A New Image For A Copier Dealer

Value added reseller (VAR) Brad Moore looked across the table at Bryan Taylor, a representative from software developer TMS Sequoia Inc. and said, "Could you please explain to me what we were talking about for the past three hours?"

Moore, Taylor, and Jack Litteral, a systems analyst at Moore's business, Advanced Imaging Systems (AIS), had just finished a meeting at the Federal Bureau of Reclamation's (FBR) office in Oklahoma City, OK. The FBR keeps records of land owned by the U.S. government.

The trio had just finished talking to officials at the FBR about a plan to convert its paper records to a computerized format. They were now having lunch at a hot dog stand next door.

"TMSSequoia specializes in software to manage the conversion of paper documents to an electronic format that can be kept in computer storage. This process is called imaging," says Moore. "AIS, however, at that time (early 1995) had only sold one system that was related to imaging. Our main business was reselling Xerox copiers and fax machines. Bryan and the FBR representatives had been talking about document scanners and compact disks, and other things we had never worked with. So, we just sat at that hot dog stand and Bryan explained what we were getting ourselves into."

Half Of Annual Revenues Now Generated By Electronic Document Management Systems
What AIS was getting into was selling document and image management systems. Since landing its initial document imaging installation with the FBR, AIS has grown to where half of its approximately $2 million in gross sales for 1997 were generated by document imaging sales. The other half of the Oklahoma City-based, 11-employee company's gross sales came from Xerox copier and fax server sales.

"The document imaging side of the business grew by 40% from 1996 to 1997, while our copier and fax side grew only 10%," Moore says.

Moore says a telltale sign of the future of the document imaging industry vs. the future of the copier industry is the state of each industry's flagship trade show. "The Business Technology Association (BTA) trade show for copier dealers used to be like Comdex (the largest computer show in the United States held annually in Las Vegas). Now it's dead," says Moore. "At last year's AIIM (Association for Image Management) show, though, everyone brought out their most expensive exhibits. There was tons of noise and activity. It was like the BTA show used to be."

Leveraging A Family Connection
Moore received his formal introduction to imaging shortly after forming AIS in 1992. "Dr. Dick Phillips, the founder of TMSSequoia is a relative of my wife," says Moore. "We had met at family functions over the years and become good friends. We had a common interest in documents. For the 12 years prior to founding AIS, I worked in sales and marketing for Xerox. When Dr. Phillips heard I was forming my own business, he asked if I'd want to stop in at TMSSequoia and see what his business was all about."

TMSSequoia, headquartered in Stillwater, OK, is a developer of document imaging software. TMSSequoia has 85 employees and its 1997 gross sales were $5.6 million.

What's In A Name
Moore founded AIS in 1992 to resell Xerox copiers, fax machines and printers. The first thing Moore had to do was choose a name for his company. "The first part was easy. A consultant told me to choose something that started with an ‘A,' so I'd be listed first in yellow page categories," says Moore. "Originally, I was going to follow ‘Advanced' with ‘Business Systems.' But I thought that might sound like we were limited to copiers and fax machines. I didn't have any specific plans to add document imaging systems to our product offerings. But, from talking with Dr. Phillips, and from hearing that Xerox was going to be using digital technology in all its copiers by 1996, I thought that document imaging might be the wave of the future."

A digital copier operates as a scanner and a printer. The scanner makes an electronic image of a piece of paper. The printer uses the data from this image to make a printout. "Because they work with images, digital copiers lend themselves to integration into computer systems running document imaging software," says Moore. "If copier installations were heading this way, I wanted my company to sound like it was heading this way, too. So I chose Advanced Imaging Systems as our name."

It Looks Like Document & Image Management
AIS' first business experience with imaging occurred in late 1993, when Grandmother Calendar in Oklahoma City contacted Moore about installing some high-end Xerox color printers. Grandmother was a startup whose plan was to manufacture custom calendars featuring pictures provided by its customers. "Grandmother's owner barely knew how to turn a computer on," says Moore. "But he wanted to use a computer system to combine photos and text in one file, and then, using a Xerox printer, print that file as a calendar. This sounded like an imaging installation to me, so I contacted TMSSequoia. I then worked out a deal with Grandmother to bring in TMSSequoia to do a proof-of-concept study."

