Updated: Oct 20, 2019
Perspectives of HP's (HPQ) Printer strategy.
For better and worse the HP imaging community and devices have operated similarly to open source technologies. Everyone had a shared interest the success. Since everyone benefited from a strong HP everyone helped the OEM in their own ways to make sure HP succeeded. With so many people and companies linked with HP's success, the rising tide effect lifted all boats until it stopped working.
HP announced it plans to begin phasing out discounts for printer models that are capable of using non-HP supplies, while retaining the subsidies on models that only work with HP-branded supplies.
This strategy is hard to digest without all the details and price points however I don't know how the net result for them differs from discounting they are doing now. Since many of these devices are already on the high end of the spectrum. removing subsidies may worsen device placements and the 60% or so of supplies business, they retain now.
Contractual managed print service vs transactional business
Transitioning between these business models at the same time is a huge undertaking. They are two opposing forces working against each other. It appears they are in the middle of the transition right now. It's a complicated process which is why they have a long runway opting for a multi-year rollout program.
As an outsider, my guess is the transactional business is still the lion share of revenue right now. It makes sense to move as much as they can from one side of the spectrum to the other before the final push.
Even with the price break on the hardware on the front end, it is still difficult to see how they will compete with 3rd party service, wrapped in 3rd party MPS, utilizing aftermarket supplies.
Another important point about this strategy is it may set them up with a confrontation with their customers or dealers that are looking to "enhance" opportunities as capitalists often do. If companies go outside for 3rd part imaging supplies will it be challenged by HP? If so how? Some historical Lexmark programs had similarities that could offer some insight.
From the Aftermarket Service Perspective
HPs decision to close of the ecosystem is having a chilling effect on service side recommendations for hardware placements. The changes over the last 24 months have forced many dealers and their printer service technicians to choose sides. We have seen more dealers looking for other OEM partnerships like never before.
The Printer Supplies Industry Has Thwarted Many Attempts by Manufactures
Keyed Toner Cartridge Configuration
Firmware Kill Switches
Integrated Circuit Chip Defenses
Page Count Reset measures
If what is separating the managed print service devices and transactional business devices is a part number it won't take long to discover printer model interchangeably. Let's not forget all these marvelous device defenses come with an added cost to every customer, not just the ones using 3rd party supplies.
I was chatting with a service leader and industry icon and he pointed out to me Xerox has probably had the best-managed program and keeping customers to stay in the program but it's not perfect. Essentially HP is moving toward becoming a copier like OEM.
Outlook for Printer Supplies Industry
Overall reduced device placement but taking share away from overseas device manufacturers. HP and Xerox look to be taking advantage of their nation's favorite position which could make them dominant in the security-sensitive enterprise as well as Gov and Healthcare markets. The blackberry of printing if you will.
I am optimistic about the outlook for HP not as an investment but as one of the last manufactures standing that will make it through to the other side. It will be a bumpy road and I am not sure the path they will ultimately take to get there.
This go-to war strategy is targeting companies that are not operating as a for-profit business. One could argue some of these companies are a jobs program for nation-state enterprises.
On the other side of the spectrum are private equity-backed companies with highly leveraged debt which many just want to get through 2020. Highly Leveraged Zombie Companies Threaten the Global Economy
Ultimately it may come down to who has deeper pockets and who can endure the pain more. We would love to hear your comments below!
Now It’s Your Turn…
I hope today’s post created some thoughts on HP's strategy
Now I want to turn it over to you:
Will it work or fail?
Either way, let me know by leaving a comment below right now.
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