November 1, 2000
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Signs of the Times

"The Minnesota Department of Employment Security predicted that typesetting and composing machine operation will be the fastest declining occupation between 1998 and 2008 - a 50% drop from 339 jobs to 168." A factoid in the Sunday Minneapolis StarTribune 15 October 2000.

Dennis Gillan, an IAPHC member-at-large sent this amusing e-mail on 25 October which people peddling paper may find pointedly poignant:

"Kevin, here's a sign of the times --- I spent $500 dollars on a digital camera. I was all prepared to curl up on the couch by the fire to read about my new toy, but, I had to stay in my office and read it off my computer screen, because no paper manual was included! The manual was available on a CD in a PDF format, so if I really wanted a manual my only option was to print out the 100 or so pages from the CD.

I called the company to complain, but they aren't budging. "

Did the Luddites ever get a composing machine named after them?

With zero intent to inadvertently defame any person now named or hereafter to be named "Ludlow," we remind our gentle readers in Australia, Brazil, Canada, Egypt, Denmark, England, France, Germany, Ghana, Hong Kong, Ireland, Mexico, New Zealand, Norway, Peru, South Africa and the United Arab Emirates (and the U.S. too:) that once upon a time, there was an industrial revolution. And just as today we find folks convinced that the digital revolution is a mere mirage of misanthropes and madmen, so too, the Luddites were convinced that by destroying the textile machines of the industrial revolution they could somehow derail or unravel the inevitability of progress.

Eventually of course, the Luddites made like little lost Lemmings and were last seen hopping into the wine dark sea off Land's End cape, never to be heard from again, except as a quaint footnote to history.

All of which is a segue into the numeric reality of the printing industry today.

The numbers don't lie, Pilgrim

Our good friend Larry Hunt has been writing for several years about the troubling decline in net owners compensation in the so-called quick printing segment. As the 1980's ended, the typical quick printer would shoot for net owners compensation of 20% of sales. As the 1990's ended, that number had dwindled to 11 or 12%. Mr. Hunt points out there is a direct correlation between rapidly escalating labor costs and rapidly declining net owners compensation.

In a tight labor market there is obviously not much chance of cutting wages. And we suspect there are quite a few folks reading this missive who would not take kindly to any suggestion that their wages need trimming.

The key is to find ways to increase productivity from the same number (or fewer) of employees, and the chief way to do that is to automate more of the production process.

To say it another way: in order to take more costs out of the production process, one has to give employees more automated tools so they can do more in less time and without inflationary wage escalation. And as we have written before, the best way to automate may be to partner with an Application Service Provider (ASP).

The mainstream commercial printing industry is dealing with the same profit pressure phenomena. On 28 June, the PIA released its 2000 PIA Ratios. Profit on sales before taxes dipped from 3.4% in 1998 to 3.2% in 1999. Dr. Ron Davis, PIA Chief Economist was quoted: "The industry's economic and financial performance has improved steadily since the early 1990's recession with sales growing with the general economic upswing. (in 1991 the profit ratio before taxes was a paltry 2.0 %). At the same time printers have focused on cost controls, productivity improvements and new products and services."

There are those buzz words again: "take out costs, boost productivity."

In fact, the ASP model is ideally suited to accomplish those twin goals. A software firm selling membership software to trade associations presents its case as follows:

"An ASP is the most recent development in software deployment available today. It is recognized as being the most cost-effective way to use software. You are renting software that is located on the Internet instead of buying it. You no longer need to worry about...

o Upgrading your servers (you won't have a database server)
o Compatibility of new releases
o Beefed-up desktop computers for staff -- all you need is the ability to run a browser and connect to the Internet
o Hiring and retaining specialized staff members to take care of your technology infrastructure -- we do that for you.

The bottom line: you get to take advantage of enterprise software applications without the hassle of buying applications from vendors, hiring consultants or an internal staff to implement, run or support them. And, you can devote more time and resources to your core activities."

If we apply that sales pitch to a profit pinched printing industry, it works rather well. An ASP should help us take out costs and improve productivity.

So why are printers resisting?

We have met the enemy, and they sure do resemble us!

The well known industry consultant Dick Gorelick wrote earlier this year:

".....virtually every printer who has discussed the matter with me believes that e-commerce services simply promotes price competition. .... (And are only attractive to).... obuyers with bad credit that can find somebody to do their work oprinters in dire straits that are desperate for work."

