Will Indian users chant the MFD mantra?

Come to think of it, it’s surprising that the office equivalent of the two-in-one music system took so long to become a reality. But now it’s here, and the multifunctional device has begun climbing the charts. 

Convergence, that mantra of the digital age, has permeated every aspect of technology, becoming the rule rather than the exception. The segment to benefit the most has been the small office home office (SOHO), especially with the convergence in desktop office productivity peripherals. The metamorphosis from analogue to digital technology has redefined the office experience. Canon, HP and Brother—among others—have totally switched from analogue to digital models. This means that the new document-handling devices can now be connected to a PC or network. The introduction of multifunctional devices (MFD) or all-in-ones has also seen significant reduction in operational costs, improvement in efficiency, and a boost in productivity which has benefited not only SOHO setups but also the enterprise segment.

The market for MFDs can be divided into three sectors: high-end, low-end and mid-range. Low-end devices are generally designed keeping in view the needs of the SOHO segment. These machines are typically built around a fax machine, but can be connected to a desktop for scanning and printing. They can also be used as a convenience copier for items that can be fed through the fax scanner. Mid-range MFDs are built around a small copier and connect to a computer for printing, scanning and faxing. High-end MFDs offer a lot of value-additions like sorting and stapling, besides high-speed printing. These machines combine copying and printing functions into a single unit.

What are MFDs?
Convergence in the desktop peripheral space means that several core technologies, including image scanning, document printing and fax signalling have been amalgamated into one entity. Depending on how they are combined, an MFD can perform several different functions. By connecting an MFD to a PC you can scan and print documents or images. Similarly, if you scan and then print the resulting image it can act as a copier. Likewise, by using fax software it can also serve as a fax machine.

The market for MFDs
Falling prices have ensured that an entry-level inkjet MFD today costs around Rs 15,000, which is less than half its cost two years ago a high-end model is available for Rs 40,000. This has resulted in the segment seeing robust growth in 2002. According to P G Kamath of Lexmark, the major driver for growth was the aggressive price points announced, besides product positioning. As in the case of stand-alone printers and copiers, even MFDs are available in two different technologies, inkjet-based and laser-based. The inkjets are targeted at the SOHO, small and medium business (SMB) and home consumer segment.

Says Nitin Hiranandani, country commercial category manager, imaging and printing group, Hewlett-Packard India, “The SMB segment requires two things—a smaller footprint and cost economy. Corporates, larger enterprises and even professionals like doctors and lawyers prefer laser-based MFDs as their need for copying and printing documents is much higher.” He goes on to add that though revenue from stand-alones is still higher than that from MFDs, the all-in-one segment has been growing four to five times faster than stand-alones.

Agrees Alok Bharadwaj, general manager of the systems products division at Canon, “This category has been doubling every year. Around 21,727 units were sold in 2001 of which 11,003 were inkjet-based while the rest were laser-based. Compared to this, around 47,499 units were sold in 2002, of which 29,268 units were inkjet-based.

This shows a growth of over 100 percent. At this rate, a total of more than 1,99,656 units will be sold by 2004, of which 1,54,535 units would be inkjet-based.” The slowdown in the growth rate of printers was also responsible for vendors pushing MFDs in 2002. Studies conducted by research organisation IDC predict that printer sales will grow at only 10 percent compared to 15 percent for scanners and 100 percent for MFDs.

Reasons for popularity
Optimisation of resources and maximisation of functionality are the basic reasons for going in for multifunctional devices. Elaborates Vinnie Mehta, director of industry association MAIT, “The main consideration for consumers opting for an MFD is optimisation of resources, which includes the total cost of the device and also the physical space which multiple number of stand-alone devices would occupy.” Agrees Tashi Gelek, managing director of BenQ, “MFDs provide consumers the convenience of many functions in a single device. This translates into benefits like space and also price benefits in terms of value for money.” The cost of an MFD is economical when compared to the cumulative individual cost of the products. The combined cost of a printer (Rs 3,000), scanner (Rs 5,000), fax (Rs 15,000), and copier (Rs 25,000) adds up to Rs 48,000. Compare this to an entry-level MFD, which has all the above features, and costs around Rs 15,000, thereby resulting in huge savings. Says Bharadwaj, “It doesn’t make sense for them to invest in lots of stand-alone devices, as MFDs provide them with both cost and space economy.”

MFDs also help save on space. Though this may not be a major issue for corporates, SMBs, SOHOs and home users hold space at a premium. Says Hiranandani, “Space cost is becoming more and more critical. Instead of four stand-alone devices cluttering your office, you have the option of a single device managing all your work.” Other than these there are certain cosmetic benefits: the need for multiple power cables and cords hanging loose at the back is also done away with, as a user requires only a single power cable and connection to the computer.Apart from the initial cost savings there are other benefits that accrue on buying an MFD. The cost of maintaining and servicing MFDs works out much cheaper than that of a stand-alone. Also, you can avoid the hassle of replacing cartridges and other consumables in four different machines since MFDs require only a single periodic replacement.

Another important factor is the reduction of customs duties. Earlier, customs duty for each stand-alone device was different; a printer and a fax machine fell under different duty categories. Stand-alone devices like fax machines and copiers were categorised under office automation devices, which fell under a higher tax bracket.

