Lexmark 2015 Annual Report Download - page 33

29
approximately $68 billion in 2015, including printing hardware, supplies and related services. This opportunity includes printers and
multifunction devices as well as a declining base of copiers and fax machines that are increasingly being integrated into multifunction
devices. Based on industry information, Lexmark management believes that the overall distributed printing market declined in the low
single digit percentage points in 2015. The distributed printing industry is expected to experience low single digit declining revenue
overall over the next few years, but continued growth is expected in MPS, smart MFPs and workgroup color laser printing products
which are all areas of focus for Lexmark. Based on industry analysts’ forecasts, MPS and fleet solutions are projected to continue to
experience approximately 10% annual revenue growth rates over the next several years and the relevant content and process
management software markets that Lexmark participates in are projected to grow in high single digit percentage points annually over
the next several years. In 2015, the total relevant content and process management software market was approximately $12 billion,
excluding related professional services. However, management believes the total addressable market is significantly larger due to
relatively low penetration of content and process management software solutions worldwide.
Market trends driving long-term growth include:
 Continued penetration of color and graphics output in businesses;
 Advancements in electronic movement of information, driving a continued shift in pages away from centralized commercial
printing and document scanning to distributed printing and multi-channel capture by end users when and where it is
convenient to do so, including via smart MFPs, mobile devices and web portals;
 Continued convergence between printers, scanners, copiers and fax machines into single, integrated multifunction and all-in-
one devices;
 Increasing ability of multi-function printing devices and mobile devices to integrate into business process workflow solutions
and enterprise content management systems;
 Continued digitization of information and the ability to electronically store and distribute this information, driving the
explosive growth of unstructured digital information, such as office documents, emails, photographs, audio and video files;
 Customer desire to have a third party expert manage their printing and document output environment;
 Ongoing emphasis on improving business process efficiency and driving costs out of business organizations by better
managing enterprise content and associated processes;
 Increasing need to capture, manage and access content from any location via any web-enabled device, including mobile
devices and Smart MFPs, to streamline and optimize process workflows while ensuring information security;
 Growing desire to unify structured data in business systems with unstructured paper and digital content to make the
unstructured content more valuable and actionable within business processes; and
 Increasing need in the healthcare industry to unify structured patient data, that is now typically stored in an EMR system,
with unstructured content, that includes medical imaging studies and other patient documents and content such as lab reports
and physicians notes, to enable easy unified access by clinical staff and referring physicians, across the healthcare continuum
to improve clinical and business outcomes.
As a result of these market trends, Lexmark has growth opportunities in monochrome and color laser printers and MFPs, MPS, as well
as fleet management solutions, ECM, BPM, DOM/CCM that includes case management, electronic signature, process analytics,
information and application integration, intelligent content capture and data extraction, enterprise search software and medical
imaging VNA software products and solutions.
Color and MFP devices continue to represent a more significant portion of the laser printing market. The Company’s management
believes that these trends will continue. Industry pricing pressure is partially offset by the tendency of customers to purchase higher
value color and MFP devices and optional paper handling and finishing features. Customers are also purchasing connected smart
MFPs and content and process management software solutions and services to optimize their document-related processes and
infrastructure in order to improve productivity and cost. This includes solutions to enable mobile printing and content capture/access.
While profit margins on printers and MFPs have been negatively affected by competitive pricing pressure, supplies sales are higher
margin and recurring. In general, as the printing and imaging market matures and traditional printer and copier-based product markets
continue to converge, the Company’s management expects competitive pressures to continue.