Wednesday, March 30, 2016

Pitney from Postage to Paperless

          Pitney Bowes Inc. dominates the postage meter industry, having over 1.5 million customers worldwide including 90% of Fortune 500 companies. Three out of every four postage meters in the U.S. are made by Pitney Bowes. So what are postage meters? These are the machines that weigh and stamp envelopes and other postage. A postage meter provides an organization with an easy way to pay for postage and track these costs across their business. Pitney Bowes is facing a problem however; the postage industry is declining rapidly, they must adapt before their ship sinks, but some innovative IT might just keep them afloat.
             In 2012, one of Pitney Bowes Chief Executives Marc Lautenbach said “Very few things are quite as profitable as a mail meter” this may have been true back then, but as time goes on this statement will sound more and more like historical fiction. Just in the past decade Pitney Bowes’ shares have declined by more than 40%. Physical postage is making a shift and so must Pitney Bowes, in this case to e-commerce. Businesses are straying from traditional postage, but do still need solutions to other aspects of mailing like processing orders and shipping packages. This exactly what the Borderfree Inc. specializes in.
            It was just last year that Pitney Bowes made the large acquisition of Borderfree for $381 million. Borderfree helps retailers like Macy’s and Harrods sell and ship their products to customers in other countries. Acquiring Borderfree has lead Pitney Bowes much deeper into the developing world of IT and is ultimately where their future lies. With Borderfree the focus is on companies shipping over borders. They are now providing solutions to these businesses logistics and transactions in a variety of ways. A company trying to ship internationally faces many obstacles that Pitney Brownes can now help with. From translation, calculating customs duties, currency conversions to finding the cheapest local delivery service for the last stretch to the customer.
            Just a few months ago, in January Pitney Bowes launched its first television ad in over twenty years, and as a provider of business services not postage meters.
            Pitney Bowes is midway through its five year turnaround plan. Postage machines still consume 50% of their revenue, but ecommerce rose 29% in 2015. This is a great example of a company changing its technologies and adapting to the changing times. Adaptability is increasingly more vital for technology companies. Pitney Bowes is “shedding its image as a mail-equipment vendor” successfully, but the one thing the article does not draw into question is where they a little late to the game? Only last year though did the company make this large investment, and not even three years ago did they begin their five year plan. I think Pitney Bowes will find success in e-commerce, but also that the demise of a strong postage industry was apparent more than three years ago.

http://www.wsj.com/articles/pitney-bowes-gauges-new-path-away-from-mass-mailings-1458861296?mod=ST1

http://pe.usps.com/businessmail101/postage/postageMeter.htm

9 comments:

  1. Hello Joe,
    I would like to begin by saying this is a very well done blog post. I think that you mentioned some very valuable points. In-addition I think you also contrasted those points with other outside information that added to the overall success of the post. I really like how you used the information from the chief executive Marc Lautenbach; by mentioning this I think you give the reader of the post a better insight about what the article you chose is trying to say. Also, I agree with the comment that you made about everything a business has to go through in-order-to ship something to a consumer. Lastly, I would like to say that I really liked this blog post and I think you wrote about a appropriate topic.

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  2. Prior to reading you post, I had never heard of Pitney Bowes or Borderfree before. As e-commerce continues to grow, companies must look for innovative solutions to meet customer demand. Based on your post, it seems like this company is positioning itself well in this market. You mention in this blog post that Pitney Bowes stock has declined 40% in that past decade but the company is in the middle of its five year turnaround plan. I think it will be interesting to see how the company's stock price looks at the end of the five year plan.

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  3. This is a great article on how a company has used IT to innovate and revamp their company. It is incredible that e-commerce was over 29% of Pitney Bowes' profits. I was curious however of what else contributes to this firms profits. In the future, I estimate that e-commerce carries on with the upward trend of popularity over traditional mail. It is interesting that Pitney Bowes Inc. has been around since 1920 and it only took them until 2012 to really have to change the innovation of their company around. This just goes to show how big of an impact IT is making on the world around us today. Companies all over the world are having in adapt to this new world of technology, and Pitney Bowes Inc. is a perfect example of that.

