Visioneer: Clearing The Office Paper Jam

By Mary Eisenhart
Photos: Tustin Ellison

The analysts, venture capitalists, institutional investors et al. who fill the hallways at Dick Shaffer's conferences are a notoriously tough audience. As parades of hopeful executives paint rosy pictures in their quest for funding, audiences shrewdly weigh the evidence in their never-ending search for Return On Investment.

At 1993's PC Outlook, yet another fledgling company's Acting CEO didn't talk about networking arcana or the minutiae of client-server architecture or how his business plan could not possibly fail. Instead, he fed a business card into a tube-like device, pointed out the image of said bizcard on his computer's screen, and proceeded to file it and do useful work with its contents. He extolled the glories of PaperMax, the first product incorporating breakthrough technology by a Menlo Park startup, Visioneer.

This got the audience, pockets full of bizcards, where it lived. Visioneer got its funding.

Many PaperPort devices, dozens of awards, and boatloads of testimonials later, Visioneer (www.visioneer.com) is a publicly-traded company based in Fremont. The combination of radically new technology, affordable pricing, and a host of industry alliances has resulted in a product line embraced by corporate and SOHO users, who use PaperPorts for everything from contact management to global faxing.

CEO Michael McConnell and marketing VP Bruce Mowery are seasoned industry veterans with experience that includes Computerland and SuperMac in McConnell's case and a lengthy stint at Apple in Mowery's. We recently paid a visit to Visioneer's corporate headquarters to see how things were going.

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Going back to the technology that made the VCs' jaws drop--what is different about your technology that made it so impressive? There were scanners before, there was OCR before, but they didn't have that dramatic appeal.

Michael McConnell: I think it starts with the observation that the promise of the paperless office never happened. In fact, computers create paper. We think about a trillion pieces of paper are created each year, and most of it is created by computers.

The reason for that is there's a great interface between the computer and paper. It's called the printer, and it's a one-way street.

You can get information from your computer onto paper really easily. You can't get information from paper into your computer, period.

So the premise of the company was, how do you get information off paper into the computer? We really conceived of the PaperPort as a disk drive for paper--you put paper in, it should be as easy as putting a disk into your floppy drive.

There are certain technical problems with that--people like Xerox have been trying to solve it for years. How did you guys get lucky?

A lot of technology infrastructure came together at relatively the same time. Processing images is compute-intensive--computers are very powerful these days. Images tend to take up disk space, but a gigabyte disk drive is plenty to handle 10-, 20-, 30,000 documents, so that's no longer an issue. Communicating by sending images back and forth is a problem if you have a slow modem, but bandwidth is coming up all over--the Internet obviously extends outside the office.

The reason I think scanner companies weren't doing what we're doing is that their design point was professionals--either in insurance companies or in banks, some place where they had high volumes of documents they were processing, or else desktop publishing. In all those cases, the person they were designing for was a specialist who did this for a living. So the issue was making it more and more sophisticated, because people would go to classes to learn it.

Our point of view was, I have a business card or a taxi receipt in my hand. When I leave this meeting, I'm going to go back to my desk, and there's going to be something I have to do right now. So if I can't process this business card in about five seconds, it's not going to get processed, it's going to go in a box.

So our design point was people who are too busy to learn and too busy to work on their paper--but if you give them a very simple system to get it into the computer, that would be valuable. Literally, you touch paper to PaperPort, it turns itself on, it grabs the paper, it drops it on the desktop, and then we interface with all the applications which you already have, and which by definition you already know how to use.

We spent a huge amount of time on the infrastructure behind getting information from our desktop into other applications, and making it simpler for people.

I think it's just something no one thought about, and a lot of things came together. Our engineers, to their credit, have done a great job of designing a product that is simple to use and really powerful.

In relatively lay terms, how does this work? Say I have a business card and I ultimately want to enter it into my FileMaker database. How hard is that?

First of all, to put a piece of paper on your desktop using PaperPort is about as complicated as putting a piece of paper on your physical desktop. You stick it in the slot; we sense it's there just like a dollar-bill changer would; we grab it. That launches the software, that deposits it on the desktop as an image. We crop it, we size it, we do some processing to it, we sharpen it up. All those things happen automatically--you could be doing something else.

