stations

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On The Up Side

Data centers are the cornerstone of the personalized printing and One-to-One communications market

Leveraging technology to add value to printed documents will augment electronic document viewing and promote growth

Vendors seeking growth in this segment will provide better faster and colorful output at attractive cost matrices

While leveraging their resources Data Centers and In-Plant print centers as well ad Data Center Service Bureaus can become active players in the POD market space

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In conclusion

New opportunities require new business approach

Technology supports the new approach

Convergence bring markets together

Customers benefit from convergence

Resistance is futile


Thank You


Beyond ADF...The Super-Efficient Organization

Holly Muscolino, DirectorProduction Workflow

Solutions Service

October 29, 2002

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Your Customers: The Pain is Real

Productivityrequirements

Distributed workforce

Globalizationrequirements

Manualprocesses

Legacysystems

Content explosion

Securityrequirements

Disparate pointsolutions

Isolatedworkgroups

Inefficient communication processes with all stakeholders!

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Paper is No Longer the Medium of Choice

Artwork courtesy of Adobe Systems

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Business Documents Must Be Distributed Via Multiple Media

ScreenScreen

ProductionProductionPrintPrint

DesktopDesktopPrintPrintPDAPDA

Cell PhoneCell Phone

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Corporate Requirement: Integrated Information Delivery Tools

Communicate with customers in a high impact, personalized way

Customer retentionGrow share of customerRecognize valuable customers

Output consistent messages to multiple distributed devices and multiple customer channels

Utilize both print and electronic mediums with attributes desired by the reader such as color and graphics

Comply with legal and regulatory requirements

One product to support multiple applications

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Requirement for More Effective Document Production

Distribution via multiple channels

More individualized, targeted

Cleaner, easier to understand

More marketing appeal (i.e. color, charts, graphics)

More consolidated

. . . all while increasing turnaround and reducing costs

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Review of ADF Concepts

Input module – Where data and transformation instructions enter the ADFVariety of sources including electronic forms and data from a mainframe

Transformation module – Where the document is producedIncluding traditional printing, print-on-demand, CD-ROM production, output to the World Wide Web and online viewing

Delivery-preparation module – Where documents are prepared for delivery to the recipientIncluding inserting, mailing, packaging

Control and reporting module – Manages the production aspects of the ADFIncludes inventory management, document tracking, production control, cost estimating, real-time equipment status monitoring

Interfaces are standards that hold the ADF together

Source: Gartner Group

Control and Reporting Module

Input Module

TransformationModule

Delivery-preparation

Module

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Market Convergence

ManufacturingBased

Paper

PressDuplicatorsCopiers

Craft/Trade Computer/Technology

Industry

Media

Tools

Skills

ComputingPrinting

Contenton

Demand

ServiceBased

Electronic

ComputersNetworks

Databases

PostScriptLanguages Datastreams

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Technology Convergence

Offset and digital

Transactional and print-on-demand

Production printing and distributed print

Print and the Web

Merging of different systems into a single collectively managed system

“Convergence means document-based communications strategies must focus not only on the devices that are used to communicate but also on the information being communicated, who the senders and receivers are, and the values conveyed by the communications.”*

* Source: Keith Davidson, founder and former president of Xplor International

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Functional Convergence

Mail Operations

Marketing

Call Center/Customer Support

Web SiteManagement

InformationTechnology (IT)

Administration

Print/Finish

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What is a “Super Efficient” Organization?

A “super efficient” organization means:Internal processes function with rare interruptions and few errorsLittle data is re-keyedFunctional areas collaborateThe organization provides its stakeholders an integrated end-to-end solution, sharing processes across the supply chainCommon data and document repositories eliminate duplication of effort, time and cost while providing higher levels of serviceThe Web is used as a common business tool

Achieving “super efficiency” will allow organizationsto exhibit and reap the benefits of market leadership

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Super-Efficient Workflow

Document Creation Document

Distribution(print, Web)

CustomerResponse

UpdateCustomer

Data

ITAdministrationSales/Marketing

Customer ServicePrint/Finish/Mail

Document Production

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End-to-End Processes for Efficiency and Effectiveness

Production Processes

Business Processes

Real-Time CommunicationSuppliers Customers

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Web Portal

CommercialBank

ApplicationOutput

Hard CopyProduction

Control &Reporting

D3

BillerInformation

Systems

•Bill Generation•A/R

•Cust. Service

E-Mail Notification

On-Line Bank

Consolidator

BillerWWWServer

Presentation

StatusPosting

Print Regeneration

TransactionsConsumer

Bank

Funds Clearing

Example: Digital Document Delivery (D3) Capabilities for EBPP from Pitney Bowes

©2002 Pitney Bowes, Inc. All rights reserved.

