Excerpts from an article in the Wall Street Journal…

For decades, Xerox and others built their businesses by pushing companies to buy more office machines and supplying pricey ink and toner. But increasingly these vendors are now advising big customers to reduce their number of machines and find ways to cut printing costs."That sounds like a strange way for a manufacturer to make money," concedes Stephen Cronin, president of Xerox’s global-services business, which reached $3.5 billion in sales last year.

The printing companies want to entice clients to sign up for exclusive contracts, allowing them to replace machines made by rivals and thus provide all printing supplies. In some cases, clients let a single supplier manage the whole system for a monthly fee. The business, known as managed-print services is expected to jump 36% this year to $15.7 billion. In Xerox’ case, more than half of the 1.5 million devices the company currently manages are from other vendors. "Total spending goes down, but my proportion goes up," Mr. Cronin says. Last year, services, including maintenance as well as managed print, contributed $3.5 billion of Xerox’s $17.6 billion in revenue.

Last month, Procter & Gamble Co. agreed to turn over to Xerox its vast fleet of printers and copiers in a multi-year contract valued at more than $100 million. Filippo Passerini, P&G’s chief information officer, says the decision is expected to cut paper usage 40% and costs 20% to 25%. He declined to disclose dollar figures.

Because of their push into services, the hardware makers are increasingly frank about the high costs of printing. Xerox says its research shows that companies spend between 3% and 4% of revenue on producing documents, or $3,400 per employee, so savings can be significant.

Great article in today’s Wall Street Journal about Procter & Gamble, one of the ultimate consumer product companies, is launching a new business model based on service : franchising car washes. Leveraging the decades-old "Mr. Clean " brand, P&G CTO Bruce Brown said, "We need to look for new opportunities to allow us to grow. That isn’t limited to things within our current business model."

Car wash services represent about $35 billion USD annually. According to Nathan Estruth of P&G’s the industry "lacks a dominant national chain, aging baby boomers are reluctant to wash cars themselves and more water-strapped communities are pushing professional car cleaning as a conservation measure."

Exactly the right mind set, and why P&G is a market leader.