W H I T E P A P E R

K o n i c a M i n o l t a B r o a d e n s I t s M a r k e t R e a c h a s a T r a n s f o r m e d D o c u m e n t S o l u t i o n s a n d S e r v i c e s T e c h n o l o g y P r o v i d e r

Sponsored by: Konica Minolta

Keith Kmetz

October 2013

I D C O P I N I O N

While the traditional print market matures, customers' need to manage the massive

amount of paper and digital business information is becoming increasingly critical. We

anticipate that the future market success of print providers will stem from the ability to

provide a more comprehensive set of solutions and services that cater to a range of

requirements in the document life cycle. Konica Minolta is an example of a vendor

that has been undergoing a series of transformative changes to best serve these

evolving market needs. Over the past three years, we have observed a number of

substantial moves that signal a new Konica Minolta, including:

Creating a vertically integrated solutions and services organization.

Konica Minolta's EnvisionIT brand puts together specifically targeted document

software and solutions for key vertical markets. Today, this includes initiatives for

the legal, healthcare, and education markets, and more is expected soon. The

company is strategically planning for key growth areas that align with its

EnvisionIT value proposition. It will continue to provide unique document and

information solutions that focus on addressable workflow opportunities in these

markets and tailor a distinctive set of solutions for each one.

Offering a software portfolio that targets key document management

requirements for a transforming market. Many document challenges — such

as security, document/enterprise content management, job tracking, and general

workflow — are horizontal in nature. Konica Minolta is focusing on these key

areas that apply across industries and providing unique solutions within many of

them as part of the EnvisionIT industry initiative.

Providing managed services. The creation of Optimized Print Services (OPS)

Enterprise Edition and the All Covered acquisition offer clear signs that Konica

Minolta is moving quickly into managed services opportunities. This effort not

only includes traditional print opportunities but also extends this capability into a

broader managed IT services program. Additionally, Konica Minolta has built

this infrastructure so that it can extend such offerings into both office and

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Finding success in both traditional and new markets. Konica Minolta not only

has managed to grow its embryonic software and services business at an

exponential rate over the past three years but also has increased its share of the

U.S. copier MFP business from 12.6% to 15.1% during the same period. This

means that Konica Minolta is effectively managing the traditional and new

business opportunities by growing its presence in both markets simultaneously.

I N T H I S W H I T E P A P E R

IDC analyzes how Konica Minolta is transforming itself from a provider of print and

copy solutions to a provider of new document solutions and services technology to

address its customers' business information needs.

S I T U A T I O N O V E R V I E W

Companies such as Konica Minolta have historically thrived by addressing the basic

copy/print needs of their business customers. With a focus on satisfying customers'

requirements for printed output, these companies have realized revenues and profits

primarily from a business model based on equipment sales, print supplies, and break/fix

service contracts.

However, these print industry revenue and profit pools are changing at an accelerated

rate. In recent years, we have witnessed the transformation of many customers'

business information needs, particularly in an IT market that is increasingly offering

solutions that shift users further away from a reliance on paper-based output.

In fact, IDC has determined that this market is in the midst of a seismic "once every

20–25 years" shift to a new technology platform based on mobility, cloud, big data,

and social technologies. This means that suppliers and customers will need to

exploit this "3rd platform" to drive future growth and innovation. In fact, we anticipate

that the "3rd platform" will drive the bulk of IT industry growth over the next dozen or

so years. Millions of new apps and services will be built on this emerging platform and

spread to a broader range of users inside and outside organizations (see Figure 1).

©2013 IDC #243471 3

F I G U R E 1

T h e 3 r d P l a t f o r m

Source: IDC, 2013

While this significant market transformation does not eliminate customers' need for

print anytime soon, it does change how businesses use and manage data,

documents, and other types of business information. Although print will continue to

play a critical role in future business operations, it is expected to mature and decline

slightly over the next several years. Even though IDC's latest U.S. page volume

forecast projects a -1.5% CAGR through 2016, it is anticipated that a robust 1.1 trillion

pages will be produced at that time. It is clear that paper-based document

technologies will still be significant years from now, even as obvious market maturity

sets into this segment.

