September 24, 2003

Rick Malone Interview July 2003

KIS and Rick Malone kiosk news and self-service kiosk news

An Interview with Rick Malone of KIS
[published by Kiosks.or located at http://www.kiosks.org/columns/rickmalone.html]

Rick Malone is the president of Kiosk Information Systems (KIS). Founded in 1993, Olea is the established leader in the design and manufacturing of kiosks, public internet stations and other self-service and informational terminals spanning every imaginable application.
PhotoTour of KIS and facility

Spending time with Rick Malone is always fascinating to me. I had the chance recently while in Colorado to stop by and visit (and also see the new facility). I've known KIS for 10 years and have always had the deepest respect for them.

KIS is arguably the single largest self-service and kiosk solution provider in the world (the folks at NeoProducts in the UK/Australia likely noticed that phrase arguably...). Recently KIS moved into a brand new facility in Colorado (doubling once again) and here I was visiting it for the first time.

Rick met me in the foyer and as usual was neatly dressed and all business. We went directly to the new manufacturing area. The Postal Service deal had just been awarded completed ($1.4M) and we talked about that. Also KIS is participating in the job application kiosk for Wal-Mart which also involved Wyse. We walked on.

The new ultra-modern flexible manufacturing floor came into view and it was easy to see all the different (small and large) jobs in process. KIS does everything inhouse such as prototyping, modification and all of the integration, QC and testing. They have their metal fabrication partners offsite like everyone else.

Rick noted that right now 70 to 80 units were being rolled off the line per day right now but that scaling up for clients like Wal-Mart and doing 100 to 200 a day just for them is no problem. A wide spectrum of clents and jobs I could see on the floor and literally could be from 1 unit to 2,000 unit jobs. High levels of customization are typical.

A large area of McDonald kiosks was there. QSRs are one of the hottest areas right now and I was not surprised. Standalone and counter-top units were there. I was surprised to learn the software was from a company in Fort Collins, CO.

The next area we went thru was another job application terminal being done for Shop and Stop. It had just finished being UL-approved and 350 units are the job.

The application terminals on the floor ranged all over the spectrum including cellphone toppers, ring-tones, airline booking systems, some new FREEosk units, a very cool high-end digital camera unit for Kodak, a check-in and checkout unit for prison inmates and a lot more. Very impressive for sure.

Rick said pointed out some of those (the Kodak unit for example) and commented that different colors, onesies or twosies are actually pretty popular.

Asking about the structure and processes and Rick talked how KIS adheres to the classic outsourcing model for metalwork and components. The idea is to own those factories only when you need them, which is smart. Outsourcing Vertical integration affords the opportunity to select the best supplier at the best price for the job. The entire company is ISO9001 controlled and inventory runs on JIT.

So how is all this new "stuff" working out I asked? What are the results?

The results, Rick told me, are that at this time KIS is experiencing twice the revenue with half the people. We do full machine integration and design, Rick said. And all units come with one-year onsite free maintenance he added.

We made our way back into the far other side of the facility and entered a very nice art area for signage/etc that the new facility afforded them. Probably 40-50K of equipment there and inhouse these sorts of capabilities are essential.

Expansion? Two new offices are being planned. One in Minnesota and one in California Kansas City. Let's see, we have Best Buy, 3M, Northwest, General Foods and Hallmark in those cities...

KIS has a new sales VP coming in and are in process of adding additional expert sales engineering staff.

East Coast and Southern West Coast offices are coming.

KIS it appears is headed for a significant larger expansion that I had estimated...

Later on we stopped into Rick's office. The architecture of the building has a striking and pleasing effect. Rick's office was neat (he is a bit on the meticulous side being an engineer) and I sat down.

I knew I had to ask the question. Francie had made me promise that I would after I said I would.

The question being, "I know its just one segment of your business, but these internet biz ops, and ones like Nationwide, they are pretty scary aren't they?".

Rick smiled (I think he was expecting it...) and began. Look at ATMs. Look at pyaphones. Internet access is tracking much the same. "Bizops" were a big part of those industries. Back then, one in ten succeeded but that number grew and eventually they went to the next level.

We talked about people who introduced public internet. US West for one. AT&T for another. Getting the equipment and the equation perfected was needed. Rick talked about all of the many clients that Olea provides internet terminals to (not just Nationwide). Having the right portfolio of application for the machines and where they are located are drivers of success. Different forms of entertainment and transactions in general. Multi-applications...

Rick asked me directly, "Do you believe in public internet terminals, and do you understand the volability?". I had to nod yes. The conversation then went on to observe how so much similar the vending machine industry is to public internet. Scenarios related to vending and different ROI plans emerged. Rick said not to talk those thru so I won't.

Back to the BizopsNationwide Rick noted for my benefit that one of his customers, Nationwide, is continually improving the machines on an active ongoing basis. That says something good for sure. Bottomline KIS invests in public internet machine because they believe they will flourish.

And I have to agree.

"One rule in Business is You Cannot Be Late", said Rick. "Look at the Shibbys. Right now they make $26.46 average per machine per day."

We noted that fortunately Uniglobe shut down and that the new American Terminal is doing well.

"There is a growing network out there Craig. Nationwide, Netkey, Zaplink, many more. What if product is distributed across the entire network?".

You make money then right?

That got Rick started and the excel file out. Here's the expenses, here's the total capital, here's the lease back. Charging 25 cents a minute and at current usage rates and given certain revenue sharing, thats $17K a month and 26% net profit after all of those expenses. That's not bad Craig.

Hmmm. Now I am thinking. So what about usage?

Well, right now Craig typically its 107 minutes. With some new apps that can easily go to 180 minutes. That's 44% after net profit ($19K). The big app?

Email, email, and email...

I got some more numbers from Rick like average time of a session (10.7 minutes per session) and of course the average $2.67/user with 10 users per kiosk a day. All handy numbers. It's almost like KIS has elected to do its own research and proof of concept. Rick agreed and smiled, "and don't forget, machines and costs all the way around are going down...).

All in all it was one great visit to KIS. In the business world it's about being in the right place at the right time, executing, and not being late.


Posted by Craig at September 24, 2003 02:35 PM