Prognosticators Beware: Forecasting 2023 Not for Faint of Heart

We’ve read all the reports. We’ve seen the statistics from the industry’s analyst community. We’ve heard all the talking heads shouting admonitions and excoriating us for our failure to heed the warning signs. And we’ve shared notes with one another regarding our own experiences and anecdotes. But the truth of the matter is, forecasting is an inexact science, no matter how much data and information we inhale beforehand.

Sometimes, we’re too close to the situation to make an educated guess. Other times, we’re perhaps too far removed from the experiences of others to make an accurate assessment. Even given all the information and tracking results at our disposal, providing a spot-on prediction for 2023 might, in the long run, be a matter of wishful thinking.

But inherently, we possess this need to be able to wrap our heads around matters that are largely out of our control. Which is why we’re offering our annual State of the Industry report on trends and predictions. You’ve already perused the trends that bear monitoring in 2023, but in this feature, the brave and bold among the office technology universe take their best stab at offering a look at what 2023 has to offer.

Perhaps we’re wrong more often than right, but it’s a necessary exercise to flex our analytical muscles. And in being wrong, we have the chance to break down the game film on Monday morning and learn more about what we didn’t know.

“I think if 2020 and 2021 taught me anything, it was not to predict anything,” one of our panelists succinctly observed. “But I’m no quitter, so here you go!”

I know many believe the supply chain issue is behind us, but there were a number of dynamics that eased the pressure this past summer and allowed for some increased availability.

– Mike Marusic, Sharp Imaging and Information Company of America

It’s that spirit that moves us forward and compels us to aim small, miss small in our projections. So, whether it’s the supply chain, the economy, hiring proclivities, the future of decentralized work or the need for product and service diversification, we can figure out how to reduce the gap between what we know and what may transpire in the new year. As always, we wish you much success, health, happiness and prosperity in 2023. Read on…

Chain Links

One of the hottest topics on the mind of resellers is the supply chain and the long-awaited resumption of normal inventory levels. At least one manufacturer executive—Toshiba President and CEO Larry White—is willing to proclaim that 2023 will see a more normalized flow between OEM, dealer and end-user.

“One caveat is China, which is a bit of a wild card with its zero-COVID policy and the lockdowns in Beijing,” he said. “Although virtually all suppliers have diversified our manufacturing facilities, we’re still tied to China in so many ways in terms of components or main manufacturing plants. If a lockdown occurs, it could start limiting production again. We’re hopeful that it doesn’t happen.”

We can expect to still see supply chain obstacles such as delays and shortages, but they should gradually improve in the year ahead.

– Elliot Williams, Epson America

Likewise, Mike Marusic, president and CEO of Sharp Imaging and Information Company of America, projects a return to “some normalcy,” although he’s wary of bumps along the way. Even with some prognosticators pointing to a likely economic slowdown in the coming months, Marusic believes supply chains will improve and a greater percentage of the working population will be back on premises by the second half of the year.

“I know many believe the supply chain issue is behind us, but there were a number of dynamics that eased the pressure this past summer and allowed for some increased availability,” Marusic noted. “Those factors will return to the previous years’ challenges, and so there will continue to be some difficulties, but not as severe as last year.”

Noting that supply chain challenges are ubiquitous across the globe, Elliot Williams—the director of product marketing, business imaging for Epson America—believes relief should be around the corner. For the time being, backorders will persist.

“We can expect to still see supply chain obstacles such as delays and shortages, but they should gradually improve in the year ahead,” he predicted.

Customers seem to understand that costs across the board are going up on both goods and services. Dealers will need to get creative and raise the floor on their pricing to continue to grow and adapt.

– Mason Smith, MTS Office Systems

The normalization of business is a key indicator for success in the eyes of Mason Smith, president and CEO of MTS Office Systems of Anderson, South Carolina. He feels the supply chain situation has demonstrated enough improvement to make him optimistic for 2023.

“We were in a much better place in November of 2022 than we were in the first half of the year,” he said. “It will result in dealers stocking more devices in their warehouses versus buying them on-demand. I also see lease rates continuing to increase. Customers seem to understand that costs across the board are going up on both goods and services. Dealers will need to get creative and raise the floor on their pricing to continue to grow and adapt.”

Some dealers, including Vision Office Systems of Charlotte, North Carolina, are taking a more conservative view as to when the supply chain normalization will resume, although in some cases it’s not a significant difference. Jason Habbal, company vice president, believes it may extend through 2023 and into 2024.

[Consolidation] will result in at least two manufacturers merging and possibly one even exiting the space altogether.

– Dan Cooper, Novatech

“The strict lockdown guidelines in Asia will continue to cripple manufacturing and create issues for the U.S.,” he said. “I also think dealers whose base of customers is more SMB are going to be in better shape with people returning to the office. Dealers that have a big focus on enterprise-level accounts are going to need to get creative if these companies don’t return to their offices.”