On the other hand, digitally based content is exploding. According to IDC's top 10 IT

predictions for this year (see IDC Predictions 2013: Competing on the 3rd Platform,

#238044, November 2012), the "digital universe" (a measure of all digital data created,

replicated, and consumed in a single year) is expected to expand by almost 50%,

Intelligent Industry Solutions

3rd Platform

Mobile Devices and Apps

Big Data/Analytics

Cloud ServicesMobile BroadbandSocial Business

Trillions of Things

Mainframe Terminal

1st Platform

LAN/Internet Client/Server

PC

2nd PlatformHundreds of Millions of Users

Tens of Thousandsof Apps

Millions of Users

Thousandsof Apps

Billions of Users

CIOsLOBs

EnterprisesSMBs

SPsConsumers

Emerging Markets

Millions of …

Apps

Services

Information

Content

Experiences

4 #243471 ©2013 IDC

reaching 4 zettabytes (or 4 trillion gigabytes). This is nearly a quadrupling of the 2010

volumes. Given the rapid emergence of new data capture and generation technologies

and solutions, it's almost certain that we're underestimating the volume and growth.

Obviously, these figures represent massive changes in how businesses will adequately

create, manage, and distribute the increasing amount of content (i.e., data, documents,

business information) in both paper and digital forms. Additionally, this transformational

effort needs to be conducted in a fashion that drives cost savings and improved worker

productivity benefits that ultimately create a positive bottom-line impact.

H o w K o n i c a M i n o l t a I s C h a n g i n g t o B e t t e r M e e t C u s t o m e r s ' B u s i n e s s I n f o r m a t i o n N e e d s

Technology suppliers must cater to this transformational customer demand in order to

remain successful and viable in the future marketplace. We expect that rather than

being print or device focused, the current printing and imaging market, as defined today,

will be reinvented into more of a solutions and services market opportunity. The truly

savvy print technology providers are already in the midst of this metamorphosis, while

others may be just embarking on this journey.

Konica Minolta is an example of an organization that correctly assessed the market's

pending changes and initiated its own transformational process a few years ago. Its

Enterprise Services Strategy starts with a "four pillar" infrastructure as the building

blocks to this initiative (see Figure 2).

F I G U R E 2

K o n i c a M i n o l t a ' s E n t e r p r i s e S e r v i c e s S t r a t e g y

Source: Konica Minolta, 2013

©2013 IDC #243471 5

As a result, this document analyzes a transformed Konica Minolta offering a new set of

value propositions in categories such as software integration and professional services,

document management and enterprise content management, vertical market software

deployment and integration, and managed IT services. Certainly, this is an impressive

array of new capabilities that extend beyond the printing and copying that the company

has long been known for. The following sections take a closer look at each of the four

pillars Konica Minolta is building in response to the market's transformation.

Services & Solutions

In early 2011, Konica Minolta launched a new branding position to signal its solutions

and services initiatives for select vertical markets. EnvisionIT was created to provide

these industries with the ability to work smarter and more efficiently with integrated

workflow solutions from Konica Minolta. The initial offering was aimed at providing

managed print services, managed IT services, integrated software (Konica Minolta

and/or third party developed), professional services, and hardware under the EnvisionIT

brand umbrella and tailored for each industry. The current EnvisionIT roster includes:

EnvisionIT Legal

EnvisionIT Healthcare

EnvisionIT Education

EnvisionIT Print Production

In the near future, Konica Minolta is expected to expand this roster to include

EnvisionIT Government, EnvisionIT Financial, and EnvisionIT Manufacturing.

The company's bizhub MFPs and software solutions are core to this strategy. Konica

Minolta's bizhub Extended Solution Technology (bEST) MFP platform is the

architecture on which software solutions can be integrated into the company's family

of bizhub MFPs. The software portfolio focuses on six key opportunities:

Security and compliance

Cost accounting

Document management

Enterprise content management

Variable data

Workflow for office and production environments

Depending on the opportunity, Konica Minolta will work with third-party providers and

partners for these solutions (e.g., NSi's AutoStore for Healthcare for scanning

applications; Prism Software's document management suites for the education,

healthcare, and legal markets; Hyland Software for enterprise content management)

or will integrate its own solutions (e.g., Dispatcher Pro for the legal market, bizhub

Secure for security and compliance needs across industries).

