I read with interest the January 11, 2012 announcement from RR Donnelley that the $2 billion company had penned a multi-year, multimillion dollar agreement with Chrysler to “provide a comprehensive array of Print Management services, including on-site premedia resources and sourcing support, commercial printing, direct mail, logistics, labels and forms.”
While this is undoubtedly good news for Donnelley, it is more than likely troubling news for incumbent suppliers of Chrysler. Everyone is probably thinking the same thing: how do printers compete for Chrysler’s business when a huge competitor is managing the sourcing process?
Clearly, the growth of print management services over the past decade is an important and significant development. According to Ronnie Davis, Chief Economist of Printing Industries of America, print management services is one of the key emerging market tendencies within the printing industry.
In his book Competing for Print’s Thriving Future, Davis writes, “Print management services are typically defined as the practice of a customer outsourcing the management of their print and print logistics operation to a commercial printer.” Davis reports that the total value of these services to the printing industry is estimated to be as high as $5 billion or 6% of total industry value.
Davis reports that more than one in five printers is offering these services today; firms with more than one hundred employees are more than twice as likely to offer the services as firms with less than 20 employees.
But printing companies offering print management services is only part of the story. A larger sector of this market is made up of firms that have no printing equipment and do none of the production or distribution of printed materials. These firms are either outsourcing everything to companies on their supplier list or they are making the sourcing decisions and handing the management of the projects back to their corporate partner and/or its agencies.
Brought on by the drive for corporate cost cutting, excess capacity in the print supply base and the growth of online procurement solutions (e-commerce), the companies that specialize in print management services—also known as print procurement outsourcing—typically enter into corporate contracts. These agreements offer significant reductions in print spend as well as more efficient management and control of print-related marketing and communications materials.
For example, a well-known company of this type is InnerWorkings, a publicly traded firm (INWK) with a market value of $500 million. On their website, InnerWorkings describes themselves as “a partner in maximizing budgets and providing brand oversight in every corner of the globe.”
In a white paper entitled, “Top 6 Challenges to Managing Your Multi-Million Dollar Print Spend,” another provider of these services explains that corporate cost reduction efforts have, up to this point, used in-house resources and delivered minimal results. They write, “Many organizations are now choosing to work with a strategic partner who can bring additional spend, tools and resources … they are experiencing savings in the range of 10% – 40%.”
These changes are impacting every aspect of the traditional print supplier and corporate print buyer relationship. Corporate purchasing departments no longer need highly educated and informed print buyers since these skills are provided by experts within the firms hired to perform these functions.
Meanwhile, the nearly one hundred-year dominance by advertising agency print producers over the print sourcing process is being disrupted and, in some cases, completely eliminated. In instances where the only point of contact between the print supplier and the corporate end-user is through the medium of the print procurement firm, agencies play no role in sourcing decisions whatsoever.
For printing companies that participate as subcontractors in these arrangements this has meant a two-fold change: 1) loss of direct contact with corporate end-users and; 2) significant reduction in the prices that can be charged for print products and services.
Print management services and print procurement outsourcing are growing features of the print markets in the brave new world of 21st century corporate cost reduction. These firms and relationships have emerged alongside of the migration of marketing and communications dollars away from traditional print media to digital and social media alternatives.
As an industry, we need to understand these changing dynamics and develop strategies to adapt; we need to see that within every threat is also contained an opportunity. Rather than complaining about the difficulties of the environment, printing companies must develop a relationship with the print management services market that either leverages existing capabilities or competes directly for the business. As Ronnie Davis puts it, “printers can create their own positive future by understanding and taking advantage of emerging changes in print’s driving forces—those changes that are shaping the printing industry of today and tomorrow.”