Top Of The Heap
Reseller adds imaging to its product and services line in order to move closer to its goal of offering clients business process re-engineering.
For the past 12 years, Word-Tech, Inc. has specialized in installing systems that manage electronic documents created in programs such as word processing, CAD, spreadsheet, etc. But every company works with two types of documents. In addition to electronic documents, businesses also have to manage paper documents.
Word-Tech president Bruce Karlson saw that if he wanted to take his business to a higher level, he was going to have to offer his clients systems that could manage all of their documents.
So, in 1995, Word-Tech added imaging products and services to its line. Imaging technology enables users to convert paper documents into electronic format. These "images" (paper documents in electronic format) can be integrated into the users' networks and managed along with their other electronic documents.
The Reseller Pyramid
Karlson uses a pyramid metaphor to describe the reseller market. Hardware dealers are at the base, with network integrators on the next level, and application integrators a level up from them. At the top are integrators that do business process re-engineering (BPR). It is to this top level that Karlson aspires. Following is a look at Karlson's pyramid of resellers from bottom to top:
Hardware dealers: "These companies are like lumber yards are to a builder. They provide the building materials for systems."
Network integrators: "These companies are good at installing LANs (local area networks) and are experts in Novell, Windows NT, bridger-router and the Internet. They are like the plumbers that put in the pipes for a building."
Application integrators: "These companies can tie two software applications together well. For example, before Word-Tech offered imaging, we installed systems that enabled attorneys to retrieve electronically-generated legal documents from their databases through various indexes, including full-text searches for key words.
"But our systems had no control over documents that came in on paper. While we fulfilled an application for these law firms, we could not address their entire process because we could not address how they indexed and retrieved the documents that came in on paper."
Integrators that do BPR: "These integrators can offer consulting and systems to improve the management of all of an organization's documents. For example, an integrator that does BPR would be able to design a system that ties together an accounts-receivable department's paper documents with its electronic data and files. This can be done by combining imaging and electronic document management in one system.
That system would also include a method for moving the correct documents and information to the correct workstations, and for monitoring this process to alleviate bottlenecks. Workflow software can accomplish this in an automated environment.
Automation vs. Computerization
The major difference between an integrator who does BPR and one that only addresses an application, according to Karlson, is that the former sells automation, while the latter merely sells computerization. "It's the difference between selling a concrete financial return on investment (ROI) and selling technology." Offering imaging has enabled Word-Tech to better show ROI, says Karlson. "Installations of systems that manage electronically-generated files have some business case studies a dealer can relate to a client, but they are not as striking as imaging case studies. When you tell clients they can save amounts like $32,000 a month by eliminating microfilm, or that they can receive a half-million dollars back annually from creditors since they are able to pay their bills faster because they can manage their billing departments better, it opens their eyes."
Showing The House, Not The Building Materials
The importance of telling automation stories to end users in terms they can understand is something that technology dealers have often ignored in the past, says Karlson. "If you are adding on to your house and interviewing builders, the builders are not going to start by showing you the lumber, beams, and concrete they will use to build the room. They will talk about the complete project, and tell you about similar ones they've completed.
"But, in the technology industry, the first thing we often do is start explaining hardware and software to a customer, without taking the time to look at the way the customer runs his business, and what he wants to accomplish."
Poor Planning Burns Users & Dealers
One of the biggest problems Karlson sees in the imaging industry is that too many integrators dive into imaging projects without properly analyzing the situation beforehand. This leads to problems on both ends of the deal, he says. "A lot of dealers just want to sell some product and make some money," says Karlson. "You can get killed in this industry if you take that approach."
Clients will often end up with imaging systems that do not fit their needs. "This will often discourage a company from ever trying an imaging project again," says Karlson. "It also discourages vendors because their product is usually blamed for the shortcomings when it is actually the integrator's misapplying the technology that causes the problem."
On the reseller end, integrators who have not taken the time to predefine what an imaging system will include, can run into problems when it comes to determining exactly when a project is completed. "If the terms of an end user's 'final acceptance' of a project are not clearly agreed upon before the integrator begins the project, and a set fee has been agreed on, the integrator is taking the chance of a 'runaway,'" says Karlson. "A 'runaway' is a project that never ends, because the client keeps asking for more features and service, and the integrator cannot get closure on the project. Before the integrator knows it, he is working for $5 an hour.
