As anyone who has read former IBM chairman and chief executive Louis Gerstner’s excellent memoir Who Says Elephants Can’t Dance? will know, transforming a business is not an easy task. However, for many companies in print, this is the task at hand. Companies from across the industry that have historically considered themselves manufacturers are increasingly aware of the fact that they need to be service providers.

Acquisitions aplenty
This trend is reflected in the acquisitions that have come in all shapes and sizes over the past five years, from Xerox’s $6.4bn (£4bn) acquisition of ACS to the numerous marketing services and analytics companies that have been snapped up by the likes of Communisis, DST and St Ives. The latest acquisition to join this growing list was Konica Minolta’s purchase of Charterhouse in November 2012 – a deal which marked a serious change of strategy for Konica and the culmination of a two-year hunt for the perfect print management partner.

According to Konica Minolta Business Solutions Europe general manager Olaf Lorenz, the company, which is best known for being a manufacturer of digital print engines, identified a need to widen its service offering around two years ago. This thought had previously been based primarily on managed print services (MPS) rather than print management (PM) and involved things like printer fleet consolidation across an organisation and the implementation of software and processes to help monitor and reduce costs and increase efficiency.

While most of its manufacturing rivals are focused on the transactional side of print management, Konica has chosen to focuses on marketing communications and, as such, found Charterhouse was the best fit in terms of acquisition targets.

"Charterhouse offers marketing services to marketing organisations – not just from the execution phase but also from a conceptual phase, including clear measurements for effectiveness, like return on investment and how many customer touch points have been generated," says Lorenz.

Prior to its acquisition, Konica had identified a growing demand in Germany and France for outsourced marcomms services. The UK was the natural place to turn to in order to shop for these skills, as it has the most established PM sector in Europe.

Challenges faced
However, while Lorenz sees the potential to sell Charterhouse’s services to Konica’s MPS clients, he is realistic about the challenges and says it won’t just be a case of dumping Konica’s MPS client list on Charterhouse. "That might not be an effective way to keep those clients really happy," he adds. "That’s why this will be a step-by-step approach where we would like to utilise the know-how and the knowledge [of Charterhouse] and bring it organically back to the Konica Minolta organisation."

Learning process
Lorenz talks of a one- to two-year learning process, after which Charterhouse will continue to act independently, but with increasing collaboration with Konica Minolta. "Once we have finished that learning process, we will take the principle and bring it to those Konica Minolta organisations who can’t be serviced through the Charterhouse local network infrastructure," he adds. "We would like to keep the [Charterhouse] brand alive because one of the biggest assets for them and for us is that they have a name in that industry – we don’t aim to just remove their brand or remove the company and try to absorb everything into Konica Minolta."

One of the most interesting things about the Konica-Charterhouse deal is that it has taken this long to come about. A quick look at Konica’s main manufacturing rivals, Océ, Ricoh and Xerox, tells us that this is a well-trodden path. According to those who have gone before, it may take longer than Konica envisages.

"Understanding what services are and having a service mentality is completely different to just buying it in and trying to make one plus one equal three," says Océ Business Services UK business group director Steve Berney. "It will be a challenge [for Konica] and I wish them all the best, but it’s taken us 15 years to get services sitting alongside a firm that gets revenues from manufacturing."

Director and general manager of Xerox GDO Europe Andy Jones agrees: "It is now over 20 years since we first got involved in outsourced document services and it is more than a decade since we invented managed print services with the launch of Xerox Office Services. The migration into services is something everyone is looking at now but it takes tonnes of hard work. It’s like building a start-up inside your existing company."

Konica’s acquisition of Charterhouse clearly makes sense for both parties – as Lorenz says, it is "the famous win-win situation". Charterhouse has wiped out its debt and gained access to a much bigger global network, albeit one that is currently focused on the supply of equipment and consumables, rather than services.

While Konica now has access to the services, knowledge and supplier network it needs to kick-start the transformation of its business.

Continued evolution
It will be interesting to watch the pair’s progress, just as it will to watch the continued evolution of the sector, which Berney argues is essential to future prosperity.

"What’s changing all of this is the client," he argues. "They are going out wanting a complete, end-to-end, joined up service – that’s why people like Konica are going out and buying Charterhouse. We’ve got to be experts in all of these areas or we cannot play.

"Services is at the natural heart of where all these manufacturing companies need to get to but it’s a difficult journey and it takes a long time to get right. Only some will."

30-SECOND BRIEFING

• One striking thing about the deal is that it has taken Konica a comparatively long time to branch out beyond managed print services (MPS) into print management
• Rivals Océ, Ricoh and Xerox have all been down a similar path and have evolved print management service businesses that sit alongside their manufacturing divisions
• Charterhouse will benefit from the financial backing and scale of Konica, while retaining its independence and brand
• Konica, on the other hand, will be able to kick-start its entrance into the print management market thanks to the knowledge, services and network available to it through Charterhouse
• The evolution of print equipment manufacturers into service businesses mirrors the trend in the IT sector that was started by IBM in the early 1990s

What is currently driving print management’s evolution?

Mark Wilson
Business development director, Ricoh
"Around 50% of firms have looked at print and the costs associated with print, and those who have already consolidated their fleets and put in a strategic focus around how they produce it are looking at what to do next. As a managed service provider, that means you have to be able to cover all channels, whether that’s digital, print or mobile. It’s about communications and that is what’s driving the evolution of companies in this sector from managed print services/print management to marketing services providers."

Steve Berney
Business group director, Océ Business Services UK
"No client today will expect what you deliver at the beginning of the contract to be the same at the end – you have to be able to transform their business.Optimisation can only do so much – the approach to adding value through driving down the price of print is a cul-de-sac. If you’re skillful enough, you can move information around a business much faster. You can enrich inbound and outbound communications to add significant value. The trend is towards wider scope and deeper and deeper outsourcing of non-core processes."

Robert MacMillan
Chief executive, HH Global
"Every BPO organisation needs a credible global offer and large corporates expect their outsourced provider to be able to match their footprint globally and offer a wider range of marketing services. There is tremendous interest in marketing services businesses again as it is an area that many large groups do not understand and cannot compete in. Yet it is what the clients need. There is massive growth potential in this space and higher margin opportunity in the digital and retail space of marketing services."