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By Kevin Keane, IAPHC CEO Is Print a Commodity or a Service? In the 95th issue of Tuesday Morning News (TMN for 12 January 1999) we quoted the new corporate profile for financial printer Bowne and Company, established 1775: "an information empowerment company." On 14 January, Rudolf Hokanson of CIBC Oppenheimer observed that he believes: "Bowne's sales mix could continue to favor lower-margin print business." Last week The New York Times ran an interesting editorial by Thomas L. Friedman who wrote: "... And the trend is that the Internet is going to define how we communicate, how we invest and how we conduct commerce. As a result, I believe there are going to be just two kinds of companies -- Internet companies and anti-Internet companies. Internet companies will be those whose business can be conducted over, or greatly enhanced by, the Net -- everyone from booksellers to consultants." Mr. Friedman went on to offer examples of anti-Internet firms. Barbers can't very well sell haircuts over the Net. Steel mills can't make steel on the Net. But what about printing? Is it an Internet or an anti-Internet business? Also on January 14th, Deluxe Financial Services, Inc., announced that Provident Central Credit Union had implemented Deluxe's Internet check ordering system. "We wanted to provide online services that are truly useful to our members using our Account Manager online home banking service," said Ludelle Morrow, CEO of Provident. "Deluxe's O N E for the Internet ties into our fully integrated online services and will forever change the way credit union members do business with us." O N E for the Internet streamlines the check ordering process for consumers. It connects the consumer directly to Deluxe through the financial services company's Internet site and is available 24 hours a day, seven days a week. This direct ordering process eliminates the need for a credit union or bank to handle any paperwork associated with the check order. Let's not forget that an order for cheques is still an order for printing. We have noted before that check printing is more reminiscent of cookie-cutter printing. It offers limited variables, and thus the orders can be stamped out in assembly line fashion. And most printers would argue that their typical order for printing does not lend itself to cookie cutter methods -- every printed job is uniquely customized with one thousand and one ways to screw up the job. No way you can cookie cutter that kind of work, and no way you can offer it over the Internet. Yet, one of our 7 failings cited by Mr. William Davis, CEO of R.R Donnelley and Sons, in his speech to the Web Offset Association Conference in Toronto in May of 1998, was the slow embrace of statistical process control by the printing industry. "We have to be a graphic science. We have to make our product using defined ... standardized ... repeatable ... manufacturing processes." Dare we say cookie cutter? "In this game manufacturing discipline will win ... and the craftsman who must leave his thumbprint on every page will lose. ... I have not seen the adoption of Statistical Process Control that you take for granted in other manufacturing environments. I'm amazed at the amount of time that the press is not actually running ... and the amount of paper that we systematically waste at both ends of the press line. ... we have not brought our processes under control." Okay, we printers might retort, fine, we will get better at SPC but printing is still about customizing orders to a client's specifications. We certainly are not a commodity item, even if cheque printing resembles a commodity. Our customizing means that we provide a service, not a commodity. That's why a printer like Bowne calls itself an information empowerment company. They are a printer and they provide many other services today, albeit often digitally empowered services. Okay, but the question remains, is printing an Internet or an anti-Internet business? One industry that is on the cusp of being heavily changed by the Internet is that of banking. Is banking a commodity or a service? Most of us might agree that banking is a service (or at least was a service, before they started trying to discourage us from ever meeting face to face with a teller!) And like our industry, as we have noted in previous issues of TMN, banking is seeing a lot of consolidation. A decade ago there were 16,000 small banks in the US, today there are less than 9,000. If banking is a service that easily can move to being an Internet business (Security Bank owned by the Royal Bank of Canada is a virtual bank) then maybe we can learn from some of that industry's issues. According to CNBC (Monday January 18, 1999) the following are the actual costs of banking transactions: $1.07 at a teller window $ .54 by phone $ .27 at an ATM $ .01 online No wonder the banking industry is encouraging us to move to online banking. And no wonder banks and credit unions are encouraging people to order checks online as well. Perhaps you saw the news last week that Delta Airlines is trying to force people to order air tickets online by adding a surcharge to tickets purchased through travel agents or via the mail. Delta claims that the distribution costs to work with travel agents or even directly with their own customers via the mail are just too high. And we might do well to remember the words we cited in the first TMN of 1999, (1-5-99) Frank Gens, senior VP of