6 #243471 ©2013 IDC

The true value of this initiative to bring software and solutions to key target markets is

in the integration of the technology with Konica Minolta's bEST-supported MFPs.

Through integrated connectors at the device level, Konica Minolta users can access

any of these solutions directly from the MFP control panel. This full integration brings

simplicity to the process and is seamless to the user. The customer benefits from

both the cost efficiencies and the productivity gains resulting from replacing paper-

intensive workflows with digitally based workflows.

Managed Print Services

Integration is also an important step in the next phase of the Konica Minolta

transformation strategy — managed print services (MPS). According to IDC's most

recent forecast, the U.S. managed print services market is expected to reach $17.29

billion by 2017, representing an 8% CAGR from 2012 to 2017. In preparation for this

market growth, Konica Minolta's OPS offering is positioned to target the MPS

requirements in the SMB and enterprise markets with four important components:

Fleet management. Rightsizing the fleet to ensure an optimized printing

environment with sensitivity to cost of ownership and environmental concerns

Worker efficiency. Maximizing business process efficiency on all business

workflows

Financing. Offering a range of financing options under one financial plan

Security. Ensuring security of all information-related solutions

Of course, this all sounds typical of most MPS programs that focus on cost-saving

opportunities for customers that implement such a program. The true success of any

MPS initiative is to ensure that the MPS provider and customer dialog makes certain

that customer cost and productivity gains are ongoing.

The Konica Minolta OPS offering continues to evolve. The latest development is the

creation of the OPS Enterprise Edition, designed to begin the customer's migration

toward a "less print" environment. It has all the usual elements of an MPS program for

large companies (e.g., meter reads/alerts, usage data, print behavior, floor mapping),

but the key piece of this program is establishing a system in which customer usage

data is integrated with Konica Minolta's SAP system. This means that usage data is

collected directly from customers' print servers into a Konica Minolta repository to

effectively monitor machine activity. Konica Minolta's OPS Enterprise Edition, which

launched on October 1, enables the essential ongoing management of the customer's

print environment with an established system of using this data to proactively manage

these customer accounts.

For example, as part of OPS Enterprise Edition, customers' print usage data is

integrated with Konica Minolta's call centers. Based on this data, Konica Minolta

service providers can predict when supplies will run out or when parts will wear out

and need replacing. Rather than losing productivity due to the conventional initiation

of a service call by a customer and waiting for the tech's arrival, Konica Minolta

service providers can use data analytics to proactively respond to a pending customer

©2013 IDC #243471 7

need prior to the customer even noticing it. Downtime is virtually eliminated because

the process to initiate machine service occurs before any breakdown.

This predictive maintenance aspect of OPS Enterprise Edition potentially sets a new

standard in how managed services accounts will operate under a usage data set

made available to the provider. The Konica Minolta software platform is the toolset

that will enable the vendor to deliver the necessary data and reporting to clearly

identify the opportunities for cost consolidation. Perhaps more importantly, this

software database platform of actual customer usage data will help Konica Minolta

sales teams and channel partners rapidly assess and more efficiently identify ongoing

cost and productivity efficiencies for end-user customers.

OPS Enterprise Edition is not for all Konica Minolta customers. The company admits

that the account should have a significant number of devices (75 machines and up) to

make it a worthwhile venture for the customer. While the offering is targeted at large

enterprises, we believe it could extend into the upper end of the SMB market where

some smaller companies may have a large number of devices to adequately address

their high level of document traffic.

In subsequent phases of OPS Enterprise Edition, Konica Minolta will address MPS for

the production/CRD and external print management environment. The intent is to

develop a platform that links all print elements for Konica Minolta customers to assist

with decisions related to the transformation of their print infrastructure.

