Anoto Functionality Conference 2004
Wave Issue 0424 06/25/04
The WAVE Report has long been interested in the Anoto pen technology. The use of a dot pattern on paper allows the Anoto pen to determine exactly where it is pointing in a very large address space. This makes each sheet of paper unique and it a major value of the Anoto technology – which they call Anoto Functionality. We learned just before the conference that Anoto and its partners would be talking about the status of digital pen and paper at a level not seen before. With that the WAVE Report was off to Ystad, Sweden.
Anoto Functionality Conference
The conference was located in the small town of Ystad, Sweden about 40 minutes drive from the center of Anoto in Lund, Sweden. These towns are in the far south of Sweden near Denmark. The conference was held at the small sea side resort of Ystads Saltswjobad. There were 110 in attendance, exclusive of Anoto employees.
Anoto defines partners as those who adopt their technology and it is assumed those that sign the license agreement. The words Anoto Functionality were everywhere. One poster said it well:
Anoto Functionality is all about addressing 170,005,193,383,307,227,693,056 dots.
This is an event to allow partners to meet others, to learn more about applications and to understand more about the developments at Anoto. The focus is on what the technology can do in the business market and not about other applications of Anoto technology. Analysts and press participated in a one day program which was part of the overall conference.
The heart of the Anoto technology is the imaging engine. As Anoto allows its partners more freedom to create pens, there are now companies 4 making pens, such issues as pen size and even power management are increasingly being done by the partners. However, to date every pen has the Anoto ASIC which is the imaging engine. This may change in the future but for now it is the unique signature of all Anoto pens. It is also the way that Anoto assures reliability and controls the market.
One of the major challenges is to assure that the pen from each company works with all the paper suppliers. As a result they have a specification for the paper properties. In order to enable the broadest possible market it is essential for Anoto to support a wide range of paper types – from simple bond to plastic coated paper, for example. To better understand the implications of this consider the following simple image chain.
The Anoto functionality is the dot pattern as read by the Pen Detectors and ASIC recognition engine. The atmosphere and paper characteristics can each distort the patterns and lower the contrast ratio. Thus, the specification for the paper is very important, given the many types of that can be used. Consider the following: take the dot pattern and do an inverse transform of those patterns back to the detector. In this transformation, the paper specification defines the variability in the pattern which is tolerable and still achieves Anoto functionality. One speaker stated when there is an error in imaging the dot pattern this is like a software bug. Another way to view this process is in a systems context where there is a tradeoff in the dot patterns, the quality of the imaging system, paper specification and performance of the ASIC. It is clear that Anoto, with some 7 years of experience, has done considerable systems engineering to achieve the performance now taken for granted.
Given the role of Anoto paper in imaging it is also a supply chain element. To those buying a digital pen solution the paper should not be an issue – this is just like any other paper. This not quite the case when it was stated the quality requirements are stringent. Another factor is paper availability in a local market. The WAVE spoke with a company seeking to do business in India. They need a paper company in India as imported paper will not be cost effective. Another emerging factor is self generated paper. HP now has a printer will make Anoto paper. In November HP announced its own Anoto Pen.
The desire of Anoto to leverage is technology and force the use of unique paper sheets and unique pens may seem overblown. An analogy might be like building pens which use IPv6, this may be an overkill but even larger if uniqueness is applied to sheets of paper and locations on the paper. Doug Patterson, VP at Standard Register, one of the largest forms companies, described the requirements as:
This then mandates the need for uniquely patterned paper.
This means not only absolute positioning on a sheet but sheet recognition and stroke recognition by individual pen. When asked is it not possible to have unique areas set aside on the sheets as common areas. The problem of this is that the pen has to “sign in” to the common areas. Thus, from a user perspective it is far better to have on uniform interface, thus, uniqueness everywhere on the sheet.
The Anoto business model is important because it defines the relationship with the partners.
An indicator of how successful the company has been, is the number of pens sold. There was a lot of buzz at the event about pen sales. It is unlikely that over 100,000 pens have been sold to date. Logitech indicated that it had, until recently, 50%+ market share.
In conversations with the attendees the most consistent comment was about Anoto’s high costs. Central to the relevance of this cost is the ROI where it is being used. Thus, if the pen can generate a short term ROI, most examples cited ROIs less than a year, the pen cost is immaterial. B2B is solution selling and if the return is great enough the cost of the royalty stream is just one cost of its deployment and use. But if applications are to scale to millions these costs must come down and Anoto recognizes this. This implies lower cost pens and license fees. However, the market is not there yet, especially when sales of 10,000 units is a large order. And thus the pressure on lower pen costs and even smaller pens is not there.
The largest generator of information in the world is paper and pen/pencil.
