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Is there money in digital asset management?

Apr 1, 2001 12:00 AM


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Yes, but DAM requires new sales skills and a keen eye on internal costs

Today, digital asset management (DAM) systems are commonplace for larger prepress and printing operations, corporate clients and a limited group of large ad agencies. DAM systems provide centralized management of digital assets, a collaborative workflow, easy access to client legacy system information, centralized product and brand information management, and content and customized publication versioning.

DAM systems also must manage more than images. The top-of-the-line DAM systems manage photo archives to allow easy storage, access and retrieval. Plus, the DAM systems communicate with legacy systems at the corporate site, automating the process of accessing product price information, inventory controls and financial data.

DAM SYSTEMS ENHANCE WORKFLOW

The premier systems being offered also drive the production process. They automate traditional paste-up processes by electronically populating software templates with photos, text and pricing for creation of multiple media, such as free-standing inserts, catalogs and websites.

A DAM system also can gather and provide reports and billing information for cooperative advertising programs, regulate file and/or system access among employees and help enforce corporate graphic standards.

As systems become more complex, it can take years and millions of dollars to develop proprietary software systems. Therefore, some of those interviewed for this article indicated it may be best to customize off-the-shelf software to launch a DAM system rather than writing your own program.

TRAINING: THE BEST WAY TO OVERCOME OLD ATTITUDES

Selling in the DAM environment can produce a healthy revenue stream — if the effort is properly targeted. Companies must train, encourage, mentor and support their sales staff.

For one company interviewed, the primary marketing focus is training and educating its sales force. The company has a number of salespeople who easily made the transition from prepress sales to DAM sales. They already understood how to build multiple relationships within a company and how to fully capitalize upon those relationships. There are other sales staffers, however, who will never make the transition, according to the company.

Resistance may come from salespeople who already have a large book of business and do not see the need to work hard and make a transition into the new area. They're comfortable, and inertia has taken over. They're afraid of losing their business by introducing new components. Unfortunately, if this attitude is allowed to persist, competitors will take the business away. In today's selling environment, complacency equates to death.

CREATING THE TRAINING FRAMEWORK

To properly train the sales force, you must develop systems and guidelines for the selling process. One company developed a prospecting kit for its sales staff. The kit helped the staff organize its new tasks and gather specific information about the customer, such as financial data including revenues, profit-to-earnings ratios and budgets. It also cites number of locations, number of employees, the company's history and the number of years it has been in business. Ideally, the kit includes information about the company's workflow, network and telecommunications abilities, company goals, present problems, current expectations, etc.

The resulting information is presented to an approval committee prior to beginning the selling process. While a salesperson may be very excited about a new prospect, it is the committee's function to review the information and to determine if the excitement is warranted. If, for example, the prospect company is looking at a $400,000 DAM system and its prepress budget is $100,000, the committee either elects not to pursue the prospect or to send the salesperson back to perform further investigation.

As many others have noted, DAM sales require a different approach and different skills than do other prepress products. First, the selling cycle for larger prospects is at least one year or more. Second, the buyer is no longer the prepress buyer. Instead, the sale is a “top-down” sell to the company's CEO, CFO or CIO, as this investment may amount to millions of dollars and require corporate board approval or, at least, executive committee approval to make the purchase.

Third, the prepress company selling high-end DAM services or systems also will need to gain access to many others in the prospect company. Using a top-down selling technique works well, since a high-ranking official of the company will instruct staff to participate in the discovery process.

While many prepress sales staff are well-educated in the technical side of prepress, prospective clients of new services aren't interested in the shape of the dot or in relative color saturation. They expect all of the technical aspects to be perfect. What they are most often interested in is enhancing shareholder value, and that translates to increased net profitability — either through cost savings, increased sales or perhaps both.

KNOW YOUR CLIENTS' CHALLENGES

Graphic arts service providers must therefore demonstrate the value of the DAM system in the client's terms — not prepress terms. The successful vendor must learn virtually everything about the client. Certainly, the client's printing and advertising practices are important. But you also must understand, in detail, what market segments the client is trying to reach, what its customer's buying cycle is like, what its sales and marketing goals are, what challenges and competitive threats it faces, and what its growth goals are.

One prepress company, for example, learned during the discovery process that one of its prospects had 17 domestic production facilities. Images were captured at each facility for use in regional production of marketing materials, such as free-standing inserts.

One of the first recommendations was to centralize all image capture and storage. Using a shared database, all of the production facilities could easily access the central site. If an image weren't available, it could be requested for capture during a future photography session.