Then if you want to take that image and interface it to some other application, you simply drag that image to the icon of that application on your desktop and a process starts, depending on what that application is. If it's a word processor, we'll run optical character recognition software on it, launch the word processor, convert the file into the format for Microsoft Word or WordPerfect or whatever, and you end up with that document in that application. You don't even see the OCR. You don't even know it's there unless you're looking.

With business cards you have a couple of choices. If you wanted to put a business card into Symantec's ACT, for example, you could drag it to the ACT icon. That would give you a list of names in your ACT database that you wanted to associate this card with. You pick the name, it attaches it, and the next time you're in that person's record you could look at their business card.

If you wanted to drop it into business card reader software, we bundle CardScan with our product. If you drag the image to CardScan, it will automatically launch a routine that OCRs the card, converts it to computer text, then makes intelligent choices about what's the name, what's the address, what's the phone number, what's the title, etc. It drops that into a database which is editable. You can look at the image of the card, or the edited text, and from there you can export that into a database through a series of filters that the company CardScan provides.

We also have a new product called PaperPort Deluxe, which is software-only and works with our scanners. It works with flatbed scanners, even works with our competition's scanners should anyone have been so unfortunate as to buy one [laughs]. It doesn't work quite as well with other scanners...

If you've got any scanner and you've got PaperPort Deluxe, when you're not using your computer we will go in and OCR every document you've ever scanned. So if you want to say "Look for the press release of Gil Amelio's on Apple earnings," it will go find just those pieces of paper that say "Gil Amelio" and "Apple earnings." It'll search on every single word.

What many people are doing is just scanning business cards. [Holding business card] So I could search for "Mary Eisenhart," "MicroTimes," "Pleasant Hill," "Buskirk Ave." I could also search for business cards with the word "editor" on them. That takes no dragging, and it's as simple as possible.

So now there are two or three ways you could work with one kind of file, depending on your preference.

Bruce Mowery: The other thing is, there's a fuzzy logic feature incorporated.

You get lots of business cards. You say, "Gee, I met with this person, I can't remember what her name was, I think it was Eisenberg." You can adjust the slider and it could come up with "Eisenhart."

Also, many times what people remember about a document is not words, it's the document itself. So apart from getting a stacked ranking from most to least in terms of the mentions of "Eisenhart," we'd also see a little thumbnail of your business card. So you could say, "Oh yeah, that's the Eisenhart I wanted, the one with that kind of funny logo." So you get visual reinforcement as well as text.

Granted that we automate this process by touching the paper to the front of the machine, and we did start with this objective of building this bridge from the analog world to the digital world--but once you get to the other side of the bridge, what's there?

We think of the scanner as just the deposit box, a very elegant one, but really a means to an end, which is to get to the desktop and get real utility out of the box--as contrasted to traditional scanner companies. Another way to express it is that scanning companies traditionally designed their product for the 2% of the market that already had one. They kept going back and reselling it. We came in and said, "What about the other 98% of the market that don't have a scanner? What could they use this technology for?"

In fact, I'd expect that a lot of your customers don't think of themselves as needing a scanner at all. They think of themselves as having a pile of bizcards they can't manage.

McConnell: Absolutely. And I claim that the PaperPort will pay for itself for someone who travels in the amount of the taxi receipts that don't get lost. Documents that got lost are now storable and retrievable. You have lots and lots of alliances in the industry. Five years ago you were at the gleam-in-the-eye stage, and within your niche you're a household word now.

You didn't get that way all by yourselves. In order to get a piece of paper into Microsoft Word, you've got to talk to Microsoft, you've got to talk to some OCR company... So how does that work?

This is a young company, but there's a lot of experience here. I've been in the industry twenty years, Bruce has been in the industry since it started. One thing you learn is you can't do it all yourself. Whether you call it keiretsu or whatever, you need partnerships.