Internet Research for International Data Corporation said: "Not having an Internet presence and an Internet commerce strategy is a recipe for market share loss. In the U.S. market, starting in 1999, the virtual market is reality." But those among us who fight the rear guard action against change may assert that because printing is such a heavily customized service, it doesn't translate well to online ordering. Member Todd Duckworth of Minuteman Press of Janesville, Wisconsin sent us an e-mail on 7 January: "Thanks for the weekly info. Would like to have you visit my website @ www.minuteman-press.com/janesville and let me know what you think about the site. It just happens to have the electronic estimate/order form that was mentioned in this week's TMN." Steve Jecha president of Digital-Net, Inc. in St. Paul, Minnesota sent us an e-mail on 5 January noting that an online ordering system his firm has created for the printing industry is nearing finalized license agreements with some very well known Fortune 150 and Fortune 1000 companies. (www.digital-net.com/) And we've mentioned Seattle based ImageX.com and its online virtual print shop approach in recent TMN issues as well. (www.imagex.com) The past holiday season showed off the rapidly increasing importance of online selling. Many firms do have the Internet presence Mr. Gens so ardently recommends, and they saw that it can lead to market share gain. They also saw that if their systems aren't up to speed, ordering on the world wide web can become the most frustrating game of world wide wait. A recent article in the San Francisco Chronicle said that in 1998 shoppers spent an estimated $3 billion dollars on the Web. According to America Online some 1.25 million subscribers made their first ever online purchase between the US Thanksgiving and Christmas. Zona Research says more than half the people ordering online in 1998 had spent nothing online in 1997. And Forrester Research projects $7.8 billion in online holiday sales in 1999. Which looks an awful lot like a geometric progression to us. Mr. Friedman's editorial in The New York Times had a caveat for Internet Companies. "... the next phase of globalization is going to be a real bear. It's going to squeeze the profit margins of every company that does business over the Net, which will be great for consumers and a terror for producers." This is not exactly great news for the printing industry. During the entire decade of the 1990's the industry, according to the PIA, has struggled to get profit margins above the 3% level. In 1997, the ratio was 3.3 percent of sales and that's before taxes. The 1997 profit rates for prepress specialists wasn't much better, at 4.3 percent in 1997 (before taxes). Recall the comments of Rudolf Hokanson regarding the possibility that Bowne and Co.'s sales mix favors lower-margin print business? Another factor that will compel consideration of an Internet presence for the sale of printing is the tight labor market. Bill Farquharson of Print Tec Network sent us a thoughtful e-mail on 12 January: "I have been asked by Printing Impressions magazine to create two days of seminars for a show called Document Management World. (Rosemont, IL April 20 and 21, 1999)... While creating the seminars, I polled dozens of printers asking them what kinds of sessions would motivate them to come to Chicago. When I was done, I had eight one hour topics I felt had the printer in mind. Interestingly, when I sent the list back to those whom I had originally polled, the one seminar that was an absolute lightning rod for interest was one on Personnel Issues. Printers want to know how to find and keep quality people." Back on 2 October 1998, the PIA's chief economist Dr. Ronnie H. Davis reported that: "Nearly 40 percent of printers have positions that are open for more than 60 days because they cannot find qualified employees to fill them, to compensate for this, printers - more than 93% - are paying overtime to current employees to get jobs done." Now go back and reflect on the cost statistics for the banking industry or the airline industry. Face to face contact (the teller window, the travel agent) is perceived as costing an awful lot more than online ordering costs. The double whammy of not being able to find qualified employees in tandem with the higher costs of face to face human contact are still more reasons why online ordering of printing is sure to increase. And don't think our graphic arts vendors aren't also wrestling with this thorny problem. A member from California was musing the other day: "You know I have a printing business that will generate close to $3 million dollars in sales in 1999, but I can't ever remember being called on by a representative of (a large dealer organization.)" Or the member from Minnesota who said last week: "You know there was a time when I knew everyone who worked for (xyz vendor) in their Minneapolis branch office, now I don't even know if they still have an office here." When it comes to the Internet, nothing is certain. Nonetheless, we have a nagging suspicion that a firm in the business of providing printing services is not an anti-Internet company, it's an Internet Company just waiting to be digitally empowered, so that it may take advantage of what Bowne and Company intends to do: "Combining superior customer service with appropriate new technologies to manage, repurpose and distribute a client's information to any audience, through any medium, in any language, anywhere in the world." {Note to Club Bulletin editors. The 'opening monologue' of this week's Tuesday Morning News will be repurposed as the first issue of Know More Notes for 1999, as we do recognize that not all members have access to e-mail. Yet.