This is a very large proposition. It means converting a percentage of the pens being sold to digital ones. Connecting those pens to a digital infrastructure is another challenge. Note that handwriting recognition is needed in only a small part of this roll over based on what the digital pen is used for. The role of the Anoto technology which allows for unique pens and unique paper is to make possible digital identity. A massive market demands it. Another consideration shapes the design, the implementation and the potential for a digital pen market – the ability to scale to billions of items with billions of actions.
The most striking aspect of this conference was the change in focus at Anoto over the last 2 years. The WAVE spoke with Örjan Johansson, President and CEO. He described that the company has always been an IP company whose business model is licensing the technology. Early on they felt that the best way to show the technology was to do an end-to-end product. This is where the Chatpen fit, done with Sony Ericsson. Yet, the phone emerged when the telecom bubble burst and this died as a business.
At the same time others were seeking to apply the technology. They were increasingly pointing to B2B and forms as viable markets. The problem is that these have long sales cycles. There are high stakes bets which have pilots first, evaluations of the pilots and then a go or no go decision. There were numerous presentations in this area.
In the Logitech presentation, they got the message also. Logitech is a pen supplier who identified the personal productivity market but this was a flop. Now they are going into the enterprise market also.
But there is more. Anoto announced a $18M sale in the last 4 months for an application of the Anoto technology. This has not been specified but it includes the pen and paper. However, what the buyer got was an exclusive license for the use of the technology in that application. This is expected to be disclosed in October. When the WAVE spoke with Orjan Johansson, I stated that this is great for cash flow. But more importantly I asked “…is there an intent of the company to stimulate more of this?” He hedged. Cited was an example, I gave of the use of Anoto pens for multiplayer board games. He smiled and knew of the application. Yet, he reiterated that the vision of the company is in digital paper and pen.
The PC is hardly a part of the Anoto pen applications. Certainly Logitech pushed this but the reality was much less that expected. But more important in the B2B space we saw several examples where the cell phone, via Bluetooth, was used for transport. The cell phone was the WLAN interface. This reinforced the point that Anoto’s vision is not dependent on the PC. There is a digital back office but this is a part of the enterprise IT function.
Örjan defined the company. His presentation included the following:
The business streams of the company include:
The conference only addressed the top two.
To grasp the scope of this consider the following:
Anders Tormod, COO, went into more details on the company. Some highlights of his presentation included:
Standard Register used the conference to announce ExpeData its offering using the Anoto pen. Standard Register is one of the largest form companies with annual revenues of approximately $1b. Doug Patterson gave an energetic presentation on its offering.
Destiny Wireless in the UK has launched a pen service for Cobra, a direct sales company in the UK. Cobra sells door to door and other face to face marketing environments. It has launched a pilot to use the Anoto pen for sales call logging. The stats from the early trial are impressive:
As a result of this Cobra has committed to a 5,000 pen order.
Bo Peterson of Malmo University, Malmo, Sweden described the use of the Anoto pen as a HID. This effort was part of the EU funded ATELIER Project. It supports tangible interaction and ubiquitous computing. Examples were shown how pen and paper could be used to create a user interface.
Paras Chopra, Product Manager, Nokia, came as close as any making critical comments. Some of his points included:
Dai Nippon Printing claims it can print on anything. With annual sales of $12b it is a large printing company headquartered in Japan. They have a very broad view of the potential application of Anoto technology. They showed as target markets: education, medical, department stores, transportation, credit, insurance and the public sector.
The application shown was to use the Anoto pen to score achievement tests given to school students in Japan. The value is that scoring and analyzing tests is a major teacher burden. The results of a pilot that had 20,000 subjects taking tests on 4 subjects showed a reduction in cost of 15% and a drop on response from 1 week to a few days. It is estimated that the scoring market is $240m in Japan.
So far DNP has used 1,000 pens and forecasts the usage of 50,000 pens next year.
Fruits was established in the Copenhagen in September 2002. It is focused exclusively on using the Anoto pen solution. Fruits has two solutions in trial.
Health Care Delivery for Elderly
Logitech has as its objectives from the investment in Anoto the following:
Logitech has recently set up a stand alone business unit for the Anoto business.
Thus, Logitech has a two part strategy: Retail and Vertical Markets.
When asked when will we see the <$100 pen a long discussion occurred.
Irrespective of the technology used for the digital pen, the market has not shown it is ready to accept it. We have seen this before but the Anoto Functionality Conference made it abundantly clear. Everyone who sees the technology is impressed. It just does not sell. This is a source of great frustration at Anoto. Their future depends on large increases in digital pen volume. Many are working to accomplish this and at the conference some interesting applications were shown.