Digital Transformation

The topic of digital transformation continues to loom large as ongoing cost pressures coerce customers to save money, notes Mike Pietrunti, senior vice president, U.S. multi-brand dealer channel for Xerox Corp.

“Dealers can leverage technology to automate routine tasks, optimize print infrastructure, and manage data and information capture more effectively, saving customers time and, most importantly, money,” he added.

The most successful of solutions providers will continue to master their go-to-market strategy as an end-to-end servicer for clients, according to Jennie Fisher, senior vice president and general manager of the office equipment group at GreatAmerica Financial Services. That entails employing the right agreements and billing to simplify business for end-users.

The talent and support at the large, independent dealer level is extremely high, so those entities are poised to see healthy growth.

– Melissa Confalone, Fraser Advanced Information Systems

“Use of the GreatAmerica HaaR (hardware-as-a-rental) document has increased because it provides flexibility to layer in new technologies as dealers grow, scale and innovate,” Fisher remarked. “Our 1nVOICE solution compiles everything on a single, understandable invoice, an important aspect to end-customers seeking a total technology solution provider.”

Hybrid Tools

With the brisk pace of digital technology adoption and a hybrid workforce that continues to redefine the traditional workplace, organizations will continue to seek effective ways to manage information, notes Jim Coriddi, vice president, dealer division for Ricoh USA. Dealers that are well-attuned to the hybrid worker’s needs and are willing to invest in digital experiences—including digital enablement and web updates to obtain knowledgeable buyers—can create high-impact, ROI-generating solutions for a growing base of end-users.

“We also anticipate a challenging but necessary shift in the conversation toward a deeper understanding of workflow and solutions that improve operational efficiency and advance business,” Coriddi added.

The surging growth in hybrid work environments will continue as companies seek to entice existing and prospective employees with flexible scheduling and home-based operations, according to Bob Burnett, director, B2B solutions development and planning for Brother International. That will continue to facilitate the shift from A3 to A4 print units.

“Decentralized and distributed print will continue to be a trend, and there will be a continued high demand for smaller, more robust printing solutions, as opposed to bigger copiers,” Burnett said. “The shift from A3 to A4 continues to accelerate, in particular on color machines, which we predict will be at the forefront of this demand as we head into 2023.”

From secure printing to complete smart offices, RFID readers will continue transforming how we work.

– John Villegas, ELATEC Inc.

Sharing Burnett’s sentiment is Clark Bugg, director of North America channel sales for Lexmark. A burgeoning decentralized population, he says, translates into organizations requiring fewer large departmental devices.

“A4 devices allow dealers to adjust their business strategies accordingly and capture growth in new segments,” Bugg said. “This will be key to dealer success in 2023. Also, value-added solutions such as cloud, remote print management solutions and security should be on the top priority list for businesses and channel partners in terms of 2023 growth areas.”

Managed IT Growth

All eyes will be on the national economy and the industry manufacturers’ ability to close the order backlog, notes Preston Woolfolk, co-president of DOCUmation in San Antonio. He forecasts a steady and consistent path for the office equipment industry, fueled by an increase of resellers offering managed IT.

“I believe managed IT should have the highest growth for dealers,” he said. “It’s continuing to become more necessary for small- and mid-sized businesses and the mid-market space.”

It will be important to make sure we instill the same company culture and service excellence that we’ve established in our current offerings.

– Lauren Hanna, Blue Technologies

Given the overall economic concerns, one observer who projects a flat 2023 in most spaces is Tyson Johns, director of finance for Pearson-Kelly Technology of Springfield, Missouri. Still, he believes the leading dealers will capitalize on the opportunity to grow their market share.

“I think the managed IT side of our industry will continue to grow big in 2023 as cybersecurity concerns continue to rise and will do so for the foreseeable future, but also because our workforce is in limbo between office, home, coffee shop, etc.,” Johns added. “Furthermore, we’re hiring across the country to fill our needs, and they all require tech support and office support. How we grant that adds more pressure on cybercrime.”

Some pundits have predicted an economic downturn for 2023. Paul Archer, CEO of Automated Business Technologies in Centennial, Colorado, is greatly concerned that the U.S. economy, at least, is foreshadowing signs of a sharp decline and the first recession since the 2007-2009 period.

Dealers and manufacturers will continue to look to diversify their offerings to make up for the decline in print.

– Dean Swenson, The Swenson Group

“There are lots of predictions about a deep recession,” he said. “[JPMorgan Chase CEO] Jamie Dimon predicted an economic tsunami. Amazon just announced a layoff of 10,000 people, and HP just announced a coming layoff of 4,000 to 6,000 people.”

M&A Among OEMs

Much has been said and written about the inflated volume of merger and acquisition activity in the industry. By our estimates, there was a 35-40% increase in the number of reported transactions between dealers. And while there have been some eye-popping, billion-dollar moves on the manufacturer end, they’ve mostly involved major OEMs adding managed service or software specialists.