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  4. Hi Joe,
    Before reading your blog I had never heard of Pitney Bowes. You mentioned that in the years leading up to 2012 the company had been going through some bad times. I think it's really interesting how they are now catching up with the times. It's better late than never! Sometimes companies are too proud of who they are to change for the benefit of their companies. It's really good how they decided to change. I give them a lot of credit. They went out there and took at risk on Borderfree and it seems to be paying off. Now Pitney Bowes is lining themselves up for the future. You mentioned that they are in a rebuilding phase of the company which includes a 5 year plan. Now that they are 3 years in and their e-commerce is increasing I have no doubt that they will continue to improve. The one thing that scares me is most of their revenue is still coming from postage machines but I understand this is a process and they need time. I'm really interested to see where most of their revenue is coming from 2 years from now when the 5 year plan is up. Great post!

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  5. Similar to Juliana and Matthew, I have never heard of Pitney Bowes. When thinking about industries that use information technology, the postal industry is not one that comes to mind. I believe it is a good idea that the company transforms from its traditional postage sending business to something that more companies will get involved in like processing orders and shipping packages. If the company continues to increase its use of technology, it can keep up with today's technologically advanced society and continue to prosper as a company.

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  7. Prior to reading this article I was not aware of Pitney Bowes. I believe that it was a smart business move to change their strategy of their postage business into a better utilized service of shipments and package. Businesses are always evolving due to the time period and consumer wants/needs. With electronic commerce and online shopping every business involved in this sector requires more processing and shipment strategies. I believe that although this is not the sector that brings the most to the company's marginal profit, that it essential for businesses to improve in every area and keep up with society's movement in technology. However it would be interesting to see any possible drawbacks or difficulties these changes may have caused and what technology is being used to solve it

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  8. Like many of the others, I also did not know what Pitney Bowes was or what they did, which is interesting given that 90% of Fortune 500 companies have a connection to it. However, after reading this article, it's easy to see how this company is so successful. They are approaching this problem in the exact right way. By using Borderless's experience in IT, they can advance into the future of ecommerce smoothly. They already have the brand recognition and customer base to be successful. By continuing their old postage machine business for revenue while they start to implement new technology, they are giving themselves a margin of safety. If the ecommerce section of their business fails, they still have the majority of their revenue coming in from postage machines. However, you mentioned that in 2012, Marc Lautenbach said “Very few things are quite as profitable as a mail meter”. Given that we are living in such a technological era, I would be surprised if the demand for postage machines was as high in 2012 as it was in the 80s and 90s, and even prior to that. I'm curious to see if there was anything specific that was recently converted from paper to paperless that caused Pitney Bowes to look towards ecommerce. If so, I'd like to know what that was and how the company plans to remedy that situation.

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  9. Like many of the others, I also did not know what Pitney Bowes was or what they did, which is interesting given that 90% of Fortune 500 companies have a connection to it. However, after reading this article, it's easy to see how this company is so successful. They are approaching this problem in the exact right way. By using Borderless's experience in IT, they can advance into the future of ecommerce smoothly. They already have the brand recognition and customer base to be successful. By continuing their old postage machine business for revenue while they start to implement new technology, they are giving themselves a margin of safety. If the ecommerce section of their business fails, they still have the majority of their revenue coming in from postage machines. However, you mentioned that in 2012, Marc Lautenbach said “Very few things are quite as profitable as a mail meter”. Given that we are living in such a technological era, I would be surprised if the demand for postage machines was as high in 2012 as it was in the 80s and 90s, and even prior to that. I'm curious to see if there was anything specific that was recently converted from paper to paperless that caused Pitney Bowes to look towards ecommerce. If so, I'd like to know what that was and how the company plans to remedy that situation.

    ReplyDelete

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