Imaging's Payback Pays Off For VARs

Recently, I was asked to participate in a press and analyst panel at Eastman Kodak's annual Breakaway Conference. The topic posed was how imaging VARs can make money in a tough economy. Based on my conversations with VARs, it was my impression that most imaging VARs already were making money, even during what one analyst firm referred to as "the worst year [2002] in IT history."

My suspicions were supported by research conducted by Harvey Spencer Associates (www.harveyspencer.com) and Strategy Partners. According to their findings, the document capture market in North America outpaced most other segments of the IT industry in 2002, which some estimate grew at rates ranging from 1% to 3%. Spencer and his colleagues predict document capture software sales (not including hardware and services) will continue to steadily increase at rates between 5% and 15% annually, depending on the technology.

Archival And Retrieval Moves From Nice To Necessary
Why do imaging VARs succeed in tough economic times? As one of my industry colleagues once put it, imaging is bread and butter. It's not fancy, but it does the job. A well-designed imaging solution reduces the amount of labor it takes to perform a task without a prolonged implementation period and delivers a return that can be measured in hard dollars. That's a message that is especially powerful in today's economy. For a while, end users' heads were turned by CRM (customer relationship management) and knowledge management technologies that offered soft returns, but tight budgets have brought them back to reality. In fact, the largest portion of the document capture market by far is the most basic: archival and retrieval.

Spencer and his colleagues believe that segment will continue to see modest, single-digit growth through 2005, but I believe imaging VARs may exceed their expectations. This is an era of regulatory headaches and CYA (cover your a**) where corporate and government documents are concerned. At one time, end users at desktops believed it would be convenient and efficient to have digital documents available. Now, thanks to legislation like the Sarbanes-Oxley Act of 2002, which regulates corporate accountability, auditing, and disclosure, the CEO is afraid he'll go to jail if he can't produce a document. With buy-in from the top and laws that practically require an imaging solution, document capture VARs in verticals such as financial services and healthcare have reason to be optimistic.

As more and more business is conducted via the Web, I am confident VARs will also benefit from the overwhelming volume of electronic correspondence. The regulated industries in which imaging VARs thrive are struggling with ways to capture, archive, and retrieve e-mail and IM (instant messaging). E-mail volume is expected to reach 35 billion messages a year by 2005, and META Group predicts corporate IM will be ubiquitous by 2007. For VARs, that means larger imaging systems with more seat licenses, an increased need for mass storage hardware and storage management software, Web access for distributed enterprises, ... need I go on?

Imaging Isn't Getting Older, It's Getting Better
VARs also benefit from the fact that hardware and software innovations are increasing the value proposition for the end user by offering more functionality at lower prices. Document scanners are a good example. Each year, they run faster, provide more functions that reduce labor for operators, and include firmware that enhances image quality and better supports the overall capture process. At the same time, prices remain steady or even drop in some segments, so VARs continue to shorten the payback period on imaging solutions every year.

Spencer predicts intelligent document identification will be one of the technological advances driving continued growth in the industry. That segment includes the processing of unstructured and semi-structured documents as seen in the forms processing products offered by Microsystems Technology, Inc.; Captiva Software Corp.; and ReadSoft, Inc. It also includes intelligent software engines like SER Solutions, Inc.'s SERbrainware, which uses neural network algorithms to analyze documents based on content and context rather than keywords.

This year's AIIM show promises to showcase another generation of vendor innovations. It will also be a great opportunity for integrators to learn more about how AIIM International is helping to promote standards that benefit integrators and end users. IDC predicts IT spending will pick up in mid-2003, and imaging VARs have the expertise, products, and industry support to lead the recovery.