The benefits to the client were numerous. First, this ensured that one version of each product was used in all promotions, instead of 17 variants of a product image. This improved advertising continuity, simplified co-op payments and enhanced graphic consistency and graphic standards — all of which are hard to quantify in financial terms. While these areas are extremely important, the company was most interested in “hard numbers.” What it could quantify was a savings of more than $3 million in the first year in image capture alone, not including all of the ancillary savings in time, labor, etc.

PUT IT ON PAPER FIRST

During the formal discovery process for DAM, several interviewed companies send a team of professionals to the prospect site for 30 to 60 days or more. The same team will continue working with the prospect for a year or more to literally map out the system, the workflow, process controls, standard operating procedures and a host of other details. In essence, each DAM/facilities management system is custom-built on paper for everyone to approve prior to purchasing or installing any technology.

Some of the elements of focus during the discovery process include the prospect's expected ROI, the impact of the DAM/facilities management systems on the company's sales cycle, the length of the product introduction cycle and how the new service will affect the prospect's overall financial goals. None of these areas are typical prepress concerns. Therefore, selling in this environment requires a great deal of training and a complete shift from traditional prepress sales techniques.

WHOM DO YOU SELL TO?

When considering whether to target entire companies or just one department, the answer is “it depends.” While some companies are successful selling to the entire enterprise at once, one large company interviewed chooses to sell first to the marketing department, then to the rest of the company.

Another company “rents” its DAM system for a monthly fee ranging from a few thousand dollars to tens of thousands of dollars, and targets corporations and catalogers with millions of dollars in catalog sales or hundreds of pages of color print production per year. This approach, compared with selling systems outright, shortens the selling cycle, according to the company. Instead of having to sell multiple departments within a prospect company, the prepress sales efforts can focus only on the marketing department. In addition, it is much easier to sell a monthly fee than it is to sell an enterprise-wide system.

AGENCIES CAN BE FICKLE

While every market has special requirements, ad agencies are interested in some specialized areas, such as intellectual property rights, which must be detailed in a written contract to avoid problems in the future such as basic ownership of materials, and future fees for releasing materials. Another primary difference between ad agencies and other markets is the length of their client relationships. The life span of an ad agency/client relationship is only two to three years in some retail industries, so you must construct a business model that caters to this cycle. You also need to consider the need for flexibility in terms of movement of file control from one agency to the next, clearly specifying all intellectual property rights and stating the financial responsibilities of the agency and its client in advance.

In addition, the agency market has a special set of requirements that may make it unattractive to some prepress operations. Large agencies frequently expect prepress houses to research and implement all mechanical specifications for printers and publishers worldwide. One company indicated it maintains a shipping department 24 hours a day simply to meet the needs of its agency clients.

AFTER THE SALE

Many salespeople believe that once the initial DAM sale is closed and the system is installed or implemented, this is the point to end the sale. Nothing could be further from the truth.

Following the initial sale, it is time to work on selling systems and services to the next department and the next decision-maker in the company. You have to continue to explore its business and create new ways to help it achieve its goals. You also must accept the fact that the client will, in two to three years, no longer want to pay you to do what you're doing today. It will have determined how to produce the work without you, and technology will have advanced to enable it to do so. The customer will know that it can do what you're doing today easier and for less without you. Therefore, the sales organization must continue to move through the company, providing more solutions to more problems. By staying ahead of the curve, the company will continue to demonstrate its value to the client and will be retained.

IS IT PROFITABLE?

In a word: very. Assume for just a moment, however, there is a large demand for production of film and proofs (which there isn't). Even if there were a booming market for these items, they no longer offer a substantial profit potential to a large prepress company. As one prepress executive put it, “Why have these incredibly expensive prepress facilities with highly trained and costly staff, only to make pennies per project? We'd be better off to invest it in CDs.”

Based on a shrinking film/proof market and a host of other market conditions, a large prepress company may be forced to offer DAM simply to remain in business. In addition, some company spokespeople believe they will have to be successful in a variety of areas, including on-site digital photography studios, DAM, facilities management and printing, to remain profitable.

KNOWING COSTS LEADS TO PROFITABILITY

Every successful DAM vendor interviewed was careful to point out that its company is knowledgeable about its internal costs in terms of overhead, incremental costs, cost of funds, cost of inventory and a variety of other specific areas.

One DAM company developed an operations management system that has been in place internally for two years. The system produces sophisticated costing reports, and the company uses this system to control its costs and targeted profit levels by focusing only on business that will meet or exceed the variable margins.

CAN SMALL SHOPS DO THIS?

