ICT Solutions Part III: Dealing with hidden costs

25 Jan 2005

Outsourcing and managed services seem to have a bad reputation in this country. For many the two terms are synonymous with job losses and the moving of manufacturing bases to the Far East and other low-cost locations.

This mindset may go some way to explaining why Irish businesses have been slow to embrace the potential of managed services, even in non-core areas where jobs are not at stake. In the realm of IT there have been a few high-profile outsourcing deals, in addition to the Hewlett-Packard (HP) and Bank of Ireland deal that put the issue firmly on the corporate agenda, but adoption still lags behind the US and UK.

One area that is gaining traction is managed print services. Rather than a business purchasing its own printers and then contracting with a third party for the supply of consumables and maintenance on those printers, it hands over the service entirely. This means a third party, typically a partner of one of the large manufacturers, installs and maintains the printers and in turn charges an annual or monthly fee based on the amount and type of documents printed. High-profile organisations that have already gone down this route include Esat BT, Davy Stockbrokers and clinical trials company Icon.

Stephen McDonald, commercial manager for HP’s Imaging and Printing Group, says that over the past year printing has become the managed service that businesses are spending most time considering.

“If a printer goes down in an organisation and you need to get a report out in two to three hours or you need to print a document that’s critical to winning a deal, that’s going to hit your bottom line,” says McDonald. “If your PC goes down you simply go on to someone else’s but with printers there’s usually only one or two in a section. By outsourcing printing management you can have an impact on cost reduction and productivity straight away.”

Improvements in printer technology have also made the model more attractive according to Edel Creely, general manager of supplies and services outfit Datapac, which offers a service called PrintPac. “The technology has improved so that companies can consolidate the number of printers they have on the network,” says Creely. “They are looking at multifunction devices so they can have a smaller number of larger, more powerful devices. Some organisations had almost a printer per person.”

Companies such as Datapac, Ergo Services and others that provide the service start by conducting an audit of a company’s current printing usage. Based on the current usage they make recommendations on the number and type of printers that are required. “It’s a great way for them to get a fix on their costs,” says Creely. “Traditionally the use of consumables and how much printing is being done is not tracked and it lets you get visibility of that.”

Moving to an outsourced printing model can often involve a major cultural change for an organisation. Rather than having their own personal printer, or sharing a device with a small number of other users, users are now sharing a device with a department or team. Due to the low purchase cost of printers it is not usual for audits of large organisations to discover that there are many more printers in the business than the IT department were aware of, because users have purchased them out of their own budgets.

Outsourcing the service ensures control over this kind of maverick buying but also delivers ongoing cost savings. Bob Horastead (pictured), general manager of Xerox Ireland, says that the typical savings from outsourcing printing is about 25pc, but in order to justify the cultural change an organisation needs to go through, the projected savings should be at least 20pc.

“People are looking at managed services so that they can focus on the point where costs are hidden,” says Horastead. “The initial outlay on purchasing a printer is low but the add-on running costs, particularly for inkjet and colour printing, are high. Getting a handle on that is key.”

According to McDonald, HP’s approach is not simply to give the customer a better deal based on increased print volumes, but is more about giving the business what they need and looking at costs over the lifecycle of a device — something he calls the “balanced deployment approach”.

“If you simply go for the cheapest cost per page that you are offered you could get the most unreliable product on the market,” says McDonald. “In order to get the lowest cost per copy they reduce the number of maintenance and toner elements, which has a big impact on reliability.”

Outsourcing can also deliver a significant saving on the cost of support. According to Creely, research has shown that in large organisations up to 50pc of calls to internal helpdesks are related to printing.

“A lot of that can be resolved by putting in better devices,” says Creely. “We work closely with the helpdesks to reduce the number of calls. We also provide preventative maintenance so that an engineer goes onsite once or twice a week and checks all the printers rather than waiting for them to break down. It’s also important to talk to the users and the helpdesk to see what the recurring problems are.”

By John Collins