On January 5, 2004, Xerox announced it had entered into an agreement under which Creo will resell Xerox's mid-range and entry-level production color digital presses in the United States and Canada. Effective February 1, Creo began selling the Xerox DocuColor 3535, 5252 and 6060 digital color presses combined with the Creo Spire color server and other prepress software. In addition, Creo will work with Xerox's direct sales force to identify sales opportunities for the DocuColor iGen3 production press.

On January 7th, Creo announced that Martin Judge, Business Manager, Strategic Business Initiatives, would be taking on the responsibility for guiding the success of the Xerox reseller agreement. Prior to joining Creo, Judge held senior positions in Business Development and Operations at Fiber Optic Network Solutions, a fiber optic component manufacturer. He implemented domestic and international manufacturing, drove product development and implementation, and established new sales organizations worldwide.

Many of our readers may remember Judge from Indigo North America, where he spent five years in senior business development and legal affairs roles. An attorney by education, he also ran a successful law practice and began his career with Cambridge Digital Corporation, a Digital Equipment VAR.

WhatTheyThink spoke with Judge to gain an understanding of Creo's plans for and expectations of the expanded Xerox relationship.

WTT: Marty, thanks for taking the time to speak with us today, and congratulations on your new role. Had you been with Creo prior to this assignment?

MJ: Prior to assuming this role, I was responsible for Creo's remanufactured equipment program.

WTT: What prompted you to rejoin us in the printing industry after your stint in telecom?

MJ: After leaving Indigo in 1999, I built a company focused on fiber optics component and subassembly segment of telecommunications. That industry has pulled back quite a bit, of course. When I started speaking with Creo about rolling out the remanufactured equipment program back in the fall of 2003, I was not looking to return to the printing industry, per se, until I started looking at Creo in more depth. I had been aware of Creo and Scitex over the years, of course, but had not really kept up with the latest developments. Through those discussions, I gained some insight into how the company was addressing critical customer issues, including improving production efficiencies and the ability to apply a greater variety of products to customer business problems. Between the NGP initiative and the workflow portfolio, I was very impressed with the strategy Creo was executing onit appeared far different from what others in the marketplace were doing.

At about the same time, Creo announced the acquisition of First Graphics' plate production facility, which I thought was a terrific initiative from a business perspective. The corporate environment was a good fit, and its pace and strategy made sense to me, in this industry and in this time.

When the Xerox opportunity came up, I was excited taking on that role. We sell in a consultative manner, and from the customer's perspective, a partner that can look at how to improve their business, and their efficiency with workflow, CTP and digital printing solutions, the expanded portfolio is attractive. Now we can sit at the table with the customer and have a true open conversation to understand their long-term strategy and what makes sense near- and long-term, and we can offer a best-fit solution, including a hybrid print environment.

WTT: Last year, Xerox had arrangements with both Enovation and KPG to resell its color digital portfolio into the graphic arts industry. The relationship with KPG, obviously, has been discontinued. In the previous scenario, the two companies had specific geographic territories. Will that be the case here with Creo and Enovation?

MJ: There is no geographic breakdown. We are both in the graphic arts/commercial print market together. Creo has the Spire and DocuSP front ends, and Enovation has EFI and DocuSP. For both of us, iGen3 opportunities will be handled through a referral process, where we are selling directly with Xerox sales folks. If it turns out that an EFI front end is the appropriate solution, it will be something we will work through. We have not yet run into that situation yet, though. We generally find that customers are interested in the full NGP workflow, combined with CTP and Spire, that allows them a logical growth path for their company.

WTT: Creo and Xerox have had an ongoing relationship for many years, and Creo is a key Xerox partner in its FreeFlow initiative. What were the key drivers for Creo in this expansion of the relationship?

MJ: Xerox is looking to the graphic arts marketplace to improve the penetration rate for digital print. They understand Creo and appreciate the power of our brand in the graphic arts/commercial print market space. From our perspective, the Xerox print engine is very reliable, offers good quality and good workflow. We look to their line to broaden the product line for our customers, allowing them to offer complementary printing services. We work with our customers to help them understand how digital print fits in and how to successfully approach the end user as a provider of communications services, regardless of whether they are offering offset, digital or hybrid services. In other words, it is important for our customers to be selling value versus just ink on paper, and to think in a more strategic mode. Adding the Xerox product line to our portfolio better positions us to offer a full range of products and services to our customer base.

