To a certain extent, the analysis between offset and digital is a competitive issue. Where and when can printers win jobs from other shops based on process? But as digital has evolved into a largely separate marketplace, with different applications and business models, more often, it is an internal costing issue.

It’s been almost 15 years since the introduction of what we think of as the digital press, a PostScript-based, full-color, completely electronic digital output device; and according to the latest data from The Industry Measure IM Printing #25, Spring 2007, more than half of all graphic arts firms now offer some kind of digital printing in-house, whether color or B&W. Consequently, the tipping point between when to use offset and when to use digital has become even more critical than in years past, since it faces more firms on a daily basis.

When we ask the question, "offset or digital?" there are three primary umbrella factors to consider: First, the technical aspects of each press, including format size, print quality requirements, need for spot or brand colors, and special finishing needs. Second, the applications to be produced, whether static or 1:1/variable data. And finally, the total job cost, including prepress and bindery.

With so many shops offering both offset and digital production, when the job requirements do allow the job to be produced with either process—and when the printer has the freedom to choose between them—it’s critical to be able to accurately determine which process will produce the highest profit margin.

Then and Now
Back in the mid-1990s, when digital printing first gained widespread acceptance, the primary goal of digital printing was to win short-run jobs from offset. From this perspective, the tipping point was merely a number—a run length at which the per-piece cost of digital exceeded the per-piece cost of offset.

There were only a handful of digital presses, so printers and pundits could lock horns over equipment costs, consumables costs, click charges, and other costs, and debate what they believed to be the exact tipping point between the two. Digital press manufacturers sent out press releases every time a tweak to equipment design or consumables allowed them to claim a reduction in their cost-per-page, as if this were the defining issue.

On a job-to-job basis, the squishy factor was the quality required by the customer. For some customers, the good but still noticeable difference meant that the job must be produced offset, regardless of the run length.

Today, however, we realize how simplistic those early analyses were. Moreover, the digital machines, the workflows, the applications, and customer expectations and needs have changed so radically that any generic discussion about offset versus digital has become impossible—if it ever really were possible.

For example, there has been an explosion of digital presses in the marketplace, from a $40,000 small-footprint device to a full-scale press. The best-cost tipping point is different for a massive production machine like the iGen3, a medium production machine like the HP Indigo 1050, and a copier/printer like a Konica Minolta 850.

High levels of automation on traditional offset presses—especially 20-inch presses, which compete directly with static digital on format size—mean that the threshold for competitive pricing against digital has dropped.

The volume of digital print jobs has exploded, meaning that the time and cost of job preparation have become as important—in some cases, if not more important—than the per-piece cost. There are some jobs that, even though the per-piece cost is higher, printers with small format digital printers win because digital printers with big production machines won’t touch them.

The quality gap between digital and offset is narrowing. According to The Industry Measure Design & Production #22, Summer 2006, 82 percent of creatives with an opinion on this issue are now either "satisfied" or "very satisfied" with the image quality from digital presses.

Entire generations of print buyers, from graphic designers to corporate marketers, grew up with digital, so the difference from offset means little to them anyway.

Beyond the Impossible
Today, all of these factors and more make any generic comparison between digital and offset moot. Any analysis must occur at the shop level on a job-by-job basis.

Before even attempting this, however, it must be determined that it is even possible to compare the two. There are six primary factors that determine whether offset or digital can even be used: format size, run length, print quality, brand (or spot) colors, finishing requirements, and application.

The largest production digital presses are 20x14 inches—so before the "offset versus digital" question becomes relevant, the job must fit within this format. If the answer is yes, then issues such as cost-per-piece, print quality, color fidelity for brand or spot colors, and the ability to accommodate any special finishing requirements play a critical role.

Although digital has come a long way since the first Indigo E-Print 1000 was introduced in 1993, there are still limitations. Because of the cost and time associated with switching out special colors, few digital presses offer more than four or five colors, even today. Digital presses cannot run metallics, although some approximate them better than others, and while the range of substrates is broadening, it is still not as broad as offset. Certain finishing techniques, such as embossing, also cannot be used on digital press output.