Though MFDs and other stand-alone devices are still considered office automation devices, the duty is standardised for all devices. This, according to Anand Kumar, country manager of Brother, has contributed a lot towards the gaining popularity of MFDs.

MFD vs stand-aloneOther than price, the cost of maintenance is the most important consideration for any consumer buying an MFD. All the vendors Express Computer spoke to agreed that with fewer machines, the consumer benefited from lower supply and maintenance costs because fewer consumables and service plans are needed. Says Kumar, “The total cost of maintenance for MFDs works out to be lower as the print engine is the same for copying and printing. A basic cost of 40 paise covers copying and printing whereas in a stand-alone device copying costs around 30 paise per copy and the printing cost varies between Rs 1-2.50 depending on whether a laser or an inkjet printer is used.” Another advantage is that since it is based on digital technology, an MFD can be customised as and when a company grows and its needs change.

Adds Kamath, “If one analyses inkjet printer sales, over 50 percent comes from entry-level inkjet products. This category will continue to grow as it suits first-time PC buyers looking for a value-for-money product to meet their basic printing needs. MFD is an altogether different category which will make printer and scanner bundles redundant as users will realise the total cost of ownership of standardising on MFDs as opposed to stand-alones.”

But when it comes to performance, MFDs, especially entry-level ones, are not always able to match the performance of their stand-alone competitors. Unlike its stand-alone counterpart, MFD printers cannot handle envelopes and labels; they also lack the variety of paper trays and fonts usually found in a stand-alone model.

As for copying, most low-end MFDs lack basic copier features such as sorters and zoom. Also, since most entry-level as well as mid-range scanners are fax-based, the image quality is not comparable to that of a stand-alone copier. (Most fax-based scanners only capture about 200 dots per inch). In terms of scanning, the resolution of an MFD is not as good as that of a stand-alone model; scans tend to be adequate for simple images and text, but poor for photos and other detailed images. Though MFDs function quite well as fax machines, their transmission speed and memory levels are still not comparable to those offered by a high-end stand-alone fax machine.

But both Bharadwaj and Kumar believe that the models available in the market today offer output quality comparable to any stand-alone model. Though this may not be true for entry-level models, Canon, Lexmark and Brother do offer quality products in the high-end segment. Says Kumar: “Special features are required only by certain industries. For instance, an advertising agency where use of photographs is extensive may not go for an MFD. So the features provided in an MFD device is not for extensive use.”

Mehta and Kumar disagree with this thinking. Says Mehta, “We have a huge unexplored market in India. This provides sufficient opportunity for everyone to co-exist.” Adds Kumar, “Though admittedly there is likely to be an overlap in the stand-alone devices market, it would not be more than 20 percent. MFDs have not cannibalised the market share of stand-alones abroad, so it is not likely to happen in India either.”With the proliferation of MFDs, what chance do stand-alone devices have in the market? Says Anish Srikrishna, country product manager, printer division, Samsung, “The rate at which the segment has been growing there is no doubt that it will eat into the market share of stand-alone devices—but this will take some time.” Agrees Anil Ambo, marketing consultant to Lipi Data Systems, “MFDs are bound to replace stand-alones sooner or later. Five years ago, stand-alones accounted for 90 percent of the market while MFDs accounted for around 10 percent. Today, MFDs have grabbed 25 percent of the total market, and this share is growing by the day.”

Disadvantages
The full potential of multifunctional devices is still unexplored as users are still unaware of the price and performance benefits that can be accrued by investing in these devices as opposed to a stand-alone device. Says Mehta, “Like any other new or advanced product, it is trying to vie for the consumer’s attention. Therefore the challenge is to educate the consumer of its advantages. With multi-products rolled into one, at times reliability levels tend to slip, so that needs to be taken care of. Being a relatively new offering, the industry and the channel will both have to gear up with technical expertise to provide the necessary support.”

Another disadvantage peculiar to an MFD is that in the case of a breakdown all the operations can come to a standstill. Says Srikrishna, “The category is very small and requires a lot of development activity. The sale of the product is demonstration-led, so demos are necessary. Also, a different distribution channel, willing to put in the extra sales effort, needs to be identified.”

Hereafter
The initial cost of the machine is still high as compared to a stand-alone product. Distributors feel that a drop in price would be the key driver for MFDs. According to Kumar, the MFD segment is likely to see tremendous growth in the next 2-3 years, as a result of which prices will go southwards. Ambo feels that due to increasing competition, vendors will pack in new features to provide value-addition to their customers. For instance, the next generation of MFD being released by Canon is expected to be an intelligent machine; rather than just being an MFD, it will become a communication hub, a link between paper and digital. Such products are even expected to have Bluetooth and other wireless interfaces. Meanwhile, the development of a polymerised toner by Konica is expected to vastly improve print quality and substantially lower the cost of printing.

Moving forward, the choice is clearly between selecting a stand-alone printer to meet specific printing needs or investing in an MFD to meet print, scan, fax and copy requirements. Attempting to save money by standardising on anything in-between may prove unwise in the long-term especially for the home and SOHO segments where users strive to maximise their one-time investments which they don’t like to revisit in the 3-4 years after purchase.

This article first appeared in Express Computer.