The British trade magazine Printing World wrote in its Graph Expo review:

"GraphExpo provided perhaps the first clue that the dotcom revolution may be coming off the rails as a backlash from middle American printers grows against the new Internet invaders. Bob Rose, president of 58K.com, one of the most established dotcom players, freely admits the take up of its services has been more than disappointing.

He says: 'Just to bring the cashflow into balance with the amount of capital invested into 58K.com would require a turnover of $250m over the next year, and at present that ain't going to happen.'"

So why are printers back lashing or even whipsawing the nice guys in the gabardine suits from dotcom4U?

One real reservation is that the man in the gabardine suit is a spy.

Printing World quoted Chris Azbill of United Litho outside Washington, DC: "At a recent Convention of American heatset web printers, these dotcoms got beaten up pretty severely. Third party involvement with the closeness of the partnership with our customers is just bad news."

Printers don't cotton to folks messing with their clientele, and it would seem, they don't much like dealing with folks who aren't from printers row.

Fifteen years ago this writer saw first hand the struggles of small printers to adapt to software technology that was not "of, for and by printers." Compuware, Great Plains, Peachtree -- all very competent firms, able to grow their businesses successfully in many market niches, but not printing. Not one of the three ever gained more than a slippery toe hold. As xenophobic as it may sound, it appears the central reason they were never accepted is that they were not of our own kind.

Oddly enough, Collabria, printCafe and other of today's software suppliers have longstanding ties to the printing industry. It was interesting then, to see the reaction to the announcement at Graph Expo that printCafe was launching a new pricing scheme. Some observers seem to think this means the ASP model isn't working.

We suspect its simply an acknowledgement on printCafe's part that too many printers don't yet have the ASP concept firmly in their grasp. Maybe the new pricing structure is an attempt to make the menu easier to understand and to buy from. What would be so awful about a pay-as-you-go ASP model anyway?

Maybe we printers should recall that we too have had customers who wondered what we were on about, as we droned on and on about PMT's and DPI's or that new mystery acronym called PDF that we seem to feel is all the rage.

Meanwhile a closed circuit memo to all our software mogul friends: Talk to us, people! Assume we don't understand the ASP dealeybobber and explain how it can "take costs out and improve productivity." That's our hot button; not your whiz bang technology. Our mission is to try to make a buck stretch further. Help us, won't you please?

A PDF parable

The August 1999 edition of Color Business Report (subscriptions are $495 US per year for 12 monthly issues -- go to www.blackstoneresearch.com) contained a marvelous report testifying as to the use of technological innovation to take costs out while improving productivity.

"How has Copycats (located in New York City) managed to be more productive (in revenue) with a shrinking staff count? More productive equipment, automation of some equipment, and more robust systems contribute to Copycat's productivity gains. The PDF file format is an important facilitator and productivity aid for Copycats, bringing predictability to the work flow. "One of the problems you are up against when you work with digital files is 'reflow.' Let's assume we have the exact same typeface (which doesn't always happen). We open up your file. With our printer settings, the character spacing is defined differently. So laid-out text grows a little or it shrinks a little. As you accumulate this difference in size, by the end of a line, you push a word to the next line. It's a big deal because you can lose text or add pages in the middle of a document. All sorts of bad things can happen. We used to ask for a hard copy with every file, so that we could proof it page-by-page before we printed it, to ensure that everything was as it was supposed to be. By going to PDF's we have eliminated that step."

That's a perfect parable, gentle reader for why we need to look at ways to slice out costs and increase productivity. It can be done, and it will pay off.

C'mon Lemmingites, one more lugubrious leap into the abyss

Our good friend, Rab Govil, president of PODi the Digital Printing initiative (PODi was a first time sponsor of the International Gallery of Superb Printing in the year 2000) sent us an extraordinarily thought provoking article recently. It's available online (in a PDF format natch!) and we will provide the URL for this very important read to anyone who inquires. It is a must read and we leave you with a teaser from the article titled "Trends that will Change the Business of Print"

"Don't ask, 'How can we automate all this?' Ask, 'What's most inefficient in what we do today, and what can be automated?"

In our view, this article is the most provocative analysis of the future prospects for printing since the "Seven Ground Truths" speech delivered by R.R. Donnelley & Sons, Chief Executive Officer William L. Davis in Toronto on May 4, 1998.

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