TCPglobal - news, views and issues on total cost of printing

Issue #0730/1 - Radical reworking of its solid ink printer and MFP sales model results in greatly reduced Cost of Printing for customers who want to take advantage of it.

In a move that cuts across all our accepted understanding of printer industry dynamics, Xerox has announced a new solid ink printer today, Phaser 8860DN, that costs less to run even than a Kyocera ECOSYS laser printer!

Also announced is an MFP version of the engine, Phaser 8860MFP, again with low running costs.

Effectively turning the clocks back 20 years to the time when sales of printer hardware brought a profit to the manufacturer, this move is set to save colour customers money in the long-term and has the potential to spark a price war with a difference.

As corporations continue to struggle to reduce costs, this sales model should appeal. Separating capital costs from running costs has always been attractive to corporate accountants and here we see a model that should certainly catch their attention – realistic hardware costs can be written down year-by-year while ongoing expenditure on day-to-day printing is dramatically reduced.

What Xerox has done is to put the hardware for the new 8860 solid ink models on the market at prices that reflect the technology and manufacturing costs of producing the units. This means that the printer sells for £1,699, in comparison to the equivalent Phaser 8560 that sells for just £536. Likewise the MFP version of the Phaser 8860 sells for a pretty hefty £2,919 as opposed to £1,863 for the 8560MFP.

However, it is every bit as much in the pricing of supplies that we see the revolution.

Firstly, colour ink sticks are all shipped in batches of six, whereas supplies for other solid ink printers/MFPs are shipped in batches of three. The exception is the black ink that is still shipped in 6-stick packs, as with other machines.

Secondly, black sticks actually look expensive at first glance. Xerox’s list price on the sticks is £144 but, the printer/MFP will produce a quoted 14,000 pages for that sum – meaning that, per page, the cost is precisely the same as for the Phaser 8560 which has a pack of black ink costing £62 but producing only 6,000 pages.

Thirdly, however, it is in the pricing of the colour sticks that the secret really lies! Six sticks of one colour, producing 14,000 pages per pack, cost precisely one-third of the cost of a pack of black sticks. This means that customers will pay the same amount for six sticks of ALL THREE colours (C, M & Y) as for six sticks of black!

Thus, a four-colour page, comprising 5% of each colour, will cost only twice as much as a 5% black page, instead of (typically) 6-8 times the cost.

Total Cost of Printing - by Monthly Page Volume

Mid-range single-pass colour page printers
printing 70% mono pages and 30% colour pages

Note that the CPP shown here is calculated over three years on the basis of a variable page count; 70% pages in mono and 30% pages in colour; is based on the use of maximum capacity supplies; takes into account any standard, or starter, supplies shipped with the device; and also includes the cost of purchase. All prices used are manufacturer’s recommended prices without tax.

Uk Mid-range Single-pass colour	Purchase Duty Cycle	Print Speed		Nominal CPP	Mixed mono/colour CPP over 3 years
Epson AcuLaser C3800DN	£578 60,000	Mono Colour	35ppm 25ppm	1.31 pence 6.34 pence	3.44 pence
Hewlett-Packard Colour LaserJet 4700dn	£1,220 100,000	Mono Colour	30ppm 30ppm	1.19 pence 5.68 pence	3.52 pence
Konica Minolta magicolor 5550d	£799 120,000	Mono Colour	30ppm 25ppm	1.24 pence 6.03 pence	3.73 pence
Kyocera FS-C5030N (+D)	£949 85,000	Mono Colour	24ppm 24ppm	0.89 pence 3.97 pence	2.77 pence
Lexmark C780dn	£758 120,000	Mono Colour	33ppm 29ppm	1.72 pence 7.04 pence	3.71 pence
Oki C5900dn	£759 60,000	Mono Colour	32ppm 26ppm	1.10 pence 6.77 pence	3.57 pence
Xerox Phaser 6180DN	£335 60,000	Mono Colour	25ppm 20ppm	1.56 pence 8.31 pence	4.32 pence
Xerox Phaser 8560DN	£536 85,000	Mono Colour	30ppm 30ppm	1.37 pence 7.57 pence	4.18 pence
Xerox Phaser 8860DN	£1,699 120,000	Mono Colour	30ppm 30ppm	1.16 pence 2.22 pence	3.26 pence

Total Cost of Printing - by Monthly Page Volume

Mid-range single-pass colour page printers
printing 30% mono pages and 70% colour pages

Note that the CPP shown here is calculated over three years on the basis of a variable page count; 30% pages in mono and 70% pages in colour; is based on the use of maximum capacity supplies; takes into account any standard, or starter, supplies shipped with the device; and also includes the cost of purchase. All prices used are manufacturer’s recommended prices without tax.