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Example: Pitney Bowes’ Strategic and Cost Benefits

Improved Customer SatisfactionSingle view of Pitney BowesOffers customer more choicesImproved access to account informationReduces customer transaction costs

Improved Revenue OpportunitiesImproved data capture on customer behaviorTargeted marketing campaignsCross-selling through enterprise view of Pitney BowesEnhanced customer relationships!

Transaction SavingsPostage, materials, remittance processing fees$0.63 per transaction assumed in analysis

Float BenefitPBCC realizing 20 days benefit during 700 customer pilot10 days assumed in analysis

Reduction in Call Center VolumeBilling, leasing calls30% reduction in billing-related calls assumed in analysis, at $2.48 per call


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Breakdown of Incoming Billing CallsInvoice Inquiries: 36%

MSD Rental 18%Supplies 4%EMA 4%Needs Copy of Invoice 3%Late Fees / Terms and Conditions 2%MSD Equipment purchase 2%Service 2%SoftGuard / PROM / CD / Rate Card 1%Customer Has Multiple Sites - Bill is Confusing 0%Parts 0%

Dispute Charges: 11%

Customer Acct Maint./Unsolicited Payment Transactions: 27%

Misdirected Calls: 17%

Collections / Return Calls: 9%

Total 100%

Example: Pitney Bowes’ Breakdown of Incoming Billing Calls


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Example: Pitney Bowes’ ROI Analysis (Base Case)

Benefits Yr 1 Yr 2 Yr 3 Yr 4 Yr 5Float Benefit (GMS) 70,685 141,370 212,055 282,740 353,425Check Processing Savings (GMS) 100,832 201,663 302,495 403,327 504,158Call Center Savings (GMS) 31,985 95,956 143,934 191,913 239,891Call Center Savings (PBCC) 24,064 72,192 108,289 144,385 180,481Call Center Savings (PbP) 7,146 21,439 32,159 42,879 53,598Total Quantifiable Benefits 234,713 532,621 798,932 1,065,242 1,331,553

CostsUp-Front Costs 1,076,607Maintenance & Support 95,655 95,655 95,655 95,655 95,655Total PBI Costs 1,172,262 95,655 95,655 95,655 95,655


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Example: Pitney Bowes’ ROI Analysis (Base Case)

Summary of Results Yr 1 Yr 2 Yr 3 Yr 4 Yr 5Pretax Cash Benefits 234,713 532,621 798,932 1,065,242 1,331,553Depreciation Expense (206,880) (206,880) (206,880) (206,880) (206,880)Up-Front Expenses (non-Capital) (42,207) 0 0 0 0On-Going Maintenance & Support (95,655) (95,655) (95,655) (95,655) (95,655)Impact on Pre-Tax Operating Income (110,029) 230,086 496,397 762,707 1,029,018Taxes (44,012) 92,034 198,559 305,083 411,607Impact on Net Income (66,018) 138,052 297,838 457,624 617,411

Depreciation Expense 206,880 206,880 206,880 206,880 206,880Capital Expenditure (1,076,607) 0 0 0 0Free Cash Flow (935,745) 344,932 504,718 664,504 824,291

IRR 42%

NPV (@ 12% Discount Rate) $688,769


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Example: Pitney Bowes’ Conclusions

Clear link between investments in the ADF & EBPP and the call center

Importance of capturing metrics on receivables, billing inquiries, billing status calls


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Benefits of a Super-Efficient Organization

Reduce transaction costs

Improved customer servicePresent a single view of customers across all departmentsEnsure that data is up-to-dateEnsure reliable deliver of dataMaximize all contact points with customers across all channels

Use customer data to enhance the sales and marketing process by tailoring messages based on past interactions


Thank you!

Holly [email protected]