Margins vs. Headaches: Storing Your Customers' Documents Online

Over the past few years, we've seen a convergence between imaging VARs and service bureaus. Driving this has been the fact that almost any imaging installation requires backfile conversion. Installations typically handle day-forward scanning requirements.

The VAR and service bureau convergence has manifested itself in either service bureaus adding VAR services, or vice-versa. Now, we are seeing service bureaus converge with another industry – that of application service provider (ASP). ASPs host applications (e.g., document management) for customers. An imaging service bureau typically scans a customer's paper documents and returns them to the customer as electronic images. The customers receive these images on CDs or another media, or through electronic data transfer. An imaging ASP, on the other hand, actually stores the images for its customers. The customers then typically pay a fee to access the documents through an intranet link.

Building vs. Contracting Hosting Services
According to Frank Giannone, executive VP and director of sales for Digitech Systems, Inc., only 10% of service bureaus currently offer ASP services to their customers. Digitech (Lincoln, NE) is a developer of document management and imaging software and does 90% of its business with service bureaus. Digitech also has an ASP service called ImageSilo. ImageSilo services are sold by Digitech's VAR and service bureau partners.

Giannone advises VARs and service bureaus to consider using existing ASPs before setting up their own. "A service bureau outsourcing its ASP services follows the same logic as a customer outsourcing its conversion services. In both cases, the company doing the outsourcing can keep its focus on its core business," he says.

Don't Underestimate The Technical Requirements Of Being A Host
Giannone estimates it would cost a service bureau approximately $300,000 to set up an ASP environment comparable to ImageSilo. "A lot of service bureaus don't understand the full scope of being an ASP. In addition to storage hardware, there are also security issues that have to be considered and high-speed Internet connections that have to be installed," says Giannone. "We've also developed a billing system similar to the one used by cellular phone companies."

Scott Buchart, president of Optical Image Technologies (Optitech), also cautions that a great deal of technical expertise is needed to operate a document management ASP. Optitech (State College, PA) develops document management and imaging software. "We have several service bureau customers that have transitioned from micrographics to digital imaging. In cases where these transitions have failed, the number one reason has been underestimating the technical requirements of the digital application," says Buchart. "An employee who has a PC at home probably isn't qualified to handle the information technology requirements of a digital service bureau."

Done Correctly, Hosting Greatly Increases Imaging Margins
Buchart says if a service bureau wants to make a technical upgrade, such as adding ASP services, it must be willing to commit to adding technical resources. "This can be done either through subcontracting technical labor or by bringing more technical staff in-house," Buchart says. "Once this upgrade is complete, the potential benefits are enormous."

Buchart says one incentive for micrographics service bureaus to add digital services is the cost-effectiveness of working with digital images. "Taking it one more step," he adds, "and storing images in-house as an ASP - instead of returning them to customers - further reduces costs. An imaging service bureau that receives the same rate for ASP services as it does for scanning documents to film will greatly increase its margins."

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