IMAGING Comes of Age

With prices falling and software companies developing shrink-wrapped packages, the document imaging market has gone through the roof

Once considered a niche market, document imaging has gone mainstream, spreading horizontally across enterprises and vertically into smaller and smaller organizations.

Once confined to production departments in large corporations, the market for the technology has experienced huge growth as organizations of all industries and sizes roll out imaging technologies across multiple departments and applications -- thanks in large part to falling prices and an industry push toward packaged, rather than customized, software programs.

According to Giga Information Group, a Cambridge, Mass.-based imaging market analysis firm, the electronic imaging market grew to $2.5 billion in 1995 or more than 18 percent in one year. Industry projections peg the market at $14 billion by the year 2000.

Perhaps most significantly, smaller companies and individual departments and workgroups are fast becoming aggressive consumers of the technology, a reality that has industry players scrambling to develop low-cost imaging solutions that can be installed quickly and require hassle-free system administration.

"The imaging market is definitely down-scaling from the mainframe-based, large application to client/server environments to the desktop, and from the large-volume, visible application in the large organization to the small business," said Ted Spies, marketing manager for Image Information Programs, Commercial and Government Systems, Eastman Kodak. "And as a result, we're seeing more and more mainstream applications introducing imaging to the lower end with integrated components like image viewers. We're seeing off-the-shelf imaging packages that are available at extremely low prices."

The number of turnkey imaging systems that have been purchased and installed has increased by 127 percent since 1994 and is expected to grow another 234 percent by 1999, according to a recent Giga Information Group paper.

"Imaging has become very attractive to smaller businesses because as the technology has become more mature, it's obvious that it offers a very clear return on investment," said Roger Sullivan, vice president of marketing for the Nashua, N.H.-based Keyfile Corp., which has developed an imaging product called Keyflow. "What's more, with prices coming down, businesses can recover their investment very quickly. And the faster they can turn the system on and become productive, the faster they can start generating payback."

Connie Moore, director of Giga Information Group, said user needs vary: Many want only to replace paper filing cabinets, while others need to replace current paper processes. Either way, the market holds tremendous potential for vendors willing to adapt their already developed technologies.

"I think it's very important to recognize that at the lower end, we're talking about document management rather than document imaging," she explained. "For the most part, images don't exist by themselves at this level. They are part of files that have other types of information and images are just a part of that, so they need a system that is capable of handling a variety of types of information."

Rapid Industry Response

Many vendors are already addressing this burgeoning customer segment by developing low-cost solutions or integrating imaging components into existing applications.

For example, earlier this year, Highland Technologies, a Lanham, Md.-based developer of imaging and electronic information management solutions, unveiled its shrink-wrapped, file-and-find application called HighView ST Imaging in a Box.

This entry-level system combines imaging and database management systems with prepackaged document management and desktop work flow. Highland has already set up a comprehensive certified reseller program to work with commercial and government resellers to market the product.

In addition to imaging and document management specialists, many of the industry's biggest players are embracing imaging within their enterprise architectures. Cambridge, Mass.-based Lotus Development Corp. established Notes, its groupware solution, as a significant force in the imaging arena and works with a slew of resellers under the Lotus Notes Document Imaging, or LNDI, banner. A companion product to Notes, LNDI allows seamless imaging integration across the enterprise.

Several other companies show the market's move toward desktop imaging. Houston-based Compaq Computer Corp. just released a keyboard that possesses an on-board scanner, and Provo, Utah-based Novell Inc. is targeting the market with a message-based imaging product.

"The general public, which we characterize as anyone outside of production imaging, anyone who uses desktop applications on their business network or home computer, is now realizing that imaging is a general purpose data type," said Mark Ward, product manager for imaging at Novell.

"We believe that imaging documents are becoming -- or will soon become -- as commonplace as a word processing document in these environments," Ward said.

Carl Muller, vice president of Highland, agreed that the proliferation of networks has finally made imaging technology practical for smaller organizations. "People are looking to further leverage the significant investments they've already made in PCs and networks to make their personnel more productive," he said. "And they're realizing that imaging is a very efficient way to bring online the data held in filing cabinets, microfilm systems and paper-based routing systems, and provide access from the PCs that are already sitting on the desktop."

Still, many players are not convinced that customized software is on its way out. Bill Burke, president of Diamondhead Software, a Richardson, Texas-based company that produces image components, noted that while most organizations are no longer willing to build applications from the ground up, they still demand the ability to modify the solution and integrate it into their existing business process. "A lot of people want an image viewer and a storage application that they can adjust to meet their specific needs," he said. "So we don't see customization going away. Companies simply want a product configuration that works out of the box but can then be integrated directly into their system on a much higher platform and with much less effort."