The TMSSequoia systems engineers gave Moore an idea of where to head with the installation. "Grandmother never installed any of TMSSequoia's software, but the proof-of-concept study gave Grandmother ideas which a freelance programmer used to write a software program for the application," says Moore.

The study also listed other elements Grandmother would need to make its system work, including color scanners and RIP (raster image processing) units. RIP units are used to prepare color photos for production printing. "Before the Grandmother Calendar installation, I had only resold Xerox products," says Moore. "To secure the color scanners and RIP units I had to go through another vendor, User Friendly Operating Systems in Pittsford, NY. This was my first experience with systems integration."

Xerox supplied the color printers and also technicians who helped with the installation. To write the software and install the network for the installation, Grandmother hired local freelance programmer Jack Litteral.

The installation at Grandmother was completed in two phases. The first phase was installed in the middle of 1994 and the second later in the year. The first phase included 12 color scanners and 6 RIP units and printers. In the second phase, 6 more RIP units and printers were added. "At the time it was Xerox's largest color printing installation in the world, which generated some good publicity for AIS."

Adding Technical Expertise
Looking to take advantage of this publicity, Moore decided that AIS would further explore the market for Xerox color printers. "From my experience with Grandmother Calendar I realized that, to succeed in this market, AIS would need a systems engineer experienced in networking and programming," says Moore. In late 1994, Moore hired Litteral as a fulltime employee. Shortly after Litteral signed on with AIS, Moore received a call from a friend at the Federal Bureau of Reclamation's (FBR) office in Oklahoma City. "He said that his office was considering a document imaging installation. He said before I told him that I couldn't do it, he wanted me to know that the other companies the FBR had been talking to had been unable to fulfill the office's demands," says Moore.

The FBR's demands included a system that would provide the FBR with backup copies of the 1-2 million documents that were being stored on paper and microfilm. "The FBR could not, however, afford to convert these documents with its own staff. So, the scanning and conversion of documents to electronic images would have to be contracted to a service bureau," says Moore. The conversion of the records would also be funded separately for each piece of property the FBR was responsible for. "The funds for each conversion would also probably be approved at different times," says Moore.

Before making an appointment with the FBR, Moore contacted TMSSequoia, where he was put in touch with systems analyst Bryan Taylor. "I explained we had a possible customer for a document imaging system, and that we would like some technical support for a meeting with the customer," says Moore.

Document Conversion Services Produce Steady Income
Following the meeting, Taylor explained what TMSSequoia could do for the FBR. He also explained what he felt AIS would have to do to make the installation work. "We then asked Bryan to work up a quote on what TMSSequoia would charge for the software needed for the installation," says Moore. "I then went back to our office and began pricing out what various service bureaus charged for converting documents to images, and recording those images on CDs. We chose CDs as the media for storing the images because the FBR already had a CD-player, which could be used to retrieve the stored images."

In the first quarter of 1995, AIS closed the sale to the FBR for the installation of a system to view images from CDs. The cost of the system was $25,000 which included purchase and installation of TMSSequoia software, which was configured by TMSSequoia and installed by Litteral. AIS also signed a contract for the conversion of the FBR's documents at 25-50 cents per sheet. "The price varies depending on the amount of preparation that is needed for the documents. The most expensive documents to convert are those that need to be removed from books and then replaced in the same order," says Moore.

Despite farming the documents out to a third party, Moore says AIS is still able to make a healthy margin on its conversion services. "We end up being responsible for the conversion. We have to ensure the documents are returned on time, and everything has been indexed on the CDs properly so it can be located," says Moore. "Conversion services provide us with a steady income stream, similar to our copier and fax sales. This is the perfect complement to our document imaging system sales, which often take three to 12 months to close."

