By paying $22 million over the next 18 months EFI recently announced the purchase of Xerox’s DFE business. This is a nice win for EFI and likely a win for anyone who competes against an end to end Xerox workflow.
The win for EFI is removal of a top competitor and increased market share in the production digital printing space. While EFI has long been the market leader with over 70% share in light and mid color digital production they were in much different position in the heavy duty cycle segment of the market. HP Indigo, NexPress, Xeikon all have their own controllers and do not offer Fiery. And while Xerox offered Fiery their preference was to sell Xerox FreeFlow servers. In this segment Caslon estimated FreeFlow servers, HP Indigo servers and Fiery were all in the 25% to 30% share range. Now Fiery’s share in the heavy duty segment will double and their share in the light and mid production segments will climb up another 10-15 points.
There has been a long term love-hate relationship between EFI and the print engine vendors. The vendors love the Fiery product, but they hate to pay for it. As the importance of workflow increases the value of the full graphics arts packages continues to increase while simultaneously there is continued price pressure on the overall cost of the print engine. Vendors see a significant percentage of the sale price going towards the DFE and software and long to drive additional profit. Now Xerox customers will not be choosing between FreeFlow and Fiery, rather they will choose which version of Fiery is best for them. This would seem to give EFI more pricing power.
If you look back on the history of digital printing, one of the most successful software packages ever created was DigiPath. Used primarily to create manuals and books this software was initially built on a propriety Xerox format (RDO). Having a propriety workflow was a great advantage when leases came up for renewal. For many organizations the cost of switching to an alternate workflow was too great to justify switching hardware. This software and hardware combination was “sticky” and profitable.
Combining Xerox FreeFlow Server and Xerox FreeFlow Core products gave Xerox another chance to build new sticky solutions by creating workflows that others could not easily replicate. Evidently the synergies were not as strong as the idea (kind of like Xerox combining with ACS). Or perhaps all the features in FreeFlow Server will be incorporated by EFI into their next version of Fiery for Xerox. It’s probably too early to tell.
Well it turns out making high quality DFE’s is not as easy as it might look. And one thing’s for sure, selling workflow products has been a struggle for all the vendors. Now with a movement in digital to faster inkjet presses the requirements on the DFE are increasing rapidly making the challenge of producing DFE’s even greater. It will be interesting to see how other vendors proceed with their DFE efforts. One to keep an eye on is Canon with its PRISMA controller and PRISMA workflow products in the cutsheet market.