This time last year, as the recession was just beginning to bite, print managers were relatively bullish about the outlook for the sector. A few even went as far as to suggest that the looming recession would prove a boon for outsourcing. Positive thinking is a wonderful thing, but if there is to be a mad rush to print management (PM), it has yet to materialise; more worrying for PM, the past year has given no indication that the good times will be rolling around any day soon.

The past 12 months have probably been the quietest for PM in a decade. There were some new contracts floating around, but nothing like the value or volumes that were predicted. Added to which, most of the contract "wins" published in these pages over the past year were actually renewals. Print managers, it turned out, were not immune to the recession. Many small- to medium-sized PM firms closed and even some of the big boys had their wobbles. So, with all that confidence going into the recession, built on a decade of excess for the sector, what happened to PM in 2009?

"We have seen clients batten down the hatches, more than we have seen a move to increased outsource," says Mike Newman, founder of Nsquared consulting. This clamp-down on spending was a problem that hit both printers and print management. For the first six months of 2009, as the Bank of England slashed interest rates to the bone and started pumping billions of pounds into the economy, budgets were frozen, leading to the demise of scores of printers and severely limiting the ambitions of the outsourcing sector.

"With a 30% drop in print, I don't think anyone had a bumper year," adds Webmart managing director Simon Biltcliffe. "The key was sensible managing of credit lines and cash. Dull, but true."

The grim reality of the depth to which the nation's finances had sunk meant that, before the end of the first quarter, most growth plans were giving way to damage limitation.

"The BPO sector was just like the print industry - having to be very focused on the finances, the costs and so on, and at the same time the discussions we were having were around client retention and renegotiation, rather than winning new business," says Jason Cromack, chief executive of Lateral Group. This process of re-tendering to squeeze extra savings out of what little remaining budget was available certainly proved a frustrating distraction for the sector and, with many procurement directors going for quick wins rather than serious tenders, companies started becoming more selective.
Robert MacMillan, chief executive of HH Print Management, explains: "The opportunities that came to market were often driven by an urgent need to realise savings across the client organisations and on several occasions we elected to decline opportunities that were obvious benchmarking exercises or did not have the full potential for an outsourced solution."

General slowdown
The financial services sector in particular suffered a massive slowdown, as the lack of available credit led to the removal of a wide range of products and services.

"The effect of the Credit Crunch on the major banks was definitely a factor for us in terms of performance," admits Communisis chief executive Andy Blundell.

The impact of this slowdown is still being felt, despite the return of some semblance of normality to the sector in the second half of the year. However, while there is now the prospect of new entrants coming into the financial services industry (particularly in retail banking where Virgin's long-awaited arrival now looks imminent), it's been rumoured that several banks are looking very seriously at their options and whether print management is really delivering value.

Etrinsic managing director Matt Bird, argues that, if that's the case, it's about time. "The last year has been the most pivotal so far in the history of print management, both within the UK and globally," he says. "History shows that in times of marked economic downturn, those businesses with a sustainable offering that delivers true value prosper, while those with a flawed business model wither and die. This is commercial natural selection and it is ultimately good for all."

The main protagonists going into the recession are all still here and, with the lack of new contracts on the table, they've taken to pinching old contracts off each other - at diminishing returns, according to Newman. "Rather than growth in the UK print management sector, we have seen a domination of the top 10 print managers with new entrants finding it hard to compete at pitch stage. The result has been a merry-go-round of accounts, each time at a lower ‘price' and cost of service than before. Increasingly, back door revenue streams like rebates are having to be shared with the client as part of the deal, reducing the print manager's margin."

Bird's assessment is similarly harsh. He argues that many PM firms have spent the past decade working to a mantra of "growth at all costs", thereby failing to continually challenge the value they bring to the market. "Money became the sole aim, rather than the logical bi-product of a sustainable model built on value for the client," he says.

Despite this somewhat sickly state of affairs, the fact remains that there have been no notable failures or consolidation in the sector. At least, not yet.

Renewed activity
"I think it will all get more exciting as more companies in the sector are up for sale either through desire-for-exit or desperation," says Biltcliffe. "Last year, there were no buyers, but 2010 will see activity as investors have more confidence."

Where these investors will come from is an interesting question. Newman points out that the only money currently available is from investors outside the sector - a fact he suggests could indicate that industry insiders have "recognised the value - or lack of it - within PM companies".

Either way, mergers and buyouts look certain to feature in the evolution of the print management sector. "I think consolidation is going to be the future," says Cromack. "Those that don't adapt to the way things are going in terms of their product offering and service range are not going to survive."

That message has been dawning on the sector's main protagonists for some time, as evidenced by the diversification witnessed in both their service offering and client bases in recent years. Communisis for instance, long synonymous with transactional print and the financial services sector, has been busy developing its data and analytics capability since its acquisition of Absolute Intuistic in December 2008. Blundell says that the firm is now "absolutely about the management of customer communication and not print management as such. The previous model is evolving to a new level and the companies that will be successful will be those that put those two parts - the input side and the output side - together in one place".

Lateral Group has similarly built its capabilities through intelligent acquisition, buying Data Lateral and Dialogue Solutions, and spinning off Shift Click, all with an eye on developing its cross-channel marketing capabilities, alongside its traditional print offering at Howitt. The group launch marked the culmination of a four-year plan, making Lateral one of the more long-sighted in its sector.

As Bird points out, commercial natural selection is at work and the race to adapt is already entering the final mile. Etrinsic is seeing "significant growth" in its data management and creative services, while HH, which has been at the vanguard of overseas expansion in recent years, has been ex­­panding its service offering and its geographical footprint.
"Increasingly, customers are leaning towards new multi-channel digital services, online marketing activity and call centre services," says Toby Newman, commercial director at AccessPlus.

"Some larger deals have led us to an innovative open book commercial model that provides total transparency of our cost base and management fees," he adds. "This means that rather than traditional supplier/customer relationships, we opt for a more open, collaborative partnership."

This is an ongoing process, but for the coming year at least, it's likely that the contract merry-go-round will continue, punctuated by the odd genuine win. However, the acquisition of TPF by Thames Valley Capital did mark a return of venture capital to the sector that could be looked back on as the dawn of the new age of consolidation. As Nsquared's Newman says: "Print Management 2.0 is ready to launch."