Not that these factors ought to dissuade creatives and marketers from using digital. The differences, while still pet peeves for purists, typically have little or no impact in a marketing program. Unless you are printing packaging 100 percent digital—often, digitally produced packaging requiring metallics, for example, uses pre-printed substrates—or printing an annual report, consumers typically don’t notice nor care about such differences. It is simply necessary to acknowledge that these differences exist. In fact, when creatives were recently asked their opinions about a variety of print quality issues as they relate to digital printing, the level of satisfaction was extremely high.

Then there is the issue of application. If you want true, on-the-fly personalization, offset won’t enter the equation.

How often do offset and digital really compete head to head? Less often than they used to. While digital printers used to be in the business of trying to steal offset jobs, today, the niches for offset and digital are shaking out. Digital printers are becoming more and more like marketing services providers, focusing on 1:1 printing and other value-added applications where the short-run capabilities of digital are not focused on cost reduction but on providing real marketing muscle, such as 1:1 personalization, personalized URLs (pURLs), customization, and one-offs, where offset doesn’t play. Even in shops with both processes, each is typically running an entirely different job mix and never the twain shall meet.

Where the offset versus digital equation does impact decision-making is where shops utilize both processes and do have a high percentage of overlap. This doesn’t occur as often as it used to—as the business models for offset and digital have diverged—but when it does, the benefits of this analysis have a direct impact on workload balancing and pricing for profitability.

Challenges for Job Costing
The challenge for service providers bidding on jobs or workload balancing based on this analysis is that their job costing must be far more precise than many realize. Cost must be determined, not just by the costs associated with the press, but on a detailed prepress, bindery, and mailing analysis, as well. Even in the press analysis, many shops making profitability decisions are also working with assumptions from an offset environment that do not carry over into the digital environment, throwing their costing into disarray.

Howard Fenton, a senior consultant with the National Association for Printing Leadership (NAPL) specializing in digital workflows, regularly sees major estimating errors that may affect

a shop’s profitability. For example, many companies are working under the assumption—at least, on paper—that a digital press will last for ten years. Because the technology evolves at such a rapid pace, that ten year length may not be realistic. In addition, there is often an assumption that the toner coverage may only be 20 percent of the page when it is typically more. Using that ten-year assumption or low toner coverage assumptions in a costing model may make the cost-per-page appear lower than it actually is.

Another area that is frequently underestimated, according to Fenton, is utilization rates, especially in single-shift operations. Single-shift, two-shift, and three-shift operations have different impacts on a shop’s cost structure. A shop with a single shift will never get 100 percent utilization. It will be fortunate to get 75 percent.

"Based on these as well as other incorrect assumptions, there are companies I walk into that think their cost-per-page on their digital press is $.15," says Fenton. "They can be off by a factor of two."

Consider the impact of such errors in a low-margin environment like head-to-head competition between offset and digital for print on demand jobs based on price.

Indeed, it can be difficult to over-estimate the impact of accurate job costing. "At NAPL, we talk about industry leaders all the time, and one of the factors that separates industry leaders is that they know their costs to the penny," says Fenton. "It’s one of the common denominators to profit leaders’ success."

To help printers nail down costs, NAPL now offers a detailed spread-sheet that lists both obvious and non-obvious costs to help printers gain a complete and accurate understanding of their true costs. As it relates specifically to comparing offset to digital production, Xerox offers a similar system, ProfitQuick, from its ProfitAccelerator program.

Beyond Estimating Systems
Such a thorough analysis takes time, but without it, printers can dig themselves into deep financial holes without realizing it. Many rely too heavily on basic estimating systems, which—while useful tools—can have wide margins for error. Data also changes and must always be monitored and checked against real-world scenarios.

To keep its costing accurate, Custom Data Imaging Corporation (CDIC), a digital printer and marketing services provider based in Ontario, for example, goes beyond its estimating package and does a detailed costing analysis every fiscal year. It also does actual costing on random jobs to get a sense of actual costs, from maintenance to parts, and regularly adjusts its estimating software accordingly.

Frank MacPherson, president of CDIC, finds his estimating software to be accurate only to within ten percent—and it’s why he prices on value, not simply on cost plus. "Ten percent might sound okay," he says, "but this is ten percent on either side, so it’s actually 20 percent potential for variation. This is why so many printers go out of business every year."