I remember when I first joined the company I was at a dinner with Scott Cook [founder and chairman of Intuit]. Scott was talking about this new expense account package they were coming out with called Xpensable. I said, "This is wonderful! This is perfect! You can take taxi receipts, restaurant receipts, etc., attach them to your electronic expense account, and send it to accounting. Right?"

He said, "Well, actually, no, there's no ability to attach images to the expense accounts in Xpensable." I said, "Why?" He said, "Because we do our market research, and none of our customers own scanners."

I said, "I'll make you a deal. How about, between now and next year, we will populate the world with scanning systems. You start rewriting your code."

We got engineering teams together. There was some skepticism, but they in fact saw that it was the right thing to do. From the ground up they rearchitected Xpensable, so that you can now literally take a receipt, drop it into PaperPort, drag it to Xpensable. It goes into an envelope, it's attached to your electronic expense report, and you send it off to accounting.

As a result, they probably sold more Xpensable?

Not only that, we're shipping Xpensable with every PaperPort we ship on the Windows side now.

So Scott's a happy man?

Mowery: I would hope so! [laughter]

McConnell: Both of our products are better now. That's really the point.

A lot of software companies we've found are on version 5 or 6 or 7 of their software, and it's crucial that they develop new functionality for the next version so they can have upgrade revenue. There's really a thirst in the industry for new functionality you can add to your software to make it more valuable. You don't want to do that unless the world is getting gradually populated with the capability to use it, but that's been our job. Our job, we felt, was Get Big Fast. Our goal was to ship 500,000 scanning systems by this time; we've done that. We've got over a million and a half seats of our software now. So we're starting to get interesting as a platform for other people to build applications on top of. There are now literally small companies funding projects just to develop software that will hook into the PaperPort platform for special purposes.

For instance?

Mowery: At COMDEX Caere introduced a product called OmniPage Pro for Visioneer PaperPort. That's a very specific product. There are also things we're not in a position to announce!

We developed a little product with an outside developer called FormTyper. It allows you to scan in a form; it automatically identifies the fields, and then you can kind of tab and type. That's been an extraordinary success. We introduced that on the Windows platform last summer and recently introduced it on the Mac platform. We're vending it off of the Web--we've sold 3,000 copies in thirty days.

Those little applets, those add-on pieces of software that sit on top of the API that we either commission for development or people develop internally and then remarket through us, are potentially very successful over time.

Including Deluxe. One of the incentives for Deluxe--with a million and half seats out there, as people get more and more proficient with PaperPort, their demands go up and they want increased functionality. So we're in the process of not only selling back into our installed base but spreading that love across more products!

Are you going to come out with a Macintosh version of Deluxe?

McConnell: It's very interesting. We've done a Mac version of everything we've done; Deluxe we're not clear about because there's one set of features in Deluxe where the source we have for that technology, the indexing capability, was only available to us in Windows. Apple's working on some technology that we could make use of. We're still looking for that for the Mac, but a lot of other things are slipping into the Mac version of our standard product.

Have there been any surprises as the company evolved?

From a business standpoint there've been a number of surprises. The biggest was that when I joined the company, the strategy was to use OEMs to create a market--we made scanners for HP and Compaq.

I think we were all a little concerned about that, since most of the management team joined the company after that strategy was set and the contracts were signed, so we got to execute it.

The truth is, [Compaq CEO] Eckhard Pfeiffer isn't waking up in the middle of the night wondering how many scanner keyboards they sold this week, and [Hewlett-Packard CEO] Lew Platt was the same way. So in terms of creating the market, we realized that at the end of the day the only people that cared as deeply as we did was us.

Fortunately we had a board and enough money in the bank to make a big commitment to doing that. There are very few opportunities to create a market and associate your brand with that market. Xerox did it, Band-Aid did it, Kleenex did it, Coke did it--those are some nice examples of people who created a category. We're experienced enough to know that that's not easy or even necessarily probable, but we're certainly taking a good shot at it.

