Lexmark attempts e-business reinvention

As countless small printing jobs dominate the paperless office that never arrived, printing technologies are evolving to become an even more vital component of an enterprise IT infrastructure. Lexmark International Inc. Chairman and CEO Paul Curlander talked with Mark Jones about the company's mission to leverage the Internet as a key element in the evolution of an enterprise's business processes.

Q: How is Lexmark evolving to meet enterprise printing demands?Curlander: We see the enterprise customer spending a huge amount of money on hard copy output. We find that the average office worker will print, copy, and fax approximately 13,000 pages per year. If you start adding this up across the enterprise and you start throwing in what they do in their central print centers or copy centers, or what they send outside to people like Kinko's or other fast turnaround kinds of places, at least 1 percent of revenue is sold in hard copy output. So people are spending huge amounts of money.

Q: How is this reflected in your product lineup?Curlander: We see Internet technologies fundamentally changing the role of paper in the enterprise. [Going forward] things will come to you electronically and you will print what you choose to print for your own productivity. Otherwise, you read it on the screen or discard it or store it. The other thing that we see going on is distributed output is essentially unmanaged. So we see this waterfall of pages that's coming down to the distributed output devices -- what we see as unmanaged space. When we talk to a large Fortune 1000 customer, they don't know how many printers they have, they don't how many pages they print, and they don't know what they're spending. What we see is that in general people are over-equipped. People have way too much equipment across printers, copiers, and fax machines. In fact, we find for the average customer that they probably have anywhere from 30 to 40 percent too much equipment beyond what they need.

Q: There's been a lot of noise from companies like Xerox looking to use Web services to improve printer management and build distributed printing systems. What is Lexmark doing in this area?Curlander: We have an effort that's similar to [Xerox] in that we're focused on trying to help our customers get to what we would view to be the future office vision. [That vision is of] an information and document management environment that facilitates complete electronic workflow. You do not want to be moving paper through your business. You don't want to be doing it because of the cost, but you also don't want to be doing it primarily because of the speed. If you have a process that requires you to move paper, it means that the speed of your process is the speed at which you can move paper. So we're focused on how we can facilitate for our customers to move to essentially electronic workflow. And that's a fairly challenging thing, because what you find is that with the majority of Fortune 500 and 1000 companies, there are hundreds and probably thousands of paper-intensive processes.

Q: So are you enlisting the support from professional services companies?Curlander: We're primarily doing this on our own. What we would do normally with a customer is we would go in and engage as Lexmark. The guys who do services, like IBM, EDS, CSC, are not focused on this space. We see Lexmark in here pretty heavily, we see Xerox to some extent in here. We are focused on first putting in place our own services organization that has the ability to go on site, analyze people's workflow, and then provide to the customer a complete turnkey solution to change and re-engineer that process to move [it] to electronic workflow. And we do that utilizing their existing infrastructure. We think the key point is providing what we call an e-transform mechanism to go from paper to electronic.

Q: So what products are you developing to meet this vision?Curlander: We have announced this capability on our X-820E with its touch-panel display. When you walk up to a Lexmark device, instead of all these buttons, what you see is a touch [panel] that has three icons on it. And you can copy, you can e-mail or fax with the second icon, or you can archive. But basically, if you want to move from paper to electronic, you walk up and you touch "e-mail/fax," and basically what comes up is a touch keyboard. And you can just touch in somebody's e-mail address. It's just like being on your PC. You can just look up in the network directory somebody's e-mail address, [and] you can build a distribution list even if you don't know people's e-mail addresses. We also have a very simple scripting technology with this software so that you can write scripts that you can then pre-load onto these touch panels under little other keys that you touch, and you can bring up all these prepared scripts. So that if you have some routing that you do, if it's a repetitive kind of process, you can now just take the document, touch the panel, bring up that prepared script and touch it, and boom this thing's gone. It's faxed, it's e-mailed, it's archived, it's indexed, it's done. And that's the type of technology that we've tried to bring to bear.

Q: Are you the first company building this type of technology?Curlander: As far as I know, I haven't seen anybody else do it. We've been working on this for a number of years fairly quietly. But now we announced its general availability in the marketplace in the fourth quarter of last year on the X-820. We'll be expanding that in the very near future over a broader set of products.

