ID Card Printers: Untapped Potential?
Although the market for ID card printers may be strong, VARs need to carefully evaluate which of these products best fit their business models.
I often wonder if there are days when Tom Ridge wonders why he ever took his job. After all, Ridge has been under intense national scrutiny ever since he stepped down as Pennsylvania's governor and became the director of the Office of Homeland Security. A lot of that scrutiny has concerned the federal government's plans to implement a national ID card. In fact, in March, the Electronic Privacy Information Center (EPIC) actually sued Ridge and his office for access to documents relating to this program.
It is probably safe to say that before entering his new Washington digs, Ridge's knowledge of the ID card industry was much like every other American's - minimal. A lot has changed in nine months, though. Almost overnight, terms like biometrics, smart card, and credential have crept into the mainstream media, raising the awareness of the ID card industry in general. Yet, most ID card printer vendors would confirm that this increased mind share hasn't translated into a sales windfall - at least not with high-end printer systems.
The VAR Is Getting Squeezed
Any VAR who has tried to sell ID card printers lately has probably encountered a lot of "tire-kickers" who end up buying entry-level products. As more of these types of customers flood the marketplace, so, too, is there a corresponding influx of competitors. Unfortunately, in this low-end market, VARs are often being squeezed out of the equation.
"One of the trends I see is an increase in sales of inexpensive, low-end ID card solutions that include printers, digital cameras, and software," stated Gary Holland, CEO of FARGO Electronics, Inc. (Eden Prairie, MN). "These solutions are targeted at the old cut-and-paste market and are often sold by resellers who are not VARs." Holland listed office supply stores, catalogs, and Web-based companies as examples of these non-VARs that are operating on razor-thin margins.
Harry Schofield, president and CEO of another ID card printer manufacturer, Atlantek, Inc. (Wakefield, RI), echoed Holland's assessments of this market. "The low- to mid-range end of the market is now polluted with too many resellers competing for the same pieces of business with the same products," he said. "This has resulted in heavy discounting and margins insufficient to sustain VAR businesses."
Remember, this is a realm where price is king and the value-added services of a VAR are viewed as a luxury. It's where simple badging systems used to cost around $4,500 and are now priced closer to $2,000. In fact, some monochrome printers have even sunk below the $1,000 mark. Thus, as Holland said, "VARs that focus on these inexpensive badging systems need to sell a ton of product to make anything more than soda change."
High-End Systems Offer More Margins
Most of the major ID card printer vendors offer some type of low-end product. However, for the past several years, these vendors have focused more on adding features such as biometrics and smart cards to mid- to high-end printers. In the current security conscious climate, these kinds of features are a double-edged sword for some VARs. On one hand, customers want these increased levels of security built into their cards. At the same time, VARs must be more knowledgeable of these technologies and be prepared to withstand a 6- to 12-month sales cycle. Sure, margins may reach 50% for some of these printers, but it takes a real VAR - not just a reseller - to close these sales.
"Current users of ID card technology are stepping back and performing more thorough internal security audits," explained Kevin Gillick, head of corporate marketing for Datacard Group (Minnetonka, MN). "In doing so, they are reviewing both physical and network security gaps that represent potential threats. For these customers, the sale is longer term and developmental, and will conclude with broad based and global security implementations."
Holland believes that the VARs who will benefit the most in the next few years are those willing to learn more about the complex security features of ID card printers and how those printers can be integrated into existing security systems. "The real value-added VARs are telling me they have never been busier," Holland said. "But, a lot of VARs that are making good money selling mid-range printer systems are reluctant to move up to high-end systems."
Lacking Consumables Knowledge Could Be Fatal
As card printers become more complex - that is, they become more than just a badging machine - VARs need to become well versed in the media that these machines spit out. "One of the most misunderstood aspects of card printer sales is the importance of matching printer designs to the specific consumables required for a given application," Schofield said. "This is especially true in the case of full-function printers which, in addition to printing, must pick and encode cards, flip cards, laminate cards, and embed digital security features into cards."
Schofield estimates that half of printer failures are associated in some way with media problems. For example, unqualified use of third party, untested media, and improper driver and printer media settings can both cause printer failures. "Remember, finding the lowest price for printers and consumables is money wasted if the quality of the cards doesn't meet the need," he said.
Forget The Printer, Sell Your Integration Expertise
Can a VAR with no experience selling card printers jump on the security bandwagon and make a buck or two with this technology? That depends. As stated earlier, if your plan is to primarily sell an entry-level badging system, your profits are likely to be slim. But, one option for VARs new to card printer sales is to create a service bureau. In fact, both FARGO and Atlantek cite ID card service bureaus growing in popularity.
"Selling a card printer is not difficult," claimed Gillick. "But, the typical mistake made by any channel is to represent the printer as a component. Instead, VARs should focus on selling fully integrated solutions that include the printer, the photo capture devices, the software, and the integration services. The world has changed and customers want to be certain that people are who they say they are. The photo ID card has become the de facto identity document."