Given that, I think we're pleasantly surprised by the momentum. We're really pleasantly surprised by the amount of interest there is in our software for other platforms than our sheet-fed scanner. We're shipping our software on all of HP's flatbed scanners. We just announced a deal with Xerox where their networked digital copier will use PaperPort software to turn the copiers into scanners.

There's lots of other things you can do with PaperPort software, and we're migrating it onto other kinds of devices as well.

Where did this technology come from, anyway?

All here!

Whose idea was this?

A Frenchman named Pierre-Alain Cotte. He's still an advisor to us; he comes in once a quarter from Germany, where he lives, and tells us what he's been thinking of.

His latest brainstorm, which I love, was to envision using the Internet for sending paper, rather than using faxes or US Mail. So if you could attach documents to emails and send them around the world using the Internet, and have them come up on the monitor, then what happens is that printing becomes an option. You can turn it into paper if you want to, but you can also just read it on the monitor.

He calls this PaperPortation. Which we like.

Do you find that there are clearly defined groups who prefer reading hard copy over reading onscreen, or vice versa?

Mowery: I don't think we have any research on that. Based on personal experience, I still print out a lot of stuff because I can't read everything at my desk.

Certainly the research tells us that there will be no decrease in the number of paper documents between now and the end of the century. People are still printing.

I've found that people like us in our forties and fifties are more comfortable reading paper than screen, but people in their twenties and younger are much more comfortable with screen-to-brain, with no intervening paper. Is this a threat to your business model?

McConnell: I think so! [laughs]

Mowery: If you look at HP, one of their strategies is Mopying, which is basically using your printer as a copier. They love to incent people to print out hard copy. I don't think there's going to be any diminishment of hard copy for a long time.

McConnell: I find that about two-thirds of what I get in email is clippings. I'll read it once, and since it's PaperPort it'll be there again if I want it, even indexed by word by the time it's all over. But the truth is, I'm probably just going to read it once and throw it away. Those kinds of documents, it's very efficient to read it and just close the message and move on.

We found an office in New York on our IPO roadshow where we discovered that they were sending documents from the tenth floor to the thirtieth floor of their building via FedEx because it got there quicker. The interoffice mail took two days.

But if you sent it to Memphis and back...

It got there the next morning! [laughter] How long did it take to get email from the tenth floor to the thirtieth floor? A light bulb goes on!

Do you have a sense of whether your customers are mostly corporate, or small businesses, or individuals?

Mowery: About 75% of our customers are SOHO.

As you say, you've opened this technology to the non-specialist, and SOHO people are classic examples of people who want to do their work, not spend a lot of time learning new software. So how are they using this?

McConnell: They still have to keep the books, they have to answer letters, they have to do all of these things, and they don't have a specialist to do it for them.

Mowery: We find that after they buy the product, filing and faxing come to the fore. For a lot of people, this becomes a surrogate for the fax machine.

You touch the paper to the front of the machine, it comes up on your PaperPort desktop, then you can drag it to your fax software and type in your number and away it goes. It's certainly easier than walking down the hallway, even in a small business with 25 or 30 people--hoping that the machine isn't tied up, hoping that the line isn't busy for whatever reason or that the machine actually works that day because the one person in the office who knows how to operate it isn't there.

It's a godsend. Time is money in a small business. Not having to get up and walk someplace else, just being able to do it from your desktop, is really a profound application.

McConnell: And then of course you've also filed the document because it's in PaperPort.

It's faster and simpler than using an ordinary fax machine, and it leverages what you've already purchased. You already have a faxmodem, you already have a computer, you already have a monitor.

Mowery: Our product with NetCentric is a fax solution. It has something called POPware that works with your ISP's software.

If I wanted to send something to Japan today by traditional faxing, I would have to get the Japanese phone number, figure out how to dial in all those funny international codes--it's all very confusing. Plus, when I finally do get through, I'm going to be paying some obscene long distance charge, and if only two pages go through and I have to resend them. I'm doubling my cost.

It's a very expensive proposition. In fact, I would submit that most businesses don't know how much they're spending on faxing, because they get one telecommunications bill. Certainly in large businesses it's been identified that as much as 50-60% of the costs of the telecommunications is related to faxing.