Getting More with Less

Imaging as a mainstream way of life is being driven by many industry trends. Most importantly, the price of requisite hardware such as scanners and storage devices has dropped significantly. Just a few years ago, organizations had to pay at least $10,000 to buy a production-oriented hardware system. Today, organizations can buy the capabilities with just an imaging viewer, which is now available for less than $100 and sometimes offered free with other applications.

"One of the things that's happened is that storage devices, including CD-ROM and RAID [or redundant array of independent disks] towers, have reached the point where they're actually cheaper -- not just more efficient -- than paper methods," said Highland's Muller.

For example, "it now costs less than $20,000 to purchase both a CD tower with the capacity for 150 platters and a device to master those CDs. That device will hold about 1.5 million pages. If you bought metal file cabinets to hold that many pages, you would need about 100 five-drawer lateral file cabinets," Muller noted. "And there's no way you can buy that many file cabinets for $20,000." The advent of desktop imaging solutions is also a significant factor. Prepackaged software programs obviate the need for the expensive and time-consuming customized programs that were used with the more elaborate production imaging systems.

"You might pay $100 an hour per programmer, and it would take three programmers six months to write the application," said Muller. "The cost was in the $50,000 to $100,000 range just to get any kind of system up."

Today's prepackaged software programs support basic capture, storage, retrieval and manipulation of images. Another improvement is the availability of more off-the-shelf optical character recognition, or OCR, products with powerful engines that convert original content into editable text and graphics. Intelligent character recognition, or ICR, is even more sophisticated software that is able to read and digitize handwritten letters and words.

In addition, these commodity software programs are based on open systems, so they can be easily integrated with scanners and database programs already in place. Most can also be linked with existing groupware and workflow programs.

Kodak's Spies stressed the importance of integrating imaging products and solutions with mainstream enterprise tools such as Notes and e-mail packages.

In fact, there's been a huge groundswell among users of Lotus Notes to implement imaging capabilities, according to Bob Hunt, vice president of Advance Inc., a Lotus Notes business partner who noted that existing Notes customers believe they're enhancing the capability that's already inherent in the application by adding the ability to scan, store and retrieve documents electronically.

Novell's Ward added that imaging solutions based on existing e-mail systems may be the best fit for a lot of smaller organizations. "By taking advantage of the messaging infrastructure that's in place, you provide a single point of administration, a single point of distribution of software and a single point of directory structure," he said. "In this way, you're not replicating additional administrative burdens on the organization, but you're still providing them with an effective application that they can give their users. Additionally, because it's a replicated system, organizations can leverage the resource throughout the enterprise no matter where they may be, locally or throughout the world."

Small Companies With Big Needs

Although the earlier production-oriented imaging systems have limited availability, they did familiarize companies and government agencies with the efficiencies the technology provides. "Document imaging has come into its own because it's a technology that people are familiar with through the successes of these larger organizations," Giga's Moore said. "It's become an accepted technology, not something where companies feel like they might be betting the farm by moving your business to it. By now, it's got a proven track record."

Nevertheless, smaller organizations require solutions that are far different from the larger production-oriented systems, which generally serve individual, not multiple, departments. As a rule, insurance firms, pharmaceutical firms and those organizations that focus almost entirely on imaging and work flow make the investment practical in these types of systems.

"The smaller organization is typically in a general line of business where imaging is a piece of the puzzle, but not the dominant piece," said Ward. "So organizations need to make allocations for the capability, but at a reasonable cost."

According to Muller, smaller organizations, and even large entities that are experimenting with imaging pilot programs, are looking for entry-level packages that will self-install without requiring programming and deliver strong functionality and flexibility at a competitive price point.

"That said, those organizations require the ability to scale their entry-level imaging applications as their requirements grow. Products that bridge the gap between limited desktop functionality and enterprise requirements have been missing in the market," Muller said.

Services Business Emerges

For systems integrators and service providers, the opportunities in document imaging are immense. Because prices have decreased significantly on the front end, imaging vendors must make their profits on the back end through services such as data migration, data compression, routing capabilities, integration with work flow and document management packages and messaging-based infrastructures.

These will allow images created on the desktop to be migrated, stored, archived and routed more efficiently through the server process.

"Systems integrators will now be able to provide back-end services for the front-end services that will typically be provided by the large players," said Ward. "Within the imaging industry, there's tremendous consolidation where most of the vendors are either partnering with somebody, being acquired, finding a niche market or going out of business.

"But mechanisms like message-based imaging will allow these smaller integrators to write applications for the back end, and therefore continue to stay in business and be successful," Ward said.

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