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CLICK CHARGES — KNOW YOUR USAGE

April 2006 BY ERIK CAGLE
Senior Editor
WEIGHING THE differences between click charge plans in service contracts offered by providers of digital printing equipment is an apples-to-apples comparison.

There’s just one problem. For apples, there are Red Delicious, Granny Smith, Cameo, Pink Lady, Golden Delicious and Jonagold, among countless other varieties. And where do they hail from? Vermont? Washington state? New England?

So, in that regard, yes, click charge plans offered by manufacturers A, B and C constitute an apples-to-apples comparison when you factor in the high amount of variables influencing what may be the appropriate plan for a given digital printing operation. Which is to say that a direct comparison is not that easy.

Come to think of it, who needs click charges? This is offset country, damn it, commercial printers...not a copy shop or a high-volume black-and-white digital imaging environment. They don’t need anyone meddling in their lithography business. Well, there are plans for rogue printers who want to keep the digital device manufacturer at arm’s length.

From the equipment manufacturer’s viewpoint, the click charge provides customers flexibility and a variable cost base. While not everyone is on board with that concept, the explosive world of variable data digital printing and the need to diversify product offerings are drawing in a lot of old school offset mentalities.

“Click charges allow us to create a lower cost entry point for our customers in addition to helping them manage cash flow by aligning revenue and expenses,” notes Steve Kneeland, vice president of service, sales and marketing for Xerox Corp.

From Xerox’s perspective, base and click charges have to be matched to customer requirements. Xerox will customize the service plans from one shift, five days to three shifts, seven days coverage (with holiday coverage, if required).

Check Your Contract

The click charge is generated by the level of service contract purchased by the end user, according to Kneeland, and is a function of the service contract. All customers who lease equipment are required to carry a service contract; while he didn’t have hard numbers, Kneeland says that a lion’s share of digital users are leasing their gear.

A flat click charge rate, Kneeland points out, would punish—and discourage—those at the low end of the digital printing spectrum, who could not substantiate a high benchmark volume. The most obvious analogy is that of the automotive lease, with allowances of 10,000, 15,000 or 20,000 miles per year. Someone who drives 8,000 miles per year would not want the rates built into a 20,000-mile-a-year lease.

“So what a click charge allows us to do is...not penalize people who are just getting into digital printing,” he says. “Sometimes that low entry point is not a direct reflection on profitability, either. A printer may be running much higher payback applications through a digital box, such as highlight color or one-to-one personalization, that would drive higher revenues with lower volumes.”

From Xerox’s perspective, the click charge format starts with a base charge, with a certain amount of volume built into it (such as 500,000 four-color sheets). Anything above the base volume triggers the click charge. The trick is in selecting the most suitable plan.

“If you select the right base plan geared toward your specific needs and if then you start to grow and go above that, you just pay for that increased usage,” Kneeland says. “So your cost may go up, but your revenues are also going up because your volume is increasing. That matches the cost of the equipment with your revenues coming in, resulting in a positive impact on your cash flow.”

Hewlett-Packard (HP) offers both the click charge model, as well as an a la carte proposition that caters to the offset mentality in regards to service/support and consumables. According to Avi Basu, HP Indigo category manager for digital press business in North America, the pricing offered with an individual a la carte, caters to experienced users with a wealth of knowledge regarding the application, their usage, the technology and getting the most from that technology.

HP uses a weighted average in determining the yield for consumables, as does its competitors, Basu notes. But the more enterprising users may be able to expand their yield and thus garner cost savings as opposed to accepting the click charge assumptions.

“We’re trying to optimize what we think will be the average yield across a broad spectrum of substrates, applications and customers,” he adds. “But some clients think they can do better because of their knowledge and skill sets. Some of our biggest producers, in terms of volume, choose to go a la carte, and acquire components and consumables as needed.”

Despite the freedom to monitor and navigate their own consumables usage, less than 10 percent of printers with Indigos have opted for the individualized pricing option. In the end, it seems most printers are content with being governed by click charges. Tracking usage is the key.

“From a cashflow management perspective, click charges provide a very simple, straightforward and attractive proposition,” Basu says. “This makes a lot of sense to people starting out—printers that don’t know what their ultimate cost of operation would be.”

The Name Game

Not every digital press manufacturer employs the click charge philosophy; though some may see it as semantics, avoiding the negative stigma attached to the phrase by the older offset guard. Kodak’s Graphic Communications Group (GCG) Digital Print Solutions (DPS) offers an “insurance plan” or “not to exceed” plan, according to Todd Blumsack, director of marketing for Kodak’s DPS.

Instead of a flat fee, Kodak uses volume bands that have a not-to-exceed ceiling. If users manage their systems to an efficient degree that yields a lower per-piece cost, it is the user, not the manufacturer, who pockets the difference.

“If you bought a competitive product and paid the click charge—let’s say six cents—you would pay that six cents no matter how well you manage the process,” Blumsack says. “We guarantee you it will cost no more than six cents; but if you manage your system better and it only cost you four cents, you made two extra cents.”

According to Blumsack, a key differentiator for Kodak is the perk of having operator replaceable components (ORCs) on its NexPress digital press that allow users to effect service repairs much more quickly and eliminate considerable downtime from the equation.

“If you have an image quality issue with one of our competitor’s devices, you need to call the manufacturer,” Blumsack notes. “You have to wait for a call back, and then they schedule you a service time. You have at least a couple hours of downtime that day.

“If you determine there’s an image quality issue on one of our devices, your digital front end will help you work through that issue. It will instruct you on how to resolve the issue and, a couple minutes later, your machine is up and running.”

For printers in search of the ideal fit for their digital printing environment, Blumsack says it is important to look at the total cost of operation, as well as the total cost and impact of downtime on your business.

In the end, he feels the process does not just boil down to the per-piece click rate.

“How does the workflow operate? Is your workforce empowered?” he asks. “Is the printer looking to streamline and improve his/her overall process, and what product will enable them to do so? So it’s more than click charges. It’s all aspects of the operation—from uptime to control, to self-empowered software, to digital front ends with options. We look at the whole solution and the total cost of ownership.”

Just watch that odometer.
 

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