Wouldn't it be great if you didn't have to dial Japan? Wouldn't it be great if you were here in Fremont and you dialed your local ISP? It's fifteen cents a minute instead of $1.50 a minute. Look at the relative savings. Plus you're guaranteed a connection using NetCentric's solution. Yet another way to communicate.

The Internet, and the Web in particular, have grown very rapidly lately and pretty much changed everything. How have they changed your business?

McConnell: Several ways--one of them is PaperPortation.

It's not a precise science. There's still some work to be done about sending any kind of file from here to Boston--an Excel spreadsheet or Microsoft Word or whatever. But I do it regularly, and I would say it's a pretty reliable method of communication now, and it's free. And it's instantaneous.

Mowery: The great news for us was that the Web happened. Back to Pierre Cotte--he originally saw this product as an extension of corporate email, and the strategic thrust was into large corporations using this as an extension of cc:Mail or QuickMail or whatever was there.

At that time the number of installed sites using an email system of any kind was relatively small. Therefore the customer didn't begin to understand what this solution was about. With the advent of the Web, he's in the position to see his vision fulfilled.

I think communications will come more and more to the fore as a mission-critical application, if you will, for PaperPort. It's only positive for us. More and more small businesses are going to be creating their own Web sites. Do you want to go over here and get this very specialized flatbed scanner with virtually no software and figure out how to do that, or would you rather, as we've just described it, touch a paper to the front of the machine, bring it into Claris HomePage or something like that, and put that onto your server? All this is being done automatically without going to a specialized set of tools or outsourcing Web site creation.

So many more people are going to be able to create their own personalized pages for their small businesses than ever before, simply because we've simplified getting that data into your computer and putting it to work.

McConnell: 24 Hours in Cyberspace had a very sophisticated system for taking a photograph in South Africa and wiring it back to Marin County to be put on a Web site. Great system. The trouble was, there was writing on every one of those pages too. The roadblock for them was, "I've got this writeup the guy gave me a week ago, how do I get this on the Web site?"

We got a call and sent a lot of PaperPorts up to them, and they were PaperPorting this paper in, OCRing it, creating text that they could then drop on the Web site.

A lot of these kinds of things are just godsends for us. They're uses we never would have thought of. OCRing to HTML...

What would you like to do that you can't do yet?

Mowery: We think that the area of being able to share paper documents is an important one. There are some things in that regard we'd like to explore. Even the smallest businesses want to tap into a repository and pull out a document, be able to see it and put it back.

That's an interesting area for exploration--there's nothing that really does that today simply and inexpensively. There's very high-end solutions, but in the spirit of the original PaperPort, whether we could add significantly greater utility for the workgroup that's easy to install and access is a pretty interesting question, simply because more and more small businesses are networked.

McConnell: My dream come true would be if Microsoft, Adobe, Apple and a few others could get together and establish one standard for imaging so that if I sent you a document..

My EPS would open in your application!

Exactly! [laughter] Right now we have made it very simple to get our viewer--it's on our Web page, it's on AOL, it comes embedded with Netscape. There's lots of ways to get our viewer, but the truth is it's just silly that you need a special viewer to view anything.

Mowery: I think in that regard things like Java are especially promising--a little Java wrapper that would go around every document. You're a Mac person, I'm a Windows person, it's totally transparent, you just open the document and away we go.

McConnell: Some guy in the Defense Department got funding from the Pentagon to write a viewer for a SPARCstation because the people he was working with in the Pentagon refused to send documents except through PaperPort, but he refused to buy a Mac or a PC, so..[laughter] he wrote a viewer!

We made it so simple, and yet there's no kind of standard. We give you a choice--you can export as any of those file formats. You can send an Acrobat document or a TIFF or PICT, whatever. Or PaperPort. We're gradually going to proliferate the PaperPort viewer everywhere in the world, so maybe it'll solve itself by us just keeping up what we're doing, but gee.

