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Thursday, 29 September 2016 00:41

Friends don't let friends pay for minimum print volumes

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I'm persuaded that for any enterprise a managed print solution can provide economic efficiencies and free IT depts from dealing with these devices. Yet, enough of the "minimum print volume" contracts. Just say no, says this CIO.

Firstly a disclaimer. This is posted on my "Wired CIO" blog and does not necessarily reflect the opinions of iTWire editors nor any employer of mine, past or present. Even so, this is my personal and strong-held view based on long and substantial experience. I will not "name names" but I imagine I will receive robust feedback from companies who promote the printing pricing I will discuss. Yet, I know their arguments, and I can tell you they are only in favour of the provider, not the customer.

To clarify, by managed print solution I mean your fleet of printers is owned and operated by someone else – a managed print service provider, nonetheless. Maybe you rent the printers, maybe you are financing them to own, but in any scenario, you have a finance cost for the devices and a per-page maintenance cost. This maintenance cost covers the servicing of the devices, plus toner. The vendor will want to set up automatic capture of print volumes because they bill on this number, and if they are competent, will automatically send you toner as it becomes needed without your staff having to think about it.

The advantage to business is these devices, at least theoretically, should be at a lower rate than your company could buy them for, and you are freed from the burdens of maintaining these devices and worrying about them. Much like a business would lease a building instead of buying real estate, run operating vehicle leases than own a fleet of cars, even turn to cloud-based server hosting rather than own and manage infrastructure, so too it can make sense to outsource your printer management and just pay a monthly bill.

Yet, not all managed printer pricing is the same. There are several models. The one I object to the most is when your fixed and variable costs are rolled into one price. The provider says to you they will look after your whole fleet for, say, 14c per page for black and white, and, say, 30c per page for colour. These numbers will vary based on numerous factors. Now, here's the rub – the pricing also mandates a minimum volume of prints per month.

This pricing model does not benefit your company. Not only can your company print pages, but your vendor is helping themselves to print money. Just say no.

"Why," you ask? Let's consider this hypothetical scenario: your commitment is 100,000 black and white pages per month and 7000 colour pages per month, your black and white pricing is 20c per page, your colour pricing is 40c per page.

Under this model, so favoured by certain print companies in Australia and overseas, you will pay at least $22,800 per month. However, you'll pay more. There's little doubt.

Typically, your black and white usage will be less than the minimum. So, you're paying for prints you're not using. Your colour usage will be higher than the minimum. So, you will pay for it, plus extra.

And here's the thing: your excess — whether black and white or colour — are charged at the same rate. So, an extra 1000 colour pages at 40c per page is an extra $400.

Yet, think about it: why should it be at that rate? The finance cost is included in the initial rate – hence the minimums. The print vendor will tell you because of its hardware cost it has to enforce these minimums. That makes sense. Why charge it on the excess, however, which is purely usage? There's no good explanation. It's just a license to print money. It also means you lose efficiencies because you will be seeking every month not to have your unders and overs cancel each other out, and the more effort you put into maintaining your print pricing, the more the case for outsourcing print management erodes.

Some accountants tell me they like this single-price model because it means they have a single, fixed-price bill each month. Yet, they don't. Think about it again; if your printing bill is the same amount every month then this means you're not exceeding the minimum volumes in your contract. Again, you're just giving money away. Your contract is over-committed.

I could go on and on. Consider the scenario where you open a new branch office and want new printers. What happens? Your minimum print volume goes up to cover the cost. If you weren't already meeting that minimum, you're not going to now. However, if you keep your minimum volumes constant the solution instead is to increase your per-page rate. Now your existing offices are paying more to effectively subsidise the hardware at a new office.

No, there are no good reasons for this pricing model and I oppose it and encourage you to similarly reject it.

My advice is to separate the fixed and variable costs. Get billed two amounts each month: one for the actual hardware, which you can allocate directly to each cost centre, and one for actual print usage with no minimums. You didn't print anything on one printer that month? You pay no usage costs for it then.

In this scenario your per-page costs become vastly more reasonable, maybe 0.8c for black and white and 8c for colour.

In my hypothetical scenario above your hardware costs might come to $7000 monthly. Even if you really did print 100,000 and 7000 pages that comes to $20,600 for the month. An extra 1000 colour pages at 8c comes to $80.

These numbers are fictitious, though not unrealistic. Even so, I encourage you to do the math. If you're looking at a managed print services agreement with a single per-page fee and minimum volumes required, stop. Think about what your actual print volume is. Ask your vendor for alternate pricing, based on separate finance and usage costs, and with no minimums. Even ask for the per-page price based on the type of device – a multi-function device ought to have different costs to a desktop laser printer, for example.

What do you think? Think I'm wrong? Then let's hear why, but I've heard it before, and it's a model that I cannot support and which I vehemently believe is not in the customer's interest. It favours the provider only.

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David M Williams

David has been computing since 1984 where he instantly gravitated to the family Commodore 64. He completed a Bachelor of Computer Science degree from 1990 to 1992, commencing full-time employment as a systems analyst at the end of that year. David subsequently worked as a UNIX Systems Manager, Asia-Pacific technical specialist for an international software company, Business Analyst, IT Manager, and other roles. David has been the Chief Information Officer for national public companies since 2007, delivering IT knowledge and business acumen, seeking to transform the industries within which he works. David is also involved in the user group community, the Australian Computer Society technical advisory boards, and education.

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