One prepress manager put it bluntly: “No. They don't have the technical resources, they can't afford to put an expensive person on payroll to manage the process, they can't afford to invest $500,000 in hardware and software, and they can't continue to invest with the systems as they evolve.”

Another executive suggested a way that small- to medium-sized companies might enter the DAM market. “In the beginning, don't try to get involved in providing the actual services. Instead, work as a consultant to reduce your company's investment risk. You can be the advocate for the client and provide the expertise they need to work with outside vendors to set up the DAM system.”

TESTING THE WATERS

Others offered helpful advice to first-time DAM vendors. First, don't go into this because you think you should. Go into it because you have proven to yourself and your company that your clients and prospects need it and that you can make money at it.

If you don't have any experience in an area, then you must have a sacrificial lamb. Pick a customer who understands this is a new experience and an adventure for both of you. Make your charges nominal, so you won't harm the prospect in case you fail. Then go through the process with them. You may not profit greatly or you may lose money, but it's an inexpensive way to educate your staff and conduct a trial offer.

Document what you're doing and what it costs. This will be valuable in the measurement phase. You have to understand that a client with 10,000 images may take 40 hours of time to launder the images and prepare to populate a database. You must measure in order to create a system that will make profits.

DON'T REINVENT THE WHEEL

Last, marketing to smaller companies using simple, off-the-shelf software and hardware may be more profitable and won't take as long to go through the ROI discovery process.

Others have proven DAM to be a profitable product offering. It requires a significant investment in time, technology and training. Therefore, the successful DAM product offering is one that is well-planned, adequately financed and zealously marketed.

This article is excerpted from “Profiting from New Revenue Streams,” courtesy of the International Prepress Assn. (IPA). This study examines how prepress firms have successfully added non-traditional products and services. For more information, call (800) 255-8141 or see www.IPA.org.

Three degrees of DAM

A spokesperson for a national prepress operation explained it offers digital asset management (DAM) on a fully customized basis, which can be described in three broad levels.

Level one: The first level of DAM services is a service bureau concept for customers that don't want a DAM system on-site. The customers may be unable to afford a sophisticated DAM system, they may prefer not to manage it, or the company may not produce the volume required to justify an on-site system.

This basic service allows the customer to use a dial-up connection or to access the system via the Internet. Using a password and user ID, the customer accesses the system and manages its files remotely.

Payment for this type of entry-level DAM is typically a monthly fee that includes a base number of clicks or transactions. Once that base number is exceeded, an incremental fee is charged for each transaction. This provides the customer with the access it desires and some of the management tools it needs without the capital expense associated with the purchase of more powerful systems.

Level two: This DAM system is typically used by larger organizations that want to create a DAM system but don't require facilities management services. In this scenario, the prepress company consults with the client to determine its DAM needs. From the initial workflow to the type of system, hardware and software needed, the company maps the process flow, specifies the equipment and outlines a training program. Once the components are approved, the company helps the customer acquire, inspect, install and test the equipment. In some cases, the prepress company provides personnel to manage the system for the first year or to manage the system on an ongoing basis.

Level three: The third method is similar to the second, but it also includes facilities management. The company sets up a mini prepress facility on the client site and staffs the facility according to the approved process flow and the financial model.

This system typically includes content management, scanning, proofing and output, as well as any other services required by a specific client. In this particular instance, the company has a branded, proprietary product used to control content and automate the workflow for production of catalogs and free-standing inserts. These same services could be provided, however, using non-proprietary software. At this level, two- to three-year contracts are negotiated based on the desired level of profit plus capital equipment costs, staffing and a guaranteed cost per page of prepress output.

Putting a price on DAM

When it comes to pricing, several companies interviewed indicated that digital asset management (DAM) pricing must be localized. In some parts of the country, it is preferable to charge by the megabyte for DAM storage. In other regions, charging by the number of times the system is accessed is popular. The final method of pricing should depend on the local trade customs. One company interviewed believes it must be flexible and adjusts its policies to the local pricing practices in order to compete. While it does cause some internal difficulties, such as maintaining a constant level of profitability within dissimilar systems, it's necessary to make the sale.

Where did I put that *#$%%! file?

Studies from Gistics Inc. and Frost & Sullivan Market Research show that those of us who deal with media files spend an average of 2.9 hours a week just managing those files. File transferring eats up another 3.97 hours per week. We look for files 2,500 times a year, and fail to find files 35 percent of the time, on average.
— “Digital Asset Management: Perfecting the Art of Finding What You're Missing,” Folio, December 2000. (Find it online at www.americanprinter.com's Magazine Rack.)