Q: Is Lexmark's value proposition shifting toward managing data processes and away from its starting point as a pure printing hardware manufacturer?Kurlander: Yes, it's very different. The future for us is absolutely solutions and services rather than hardware per se. And hardware is an integral part of that solution, but hardware is not necessarily the value proposition, the selling proposition that sells that solution. What sells that solution is productivity gains, like cost reductions, but in general it's speed. It's how you speed up somebody's [business] processes.

Q: What do you see as the role of Web services in your company going forward?Kurlander: We have a [slightly] different philosophy, perhaps, than some other people. When we look at services, it's not clear to us where the winning play is. If you look over the last three years, it's been a huge focus, there's a lot of hysteria over Web services. I view the Internet or the Web as a platform for people to build applications on. And to me, it's no different than the Windows operation system. The capability is there, the question now is, what services will people build on top of that to be successful and which ones will win? The key for us is we're not necessarily trying to create services applications or services per se. What we're trying to do is facilitate our customers' ability to move from paper to electronic to leverage those services. So we're focused on distributive devices, we're focused on distributed software, we're focused on the integration services that allow people to tap into those services. And we believe that in general the end result of many of those services is that the processes will change dramatically, but there will still be hard copy. But hard copy will be at the end of the process, printed by a user for personal productivity.

Q: Rather than sit in the middle of the chain.Kurlander: Right. And we also think that printing will now become part of the storage retrieval process, that you won't keep paper in your file cabinet. But every time you need something, instead of keeping it in your file cabinet it is now [available] every time you need it, you just print it. You print it and you use it, and you throw it away. And next time you need it again, you'll print it again.

Q: How do you think things will evolve on the wireless device front?Kurlander: We're focused on wireless printing from two perspectives. One perspective is allowing people to connect from handheld wireless devices and obviously it appears that Bluetooth will be the technology of choice to do that. We view that as a very slow-growing opportunity. I think the opportunity will be there. We have prototype hardware today, in fact we've been sitting on it for a couple of years. Bluetooth is not yet to a price point where I think it's ready to take off. Bluetooth is a much better technology than infrared which [needs] a line of sight and a fairly short distance to execute. But we think there will be some of that. What we think will be a much more interesting thing is wireless connection to the LAN, the printers. And we really think as people move forward and the technology continues to evolve, that not having to run cable through your walls is going to be a key thing.

Q: What impact will wireless printing technology have on corporate networks?Kurlander: The biggest issue I see on wireless connection to the LAN is allowing people to roam throughout their enterprise with their notebooks, and if they need to print something, be able to print it on the first printer they come across -- which is where I think this ultimately will go. I think that's a more challenging technical problem that's not yet been solved. And part of what needs to happen is [your notebook] needs to either recognize what that printer is and you need a driver for that printer. And this really is going to evolve around industry standards and protocols which are not yet defined. But Lexmark is working on that, we're working with industry standards groups, we're in the IEEE Task Force focused around this, and we're trying to evolve this with the rest of the companies because we're only interested in open standards.

Q: How have enterprise customer buying habits changed during the current economic climate vs. maybe a year ago?Kurlander: Honestly, we see a depressed state of demand [from] corporate customers. There's no question there's been a lot of deferral of projects, there's been reduction in capital, almost starting in the fourth quarter of 2000. We saw the consumer market start to slow, then the business market slows as the consumer demand impacts the businesses. And I think it will be the reverse as [we] come out of it.

Q: Are you expecting to see more consolidation around these multifunction devices that interact intelligently with the network?Kurlander: I think so, because it's fascinating to see what people print. But 85 percent of what people print is one to three pages in length. Sixty-five percent of what people print is one page, which tells me what's key in general is personal productivity. So what we think is the device of the future is a fairly small, low-cost printing device probably [sold] around laser technology, with mono and color. And probably two separate devices -- one mono, one color -- and we think that's the primary application people will do because things will come in electronically. So you'll need a lot of these, you'll need these to be shared, among whatever level of productivity the company is looking for, anywhere from three to eight people.

Q: How well do you think CTOs and CXOs understand the need to push ahead with this vision of productivity?Kurlander: I think they don't. I think in general, they don't understand how much they spend on printing. I think in general, they don't know how many printers they have, how many pages they print. I think they don't know how many processes, critical core processes, they have that are printer-intensive, or the cycle time of these processes. It's just too overwhelming to get your mind around. And what we're focused on is how can we now start to work with our corporate customers, not only to help them understand it, but step up and just do it for them because nobody's got the resources to do it.

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