Interview with HK Bain, the CEO of Digitech Systems

There have been a great many stories in the news recently about Microsoft launching its new 'Software as a Service' business. As you know, the concept is not new and we have seen a number of successes here, including one of the most successful - Salesforce.com. At the boom of the dot com era, the word ASP was coined, yet the dot com bust seemed to keep that word out of the public domain. However, in the ECM space, we have seen several ASP offerings, and Software as a Service has been available for some time.
Document Boss recently spoke with one of the most successful ECM companies in the Software as a Service space. We sat down with HK Bain, the CEO of Digitech Systems, one of the ASP pioneers and a thriving and successful company. We wanted to get his perspectives about the ECM business and talk about the success Digitech has had.

Q. Can we begin with a brief history and introduction to Digitech, and could you tell us about your business vision and strategy?
A. Scott Matthews, our founder and CTO, formed Digitech Systems, Inc. in July 1997 in Lincoln, Nebraska. His goal was to develop and market document imaging capture and retrieval software that would revolutionize the industry. At that time, document management systems were complex, built with proprietary technologies and prohibitively expensive. We wanted to simplify the process, drive the cost down and provide an affordable yet comprehensive enterprise solution suite.
Digitech is delivering on this promise: our unique approach of selling the Software as a Service yields extremely low start-up costs and very rapid ROI. We now have over 60 Terabytes of storage under management and this number is growing rapidly. In addition, through our PaperVision® Enterprise and PaperFlow™ solutions, we can offer both a hosted solution and an in-house solution to our customers. Both are equally scalable.

Q. Which markets are your key markets and account for the majority of your sales?
A. We have built our ECM solutions using a horizontal methodology so they can apply to virtually any vertical market and any vertical application. We sell 100% through our channel partners, so we count on them heavily to identify developing key markets and applications. Our ability to easily integrate into any vertical application makes us incredibly competitive.
We have seen the greatest demand from Financial Services, Government, Insurance, and Commercial and Educational markets. But the fact is, once you have the option of purchasing ECM through an "On Demand" service, literally any size business can begin using ECM technology - from a 2-man shop to a Fortune 500 company.
Even professional football teams like the Denver Broncos use a Digitech solution. Fans can actually access the Bronco's past playbooks, which are hosted and served using ImageSilo® and available to the general public online at www.broncosgamebook.com.

Q. Where (regions) do you have the greatest presence?
A. We are currently selling predominantly in the United States with partners in the UK and other parts of the world.
We are interested in expanding our global reach, through our current indirect channel sales model. However, the challenge is not only to find the right global partners, but also to maintain the extremely high quality standards and customer service levels we now maintain in North America.

Q. Can you discuss some of the opportunities available to you? Where do you see the biggest growth opportunities? Is your sector or area sector showing good growth dynamics?
A. We are extremely excited by Digitech Systems' growth, and see unlimited opportunities available to us. We have seen 20% ImageSilo growth every month over a sustained period, and feel this growth will easily increase as the economy continues to strengthen and Digitech gains recognition in the marketplace. In addition, our ability to sell the software as a service makes the customer's decision time far more rapid, as it moves ECM from a capital expenditure to an operating expense - a significant change in enabling businesses to take advantage of ECM. While our software business will continue to grow, we see the services business growing far more rapidly. Companies can now manage their information at a very low cost.
In addition, all evidence points to the total potential market for this type of ECM deployment as being enormous. While the larger traditional ECM companies went after larger companies, it left a huge population of small and medium sized businesses uncovered, believing that ECM was too expensive for them. The way Digitech delivers ECM is changing that belief.

Q. In a wider sense, can you talk about the drivers that are at play, and then bring it back to your company and give us a sense of how you've been able to tap into these drivers?
A. There are a number of fundamental things occurring that are stimulating the ECM sector and will drive our continued growth. First, we believe that ECM is moving from an organizational luxury to an organizational necessity. This is being driven by a number of factors, including regulations, compliance issues, and the growth of paperwork, as well as the basic need for simply sharing information. Affordability, integration and secure accessibility on-demand will not only maintain, but accelerate our growth as more businesses move to adopt ECM.
Second, we believe a key driver of ECM adoption is moving the decision from a capital expenditure to an operating expense. This has an enormous impact on the ability of small and medium businesses to adopt our technology and solve fundamental information management problems and thus compete with larger market competitors. It also fuels rapid expansion within an organization, as well as shortening the purchasing decision time, and ultimately the sell cycle.
Third, we see the ability to scale rapidly and add new users and departments as a key expansion driver. Our hosted model allows this expansion in a time frame and through a method not possible in conventional systems.
Finally, rapid and measurable ROI will continue to be a powerful driver. This is where solutions from Digitech Systems really stand out. With no capital expense, rapid installation, simple training and ease of use, Digitech offers rapid and measurable ROI for every single installation and user.

Q. How would you characterize the current business and economic environment?
A. The economy has been challenging, but it is making a slow and sustained recovery. However, with companies trying to cut costs, streamline operations, and increase profitability, ECM solutions should be selling like hotcakes. I believe ECM manufacturers have made this industry far too complex and too expensive. Digitech is committed to reduce this complexity and establish new lower price points so solutions can be driven down to small and medium size users, as well as larger companies. ECM is not a technology driven decision anymore. It's an economically driven decision.
We are not trying to conquer the world, but to achieve our business plan in a manner of which we can be proud. And, fortunately, we have done this exceedingly well, maintaining profitability even when the economy has been less than robust.

Q. There have been many, many mergers and acquisitions in the ECM space over the last several years. Do you see that as an opportunity or as a threat for Digitech?
A. I am actually thrilled with all the M&A activity we have seen. It brings attention to the ECM sector and exposes more companies to the benefits of these technologies.
Given that we have a very different business model with a low cost structure, I don't see this activity as a threat to Digitech. Our model is not easily transferable to a traditional ECM player and, with the Microsoft's and Oracle's of the world driving more ECM functionality to their platform, our business model is not as applicable to them. With our cost structure advantages, we are more attractive as a licensing partner than an acquisition candidate.
I tend to view our business model more like that of a cell phone business model, as opposed to a traditional ECM company business model. It would be difficult for a traditional player to both understand and implement the Digitech model within their existing company structure.

Q. Who are you running up against in terms of competition? Who do you consider to be your primary competitors?
A. There is always competition in the ECM business. However with ImageSilo, our model is so different from the traditional ECM players that we fare very well against any competitor. In addition, we are far more focused on the mid-level clients, a segment which many of the traditional ECM players have shied away from. We qualify our prospects very carefully and, in a time when capital budgets and complexity are issues, we have a very strong, often unmatched, solution to offer.

Q. What are the three or four best reasons for potential customers to look towards your company?
A. There are many reasons to buy Digitech's solutions, however, the reasons we hear all the time from our customers include:
1. No capital expenditure required
2. Extremely rapid implementation with very simple training requirements. (One organization even trained their entire staff through a simple memo!)
3. Near immediate ROI which is easy to measure and validate
4. Integration with virtually any application, tying disparate sources of information conveniently into your ECM system.

Digitech Systems, Inc. is headquartered in Greenwood Village, Colorado with offices in Lincoln, Nebraska and has more than 300 resellers worldwide.