Interview conducted by:
Lynn Fosse, Senior Editor
nextScan is a world leader in cutting edge technology for the micrographics conversion and document management industry. Incorporated in 2002, nextScan was established to give the microfilm and microfiche conversion market a high performance alternative to existing technologies. nextScan’s innovative patented products are designed and built with simplicity and functionality to increase user production and lower overall costs for scanning film and fiche.
CEOCFO: Mr. Breish, the tagline on your site indicates “nextScan is the next generation in film scanning technology. What is nextScan doing?
Mr. Breish: We build film scanners for all of the old microfilm that is out there in the existing document world. Pretty much everything before 1995 that the federal government, state governments or any large corporate archives; the stored just about everything on microfilm. Therefore, as you can imagine, the reservoir of microfilm out there is very, very large. I would imagine that we would probably, at some point, still be scanning microfilm even when paper documents have all gone digital, because of the massive amounts of film that is still available.
CEOCFO: Are people, governments and organizations being selective on what they scan or is the tendency to say, “We have to save everything?”
Mr. Breish: It depends. Of course official records and legal documents get taken care of sooner and the budget seemed to be available for those sooner. However, there are also documents that date back into the 1920s and 1930s that are very, very low usage, but the federal government cannot dispose of them. Therefore eventually, as long as nextScan can continue to lower the cost of scanning, eventually they will be converted.
CEOCFO: Is all microfilm usable? Are there different types that might work better for you or that you are able to deal with?
Mr. Breish: It is easier to scan roll film. That is because the documents are all in a streaming format already. In other words, one follows the next, so it is easy to deal with roll film. The problem with roll film is, they are not indexed very well. The other format is microfiche, which is a little four by six inch card and it usually contains between seventy and four hundred documents, depending on the format. Those are easier and usually do have indexes associated with them. Therefore, it helps when we output these to document management systems, because there usually is an existing index. However, the format itself leads to slower scanning. That is because you do not have as many documents in or on the individual piece of media.
CEOCFO: Are you selling a piece of equipment that companies would use to scan? Do you do the scanning for them?
Mr. Breish: That is correct. We are an OEM manufacturer. We build the actual equipment ourselves. We have various models of the scanner with different performance capabilities, depending on what the end user requirements are.
CEOCFO: Are there many companies in your space?
Mr. Breish: There are actually only two of us in the market today that build production microfilm equipment. There are several companies which have on demand product, that you can take a roll of microfilm off of a shelf, put on your scanner and then digitize one or two pages off of that or even a series of twenty pages or so. However, those scanners are all manual operation and do not lend themselves very well to being able to do page to page automatically. Our scanners have the capability of up to one thousand pages a minute, so there is obviously no manual intervention there.
CEOCFO: Do people know where to find you?
Mr. Breish: We are on the internet.
CEOCFO: Are companies that are likely to be using your equipment, already scanning? Do people just wake up one day and say, “we need to do it?” What is the typical scenario?
Mr. Breish: Customers obviously have this microfilm and it is costing them a lot of time and storage area to maintain it in the current format. The time just comes from something as simple as; they get a sticky note from some place who says, “I need this document”. Then they actually have to go to a vault and dig through the microfilm, find the roll of film, bring it out, put it on a reader printer or one of these new on demand scanners, scan that document, either make a print of it or email it if that is possible and on the new scanners that certainly is. That was the old method. That was all that they had and it is very time consuming. Therefore, a customer comes to the realization that they have got to get this into a more modern format, with an index associated with an distributed format, which would be digital, obviously. Then they could have their documents OCR’ed or at least they have fast access to them. Therefore, they are immediately able to be pulled up electronically as opposed to having to wait and find that roll of film and so on. Therefore, they come to this realization that for financial reasons they need to be able to convert this old microfilm and get rid of the warehouse space that it is containing and speed up the process. Therefore, they have a couple of options. Either they go out on the internet and search for microfilm scanners and then they them come across nextScan. We pop up right there on the top of the Google list every time. They can come directly to us if it is a big enough project or if they have a small amount of microfilm. For example, a local company here came to us came to us and said, “I have one drawer full of microfiche. How can I get that converted?” Then we refer them to a service bureau and the service bureau then does the job for them, using our equipment of course, and provides them with the digital output. The other option is they can go to a service provider that they currently have. Most microfilm shops already have some type of a service bureau or service provider selling them microfilm, doing services for them, providing them with the reader printers from the past or the new on demand microfilm scanners. That is another way that they can then be put in contact with potential customers. “We want to get the whole thing converted.” Those are the two primary ways of actually getting a job done.
