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Concrete proof that Services are essential for survival and growth

Issue #0929/1 – IBM has provided conclusive proof that, in a harsh economic environment, it is those that have a sold services offering that stand the best chance of surviving and even flourishing. IBM posted net profit for the 3rd quarter of 2009 to the tune of $3.2bn, up 14% on Q3 of last year, while all indications so far are that IT hardware sales, and even sales of printer supplies are still flagging badly.

IBM’s report shows that overall revenue of $23.6bn was down a little from last year – 7% year on year (5% allowing for constant currency) – but, when we have seen revenues of some hardware-centric companies falling by around 20% or more in recent quarters, the outlook is positive for IBM.

IBM Services

Admittedly, IBM’s pre-tax margin for services was only 15%, while pre-tax margin for software was 32%, but this still represents an increase of 2.4 percentage points and profit growth of 11%. In addition, signings for IBM services totalled nearly $12bn in the quarter! Full year expectations are being raised as a result.

While IBM is a very diverse player in the services sector, with print management services comprising just a small component part, this must be an indicator to printer companies that services will also be critical to print provision in the future.

Most printer manufacturers are pushing into the Managed Print Services (MPS) arena and those leading the way (Xerox and Hewlett-Packard) are forging ahead with new or expanded offerings or capabilities seemingly on a monthly basis. Both companies acknowledge that there is little scope for long-term success in the print market without a solid services element to their activities – after all, MPS creates significant demand on the manufacturer’s hardware and supplies that, in itself, helps to bolster the manufacturing security and financial standing of the company.

Xerox has, for some while, offered PagePack to help small and medium sized companies take advantage of a services style approach to buying print in the office, while Hewlett-Packard is also enabling MPS in the channel through its ‘Mid-Market’ initiatives. HP Quick Page (due 2nd half FY2010) is aimed at making it easier for the channel to move into a services-selling model and to react to demands from smaller companies looking for a services contract arrangement. Other manufacturers are also pushing in similar directions in order to launch or establish MPS offerings of their own.

On the hardware side, an interesting development comes from Lexmark, which is leading the field with what it describes as ‘solutions-ready’ laser printers. These are equipped with a large touchscreen as fitted to high-level MFPs. A further article will investigate what these new machines offer.

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