INTERVIEW:

Niels Appel, Contex

Scanners4CAD spoke to Niels Appel, Contex A/S's recently appointed Executive Vice President, Sales & Marketing. Appel is now responsible for the marketing of the world's largest and most successful wide format scanner company. His appointment comes at a time when rival new products, technologies and claims are slowly nibbling away at Contex's dominant market share.

We recently visited Contex's 12,500 sq.m. factory in Svendborg, Denmark. Some facts: 140 workers and engineers produce some 20,000+ large format scanners every year. The CNC plant at the factory processes and shapes 600 metric tons of stainless steel each year. Over 105 km or 65 miles of cabling is purchased every year. On average each Contex scanner has 1500 parts. All PCB boards are printed on-site using state-of-the art equipment. High engineering standards are strictly enforced. All-in-all, a very impressive slimline production facility. It's Appel's job to sell the goods.

Scanners4CAD: "Congratulations on your recent appointment as Contex Executive Vice President of Sales & Marketing. How are you settling in?"

Appel: "I am very excited about my new role. Contex is truly a great company to work for. For many reasons I'm proud of being with Contex who do a lot more than "just make scanners". For example, Contex help "preserve history" by making it possible to archive old documents that would otherwise disappear. Also, Contex scan fine art, making it accessible and possible for ordinary people to legally own affordable posters and prints. Wide format scanning has great potential and many applications and is much more exciting than most people would think."

Scanners4CAD: "You have an impressive CV, one that includes Microsoft and HP among the technology companies you have worked for in the last 13 years. Is the marketing of large format scanners significantly different to the other products you have sold?"

Appel: "Well, it is different because we are making products for a niche market, whereas HP and Microsoft make products for everybody. Basically, that means that I am expected to know a lot more about the type of business our customers are working in than I was at Microsoft and HP where typically you only talk to IT people, whereas wide format scanners are of interest to a broad spectrum of business people."

Scanners4CAD: "Contex has been the most successful large format standalone scanner manufacturer in the world. Is the company now seeing more competition in the market now that CIS scanners have established some market share?"

Appel: "Yes, competition is getting stronger than it was five years ago. I welcome it. A market with no competition is not a healthy market. Competition helps us all to strive harder to produce better products and to deliver what the customer really wants. Contex is extremely well-positioned in the wide format scanner market. We truly believe that we have the strongest product portfolio, the strongest and most skilled partners and are the only wide format scanner manufacturer that operates worldwide with offices in Denmark, Japan, China and the US."

Scanners4CAD: "We've seen claims that Contex's market share was once as high as 92%. Recently it's been said to be around 75%. Are you able to tell us what Contex's estimated share of the global market for standalone wide format scanners is?"

Appel: "I think 75% is a fair estimate of our current market share. What it was before is difficult to say - but I do not believe we have ever had 92%. However, despite having grown our revenue every year, I believe we have slightly lost market share. The so called "low end market" has grown faster than our overall growth so it is fair to say that we have lost a few percentage points of market share to that segment."

Scanners4CAD: "We note that Contex's Vision 2012 plan sets out to achieve strong growth through to 2012 with a doubling of turnover. As Contex already dominate the large format scanner market, where is this growth and doubling of turnover going to come from? Are we not going to see sales of your new 3D printers soar while large format scanner sales will be all about retaining market share?"

Appel: "We believe that there is plenty of room for growth within the wide format scanning market. I can confirm that we are planning to grow every year towards 2012 - but I cannot talk in detail on where we see the growth coming from."

Scanners4CAD: "One reason why Contex is the market leader is that you sell not only through your own distributors, like IDEAL in the USA and Art Systems in the UK, but also through OEMs like Calcomp, HP, Océ and Vidar. How significant is the OEM market to Contex? Are you able to tell us who your biggest OEM is and what they represent as a share of your overall large format scanner revenues?"

Appel: "No, for obvious reasons I cannot give you the exact numbers on our OEM business. However, what I will say is that if you look at just our Contex distribution business, that is Contex scanners sold through distributors like IDEAL in the USA, Art Systems in the UK and our other 118 Contex distributors worldwide, then the Contex brand is the biggest selling product and the clear market leader by far!"