Uk Mid-range Single-pass colour	Purchase Duty Cycle	Print Speed		Nominal CPP	Mixed mono/colour CPP over 3 years
Epson AcuLaser C3800DN	£578 60,000	Mono Colour	35ppm 25ppm	1.31 pence 6.34 pence	5.46 pence
Hewlett-Packard Colour LaserJet 4700dn	£1,220 100,000	Mono Colour	30ppm 30ppm	1.19 pence 5.68 pence	5.52 pence
Konica Minolta magicolor 5550d	£799 120,000	Mono Colour	30ppm 25ppm	1.24 pence 6.03 pence	5.95 pence
Kyocera FS-C5030N (+D)	£949 85,000	Mono Colour	24ppm 24ppm	0.89 pence 3.97 pence	4.14 pence
Lexmark C780dn	£758 120,000	Mono Colour	33ppm 29ppm	1.72 pence 7.04 pence	5.48 pence
Oki C5900dn	£759 60,000	Mono Colour	32ppm 26ppm	1.10 pence 6.77 pence	6.09 pence
Xerox Phaser 6180DN	£335 60,000	Mono Colour	25ppm 20ppm	1.56 pence 8.31 pence	7.02 pence
Xerox Phaser 8560DN	£536 85,000	Mono Colour	30ppm 30ppm	1.37 pence 7.57 pence	6.66 pence
Xerox Phaser 8860DN	£1,699 120,000	Mono Colour	30ppm 30ppm	1.16 pence 2.22 pence	3.58 pence

By the time the higher hardware purchase price has been taken into account, the resulting long-term Cost of Printing is considerably lower than the Phaser 8560 models or any comparable colour laser printer – including those from Kyocera!

Comparison charts have been prepared for both Phaser 8860 printer and Phaser 8860MFP. These show Cost of Printing for a range of monthly page volumes at our standard 70% mono / 30% colour printing. And, alternatively, charts have been prepared to demonstrate the Cost of Printing for high-colour users, where the balance of printing has been reversed to 30% mono / 70% colour.

Considering the Phaser 8860 printer first, we see a dramatic difference in the Cost of Printing compared to any of the other models. At low volumes and low colour (Page 3), the Phaser 8860 is the most expensive printer in the group – as expected, due to its high purchase price.

BUT, as monthly print volumes rise, the cost of running the Phaser 8860 rapidly plummets through the field and overtakes the Kyocera FS-5030N (+D) at a monthly print volume of about 5,700 pages. Note that Kyocera’s model also looks expensive at low print volumes because of its relatively high hardware purchase price.

Kyocera has just celebrated its 15th year of ECOSYS printers – for which “congratulations!” – and has operated on just this sales model over that decade and a half. However, pricing pressure from the rest of the industry has played to the demands of the consumer-driven public, with hardware prices slashed so that manufacturers could take as big a slice of the consumables pie as possible.

This has meant that Kyocera, with its relatively high-priced hardware has tended to struggle to achieve as significant a share of the printer market as it should have been capable of. Ironically, Kyocera has recently begun to swing towards the accepted sales model with printer pricing tending to fall so that it does not stand too high above its competition.

It should be noted here though, that Kyocera has raised the price of the FS-5030N by about 19% in just the past month.

What makes this move by Xerox so significant is the very fact that it is Xerox, a name that has been synonymous with copying and printing since before most Kyocera employees were born! Had this been undertaken by a minor player in the industry, instead of Xerox, it would have been far less significant and stood a far lower chance of succeeding.

If a trend develops where printer prices reflect their manufacturing costs, and supplies prices give customers what they desire – lower overall printing costs – then, long-term, Kyocera could actually stand to benefit from Xerox’s boldness.

Now take a look at page 4, where the chart for high-colour users is displayed. At 70% colour printing (30% mono), the Phaser 8860 STARTS at the same overall Cost of Printing as the Kyocera FS-C5030 – even at low monthly print volumes – and only widens the gap from that point on as monthly print volumes increase.

Overall, at high monthly volumes and high colour usage, the Phaser 8860 works out to cost an incredible one-third (approximately) of the cost of running the Phaser 6180 laser printer and less than half the cost of four of the other models shown here.

Moving on to the MFP version (see charts below), the comparisons are not quite as dramatic when considering high mono / low colour usage. The results however, are every bit as significant, with the 8860MFP still plummeting through the ranks as monthly print volumes rise.

Total Cost of Printing - by Monthly Page Volume

Single-pass colour MFPs
printing 70% mono pages and 30% colour pages

Note that the CPP shown here is calculated over three years on the basis of a variable page count; 70% pages in mono and 30% pages in colour; is based on the use of maximum capacity supplies; takes into account any standard, or starter, supplies shipped with the device; and also includes the cost of purchase. All prices used are manufacturer’s recommended prices without tax.

