Mind your scaners

Office World News, Nov 2000

After a period of strong growth, the U.S. scanner market is expected to flatten out between now and 2004. Nevertheless, it's a market that office equipment resellers should keep an eye on.

Is anybody paying attention to the scanner market? The 1999 North American Scanner Market Overview, a joint report from InfoTrends and CAP Ventures yields some interesting insights and projections for this overlooked segment of the imaging market-at least in office equipment circles.

This market segment has been growing dramatically during the past five years. In 1998, the North American scanner market grew 76.3% over the prior year, and in 1999 it grew 46.5% over the previous year, according to the InfoTrends/ CAP Ventures report. However, North American scanner placements are expected to flatten by the end of this year and throughout the InfoTrends/ CAP forecast period. This year the market is expected to grow about 24.7% over 1999, and from 1999-2004, the market is expected to have a CAGR (compound annual growth rate) of 21%. By 2004 the installed base of scanners is expected to reach 74,378.7 from 31,398.4 today.

The scanner segment covered in the report is primarily mass market models selling for less than $300. These models are typically aimed at the general office and home user. These models encompass low-end flatbed units, sheetfed scanners that accommodate 8 1/2"-wide paper, network devices and MFPs. Surprisingly, the InfoTrends/CAP report notes there is no indication that MFPs are impacting the sales of standalone scanners. Yet, falling MFP prices should have an affect on the overall scanner market through 2004.

The InfoTrends/CAP report identifies a variety of technology-related issues that will contribute to the modest growth of the scanner market. Take the Internet, please. Photo sharing via the Web and e-mail and incorporating memberships to online photo communities while at the same time making scanning to the Web a much simpler process is expected to enhance the image of the scanner as an Internet imaging device. At the retail level, scanners will increasingly be bundled with PC while online distribution channels will also contribute to growth.

Meanwhile manufacturers are improving scanner performance. InfoTrends and CAP report that in 1999, 24-bit scanners virtually disappeared from the radar screen, replaced by 36-bit models. At the same time, these market research firms see more introductions of 42and 48-bit models, which will likely become the standard by 2002.

Similarly, the demise of the 300-dpi scanner seems all but inevitable by the end of this year. The InfoTrends/CAP report suggests that the de facto standard is already 600 dpi. But not for long as an influx of low-cost 1200-dpi models in the $200-$500 price range will soon be permeating the market. Contributing to the lower prices of 600 and 1200dpi color scanners is a new technology for OEMs, developed by Syscan that is expected to reduce costs by 2050%.

Interfaces are also facing off in the scanner market place. In the consumer and business markets, USB has pretty much made parallel interfaces obsolete. Coming soon, USB 2.0, which will reportedly offer higher transfer rates. In professional publishing environments, SCSI hangs on, although IEEE-1394 (aka FireWire) is showing up on more products and will eventually emerge as the standard interface on products aimed at the professional publisher.

Models utilizing contact image sensors (CIS) are on the rise with vendors, such as Canon, Microtek and Mustek marketing CIS models with more vendors following in their footsteps. According to InfoTrends and CAP, most scanners with a CIS are selling for less than $100 with the potential to sell for much less as new models draw their power from the interface port rather than a traditional wall socket.

Some scanner manufacturers seem to be paying closer attention to the vocal Mac user market introducing models specifically geared to the Macintosh platform. Canon has introduced a scanner with colors to complement the iMac while HewlettPackard is marketing the ScanJet 5300C and the 5370C, a dual-platform model. Indeed, the aforementioned USB interface is making it easier for scanners to support dual platforms (Mac and Windows) although compatible drivers and software must still be included in the total package. This, says InfoTrends and CAP, is a barrier to implementation of the dual platform as vendors must decide whether or not the investment in software development and technical support is worthwhile in the long term.

Additional enhancements are on the horizon as manufacturers confront compatibility issues-a key issue, according to the InfoTrends/CAP report. Equally important is the need for a more user-friendly interface that will allow users to scan an image once and post it directly to the Web. "Without the functionality of the PC, this may be difficult for scanner vendors," opines the report.

The impending flattening of the market is eroding prices big time. As scanners become more of a commodity, price is expected to become the primary differentiator in the market, resulting in even lower prices. Many scanner manufacturers are already selling products at or below cost in an effort to cling to their existing market share while at the same time they're examining ways to cut costs. Although InfoTrends and CAP note that scanner prices have been falling at a rapid pace during the past three years, they contend the decline is slowing even though they predicts the average selling price will decline at a compound annual growth rate (CAGR) of 15%. Consider that the average street price of a scanner was $260 in 1997. Today it is $132 and by 2004, it is expected to drop to $77.