WTT: Tell us a little about how Creo's sales force is structured relative to the Xerox line.

MJ: The Xerox products will be sold by our mainline sales force. We are not setting up a separate sales division for this product. Our model is to come in as a credible business advisor, not with a product-centric sales approach. We ask, what are your needs, what are your business objectives, where is your pain, and let's craft a solution that will help you grow your business. It's a compelling approach. Setting up a dedicated sales force for the Xerox product would be counterproductive.

WTT: Are there specific unit or revenue targets associated with this relationship?

MJ: We have negotiated an agreement that provides mutual value and we know the business will grow. That's about all I can say on that.

WTT: In the current arrangement, Creo will be generating leads for sale of the iGen3; does Creo have an interest in adding that product to its portfolio and if so, what would it take to make that happen?

MJ: Certainly we will be intimately involved with the iGen3, especially in larger enterprise customers where it is a better fit, with its larger page size and higher speed. As we get the relationship up and running, we will inevitably become more tied to that product in our market segment. We will be working directly with their specialized team, the iGen Tigers, and as the relationship matures, there will be more products added to the mix.

WTT: It does not appear that historically these reseller arrangements have been hugely successful for Xerox; what does Creo bring to the table that will make this one different?

MJ: I can't speak to why they have or have not worked in the past. Like many companies they have gone through some channel partners, and I am sure there are good reasons why they are no longer with those partners. These arrangements all look good on paper, but it all depends on making it work in the field. There has to be the right channel management, but more importantly, good understanding and good coordination between all operational and field level segments in order for a relationship like this to work. I am working with very qualified people at Xerox, and I think it is going to be a great relationship. Their sales people are excited about partnering with us, we know Xerox from our Spire relationship for a number of years, and it looks like this is going to work well for both companies. It is easy to develop a strategy; but if it doesn't tie to your internal competencies and objectives, it won't work. We believe we have the right mix to make it work.

WTT: What is your feeling about NGP and CIP4?

MJ: Both will be a key component of everything we do. It is important to understand that products are not standalone. What is important is how they fit within the overall context of the customer environment. There historically has been such a hole in the operating fabric of commercial print, and I am happy to see the number of partners that are jumping on board with NGP and working to solve these issues.

WTT: One of the obvious advantages of all of this is the ultimate ability for a printer and its customers to prepare a print job irrespective of how it will ultimately be printedoffset, digital or hybridin a multivendor environment. What percentage of Creo's customer base would you say operate blended offset and digital operations today, and how do you see that mix changing over the next 12 to 24 months in light of the Xerox reseller agreement?

MJ: The percentage is very small today. If you look at industry numbers for penetration rate of digital, the consensus is that it is below 2%. So obviously there is a big opportunity. Do I see it growing in the next 12-24 months? Absolutely, and I think it will grow at a good clip. When I look at our customers, some of them have been talking about adding digital since the 1990s but have been sitting on the fence. For the small commercial printers, they know they need to ultimately move to digital, but given what they need to do day to day from a business perspective, many of them have just not had the bandwidth to do the planning and analysis, and we can help them as business consultants. In the larger environments, I think it is all over the place. Some are adding digital to broaden product offerings to their customers as a customer retention and acquisition method. Others are staying focused on commercial print. But the key is that most printers are viewing digital not as subtractive to offset, as complementary, ultimately driving more volume to offset

WTT: Marty, thanks for taking the time to speak with us. We will be looking forward to talking with you again in a few months to get an update on the progress of both the reseller arrangement and Creo's implementation of JDF in its product offerings. Before we close, are there any other thoughts you would like to share with our readers?

MJ: It's an exciting time in our industry and at Creo. We are coming out of a tough economic cycle and that will take one rock off the back of the industry from the demand side. Now it is even more important than ever before for printers and vendors to understand the other communications options that have developed over the last few years, and how to position print as a complementary, viable option that should be part of communications strategies, particularly for the marketing executive, who is quickly becoming today's key print buyer. As an industry, our survival depends on it.

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