What a Difference A Year Makes

When printCafé made its striking debut a year ago at the On Demand Digital Printing & Publishing Strategy Conference and Exposition in New York City, no fewer than 69 other printer-targeted dot-com companies shared the same show floor.

But at this year's show, Pittsburgh-based printCafé represented only a handful of such vendors in return attendance. At a press conference during the show, printCafé co-chief executive Marc Olin nonetheless offered assurances, saying, "printCafé will certainly see its way through the current rough times in the economy and in this sector."

The company, he said, was reporting good financial health, with more than $115 million in funding secured this year. Olin added, "As e-commerce starts to roll out throughout the printing industry and the new technologies of content and commerce merge and intertwine, we expect to be a critical player."

A day earlier, word had spread that Impresse of Sunnyvale, Calif., one of the biggest and most name-recognized of the fledgling print e-procurement sites, laid off 60 people, dropping its work force count to 80. Competitor Noosh, based in Palo Alto, Calif., dismissed just about the same number the month before.

By the show's end on March 2, Printable, a Web-based printer-side solution headquartered in San Diego, announced it had reduced its employee ranks by 25%.

"What a contrast to last year," observed Oliver Pflug, chief executive of San Francisco-based printChannel.com, one of the remaining print e-procurement dot-com exhibitors at the show. "Sanity is back in vogue."

Asked about printChannel's branded e-procurement application licensed to printers and how the company's business model differed from others, Pflug reported a decided shift in the awareness level of printers and print buyers about e-commerce as it applies to their industry.

"Awareness level was in a marked contrast to other shows I've been to in the last year, including the Drupa show in Germany in May and the Graph Expo show in Chicago last fall," Pflug reported. "People know exactly what they want from e-commerce and, no, Virginia, it's not purported cost savings. They are much more aware of, and interested in, systems integration issues and process automation. They're looking for vendors that are innovators, presenting new ways to serve customers, improve margins, and beat competitors on something other than price."

Last month, State Street Consultants, a Boston-based industry research firm, released the second part of its study, "Expanding the Digital Path: E-Commerce in the Printing Industry," summarized from interviews with 197 buyers and document creators.

The message was that print buyers, some of whom think that adopting an e-commerce solution would require leaving their current printer, are amenable to trying a Web-based service, if their printer were to recommend one. Ironically, the first part of the study found that printers were waiting for their customers to demand an on-line solution.

"Among print buyers, their openness of attitude is dramatically different when asked if they'd go with an Internet solution proposed by their printer than when asked if they'd consider pursuing a middle vendor," says Randy Davidson, founder of the graphic arts portal, WhatTheyThink, Lexington, Ky., which regularly polls print buyers on industry issues. "Clearly, print buyers are open to e-commerce but they're not going to make a move until their printer recommends that they go that route."

Davidson adds, "With both parties kind of waiting for the other to come to the table, it would appear that a competing printer now has a very compelling reason to approach a buyer using this message: 'We have everything your printer has, but we also have a way for both of us to collaborate over the Web and make your job easier.'

"It seems to us that this approach could be successful in the near future and serve as a major point of differentiation."

Consultant Steven Schnoll, a 30-year veteran in the printing industry, argues that many of the failed or faltering dot-coms lost out simply by not proving that they had a sustainable value proposition.

Schnoll reasons that once the "second wave" of e-nabled business arrives—and virtually everyone agrees that it is coming—printers' livelihoods will be dependent on their ability to show a price/value relationship that extends to the Internet. He points out, "In the printing industry, the 80/20 rule, which says that 80% of the business comes from 20% of the accounts, is law."

Among the looming threats for printers are ones posed by companies like ImageX.com, Inc., a six-year-old Kirkland, Ore.-based firm that has been steadily and quietly expanding its business.

The company, which generated $50.7 million in revenue last year and employs 800 people, has positioned itself as a "sole-source vendor" for automated printing services. Its Corporate Online Printing Center, targeted at Fortune 1000 accounts, is said to be dedicated to handling the workflow process from design through delivery and management of branded communication materials.

At the On Demand show, ImageX announced a strategic alliance with Ikon Office Solutions whereby Ikon's Digital Express 2000 Web-based management, production and distribution center, in combination with ImageX's on-line center, would be offered to both companies' e-procurement customers.

Explains ImageX chief executive Rich Begert, "We take responsibility for the product all the way out to the end-user, which quite frankly is what we think the customer wants; otherwise, we'd just be an electronic broker, and many corporate customers don't want to deal with a broker. They want to deal with someone who has responsibility for the manufacturing.

"We think our approach is unique since nobody else is telling accounts, 'We want to be the supplier of your product and we've got this wonderful interface.' "

Begert admits, "Our challenge is to revise the status quo, to sever the existing relationship with the printer. Typically, the print buyer has been dealing with the print provider for a long time; they go to Yankees games together. Many times we'll go in to gain an account and they'll say, 'But can't I use your system and use my printers?'

" 'Well, sorry,' we tell them, 'but you can't.' The problem is what happens when something goes wrong with the printed item."

It is this difficult prospect of breaking into or breaking up existing relationships between printers and their customers that has convinced his company and other Web-based procurement solutions that the best approach is to "piggyback" on those relationships, according to Pflug of printChannel.

"Basically we use the printer as a sales organization for printChannel," explains Pflug, who adds that printChannel recently surpassed the 500 mark in the number of corporations set up with its configurable on-line service. "We based this approach partly on what we've observed in the market about print distribution channels and what we know about the difficulty and expense of trying to fundamentally alter the relationship between printer and print buyer."

Yet another approach is one taken by SmartWorks.com, Inc. (launched last summer as a subsidiary of Standard Register, Dayton, Ohio), which has positioned itself as an application service provider (ASP) offering a print management and e-procurement end-to-end open platform marketed exclusively through value-added channel partnerships.

Like printChannel, SmartWorks emphasizes maintaining already established relationships between printers and their corporate clients. At the On Demand show, SmartWorks announced a strategic alliance with Houston-based Consolidated Graphics, Inc. by which print buyers, using the SmartWorks e-procurement platform, would have access to the Consolidated Graphics national network of 60 locally managed print facilities located in 25 states.

"We've taken a very traditional approach in which we don't have any customers—the printer does," explains Jeff Allen, vice president of sales and marketing for SmartWorks, which is based in Miamisburg, Ohio and generated $117 million of Standard Register's print revenue through November of last year.

Allen adds, "As people in the printing industry know, there's a lot of cultural stuff in the process, which we recognize and aim to hold on to. Very simply, a customer wants to go visit the printer, have a cup of coffee, sit and talk, and look at the press. And then they want to run a proof."