March 26, 1997 6:15 PM ET
Xerox to go modular on tax day
By Scott Berinato

  Xerox Corp. is preparing to announce a new product design that will allow the company to sell separate peripherals that users can snap together into multifunction devices.

Company sources touted the announcement, expected on April 15, as the "most important statement of product direction Xerox has made in years. "[This] will fundamentally change the way in which Xerox is viewed in the office," said Xerox officials.

At the heart of the change is a core of new networked products from the company's Office Document Products division. The glue binding the devices, which sources said will transform the concept of the MFPs (multifunction peripherals) into modular devices, is Xerox's CentreWare management software.

The products, which can all be sold as single function devices or as part of a multifunction device, include a monochrome laser printer, a flatbed scanner, and fax and copying hardware. Two versions of the basic printer or copier will be announced. One device produces 20 ppm (pages per minute); the other one turns out 30 ppm, according to sources.

The modular approach will allow users to buy a printer or copier and later plug in other peripherals. The software will make it easier to manage any combination of products, sources said.

"They look like pretty impressive products," said another source who knew about Xerox's plans but asked to remain anonymous.

"This is a huge deal," added another source briefed on the new products, who also wished to remained anonymous. "It will be huge for users who are tempted by, but not sold on, [MFPs]."

Industry executives added that Xerox's management software held the key to the success of the new products.

"Otherwise, it's just like trying to bring together different devices on a network: confusing and not worth the effort," said another source.

The market for multifunction devices has been undercut by widespread perceptions that users must sacrifice performance if they want to buy a single device that offers different functions. But the modular approach, which still embraces the idea of a single device, also offers the high quality of single-function devices, according to one analyst.

"There is a prime function in most MFPs now," said Barry Tepper, an analyst at CAP Ventures, in Marshfield, Mass. "And that prime function is generally more robust than other functions in the box. That can't go on for long. Competition will drive away from this."

Budget constraints and resource constrictions make MFPs appealing, one user said.

"I particularly like the concept for environments where resources such as space, power and money are constrained," said Xerox user Bryan Bell, strategic technologist at Frank Russell Co., in Seattle.

"When you have to build a remote office, this seems like an excellent choice," Bell said. "But when you get into the enterprise level, I would go for pure performance."

Pricing and names of the components were not available, but one source said the modular nature of the products means pricing will range over a broad scale, possibly from $5,000 to $20,000.

Xerox is currently ranked fifth among vendors in the vague "workgroup multifunction device" category. (The category includes products that range from a couple thousand dollars to $20,000 and higher). Ahead of Xerox is Hewlett-Packard Co., Ricoh Corp., Sharp Electronics Corp. and Canon U.S.A. Inc., according to preliminary CAP Ventures numbers.

In 1996, 140,000 devices were sold that fall into the workgroup category. That number is expected to grow to 250,000 this year and eventually to 1.1 million units in the year 2001, Tepper said. Over that period, prices will drop 7 percent to 10 percent annually.

Xerox would not comment on unannounced products.

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