Special feature: Multifunction comes into its own

Office World News, Oct 1999 by Tepper, Barry, Martin, Cathy

The MFP market continues vigorous growth at 32 percent annually.

In this high-tech world where buzzwords and acronyms are popular, it is easy to become confused and bewildered trying to sort it all out. In the imaging world, the term MFP is being used more than it ever has in the past. MFPs are multifunction products that combine two or more functions into one unit. The functions can include printing, copying, scanning, and faxing. There are several advantages: several single function units that take up considerable space may be replaced by only one unit. There is usually a dollar savings in purchase price, as well. Finally, with an MFP there is only one set of supplies and one service contract. All these considerations can be appealing to businesses with limited space and tight budgets.

The U.S. market for MFPs had vigorous growth from 1997 to 1998, with a 32 percent increase in placements and more than 2.8 million units sold. In 1998, equipment sales revenue was $3.6 billion. This growth is exptect to continue with the market holding steady at 32 percent per year. In 2003, the market is projected to be $12.1 billion in hardware sales with 11.1 million unit placements. Service and supplies will account for additional revenue. The forecast for 2003 shows that out of the 2 million copiers sold, 42 percent will be MFPs. Of the 35 million printers sold in that same year, 23 percent will be MFPs. MFPs on the fax side will be significant, making up 71 percent of the 3 million fax machines sold in 2003.

Currently, MFPs are marketed with one prime function and one or more secondary functions. This is usually a marketing position only, as the functions are usually well balanced. However, because of the vendor's reputation or the kind of reseller channel, it may be better to pick one or another of the machine's functions as the prime function. Thus, MFPs made by a company known for copiers, and sold through copier dealers would likely be positioned as copier-based MFPs. The same considerations go into positioning other MFPs as fax-based or printer-based.

The strong trend for convergence in office equipment will eventually force convergence in reseller channels as well. At that point, prime function will fade in importance in the MFP world. Even now, if you shop in an office superstore you will see many different MFPs in the "All-In-One" aisle. From the manufacturers' perspective, some of these machines may be printerbased; others may be fax-based. But the buyer doesn't care. S/he simply picks the one best suited to their needs. This trend will continue, and prime function will virtually disappear.

SEGMENTS BY THE NUMBERS COPIER-BASED MFPS

In 1998, black and white copierbased MFPs gained a lot of ground with a 266 percent growth in units. Color copier-based MFPs lost some penetration (-7 percent) on modest unit growth. For printer-based MFPs, black and white models took a backseat to color as many new color models were introduced. Color printer-based MFPs jumped 49 percent in unit growth. A mixed bag for fax-based MFPs with no change in black and white model placements but color fax-based MFPs growing 39 percent in units.

In the future, CAP Ventures expects that 47 percent of all black and white copiers will be copier-based MFPs. Color copier-based MFPs also have a bright future with the prices of tonerbased systems decreasing and significant improvement in inkjet speeds and faster-drying, more permanent inks.

PRINTER-BASED MFPS

On the printer-based MFP side, lowend color inkjet units will drive this segment with HP and Canon as strong players. Compaq and Epson recently entered this area, and we expect Lexmark, Xerox, and other players to enter soon. We also expect that there will be inkjet and tandem (4-drum) toner products coming along as well to serve the workgroup and departmental market segments.

FAX BASED MFPs

For fax-based products, the black and white segment will have flat growth in personal products while lower prices and increased functionality will drive the workgroup products to greater heights. Features including Super G3, LAN servers, and Internet fax will all contribute to growth. For color faxbased MFPs, all machines have been personal to date, with inkjet technology driving the segment.

Color is implemented on MFPs in various ways. It can be confusing to refer to any MFP as being a "color machine." Just what does "color" mean, when you have three or four functions on a single machine? Therefore, regardless of the technology or the prime function, we refer to Cl, which means color only on the print function; C3 which is color on the print, scan, and copy functions; and C4 which is the same as C3 but adds color fax (according to the ITU-T T.30e standard).

WHERE IS THE MARIA' HEADED? The markets for single function printers is measured differently from the market for single function copiers. The same is true for single function fax machines. Because MFPs cross those traditional market lines, we must look at the MFP market in a way that can include the single products as well. Therefore, we divide the market into three user environments: Production, Workgroup, and Personal.