My Business Whitech
May, 2009
Snap happy
By Andrea O’Driscoll
Since Whitech Software Solutions started trading in 1995, the photographic industry has undergone some seismic changes. The shift from analogue to digital permeated every level of photography, from camera design to photo developing, and left several companies foundering. But Sydney-based Whitech successfully rode the wave of change thanks to its commitment to R&D and innovative product development.
Whitech was started to commercialise point-of-sale software for use in photographic shops, but it went on to develop software for self-service digital print kiosks and online digital photo processing software that enables people to order prints over the internet, always managing to stay one step ahead of its competitors. Around 50 percent of digital photo kiosks in Australia now use its software.
Its founder and director, Steve Delnawaz, grew up surrounded by photographs. “My father was in the photographic business, taking pictures and developing film,” he explains. “Then in around 1993, my brother Korosh opened up a photo shop.” Delnawaz had opted to go to university and was mid-way through his computer science degree when his brother asked him to write a point-of-sale application for use in his shop. That program evolved into Controlab and in 1995 he abandoned his studies to form Whitech and bring his software to market.
“I built something based on what I felt the system should be,” explains Delnawaz. “I hadn’t done any extensive research or even used one before. It turned out that a lot of photographic stores were looking for something that was written from a different perspective. Rather than being all about managing inventory or accounting, my software focussed more on managing the operational side, so rewarding staff and keeping track of things like that. Later, I obviously had to fill in the gaps and add all the inventory stuff, but it shifted the focus and that was well received.”
In fact the system was so well received that within two years it dominated the market. “After a couple of years, all our competitors had packed up and left because they simply couldn’t compete any longer,” says Delnawaz. “My brother’s store had been a Kodak store so initially we were a Kodak product. But we expanded into other brands and ended up taking over most of the industry here in Australia.”
Overseas expansion soon followed. “One of my customers, who had a chain of eight stores, decided that he wanted to open a branch of Whitech in the UK,” explains Delnawaz. “He moved over there in 1998 and opened a branch. My brother also sold his business and joined us, and he went over to the States to set up an office there in 2001. He’s still over there.”
But not everything went according to plan in the States. In a tragic twist of fate, Controlab’s US launch had been scheduled to take place in New York on 11 September 2001, the day the planes hit the twin towers. “It was just a disaster,” says Delnawaz. “The trade fair just had to be scrapped and we lost all the money we’d spent. We basically lost a year off our launch because of all that. Luckily, it all worked out okay in the end though.”
Between 2000 and 2003, digital technology really began to impact across the whole of the photographic industry. “By about 2003, the impact of digital had really started to ramp up, but half of the industry was still in denial” explains Delnawaz. “They didn’t want to accept that digital was going to take over and a lot of them ended up going out of business.”
Whitech saw the direction the industry was heading in fairly early on and adapted its software to allow for the changing needs of consumers. “We’d already introduced a Windows-based version of our software and then we started gearing ourselves to handle digital photography as a module within it,” explains Delnawaz. “Our software enabled stores to take digital orders over the counter – it was a world first for a point-of-sale system.”
But the Whitech team didn’t stop there. “The new module turned out to be fairly popular, so we thought maybe there’s an opportunity for us to take it and turn it into a self-service type kiosk,” explains Delnawaz. “Our kiosk system integrated straight back into our point-of-sale software. The fact that we already had such a big market share in point-of-sale systems meant that when we developed a kiosk that automatically integrated back into it, everyone wanted to deal with us. Self-service kiosks have been a really big thing for us since we launched them in 2001.”
The company did have some competition at the time of its product launch, but several of the big players had yet to perfect their systems and, once again, Whitech’s unique perspective worked to its advantage. “We did have competitors when we launched Phototeller, but it was nowhere near as fierce as it has been in the last three to four years,” explains Delnawaz. “There were probably about four or five systems available worldwide, but no one had come from a point-of-sale background.”
Whitech took the same principles they had applied to their point-of-sale system and transferred them to the self-service kiosks they developed. “Every other system on the market just enabled customers to load their images and collect their prints,” explains Delnawaz. “Our software wasn’t just about imaging, it also included business tools that helped reward customers and build loyalty. If, for instance, a customer used a machine once and then didn’t come back, our system could be set to send them a promotional email. We could provide all that because of our system’s integration with the point of sale.”
In Australia, Whitech secured distribution deals with Kodak, Konica Minolta and Fuji and came to dominate the market. Internationally, the company faced some tougher competition which inevitably decreased their market share. “It went fairly well overseas,” says Delnawaz, “but our big success was here in Australia. In the US, Konica Minolta became a distributor for us, but we probably didn’t do as well as some of our competitors. We’re definitely in the top three or four kiosk producers worldwide, but in Australia we’re number one.” One of Whitech’s biggest domestic customers, Fuji Film, bought a 35 percent stake in the company in July 2007.
At its height in 2006 and 2007, international sales accounted for around half of the company’s total turnover, but the global economic downturn has begun to take its toll. “There has been a significant slowdown in international sales over the last 12 months, but that’s to be expected,” says Delnawaz. “We’re not expecting much from the European or US markets for a little while. We’ve geared ourselves for a year to 18 months of roughing it out, and we are still reasonably optimistic.”
As in the past, Whitech has elected to meet adversity with innovation. “Around a year ago we saw the downturn coming, so we progressed our solution further,” explains Delnawaz. “We took the kiosk software we had developed, which was very successful, and launched it as an online solution. It’s really taken off. Big W was our first customer to go live with it in September and their results have been ten times what they forecasted. Harvey Norman is due to go live with us in April and internationally a number of major chains are lining up to use our solution. We hope it’ll help counteract some of the negative effects of the recession.”
Delnawaz believes that the company’s online solution, Imagine, represents its next phase of growth, but its impact might not be felt fully for around 12 months. From 2003 to 2007 the company enjoyed a period of exponential growth, followed by a levelling off and now there’s the possibility of a slight contraction in 2009.
The problems created by the economic downturn are compounded by the fact that the market for kiosks is approaching saturation, and it may take a while for royalties and annuities for the Imagine software to filter through. But Whitech has encountered challenging times before now, and Delnawaz remains confident that it’s just the beginning of a new phase for the company. Its commitment to ongoing research and development and proven ability to launch cutting-edge products stand it in good stead. “We can’t afford to stop, even for a minute,” says Delnawaz. “We still go to all the international trade shows and do everything we can to stay ahead of the curve. The business is changing in some senses, but I think ultimately it will be a good change.”
www.whitechsolutions.com
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