The other thing--we don't understand why everybody doesn't have one of these PaperPorts, but the rational part of us says "Isn't it good, that this didn't happen overnight, that we're only growing 100% a year?" Because if it got too big too fast a lot of other people would be trying to jump in before we were strong enough.

Do you have serious competitors?

It's really wonderful right now--probably the #2 company in the market, Logitech, is addressing a different market with a color device and really no kind of software. Our second competitor is Hewlett-Packard, which of course buys from us, so that's okay.

The you've got a number of offshore competitors who said, "Oh, I see what this is, it's a cheap scanner! We'll do a cheap scanner." They're honestly not competition. They're doing something else--kind of the do-it-yourself approach. If you've got a Saturday afternoon, go buy one!

Mowery: The market penetration is still so low that there's tremendous potential for growth here for everybody. So while more and more people are coming into our space, we don't think any of them are really selling what we would call a whole system which totally integrates the hardware and software.

But to the extent that they're legitimizing an aspect of the category, scanning in a very small form factor, getting the channel smart and in turn adding to the interest on the part of potential customers--that can only help us, and we have to harness that energy and interest to our advantage from a branded standpoint.

McConnell: I have one more dream. It would be terrific if somebody--not us--would just take bills and pay them. That's an area we're trying to encourage others to work on!

We have 6% of the company dedicated to working with third parties.

The SOHO market is still growing.

Mowery: It's growing tremendously.

A lot of this is the result of corporate downsizing--people saying, "I've had enough of large businesses, it's time for me to strike out as an entrepreneur." I think 50% of all small business formation is being led by women. it will be bigger than that by the end of the century.

This industry has created a multitude of new ways of working that weren't imaginable before. It's not just Webmasters in Silicon Valley, they're all across the country. More small businesses are calling on other small businesses to help them create better uses of the technology. It's growing dramatically.

As small businesses look to the Web as a new mode of distribution and sales, again, that plays right to our strength, which is the ability to get that information into the computer and put it to work in ways that were never before imaginable.

McConnell: One of our investors just sent me an article about a man who had moved to New Hampshire. He wanted to work out in the country, so he started a business, and now it was booming. He was doing callback services to Europe--you'd call his number, Europe would call you, so you'd save on tolls.

His business got big. He refused to hire people. He said he was sending 50% of his invoices via email using PaperPort, getting more and more done without taking more and more hours or hiring staff.

We've now introduced a battery pack, because we kept getting requests from people like Chris Bonington, the British explorer, who sits there and wants to fax from Tibet and doesn't always have an outlet, or people in hotel rooms.

The best application we've heard of so far is a trucking company that would send someone from San Francisco to Detroit and make a delivery. The guy would drive back to San Francisco and hand in the signed receipts, and then they would send the bill.

Now he gets the signature and literally faxes it from his truck using PaperPort and a laptop and a modem, and the bill usually gets sent five days before he gets home. The invoice gets cut within an hour of the delivery being made.

I'd also guess that the people who buy wireless modems would also be interested in that.

Mowery: The Chris Bonington story is really a wireless modem story. He's a very celebrated English mountaineer who's traveling in remote locations. While he may be staying in a small hotel, it's unlikely to have a fax machine. He has a PowerBook and a wireless modem, and he has an administrator in London who takes all his mail, scans it in, posts it for him, and then he can access it on his PowerBook and read hard copy. Before that it all had to go by snail mail, or he had to wait till he arrived somewhere where they had a fax machine. Now he's getting all that information in real time, effectively, and he's able to respond on the spot. He's never been able to do that before.

McConnell: I was in the World Wide Live headquarters in Washington, and the head of Asia Pacific had a picture of him and Chris Bonington on the wall. I told him that story, and he said, "Oh! I should tell you how we use PaperPort!"

He's got his offices all over Asia--Bhutan, Papua New Guinea--wired into their email system. He says he saved $50,000 last year sending communication over the Internet rather than using FedEx. To get a document from Bhutan to Washington--I don't know what the cost is, but it's not 32 cents. So they're just using email.

We couldn't possibly think up all these uses. That's why having an open system and a platform onto which other people can custom-design their application is exactly the way a company like us has to operate.