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Charting a Road Map to Scanner Treasures

12 Sep, 2007 By: Sandra Collins imageSource

Charting a Road Map to Scanner Treasures

We've known the pursuit of the “paperless office” has been a goal of many
organizations for years. This thought propelled the growth in installations of
document imaging scanners (single-function) to turn paper documents into
electronic files, which are easier and more cost-efficient to locate, work with,
and store. In the meantime, documents that exist only as electronic files are
increasing exponentially, not only encroaching on paper-based documents but also
generating large volumes of files that ultimately require classifying, indexing,
storing, and the ability to retrieve as needed. The result has been the pressing
need for companies to implement content management solutions, which have been
increasing in their rate of adoption. The recent commoditization of basic
content services — with Microsoft SharePoint as a prime example — has made the
technology even more accessible to customers.

Nevertheless, many business processes ultimately will not become completely
paperless, and will exist as a hybrid of both paper and electronic documents,
creating an ongoing need for document scanning. Scanning will also continue to
play a role in the capture of documents, as  one of the “on ramps” into content
management systems.

InfoTrends, Inc. provides industry analysis in the document scanner market,
including market forecasts. This article provides an excerpt from the official
scanner report, aiming to shed light on this multi-faceted market and to help
arm providers with a basic roadmap to the possible “treasures” found in

InfoTrends divides the document-scanner market into five segments to allow
more accurate tracking of industry trends.

5 Scanner Segments

  • Workgroup Segment. Most models are priced between $350 and $2,000, and
    have feeding speeds between 10 and 25 pages-per-minute.
  • Departmental Segment. Most models are priced between $2,000 and $5,000,
    and have feeding speeds between 25 and 40 pages-per-minute.
  • Low-Volume Production. Most models are priced between $5,000 and $12,000,
    and have feeding speeds between 40 and 60 pages-per-minute.
  • Mid-Volume Production. Most models are priced between $12,000 and $30,000,
    and have feeding speeds between 60 and 90 pages-per-minute.
  • High-Volume Production. Most models are priced over $30,000 and most have
    feeding speeds over 90 pages-per-minute.

Feeding speeds are generally measured in simplex scans of black & white
documents. In general, workgroup products scan fairly low volumes of documents
each day, and the typical daily scan volumes increase incrementally as one goes
up-market. Some High-Volume Production solutions may even be scanning documents
24/7. Typically, higher-volume scanners accompany more robust and highly
integrated document-processing solutions, incorporating a high level of document
management analysis and software integration.

The majority of companies purchase scanners to enable improved efficiencies
in their paper-document workflows. Many companies are also interested in
document management and disaster recovery systems. Popular vertical markets for
business-process scanning include manufacturing, health services, legal
services, and insurance. In addition to document archival and records
management, horizontal applications frequently include accounts payable,
remittance processing, forms processing and claims management.

Growth in the Market

The document scanning market has experienced year-over-year growth since its
inception, and remains a dynamic market.  Here we'll examine the market at a
higher-level view by combining the Workgroup and Departmental segments and
calling that the “distributed scanning” market, and then combining Low-Volume
Production, Mid-Volume Production, and High-Volume Production and calling that
the “production scanning” market. These markets differ in their projected sales
for the near future, and hold different implications for the channel.

Production scanning usually consists of centralized, high-volume solutions
designed to reduce costs and improve efficiencies in paper-intensive work
processes. Adoption of high-volume solutions has been particularly strong in
business processes that are high-cost and high-visibility. These solutions often
generate a high enough return on investment to compel large companies to install
them. Often the ROI takes the form of reduced expenses and reductions in labor
costs or reduced headcount. In addition, companies that install these solutions
see efficiencies that result in increased cash flow as well as increased
customer satisfaction. For the channel, high-visibility integrated solutions
help to position the dealer/VAR/systems integrator as a partner in companies'
document-management initiatives, making it harder to be unseated from accounts.

However, as a total market in terms of unit sales, InfoTrends forecasts that
production scanning installations are going to begin to flatten and then
experience a slow decline, making competing for these accounts more difficult.
Production scanners will begin to experience increasing saturation in the large
companies that would consider high-volume solutions. In addition, the quantity
of paper used in important work processes is beginning to decline to some
extent, in favor of the efficiency of digital documents. Therefore, the need to
incur the cost and labor of implementing a high-volume scanning solution will
become less motivating to some organizations. Winning new accounts in this 
competitive market will require significant document management and systems
integration ability.

In contrast to production scanning solutions, companies have shown increasing
interest in “distributed scanning” implementations. Distributed scanning employs
lower-volume scanners in multiple locations throughout an organization to bring
the scanning process closer to the point where documents enter the work process.
This makes  digitized information available to users sooner, and reduces the
cost and risk of transporting documents to a centralized location. With its many
benefits, distributed scanning is projected to be the new growth market in
document imaging.