Managed IT Services

As an extension to managed print services, managed IT services is a key component

of the Konica Minolta transformational strategy. In early 2011, Konica Minolta

acquired All Covered to be the delivery vehicle to tie managed IT services (e.g., data

backup, security, cloud, call centers, training, vertical expertise) with Konica Minolta's

MFP and print hardware. As the market moves toward more cloud-based services,

we believe that IT services will play an increasingly important role in customer

support, so this acquisition was and continues to be a good move by Konica Minolta

to establish itself in this category.

While the traditional All Covered target market has been SMB, Konica Minolta

expects to take the All Covered managed IT services model to the enterprise market

and utilize it under OPS Enterprise Edition engagements. The expectation is that the

company will leverage All Covered's SMB successes to continue growth in this

segment while significantly expanding its presence in Fortune accounts with a select

set of All Covered services for that market segment.

In preparation to create a more national IT services organization, Konica Minolta

has been diligently augmenting this organization with several acquisitions under the

All Covered division (see Table 1).

8 #243471 ©2013 IDC

T A B L E 1

A l l C o v e r e d A c q u i s i t i o n s M a d e S i n c e t h e K o n i c a M i n o l t a P u r c h a s e

Who When Where Vertical Specialties

United Computer April 2013 New Jersey Financial, government

InterTech December 2012 Phoenix

WaveTwo August 2012 Dallas Healthcare

Compuquip August 2012 Miami

Thinsolutions April 2012 Cleveland Financial, manufacturing, legal

PC Solutions April 2012 Minneapolis

Covisia Solutions March 2012 Boston

Service Assurance February 2012 Memphis

ColdCypress October 2011 Pittsburgh

Vertical IT Solutions September 2011 Tampa Financial, real estate, staffing, construction, nonprofits

PMV Technologies September 2011 Detroit Education, financial, healthcare, legal

LAN Associates September 2011 New York Legal

Techcare May 2011 Chicago Education

Note: Konica Minolta acquired All Covered in January 2011.

Source: IDC and Konica Minolta, 2013

Konica Minolta is expected to broaden and expand upon this initial All Covered

foundation for its managed IT services play in a number of ways:

Geographic expansion is anticipated until the company feels it is adequately

covered on a national basis. As shown in Table 1, Konica Minolta has acquired 13

companies under the All Covered family since it made the purchase over two and a

half years ago. Konica Minolta has given every indication that it is not finished with

such moves.

Product portfolio expansion will also come in the form of new skills and new

services built upon the already established All Covered organization.

Konica Minolta's EnvisionIT offering will evolve to include managed IT services

as a core component. It is anticipated that during this time, cloud services,

security and compliance, and document management will be the solution areas

of concentration and will be tailored for each EnvisionIT vertical offering. Services

will be provided in conjunction with this solutions development.

The predictive element of customer service for OPS Enterprise Edition extends

nicely into the broader IT market opportunity. As Konica Minolta launches this latest

MPS offering in the market, we expect these data analytics to be offered in any

Konica Minolta customer service engagement, whether for print or general IT.

©2013 IDC #243471 9

Commercial Print Management

Konica Minolta is also transforming its approach to the production print market

opportunity. At the end of 2012, Konica Minolta acquired Charterhouse PM Limited, a

European marketing services production company. The acquisition gave Konica

Minolta entry into the commercial print management market in Europe, but these

skills and capabilities (e.g., digital services, data management, studio services,

promotional merchandise, point of sale, and print management services) are

expected to expand to other geographies. The value proposition is that Konica

Minolta now provides a comprehensive suite of services, solutions, consulting,

support, and hardware under a single management platform. The company is in the

process of evaluating this growth opportunity in the United States to support the

expansion into commercial print management.

C h a l l e n g e s

While Konica Minolta has made significant progress over the past three years, all

other traditional print/MFP competitors are moving in this direction as well, and some

have been at it longer than three years. Konica Minolta will need to position itself as

having learned from early-adopter mistakes and plan accordingly versus competitors

with more direct experience over a longer period of time.