Mixed mono/colour CPP in the table below is based on a print volume of 2,500 pages per month.

Uk Mid-range Single-pass colour	Purchase Duty Cycle	Print Speed		Nominal CPP	Mixed mono/colour CPP over 3 years
Brother MFC-9440CN	£535	Mono Colour	20ppm 20ppm	1.59 pence 7.20 pence	3.83 pence
Oki C3530 MFP	£718	Mono Colour	20ppm 16ppm	1.28 pence 7.02 pence	3.72 pence
Xerox Phaser 6180MFP/D	£848	Mono Colour	30ppm 20ppm	1.56 pence 8.31 pence	4.72 pence
Xerox Phaser 8560MFP/D	£1,863	Mono Colour	30ppm 30ppm	1.25 pence 6.72 pence	4.96 pence
Xerox Phaser 8860MFP/D	£2,919	Mono Colour	30ppm 30ppm	1.12 pence 2.15 pence	4.61 pence

Total Cost of Printing - by Monthly Page Volume

Single-pass colour MFPs
printing 30% mono pages and 70% colour pages

Note that the CPP shown here is calculated over three years on the basis of a variable page count; 30% pages in mono and 70% pages in colour; is based on the use of maximum capacity supplies; takes into account any standard, or starter, supplies shipped with the device; and also includes the cost of purchase. All prices used are manufacturer’s recommended prices without tax.

Mixed mono/colour CPP in the table below is based on a print volume of 2,500 pages per month.

Uk Mid-range Single-pass colour	Purchase Duty Cycle	Print Speed		Nominal CPP	Mixed mono/colour CPP over 3 years
Brother MFC-9440CN	£535	Mono Colour	20ppm 20ppm	1.59 pence 7.20 pence	6.07 pence
Oki C3530 MFP	£718	Mono Colour	20ppm 16ppm	1.28 pence 7.02 pence	6.06 pence
Xerox Phaser 6180MFP/D	£848	Mono Colour	30ppm 20ppm	1.56 pence 8.31 pence	7.42 pence
Xerox Phaser 8560MFP/D	£1,863	Mono Colour	30ppm 30ppm	1.25 pence 6.72 pence	7.23 pence
Xerox Phaser 8860MFP/D	£2,919	Mono Colour	30ppm 30ppm	1.12 pence 2.15 pence	4.93 pence

At high colour usage, the benefits are every bit as dramatic as with the printer version, with overall cost also hitting a 50% differential to most machines at high volumes and high colour usage.

Although the Phaser 8860 models are essentially the same as the Phaser 8560 models, there is one important technological advance. For many years Xerox has been working on methods to improve the moulding process of the ink sticks. Up to now, they have been manufactured using a flow-moulding process where molten ink is simply poured into a light plastic mould and packaged in that mould.

Even though this process has been adequate for the purpose, the sticks tend to have air bubbles in them and the flow moulding process is restrictive in terms of the shapes that can be used.

Xerox has now succeeded in developing and perfecting a brand new process that uses injection moulding technology. The resulting ink sticks look far more pleasing, professional and dense – with no more air bubbles or rough sides and edges.

In addition, injection moulding will allow Xerox to produce and package the sticks more cost-effectively – one factor allowing the reduction in ink pricing – but also using far more complex 3D shapes. This is important in preventing the sticks being inserted into the wrong machine as new models join the line-up in the future – which could ruin the ink delivery system of the device.

For this reason, we should not expect to see such dramatic cost reductions if Xerox ever decides to translate the sales model to include laser printers also. The sales model would translate very effectively but cost reductions would probably be more muted.

One immediate reaction to the news of this change of approach by Xerox might be dismay at the rising hardware prices!

Be assured, Xerox is not turning its back on customers who wish to continue to buy printers at low cost and then pay more for their consumables.

In the charts, we see that the Phaser 8560 models are still in the line-up, meaning that customers have the choice of financial model – Phaser 8560 models are priced inline with the accepted industry model. But, it should be noted that overall Cost of Printing under that sales model places Xerox machines (solid ink or laser) persistently at the top end of the cost scale – and, this is after a 14% reduction in the cost of those solid ink consumables in the past month.

Note that the line-up here includes two models that are new to the market.

These are the Oki C3530 MFP, launched during the course of the summer, and the Brother MFC-9440CN – a brand new model just being rolled out in Europe this month.

Comprehensive cost comparisons can be found here but a review of these two models will be the subject of next week’s TCPglobal, together with Brother’s printer versions of the same engine – a brand new and innovative Brother-developed engine.

To summarise, this move by Xerox is an amazing departure from accepted practice in the industry and Xerox should be commended for taking this bold move in offering volume customers an alternative costing model.

~ End ~

This entry was posted on Monday, September 24th, 2007 at 12:00 am and is filed under New Products, Pricing, Comparisons. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.