Monday, November 26, 2007

TCO Wars

Over the past few years, the prices on low-to mid-range color laser printers have fallen ever lower even as the cost of consumables has gone up. The price of equipment acts basically as a loss leader, whereas the real money is in toner.

Are buyers of color laser printers finally starting to think about more than the sticker price? Is the total cost of ownership or TCO (a formula that combines average cost per page along with machine price) becoming a factor in purchasing decisions?

That’s an assumption that OKI Printing Solutions is working under. The company just announced consumables price reductions on its C8800 and C6000 color laser printer lines. Cost per page on the ledger-size C8800 have been lowered by 11% to 9.1 cents a page, while those on the letter/legal-size C6000 were lowered by 25% to 19.0 cents for color and 1.6 cents for black. OKI is claiming that TCO has been reduced by 30%.

Changes in consumables prices is a rare event in the printer business, and these are pretty significant reductions. The compelling reason for lowering the TCO is allowing a vendor to gain traction in what is now an extremely competitive market of very solid office color printers. The big target of course is Hewlett-Packard, whose dominant market position allows it to maintain higher consumables costs in some of its models. But beyond HP, there is a confusing array of choices from over a dozen serious rivals.

After talking to key OKI product managers, it seems clear that the price shift is likely to have most impact on large corporate and governmental purchasers, where a realization has already taken hold that more goes into costs than the sticker price. And OKI will need well-tutored salesmen and resellers to push the kind of three-year cost timeframe that’s behind total cost estimates.

Of course, the TCO argument is nothing new. Kyocera, especially, has been making it for years, with mixed success in the marketplace. Clearly, OKI is betting on a shift in thinking in the market, which is starting to get the idea that the long-term costs of color are far higher than they expected. It will be interesting to see if others follow suit.

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