The general market consensus is that printing and imaging is moving quickly to a

solutions and services platform. We expect the future market will be crowded as all

market participants build and refine their services offerings. Konica Minolta will need

to continue to demonstrate that it can execute at a level that is above the industry

norm and expectations. At this point, the results show that the company is effectively

doing so, but momentum needs to continue.

Konica Minolta needs to continue gaining legitimacy in new evolving adjacent

markets. Obviously, the company is well established in the print/copy arena, but the

market's perspective that Konica Minolta also has legitimacy in the management of

both paper and electronic business content domains may not always be readily

apparent to the buying audience. In fact, some customers may believe that these new

core competencies that Konica Minolta is building come from suppliers outside the

traditional print/copy and document technology sector. The challenge in this

reinvention is to convince customers that Konica Minolta not only has print/copy and

paper document expertise but also can bring this same credibility to the digital

information arena with unique value-added services.

Lastly, slow-to-move channel partners and end-user customers will need to be

convinced that this technology path is the right one to take and that Konica Minolta is

the best technology supplier to provide for this transformation.

10 #243471 ©2013 IDC

F U T U R E O U T L O O K

Ultimately, no one vendor can alter the changes taking place in the printing and

imaging market — the market will do what the market will do. What that means is that

the transformative wave hitting the traditional print market will not be stopped and that

change is inevitable. In response, vendors will need to make significant changes to

keep up with the market's new direction.

One thing is clear: Customers will continue to expect more from their technology

providers, including vendors and their channel partners. In part, customers expect

providers to help them manage the transformative factors that are changing the

shape of their businesses. This means having a substantive knowledge of the

customer's business (or vertical industry) and offering a range of products (hardware,

software, and services) that help customers better compete. The good news is that

such offerings are rooted not in low pricing but in the perceived value provided and

lead to potentially higher-margined sales.

As a result, this transformation is creating new opportunities for vendors and channel

partners to assist end-user customers with tailored document solutions and services

essential for their business. This includes:

Vertical markets (e.g., customized solutions will differ considerably among

industries such as healthcare, legal, education, financial, government, and

manufacturing)

Software (e.g., document management that requires cloud, mobile, security

support)

Managed services that include print as well as the IT environment overall

The successful print providers of today and tomorrow cannot rely primarily on the old

sources of revenue (e.g., hardware, supplies, break/fix) to drive the business forward.

While hardware continues to lead most current customer engagements, we believe

that software and services will figure more prominently in an increasing number of

future sales opportunities. Nevertheless, hardware will still be important for the

foreseeable future, and vendors should continue to invest in both established

(hardware) and emerging (software and services) markets to drive future success.

With all these changes taking place, Konica Minolta has artfully managed the tricky

navigation of a gradual transition from hardware to services. The company has not

abandoned its printing and imaging roots. The proof lies in Konica Minolta's continuous

demonstration of year-over-year hardware unit shipment growth and market share

increases. IDC research shows that Konica Minolta's market share of the U.S. copier-

based MFP market grew from 12.6% in 2010 to more than 15% through 2012. In

software and services, the company's revenues have grown exponentially since the

beginning of this initiative three years ago. While some of the industry is struggling with

making the transition, Konica Minolta's positive accomplishments in both established

and new business opportunities are rare and notable.

So what does this mean for the broader market as well as all participants in the

Konica Minolta ecosystem (e.g., company, channel partners, and customers)?

©2013 IDC #243471 11

Konica Minolta has made several acquisitions to make itself relevant in the printing

industry's transformation. In the process, it is hiring expertise in vertical markets,

services, and software. Hardware is not being abandoned, but it is not the only offering

for Konica Minolta's customers. The company is taking the appropriate steps to reinvent

itself in order to carve its piece of the market and to grow its future business.

For Konica Minolta channel partners, there are more profit pools available by

representing a vendor offering a greater array of technologies and services, particularly

where there are growth opportunities.

Most importantly, end-user customers get more than just a printer or MFP hardware

solution. Instead, their vendor or channel provider can offer a comprehensive set of

technology and capabilities that appropriately address workflows and processes that

are key and essential to that specific business. It is not a general "one size fits all"

approach with a generic hardware device but a "business hub" that enables efficient

business information processing.

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