By 2011, distributed scanners are forecast to represent about 94% of unit
shipments in the document-scanner market, and production scanners will comprise
6%. These production scanners, however, will contribute more to sales revenue:
distributed scanners are forecast to contribute 60% of hardware revenues,
compared to 40% from production scanners.

The Distributed Advantage

Distributed scanning is suitable for smaller companies with lower scanning
volumes, and is financially more accessible to them than production scanning,
due to its lower implementation costs. Both small and large companies are also
employing distributed scanning to comply with regulations such as Sarbanes-Oxley
and the new amendments to the Federal Rules of Civil Procedure (FRCP), commonly
called e-discovery.

Distributed scanners allow documents to be accessible to electronic workflows
much sooner, making them easier to route, process and archive. Post-processing
can still occur at a centralized area, if that is more efficient. Companies
experience reduced document-processing cycle times, improvements in customer
service - which in turn improves customer satisfaction — and increased
competitive advantage. For example, a company with branch offices that scan
documents locally rather than transporting them to a centralized scanning
facility can save days in processing time. Those that utilize document
collaboration can share and track versioning of documents easier. Companies see
cost reductions in no longer needing to transport documents, and the risk of
losing documents and having to replace or recreate them is lessened. Sensitive
documents also experience a higher level of security when they are not handled
by workers outside of the office. Even higher levels of security are achieved if
the network systems have been optimized to restrict access to data, and if the
document scanners have been password-protected or are kept in a restricted area.
This is especially important to Accounting/HR.

The ROI for distributed scanning is more elusive than for production scanning
in terms of calculable expense reduction. The most obvious cost savings are
transportation costs of sending documents to a centralized location. However, as
just mentioned, when implemented as part of business-process improvements,
companies also see enhancements in “soft costs” such as increased productivity,
improved document-processing cycle times and increased customer satisfaction.
Combined with increasingly accessible content management software, the
implementation of document-management solutions has perceived high value as a
technology investment for more companies and is showing ongoing growth.

Interestingly, distributed  scanning implementations that utilize a small
number of knowledgeable operators tend to be somewhat  more successful than
those that utilize higher-level knowledge workers to do their own scanning. Some
companies  find that these workers may not be as  attentive to the details of
achieving accurate & clean electronic files as workers who are used to hands-on
management, such as mailroom  and administrative workers.

Installations that will be more lucrative for the channel will likely be
those that require some needs assessment and knowledge of document-management
systems. Those with potential for multi-unit hardware sales will be attractive,
such as installing a system for an account with multiple branch offices.

In contrast to more complex installations, there will be a portion of
distributed scanning sales - particularly very low-end models - that likely will
not require the ability to install a comprehensive document-management solution
and will therefore involve less of the channel's investment in time and
knowledge. Increasing quantities of low-end scanners are forecast to be shipped
each year. However, these placements are commodity sales and therefore provide
less opportunity for differentiation & increased margins or add-ons such as
maintenance contracts and software sales.

From the perspective of per-unit processing costs, higher-volume scanning
applications will usually find it more cost-effective to implement a centralized
(production) scanning solution rather than distributed scanning, as greater
economies of scale are achieved. Lower-volume applications can be steered to
distributed scanning solutions, especially if cycle time is important.

Scanners versus MFPs

Companies are now implementing distributed scanning with two types of
equipment: lower-volume standalone scanners, and multifunction peripherals
(MFPs) with scanning capability. Both products have their advantages, although 
they  are frequently used in different ways. Distinguishing when each of these
is  appropriate to an  installation is  an important service that the channel
provides to customers.

MFPs, of course, with their copying and printing functions, offer a high
level of usability in an office. They are ubiquitous, as millions of
copier/printers are installed every year. While in the past the focus of both
the channel and the users has been on copying and printing, more companies are
enabling the scanning function on MFPs to improve their total cost of ownership.
However, the scanning function tends to be fairly basic, scanning standard paper
documents to one of several file types and distributing them via the network to
which the MFP is attached.

Scanners, on the other hand, are highly focused on the scanning process &
cater to the needs of applications. Single-function scanners currently offer
numerous advantages over MFPs in document-intensive environments.