One Government Installation Leads To More
After the installation at the FBR, AIS was contacted by other area government offices for document imaging systems. "Once a government organization finds a company willing to work within the procedures it is required to follow, it is very good about giving that company more business," says Moore. "Our willingness to do the Oklahoma City FBR's document conversions on a per project basis led to recommendations at other FBR offices."

At the end of 1997, 20 of AIS' document imaging installations were in government offices. "Interest from government agencies accelerated following the explosion at the Murrah Federal Building in Oklahoma City in April of 1995," says Moore. "Government agencies began to worry that their buildings might be sabotaged next. They wanted to be sure they had a backup for their paper files in case of a disaster."

Adding New Vendors
To take full advantage of AIS' increasing number of document imaging queries, Moore realized the company would have make some changes. "We didn't mind relying on TMSSequoia to help us with the larger installations," says Moore. "TMSSequoia had treated us fairly as a partner. But the smaller, one- or two- user installations, we wanted to do ourselves. To accomplish this successfully, we decided Jack should attend a class on VisualBasic programming. Most document imaging programs are written in VB, and knowing how to make minor adjustments to them is necessary in almost every installation."

AIS paid for a nine-month course for Litteral at a local college. To be able to offer complete systems, instead of only document imaging software, AIS also had to align itself with new vendors. "Every document imaging system needs a scanner to capture images of the documents, as well as a storage device for the documents. TMSSequoia gave us recommendations on who to work with for these products. We basically just sent for demo models and worked with them in-house to become comfortable installing them," says Moore. "Aligning with software vendors was more complex."

Litteral and Moore attended the 1995 AIIM show with hopes of adding a pair of software products. "We were looking for software that could recognize characters on a document and populate a database with those characters. Also, we wanted to add a more ready-to-go ‘out-of-the-box' document imaging software to our line, than TMSSequoia offered at the time," says Moore. "We settled on Cardiff forms processing software for the first product, and FileNet's Watermark document imaging, and Ensamble workflow software for the second."

To add each product required a week's worth of training at the vendors' offices. "Before FileNet would even accept us into its program we had to submit our business plan, a list of the other products we represented, a list of the networks types we supported, the qualifications of our personnel and an outline of our organizational structure."

Training Sales Staff On New Technology
Moore and Litteral also began to hold Monday morning document imaging training meetings for AIS' sales representatives. "Because AIS was coming from a copier background, Jack had to explain things as simple as the different types of networks and the cables used to connect them," says Moore. "Once, shortly after we signed on with Cardiff, Jack had all the sales people fill out some forms. He then scanned the forms using Cardiff's character recognition software to extract data and create a spreadsheet.

"After his initial presentations, Jack encourages the sales people to ask questions. These questions determine the direction of the meetings. The meetings are designed to give the sales people an idea of what signs to look for at a customer site that would indicate the opportunity for a document imaging sale. If an opportunity is recognized, Jack or I then go in with the sales rep and try to close a sale."

The Keys To A Successful Transition To Software Sales
AIS closed 20 document imaging sales in 1997. "It was the first year document imaging was profitable for us," says Moore. "Soon, I hope to add a salesperson to work full time on document imaging sales to help us grow even more."

Moore says that of three copier companies in the Oklahoma City-area that tried to add document imaging systems to their product lines, AIS is the only one that has succeeded, and is still offering document imaging. "Jack has been a huge asset to us. He is an expensive employee but has unique skills. Aside from understanding networking and programming necessary for document imaging systems, Jack knows the right questions to ask customers. This isn't true of most technicians. Instead of being customer oriented, many of them are technology oriented."

"Also, I don't know if AIS would have succeeded as a document imaging VAR if not for my relationship with Dr. Phillips. As a copier dealer I had experience solving customers' document problems with hardware such as copiers and fax machines. As a document imaging VAR, I've had to adjust to solving those problems with a software solution. A close relationship with TMSSequoia, which began with Dr. Phillips, has helped me make this transition."