Dan Cooper, CEO of Nashville, Tennessee-based Novatech, believes 2023 will see “the beginning” of manufacturer consolidation. “This will result in at least two manufacturers merging and possibly one even exiting the space altogether,” he said. “With this consolidation, we could also begin to see U.S. product availability surpass current norms.”

The pace of acquisition will continue to be brisk among dealers, notes Josh Salkin, a partner at EDGE Business Systems near Atlanta, and he also wouldn’t be surprised to see a combination among the major manufacturers.

“As manufacturers and dealers try to find a profitable path forward post-COVID, those who can provide innovative solutions will prevail,” Salkin added.

[Print fulfillment] programs are going to continue to affect the channel resellers as they get outpriced and sourced by the brands they’ve supported for years.

– Brent Martin, ARLINGTON

2023 bodes particularly well in terms of growth opportunities for the large, independent dealer universe, according to Melissa Confalone, vice president of sales for Fraser Advanced Information Systems of West Reading, Pennsylvania. The quickening pace of technology demands providers that can furnish clients with secure solutions that enable streamlined business.

“The talent and support at the large, independent dealer level is extremely high, so those entities are poised to see healthy growth,” Confalone added.

Ancillary Offerings

The diversification bell has been rung so often, it’s developing a crack. While you ponder a Liberty Bell analogy about freedom from tyranny of the MFP, consider the case being made by John Villegas, vice president of sales for ELATEC Inc., for RFID readers, which he expects will continue to gain momentum.

“From secure printing to complete smart offices, RFID readers will continue transforming how we work,” he said. “In a smart office, RFID readers can automatically record when employees come and go, and provide secure access to restricted areas. In addition, most companies are now using RFID readers to secure their printing systems. This means only authorized personnel can access the printer for sensitive documents. Finally, RFID readers can be used to automate various everyday tasks, such as tracking inventory and managing conference room bookings. The possibilities are endless.”

Since A4 printers generate fewer service events, higher CPP and, therefore, increased revenue, this could be a bit of rare good news for dealers.

– Dan Larkin. Marco

One challenge of proffering a more diverse product and service portfolio is the need to onboard staff to sell and support the wider catalog. Given the onerous task of hiring over the past two years, Lauren Hanna—vice president of sales for Cleveland-based Blue Technologies—feels dealers will need to strike a balance between filling staffing needs, retaining culture and maintaining profitability.

“The change in products and solutions can help grow revenue,” she said. “It will be important to make sure we instill the same company culture and service excellence that we’ve established in our current offerings.”

Dean Swenson, president of The Swenson Group in Livermore, California, says industry providers will push forward to seek out new avenues toward profit. “Dealers and manufacturers will continue to look to diversify their offerings to make up for the decline in print,” he said.

Plotting Strategies

Brent Martin, director of marketing for ARLINGTON, notes that manufacturers are taking cues from HP’s print fulfillment program as they seek to better accommodate a declining market. Unfortunately, this comes at the expense of reseller partners.

Industry analysts are predicting an upswing in A3 MFP unit sales this year, so it’s a great time to take advantage of this opportunity.

– Dino Pagliarello, Konica Minolta Business Solutions

“These programs are going to continue to affect the channel resellers as they get outpriced and sourced by the brands they’ve supported for years,” he added.

As end-users continue to embrace digital documents, so goes the need for larger paper sizes. Dan Larkin, solutions sales director for Marco of St. Cloud, Minnesota, believes the shift from A3 to A4 will become more pronounced, especially as supply chain clogs continue to dissipate more rapidly.

“Since A4 printers generate fewer service events, higher CPP and, therefore, increased revenue, this could be a bit of rare good news for dealers,” Larkin remarked. “And when chip shortages ease, manufacturers could also get these smaller, simpler products to market much quicker.”

In the view of Dino Pagliarello, senior vice president, product management and planning for Konica Minolta Business Solutions, the new year represents an opportune time for dealer introspection. Assessing business plans, the company’s identity and whether it has the right skills and partnerships in place is vital, and dealers can hit the reset button by getting back in front of customers and reinforcing the value of their relationships.

These companies are going to be looking at partners that can find alternative ways to help them procure these resources without much upfront capital expense.

– TJ DeBello, Stargel Office Solutions

“Sales teams should be able to discuss what a potential recession might mean for their customers and how they can navigate it,” Pagliarello noted. “Verticalization will continue to trend. Industry analysts are predicting an upswing in A3 MFP unit sales this year, so it’s a great time to take advantage of this opportunity.”

XaaStacular Performance

One of the positive developments that continues to garner momentum is the movement toward everything-as-a-service (XaaS). TJ DeBello, vice president of sales for Houston-based Stargel Office Solutions, notes companies are increasingly looking at outsourcing without the intention to own.

“We see the trend with IT hardware infrastructure, for which clients have limited IT budgets and resources. These companies are going to be looking at partners that can find alternative ways to help them procure these resources without much upfront capital expense,” DeBello added. “I believe this will also be more prevalent with copiers and printers moving into 2023.”