Scanners4CAD: "The current Contex G600 range is pretty much last year's scanner models cleverly repackaged and renamed, partly for the purpose of influencing the sale to Ratos but also, of course, to maintain your sales and prestige in the market with end-users and resellers. Is the G600 range going to be enough for Contex to retain its market share and, more importantly, the support of your OEMs?"

Appel: "We believe the Contex G600 series is the strongest wide format scanner product range in the market right now. We will continue to invest in the G600 series in order to secure our position in the market."

Scanners4CAD: "Do you see any specific changes or trends developing in the AEC, CAD and GIS markets during 2008? For example, a growing number of companies now sell multi-function scan, print and copy systems. Will a Contex MFP be forthcoming?"

Appel: "I do not forsee any significant changes in the existing AEC, CAD and GIS market in 2008. But I do see a new wide format scanner market - a low end one - developing. This emerging new market will probably be dominated by multi-function products."

Scanners4CAD: "Unlike A0 / E-size printers, large format scanners have in the past been far too expensive for many CAD users to afford. Colortrac in particular have largely succeeded in turning these cost-conscious buyers into a new market for their low cost and further discounted CIS scanners. Do Contex have any plans to compete in the low-cost end of the large format scanner market? If yes, with what?"

Appel: "Contex plan to compete in every wide format scanner market. And if there are areas where our current product range does not compete, then we will evaluate the size of that market and make sure we will be able to compete. However, we will continue to make high quality products - even if that mean a slightly higher price on our scanners. I can assure you that 2008 will be an exciting year for Contex!"

Scanners4CAD: "Given what is currently available in the low-end market - color capable, 40"+ wide, 600 dpi optical, sub-£5000 / $10000 CIS scanners - what are the benefits of the 36", 200 dpi optical Hawk-Eye at £6995 / $14000 to CAD users?"

Appel: "Many CAD users only scan at 200 dpi. The Hawk-Eye does actually produce a result that can compete with many 600 dpi scanners. We believe that the Hawk-Eye is an excellent scanner for many CAD users."

Scanners4CAD: "The Hawk-Eye is a good scanner for technical drawings where 200 dpi optical resolution is suitable. However, we have seen many scans made at 200 dpi that are ruined by inadequate detail. We scanned a technical drawing with fine parallel lines at 200 dpi optical on the Hawk-Eye in your offices in Denmark. It failed to separate the lines. All the 600 dpi scanners we have seen, including the Puma G600 iJET, separate these lines at 400 dpi. Also, the Puma produced better results at 200 dpi optical than the Hawk-Eye. In our opinion, the Hawk-Eye has limited CAD usefulness and is suited to scan-to-print applications only. Is it not now time to replace the Hawk-Eye?"

Appel: "The Hawk-Eye G36 was designed to satisfy most CAD users - but not all. Our own market research suggests - and sales numbers support - that a large percentage of CAD drawings scanned for either archive or for print purposes do not include the fine level of detail existing in more specialized drawings. More specifically, customers needing to capture documents with this level of detail, especially with the intent to vectorize the image data, need higher resolution than the Hawk-Eye can provide. We build and market our G600 line of scanners for the CAD customers who require more from the scanner."

Scanners4CAD: "In our experience, most CAD users scan mostly A1 - A0 black and white drawings (monochrome) but buy a color scanner because they may have some occasional need for color scanning. What is the best Contex scanner for CAD and why?"

Appel: "It's very difficult to generalize. As you mention, most users want a colour scanner even though they primarily scan in black and white. But that indicates they now and then use the scanner for other purposes. And that often drives the final decision for which scanner a customer chooses. We sell a lot of Hawk-Eyes to the CAD market - but also the Premier (black and white), the Crystal (42 inch) and, in some cases, even the Cougar (36 inch and high speed)."

Scanners4CAD: "Okay, lets move on. Contex publish resolutions that are higher than the actual optical resolutions of their scanners because you believe that optical resolution alone does not adequately describe the scanned image quality that your scanners produce. Wouldn't it be better for Contex to unambiguously state both the correct optical resolution and their perceived "effective" resolution rather than confusing the two and opening yourselves up to a charge of misleading the buying public?"