  • Many scanner models can feed a wide range of document types, including
    paper thicknesses & very small documents such as business cards and inflexible
    licenses and insurance cards.
  • Scanner hardware and software are often optimized for scan quality to
    capture difficult documents, automatically adjust for skew or page
    orientation, and remove blank pages from the file. Many have hardware or
    software that optimizes the image to the highest quality possible,
    compensating for hard-to-read originals and those with optic “noise.” Some
    have the ability to recognize colored backgrounds, automatically adjust
    brightness and contrast, allow color management, or optimize text differently
    than photos in the same document.
  • Some models have a system to detect if the scanner's ADF has fed multiple
    originals at one time, ensuring that all pages that the user wants scanned are
    actually scanned.
  • Scanners that offer duplexing capability often have two sets of scan heads
    to \scan both sides of a document at once. Not all MFPs have these heads and
    will be forced to turn the paper over to scan the second side, which results
    in a much slower feeding rate and may risk injury to the original document or
    increase paper misfeeds.
  • Scanners usually experience lower incidence of downtime than MFPs, and
    their usage does not conflict with those using the machine for copying and
  • Scanners usually integrate well with customers' existing systems software
    and Electronic Content Management systems.

Given the focused nature of standalone scanners, they have typically been
preferred to MFPs in applications that are document-intensive or
mission-critical. The central issue in the choice of whether to use MFP scanning
or single-function scanning is the level of importance of capturing specific
documents and whether they require consistent control. Many scanner
implementations are specifically optimized for important business processes &
use knowledgeable operators to ensure compliance and consistency in document
capture and the quality of scanned images.

Conversely, MFPs are primarily being used for ad-hoc (general purpose)
scanning, and to enable users' personal efficiency. They are most often used in
low-volume environments, and are typically used for scan to e-mail, scan to
folder, or scan to network fax. In fact, one of the most popular uses of MFP
scanning is to replace fax machines. Many companies find these activities
fulfill most of their ad-hoc scanning needs, and individual users can be trained
quickly on the distributed products in the office. In the environments where MFP
scanning makes sense, it can greatly contribute to individual productivity.
However, using MFP scanning for work-process improvement has been more difficult
to accomplish since training & compliance can be challenging, and enabling MFP
scanning to integrate with systems  and processes requires some effort.

As the Future Unfolds

Over time, we at InfoTrends believe that MFP manufacturers will begin to
close the performance gap between MFPs and scanners, making more MFPs capable of
a wider variety of scanning applications. MFPs and single-function scanners will
each continue to have their advantages, but there will be increasing convergence
of the two.

Office-products dealers in particular may see opportunity in entering the
scanning market. These channel participants have traditionally been more focused
on aftermarket supply sales and service contracts—which are not lucrative in the
document scanner market—so many have not been selling scanners. Very few have
been selling high-end scanning solutions. However, as customer demand for
distributed scanners and for MFP scanners continues to increase, office-products
dealers that sell MFPs should consider gaining knowledge of document scanning
and document management systems, to position MFPs for increased scanner usage,
and possibly to sell single-function scanners. Conversely, VARs may also decide
to start including MFPs as an option in their portfolios. For both dealers and
VARs, these increased capabilities will help to differentiate them from their
competitors, positioning their organizations to offer a wider range of
abilities. As customer demand in document scanning continues to rise, increased
ability in these areas will be a competitive advantage.

It's important to note that future prospects in this market will continue to
be much more fruitful for those capable of installing integrated solutions
within a wide range of usage scenarios. Although scanner hardware sales will be
a source of revenue, a key piece of scanner sales will continue to be
software-related. The focus of most scanning implementations begins with the
software, and most of the resulting value lies there. VARs and systems
integrators report that they typically sell a majority of their scanners with
additional software, which increases their revenue per order. (In general,
Workgroup scanner sales will be accompanied by additional software at lower
rates than Departmental and Production scanner sales.) Dealers and VARs who can
only sell scanners without implementing a broader document management solution
will be relegated to working with customers that do their own integration using
their internal IT resources. The true driver of increased hardware sales and
incremental revenue will increasingly be driven by knowledge of software,
document-management, integration, and the ability to perform workflow analysis.

Channel participants with strong abilities in configuring document-management
solutions will best serve customers by being capable of implementing an
insightful blend of centralized scanning, distributed scanning, and MFP scanning
into accounts as their needs dictate.

Scanner manufacturers will continue to improve the optimized focus of their
products, to ensure their relevance to customer applications. Some of this will
be hardware-based (i.e., in the scanner) and some will be software-based. For
example, Kodak has developed a “digital watermarking solution” to provide an
audit trail and ensure document authenticity in the scanning process. The
industry's leading scanner manufacturer, Fujitsu, has developed a time and date
stamp module that integrates with Hyland Software to enable legal compliance,
data integrity, and intellectual asset protection.

This is an exciting time in the document imaging market, as more and more
companies embrace document management solutions and install document scanners.
We are indeed at the right place at the right time to capitalize on these

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