CEOCFO: Once you have sold a machine is there an ongoing relationship with the customer?
Mr. Breish: Yes, because many times they will have one type of media that they convert this year. Next year they may decide to convert a different type of media. Many companies have roll microfilm and microfiche. Some also have aperture cards, which are the old engineering drawings; especially road departments and county government has many engineering drawings; civil engineering, all of those things are on aperture cards. Boeing has a huge, huge records department that keeps all of the old aircraft designs and so on. Therefore, all of those documents do eventually end up converted.
CEOCFO: What is your geographic reach?
Mr. Breish: We sell internationally. About forty percent of our business is international. The rest of it is here, domestically in the United States. If you look at our market segments, we are broken up into basically three market segments. We have the service industry, so we sell to a service bureau, which then provides our service to the end user or in the case of the larger end users, say a Travelers Insurance, the Mormon Church, the genecology market; those are all end users who come directly to us and buy our equipment. Then of course you have the government sector.
CEOCFO: You have a huge marketplace!
Mr. Breish: Those markets are divided pretty much evenly at this point. I think that the service market might be declining slightly. However, the government market is certainly increasing, just because of the need to get all of the old records online before the film deteriorates.
CEOCFO: What has changed in your models since you have started making equipment? What are some of the newer capabilities?
Mr. Breish: I think the thing that is most important that we look at, that nextScan really focuses on, is how to drive the cost of scanning down. The reservoir of film out there is so large that we do not really have to worry about running out of it anytime soon. What we have to do, to enable growth for nextScan, is to make sure that we drive the cost down, so that more of these projects can get converted. It used to be people could scan for ten cents a page and companies were happy to pay that, because the usage requirement was so high that it did not matter if you spent that much money. However, nowadays we are seeing prices well under a penny a page for scanning and by nextScan providing products and equipment that is fast enough and software that is more usable and more user friendly, we enable many more markets to be able to do this conversion, which helps our growth.
CEOCFO: Other than bringing down the cost, are there parts to scanning or items that are not candidates for scanning?
Mr. Breish: We are running across a few applications. We just finished a custom scanner for a Russian ministry where they were scanning aerial photographs of, I guess, cold war types of documents. Therefore, we had to do a seventy millimeter scanner for them. Therefore, there are formats which we do not support, but we are always open to doing custom engineering, because we do have our own in house development team.
CEOCFO: How is business?
Mr. Breish: Business is good! We had about a twenty five percent growth rate last year, so we were very, very satisfied with that. The way this year is starting out it looks like we are on track to do about that same growth rate.
CEOCFO: Where do you manufacture?
Mr. Breish: We manufacture in Boise, Idaho; a little suburb of Boise called Meridian. That is our manufacturing facility. Then we have a service organization in Texas. That is one of our satellite organizations. Then we have sales on the West Coast and East Coast. The international sales are run out of Boise, Idaho.
CEOCFO: For people who always question manufacturing in the United States, how are you able to do it successfully?
Mr. Breish: This is not a low cost piece of equipment. Our equipment runs from the lowest end model that we have, which is about twenty five thousand dollars, to over one hundred and twenty thousand dollars for our high end scanners. It is a low production market. We are not building tens of thousands of these a year. We ship about one hundred units a year. We have about twelve hundred scanning platforms installed world wide. We do all of the engineering and manufacturing right here in Boise. We do not contract out anything off shore. Obviously, we do have to use some components which are not locally manufactured, but in general, we do all of the design. We go to local machine shops. We have the parts built for us. Those come in house. We then assemble and do final QA and testing.
CEOCFO: Why does nextScan stand out?
Mr. Breish: It is really based upon our engineering technology. I am an engineer. I started out working for TRW years and years ago, designing telephone switches back in the Carter era. We are an engineering driven company and this is a small market where you need a lot of innovation. Therefore, if you do not have the ability to modify your products as new challenges come along, then you really do not have the ability to move forward and capture more of the marketplace. I think nextScan is growing into more of a software company. We have a new product out that we call Virtual Film. Virtual Film is the ability to scan a roll of film very, very inexpensively and do no indexing on it. Just bring the roll of film up as if it was on your old reader printer. However, the beauty is you have it in a digital format so that you can distribute it and so on. We are driving those price points down to where libraries and very small organizations can afford to get one hundred rolls of film converted and use it in a digital environment. Therefore, nextScan is really pushing its way forward on the software frontiers of helping the film industry.