Another area where printers need to pay particularly close attention is bindery. Like prepress, bindery has a greater impact in the offset/digital analysis than many shops recognize. Bindery equipment for digital presses has an entirely different cost analysis—both equipment and labor—than offset and can affect the tipping point dramatically. The overall cost of a digitally produced job can be lower based on bindery set-up and running costs, even though the per-piece printing cost is higher.

For example, one marketer chose to award 1,000 copies of a 180-page book to Custom Data Imaging to be output on its Kodak 9110 rather than elsewhere on an offset press—CDIC does not offer offset printing. The difference in this case, according to McPherson, was entirely due to the impact of the bindery.

Beyond Best Cost
The final component in the offset/digital analysis is the application. But even here, the answer may not be as straightforward as many think.

When we think of print personalization, for example, we think of digital presses. By definition, these applications, which also include pURLs and one-off, personalized follow-up mailers, must be run on digital presses, right? It depends. It would be more accurate to say that 1:1 projects require a digital press at some stage in the process, but they don’t require that a digital press be used exclusively.

For example, you can create the same look and feel of four-color, dynamically driven personalization by printing monochrome text and graphics onto four-color offset shells, either using the same shell for the entire run or by carving the print run into multiple segments, each optimized for a different demographic. Using this technique, the look can be identically or nearly identical to 100 percent data-driven images and graphics at a lower total cost at higher volumes. This is often called hybrid printing. When and where to use this approach, as opposed to producing the job entirely on a full-color press, will be based on a detailed job analysis.

Another example of where the line between offset and digital isn’t so clear, Web-to-print (W2P).

While many associate W2P with short-run digital printing, there is nothing inherent about this model that requires digital. If your customers log into their portals to create 1:1 print jobs, yes, this requires a digital press. But W2P solutions being used for customization, inventory management, and brand control do not require digital output. A marketer can make internal decisions about images, copy, brand colors, and so on, allow internal departments or third parties to apply any customization that needs to be done, and enable them to output the job to an offset or a digital press.

From an internal profitability standpoint, the offset/digital decision boils down to volumes and cost. But one benefit for service providers is that, in terms of pricing, per-piece costing is not as critical since these applications are rarely billed on a cost-plus basis. Although, according to Variable Data Pricing, a November, 2006 report from The Industry Measure, 35 percent of printers surveyed were using a line item or cost-plus basis for variable data print pricing.

Not that printers should add higher value services simply hoping to boost the profit margin. Adding these services profitably requires a fundamental shift in emphasis, from manufacturing to business development, which goes beyond adding menu items. It involves actually becoming a different kind of company, one in which the method of print production is actually secondary. Print may still be where shops get most of their revenues, but it’s not the quality or cost of their production that drives those revenues. It’s the value of their marketing expertise.

At the same time, moving in this direction doesn’t lift the need to offer basic transactional services. NAPL’s Fenton emphasizes that one of the findings from the association’s upcoming Digital Services Survey is that, in order to be most successful, printers need to have both.

This goes against conventional wisdom that you need to completely revamp your business into a value-added services business and move away from transactional services entirely.

"When the Digital Services Survey comes out, there are going to be some surprises," he says. "In fact, we think we have finally discovered the five critical success factors that determine what companies need to do to succeed in selling digital services. One of the conclusions we are coming to is that printers must offer both a consultative sales component and a transactional sales component. Neither those offering ‘the cheapest on the block’ nor ‘the highest value on the block’ succeed. When you are competing at the lowest cost, you have to pump a lot of volume there to cover your costs and make a profit. When you are selling on value, you struggle to get enough work in there because you aren’t competing on price. The successful companies have a balance of both."

Complex, But Manageable
The offset versus digital discussion is not something that can be distilled down into neat little sound bites. If there is a sound-bite, it would be simply that there isn’t one. In fact, this discussion is one that reflects the most complex and perplexing issues being faced in the industry today.

When it comes to the offset/digital equation, you can, however, distill down the individual factors that need to be considered: your technical requirements, your customer tolerances and needs, your internal costs, and your business model. But in the end, all generalizations fail. Every shop’s profitability, as it relates to the offset/digital equation, will rise and fall on its understanding of its own costs and business positioning.

And, for each printing business, that is as unique as the fingerprint of the person who owns it.