"To prevent runaways a dealer should have a written agreement that says when X,Y and Z are installed, phase 1 of the project is over. When phase 1 is completed, if the customer, who is usually becoming more educated as the installation is taking place, decides he wants more features, then phase 2 of the project should begin."
Good Planning Is 40% Of The Project
Word-Tech has developed a four-step methodology to keep from falling into the traps of misapplied technology and runaways:
Discovery - The first step involves spending time at a customer site and learning the operations. It involves not only understanding how the customer's processes work, but also compiling numbers on the operation, such as how many documents are filed and retrieved each day.
Word-Tech will sometimes bring in an outside consultant, who is an expert in a vertical like retail or banking, to help with this step. For example, Word-Tech recently created a fulltime position on its accounting department discovery team for one of its accountants who is also skilled in computer work. As other Word-Tech employees gain experience through installations in specific verticals, they will take on more discovery responsibilities.
- Analyze - The discovery team and the technical department go over the information collected in the discovery step, and discuss which technologies can be best applied.
- Design - Word-Tech will write a specifications document that includes technology elements as well as other suggestions for process improvement. Word-Tech charges its clients for this specifications document, to recoup the investment of the first three steps. The customers then have the option of either implementing the items on the specifications document themselves, hiring a third-party to do it, or contracting Word-Tech.
- Implementation - This is the application of the plan drawn up in the design stage. Karlson says the first three steps of the methodology account for about 40% of Word-Tech's effort on a project. "If you plan well in the first three steps, the implementation is a snap."
Information Eliminates 'No Decision'
Developing good specifications documents also helps eliminate an imaging reseller's biggest competition, says Karlson, that being "no decision" on the part of a customer. "The toughest aspect in an imaging sale is not convincing end users which products to buy, but convincing them that they need an imaging system at all," says Karlson. "It's not like upgrading a network that already exists. Imaging involves adding unfamiliar technology to a clients' business process."
A good specifications document eliminates any uncertainties a prospect may have about cost. "An good specifications document along with documented ROI estimates helps customers make decisions one way or the other," says Karlson. "We've found using our resources to develop a specifications document is more efficient than using them to keep after uncommitted customers who string us along for information."
Imaging: Substantial Investment Required By Reseller
Word-Tech's entry into the imaging market has not come without a price. Even though Word-Tech is Optika Imaging Company's top-selling reseller, it is just beginning to see a return on its investment into imaging, says Karlson. "We put the growth of the rest of the company on hold to focus on imaging," says Karlson.
Word-Tech's investments included moving some of its top salespeople and technicians into its imaging division. "A lot of our salespeople gave up established accounts, but they also saw the potential of imaging," Karlson says.
Several of Word-Tech's early installations were also done at a reduced price, so the company could gain reference sites and experience. "There is no better selling tool than showing prospects a successful installation at a site similar to theirs," says Karlson. "Also, the first time you do a particular type of installation, it might take more than twice as long as the second. The more experience you gain in an area, the more efficient you become, and the fewer resources you need for each application, which increases your profits. We don't think the profits we are making for imaging now are near what they are going to be."
Strategies For Future Growth Include Vertical Market Focus
Word-Tech has several strategies for increasing its future profits from imaging:
Workflow - Word-Tech is gearing up to offer Optika's workflow software on a larger scale. Workflow automates the distribution of electronic documents to the correct network users. "Workflow software can do for the computer environment what Henry Ford's assembly line did for manufacturing. It brings the work to the worker," says Karlson.
Internet - Being able to distribute documents through the Internet is in line with the popular concept of the "world-wide office." "Currently we are reselling Citrix software that creates a 'virtual network' connection to allow users fast remote access to network files," says Karlson. "But we see the Internet as the next method of distributing business documents to remote sites, so we are working on integrating Web-based technologies into our systems."
Departmental sales - Karlson says most companies want to test the waters before jumping into an enterprise-wide technology installation. "Companies will install a small pilot project first, and then expand it to include a second department, a third and even a fourth. We are reaching the second installation with most of our early imaging customers now."
- Vertical focus - "Eventually we'd like to specialize in a few vertical markets like legal, health care and retail. Once you understand a process that is specific to a certain vertical, you can become efficient at designing systems for it. In insurance, that process might be claims processing; in health care, patient records; in law, case records, etc.," says Karlson. "We are looking at the legal, health care and retail markets right now as our specialties, because through installations in them we have been able to develop process knowledge and experience. As time goes on and we add installations in other markets, we may choose to focus on some of those as well."