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Market pressures to bear further financial printer consolidation

When it comes to financial printers and XBRL reporting service providers, the more things stay the same, the more they do not.

I had taken a break from blogging on the entire financial reporting universe, but seeing how there is a dearth of information on these happenings and the fact so many of hittingthesweetspot by Bob Skelley’s readership thirsts for further financial reporting service news, I am obliged to reveal part of my year end and into 2013 forecasts.

There will be no talk of Mercury retrograde or Uranus in this post; only cold, hard speculation!

But know that this is speculation from someone who has been largely on the sidelines and in a position to view all that has gone on in the industry during the past 15 years.

Financial printing is perhaps seeing the greatest year of adjustment ever.

There are not one, but two revolutions underway.

First of all, there is the continuing decline, if not entire collapse of the inhouse model of doing business. Most of the old, hard line financial printers can count on both hands, the numbers of inhouses they have seen the past year in their various, individual financial markets across the country. This has been from no lack of trying; financial printers can boast of how satisfied the numbers of clients who actually come inhouse, are. The problem remains, however, that the numbers of inhouse clients continues to decline severely.

This is not entirely a death spiral as financial printers have been relatively quick to respond to the challenges of upstart XBRL financial reporting service companies. But, in order to survive, and to be fair, they simply had no choice but to respond in kind.

Financial printing has historically been a copycat business. Those individual companies, whether they were a now-defunct Bowne, or RR Donnelley (RRD) or Merrill Corporation, were competing with parallel service offerings. This was a natural extension of the marketplace as the former “big three” were the only games in town.

With the XBRL mandate, the killing off of the inhouse model and the change from printed books to portable document files (.pdf’s) on the web, the Big Three no longer had the only choice for companies to pick from. This was an opportunity for software-based companies like WebFilings, Cirrus and the like to make inroads into formerly un-traversed territory.

Old school financial printers may have been initially upset and angry, but as they saw some of their client bases erode, quickly went about the process of coming up with XBRL and web-based offerings that would soon match or exceed the competition being provided by the upstarts.

Competition is good for the marketplace–always has been, always will be.

But with competition comes mergers and acquisitions. That is the way of the marketplace and also the second industry revolution that is underway.

Much like all public companies, so will it be the way of the former and current financial reporting providers.

There will come a time, and not too long in the distant future, when companies who are too leveraged financially, who possess too much operating debt and liabilities, will become likely candidates to be absorbed by those competitors who are in a position to do so.

What used to take cycles of time over several financial reporting quarters now happens in the course of a fiscal year or less. The old guard has come to understand the threat of the young upstart financial reporting stallions.

We saw the merger of RRD and Bowne, and the industry shakeout is not done—not by a long shot.

XBRL will dictate how the lay of the land looks going forward. Those companies who possess the most liquidity, can be stable and who have contemporary products that serve the needs of their customers today and into the future, will still be on the map years from now.

The main difference for these financial reporting companies who wish to survive though, is, how innovative they can be: will they serve future customers or simply wish to strain to hold on to those they think they can still have?

Good old-fashioned, product promotion aggressiveness served the old guard well, but now means contemporary. Now means product offering, and…right now!

You say you are a financial reporting services company? Tell us why your product hits the sweet spot.

The new, law school guard attorney is waiting, accelerating through the ranks and their patience for empty product and service offering promises, their ability to tolerate baloney, altogether diminishes with each setting sun on Wall Street.

Will they call you or your competition?

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