Monday, February 27, 2012

Digital Services and the Reprographer

In the transcript of the ARC earnings-call last Tuesday, Suri mentioned ARC’s revenues from “digital services”…..

Our revenue mix for the fourth quarter had reprographics delivering roughly 51% of our overall revenue; Facilities Management or FM delivering roughly 25% of our revenue; equipment and supplies delivering approximately 15% of our revenue and digital services delivering roughly 9% of our revenue. The revenue mix for the full year of 2011 has reprographics delivering approximately 54% of our overall revenue; FM delivering roughly 24% of our revenue; equipment and supplies delivering roughly 13% of our revenue and digital services delivering approximately 9% of our revenue.

9% of $422 million is approximately $38 million. That’s a nice chunk of change, and, as most know, margins are generally higher on digital services than they are on “other” services reprographers offer.

Not too long ago, I put up a post on the blog about “charging for digital services”, and, in that post, I urged Reprographers, who had not already done so, to read the IRGA publication, “Digital Services and the Reprographer” – the IRGA’s “digital services guide” - which was published in the latter part of (I think) 2006. That publication was (and still is) an outstanding piece of work. Contains great ‘food for thought’ for reprographers, especially for those who have yet to begin charging for digital services. (That publication is not a short read, it’s about 20 pages long.)

The above-mentioned publication is available to IRGA members. (Membership in the IRGA is cheap!) For those of you who have yet to read this publication (or, for those of you who have forgotten what was said in that publication), here are a few of the paragraphs from that publication:

“There has been much focus on charging for digital services. As the market becomes commoditized and margins get squeezed, reprographers must find other ways to increase margins. Invoicing no longer shows only X number of prints at $.XX/sf, but rather services ranging from file manipulation to data storage and management. So many things we do are now invisible, and not easily seen by a customer. The best way to slow down the commoditization of our offerings is to establish that there is a value to each and every line on an invoice, and not having to sell on price alone.”

“Giving away digital services to get more printing is like burning your furniture to warm your house.”— S.“Mohan” Chandramohan

“Creating, explaining, and understanding the value of these services is one of the most important components of this new digital age. Sales people who cannot sell the value of these services will leave money on the table. Often, “old school” customers are the hardest to convince of the value of these services.”

“Some in our industry have suffered because sometimes new technologies we offer call for us to explain and sell the VALUE of the services that take traditional reprographers outside of a comfort zone.” — Casey Simpson

“At this point, we can say that very few reprographic companies are currently getting rich from digital services revenue. However, all digital revenue is a plus if you consider the alternative. Numbers range from 3% to 18% of total revenue coming from digital services.”

Now, I’d like to bring some closure to why I’ve put up this post. ARC’s mention of its digital services revenues was what provoked me to write this post. But, even reprographers who understand the importance of not giving stuff away, have, I suspect, not “fully implemented” charging for digital services. And, some of that non-action (or, should I call it “inaction” or “hesitancy”) is, I think, caused (or influenced) by “discussions” like this one …..

The other day, while doing some Google research related to the reprographics industry, I came across a blog-site known as “beyond the paper”, where there was a discussion about dwf files and reprographers who charge, or don’t charge, for processing dwf files prior to printing dwf files. This discussion took place back in 2006, so, yes, it is an old discussion. But, the thoughts expressed by the author of the articles is, I think, still relevant today, meaning that there are reprographers who charge for processing files (and not just for dwf files, but other types of files as well) prior to print, and there are customers who are aware that some reprographers charge for file processing (and for file-to-file conversion) and others do not. Frankly, I was somewhat amused by the fact that some reprographers, in 2006, were not charging for file processing (of all file types) prior to print, and I say that because 2006 was an incredibly strong year for all reprographers and, when there is a strong year, pricing-power comes with that. If you don’t use pricing-power when it’s there for the taking, shame on you!

Okay, here’s the discussion that I found; it is contained in several different posts and, below, I’ve provided links to each post (and I think they are in chronological order.) One of the links will take you to a document that is a chart that shows a comparison of different file types.

Comparison of Commercial Printing Formats

Comparison of Commercial Printing Formats

Why is my reprographer trying to charge me more for processing DWF files?

PLP Helps Our DWF Survey

Reprographers Who Don't Charge More for DWF: They're Out There

Okay, one last comment …. Above, I mentioned the IRGA digital services guide. It is a must-read for reprographers.

1 comment:

  1. I would be interested to see how ARC defines digital services. For example does this refer to revenues generated without paper changing hands. This would include such things as downloads, viewing and subscriptions.

    Or do they also include such things as scanning and indexing a paper original
    as preparation to a upload to their plan center. This leads to the next question, when a customer views a document and chooses to buy a paper print does this fall within their definition of a digital service ? this would have a dramatic effect on the percentage of revenues generated by the " digital " services. If I had to guess 9% would suggest no paper is involved with digital services revenue ?