Appel: "If we market our scanners with a higher dpi (optical resolution) than they actually are, then it's a mistake. We have 200 dpi, 508 dpi and 600 dpi optical scanners. But, as you've said, optical resolution does not actually tell you ANYTHING about scanned image quality. The best indicator of quality is still to see the actual result after a scan. Those customers who have the opportunity to test the quality of our scanners against our competitors scanners will always recognize that Contex has superior scanning quality."

Scanners4CAD: "We've taken Colortrac to task for claiming 1200 dpi optical resolution for their Gx series and Contex to task for claiming 600 dpi optical for the G600 range. Do Contex have a better claim to 600 dpi optical resolution than Colortrac to 1200 dpi optical?"

Appel: "Our Contex Puma G600 iJET scanner is 600 dpi optical resolution. The rest of our Contex G600 series are 508 dpi optical resolution. So, we can for sure claim 600 dpi optical resolution on our Puma scanner."

Scanners4CAD: "Thank you for clarifying that your G600 series are 508 dpi and that the Puma G600 is a 600 dpi optical resolution scanner. However, the brochure on your Contex web site states that the Puma's resolution is 800 dpi. The ambiguity of Contex's claims for its scanners' "resolution" is confusing the market and probably even damaging Contex's reputation. Some magazines are now printing retractions. Look:

Corrections and clarifications

"Is this confusion in your best interests?"

Appel: "Unfortunately, there is no specification for image quality. Resolution is often misused as the definitive specification for image quality. At Contex, we have designed and built our scanners to maximize image quality. This means using only the highest quality camera lenses, CCDs, and then designing the mechanics and electronics to enhance their capabilities.

"Our competition has made great efforts to inflate their resolution spec with minimal regard for the resulting image quality - using low-quality lenses, CCDs, or poor electronic or mechanical design that decreases quality image. Confident that we provide better image quality at a given resolution, we removed 'optical resolution' from our specification, because it is not a good indicator of performance. 'Resolution' as we have specified is simply a value more representative of our image quality, when compared to other products."

Scanners4CAD: "We have seen your factory Svendborg. It's undeniably impressive. There's no doubting your commitment to nothing but the highest of European engineering standards. But - Big But - is it possible to remain competitive as a European large format scanner manufacturer operating out of Denmark when both Colortrac and Graphtec are leveraging cost advantages from their Chinese operations?"

Appel: "Typically the cost advantage from a China production facility is one of labour costs. As we have managed to limit the number of hours needed to assemble a Contex scanner, the benefit of moving the production line to China is actually very limited. Currently we do not believe we can produce Contex scanners any cheaper in China. We also believe we can maintain higher quality manufacturing in Denmark."

Scanners4CAD: "Graphtec are experiencing great success with their 36", 600 dpi optical SK200 CIS scanner. Apparently, they have sold 6,000 in the last year, many OEM'ed through KIP and now, we are told, they plan to take 25% market share in 2008. Personally, we do not see them doing this with their standalone scanners in North America and Europe. They must be looking at the OEM and Asian market for growth. Is Contex able to compete in the growing Asian market?"

Appel: "There are more than 4 billion people living in Asia where the economy is expanding fast. Many companies are competing in Asia including Contex. It is a tough market. We have an office in China and another in Japan. We are well established in the region. We believe we have approximately the same market share in Asia as we have in the rest of the world. So, for sure, we are capable of competing in Asia where our business is growing very fast."

Scanners4CAD: "Thank you. We realise that because you are new it was always going to be difficult for you to quickly answer all of our questions in-depth and that you would want to pass on some. Scanners4CAD looks forward to continuing to build bridges with Contex, working more closely with you, the industry leader, and being able to unhesitatingly ask you tough questions again in future.

"Regarding 2008, we wish you good luck as you move ahead with your Vision 2012 Plan. Despite your stated belief in the superiority of CCD scanner technology we believe that there is a strong case for CIS scanners, particularly in CAD and the scanning technical of drawings. In fact, we believe that Contex absolutely have to bring out a CIS scanner, if only to satisfy the needs of your OEMs and the entry-level market.

"Should Contex bring out an affordable CIS scanner it could be much like the Mercedes A-Class where a strong and desirable brand name made Mercedes' entry-level motor car an overnight top-seller. If you do, we look forward to reviewing it if given the chance. Thank you, again."

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