} More Consolidation. No Surprise. On 13 January, Cunningham Graphics International, Inc., announced that it had acquired Workable Company Limited, a full service printing business with operations in Hong Kong and Singapore. Cunningham (based in Jersey City, New Jersey) is one of the publicly traded printing firms seeking to grow through consolidation. Meanwhile, also on 13 January, that frequent visitor to the pages of TMN, Consolidated Graphics announced yet another letter of intent, this time to acquire Wentworth Printing Corp of Columbia, South Carolina. If the deal goes through, Consolidated will have 52 companies with sales of more than $600 million. Adobe Building the Web On 18 January, Adobe Systems announced that it will unveil at Showcase '99 in San Diego this week, a technology to improve the merchandising of products and services on the world wide web by using Scalable Vector Graphics (SVG), a proposed open standard to the World Wide Web Consortium (W3C). According to Adobe, SVG brings the rich, compelling, high resolution graphics that users have come to expect in catalogs, magazines and advertisements to the web. Reportedly, SVG also adds dynamic and interactive dimensions to Web graphics, but they download significantly faster, freeing bandwidth and optimizing browser performance. Adobe says that SVG ensures color accuracy with over 16 million colors instead of the traditional 256, which it says will be a significant advantage for web shopping. "The breakthrough advances of SVG place Web graphics at the center of the e-business experience," said John Warnock, CEO of Adobe Systems. CorelDRAW Milestone 15 January marked the tenth anniversary of CorelDraw's introduction. Corel noted that the new Euro coin was designed using the software, of which there are now some 10 million copies in use. "Indeed, just a year ago Corel Corp. was close to failure after a Quixotic and ruinously expensive challenge to Microsoft's and Intel's domination of the desktop computer market with a premature bet on Java software and new network computers," according to Bert Hill of the Ottawa Citizen newspaper. Longer term, Corel still hopes to challenge the WinTel hegemony with new Corel Computers using the open architecture Linux operating system as has been reported to you previously in TMN. Apparently, Apple Computer is also seeking to support the Linux system after the big success of its iMac consumer computer product. Xerox is Booming in New Brunswick On 18 January, Xerox Canada announced that it plans to add 435 new jobs as the result of its new Tele-Business and Internet Operations in Saint John, New Brunswick, as well as adding another 65 positions in the existing Call Centre Operations facility based there. Kevin Francis, CEO of Xerox Canada said: "As the Canadian business environment evolves to greater and greater volume of e-commerce activity, our expanded Saint John operations will become an even larger part of our go-to market strategy throughout North America." Camille Theriault, Premier of New Brunswick said: "The Xerox expansion is a concrete example of why telecommunications and Internet growth will play an important part in the continuing economic growth of the province." Other Industry Tidbits Photoshop User Magazine named the new iBug color calibrator from miro Displays, Inc., a 'hot pick,' meaning that the magazine considers the iBug to be one of the ten hottest products introduced at the recent Macworld Expo. The iBug color calibrator (for the iMac of course) is an integrated color display calibration system that gives users an accurately calibrated color display suitable for graphics, web page creation, and screen to print matching. On 14 January, Moore Corporation Ltd., of Toronto announced that it had formed a joint venture with Correo Argentino S.A., the recently privatized Argentine Post Office. The joint venture will provide printing and finishing of billing statements, direct mail offerings and include services related to data management, formatting and variably imaged products and services. Port of Tauranga Ltd., (New Zealand) announced on 13 January that the number of logs being exported by large New Zealand forestry firms such as Carter Holt (which is controlled by International Paper Co.,) have been increasing of late. In particular more logs are going to Korea. Does this mean that Asian demand is finally increasing a bit and may in turn start to diminish the flood of Asian paper which has beaten up the paper pricing marketplace in North America since the onset of the Asian Flu? Maybe... Milberg Weiss is at it again. On 14 January, the class action specialist law firm announced that Splash Technology Holdings would be its latest target. Allegedly, Splash misrepresented the demand for Splash print servers in places such as Asia during 1997. Worzalla will be featured on the cover of Graphic Arts Monthly magazine for February 1999. Worzalla, a world class publisher of books and home to several members of the Central Wisconsin Club, will be the cover story in the February issue of GAM. Worzalla was also the sponsor of the Frank C. Anderko/Worzalla Best Book Award in the 1998 International Gallery of Superb Printing.
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