ONE well worn business adage is “Get big, get niche, or get out.” In other words, either you operate in a broad market as a big player able to crush the opposition or you play a safer game by offering very specific products or services based on specialist knowledge and skills in a market where there’s less competition. The third choice, to use another aphorism, is: if you can’t stand the heat, get out of the kitchen.
VisionID specialises in the area of data capture based mainly on bar-code technology. Founded eight years ago and still based in Clonmel, Co Tipperary, it has 12 staff and expects an annual turnover this year of around €3.5 million. It also has offices in Limerick and, more recently, in Wodz, Poland.
To most of us, bar-codes are striped labels that speed us through supermarket checkouts. However, VisionID operates in a more specialised area, working mainly in the manufacturing and supply chain sector, according to managing director Rob Jones. “Retail is not a big market for us,” he says. “Between 70 and 75% of our work is in manufacturing, where people use our systems for product traceability, inventory management, proof of delivery and so on.”
VisionID operates as a systems integrator and reseller for what Jones describes as the market-leading vendors in this sector, such as Zebra which makes bar-code label printers, and Symbol, which is now part of Motorola and makes rugged handheld terminals that can be used to scan bar-codes in mobile applications.
As somebody with some years’ experience in the mainstream IT sector, Jones says there are differences in the way the sales channel of the bar-code and data-capture business operates compared with the rest of the IT industry. “IT has always been a two-tier market comprising distributors and resellers operating between vendors and customers,” he says. “In this market, we deal directly with manufacturers and with customers, but we also recruit software companies to sell our vendors’ products as well.”
Jones says that only about 10% of VisionID’s business is with software partners and that these partners develop customised applications using bar-code technology for customers’ specific needs.
“We are not a software company,” he says. “That’s our partners’ expertise, not ours. They write applications that run on mobile rugged computers for tasks like proof-of-delivery applications for couriers, or parking ticket applications and warehouse management applications.”
“You can simply buy a financial application like Sage off the shelf, but it’s hard to get a POD (proof of delivery) application to fit your needs that way. You tend to need it custom written. Our partners do the software development and we ensure that all the hardware is properly integrated.”
The bar-code market is more mature and a little less frantic than the mainstream IT industry. Jones says that a customised software application for van sales or delivery might last for up to 15 years, with only minor upgrades. This is glacially slow compared with the ‘refresh rate’ of something like Microsoft Windows. Similarly, there is not the same turnover of new hardware products as elsewhere. “You see new laptops coming out every three to six months,” says Jones. “With rugged handheld computers from Symbol or bar-code label printers from Zebra, they get a refresh every three to four years. The market is a lot slower in that respect.”
Jones says margins in this market have been depleting for years – a familiar scenario for any technology-based business – but that they are still generally higher than in other sectors. “Margins in this market are still a lot healthier than in the mainstream IT market, where new products come out regularly,” he says. “They are still not as healthy as I would like, but it’s the same old story: you have to add value and make your money on the services and other activities around the hardware.”
In this he is helped by the fact that the humble bar-code reader is nonetheless usually a mission-critical piece of equipment. “If people can’t scan or produce bar-code labels in logistics or supply-chain operations, then production gets affected,” he says. “So we provide a lot of maintenance services to ensure everything runs properly and to replace vital equipment when it is not.”
The relatively high margins to be found in his market do occasionally attract interest from mainstream IT companies seeking lucrative alternatives to their own highly competitive markets. How does a company like VisionID survive when the big boys come sniffing around its business?
“Experience,” says Jones simply. “It’s all well and good knowing the technology, but you have to know the business, too. We have seen some pure IT companies dabble in this industry and take their foot out of the water very quickly. But I can see that changing over next decade. The high margins we have here will inevitably attract competitors, but they will probably have to do it by acquisition of an existing player in the market rather than try to enter it themselves.”
Jones backs his own company’s expertise in the business, its relationship with key suppliers, and its knowledge of the differing technologies and how they can best be deployed – from the simple linear bar-code familiar to all shoppers to the 2D bar-codes which contain much greater amounts of data in much smaller labels, and right up to emerging technologies like RFID.
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