Technology Journal
Under the Radar
Netkey Transforms Kiosks Into `E-Salespeople'
By Stephanie Miles WSJ.com
05/17/2001
The Wall Street Journal
(Copyright (c) 2001, Dow Jones & Company, Inc.)
NETKEY Inc. wants to make it easier for shoppers to find product
information
online rather than waiting in line to talk to a salesperson.
The closely held Branford, Conn., firm has developed a software
application that
allows companies to display a modified version of their Web site on
stand-alone
Internet kiosks in stores and retail outlets.
The kiosks display not only Web-based information, but also product and
inventory databases traditionally available only to sales and
customer-service
employees.
Netkey's technology allows companies to install kiosks with services
that range
from basic Internet connections to touch-screen displays and credit-card
scanners. The interface is designed to appeal to Web novices, and the
software
prevents customers from restarting the system, surfing to inappropriate
sites or
erasing the hard drive.
Borders Group Inc., Ann Arbor, Mich., uses Netkey kiosks to allow
customers to
look up titles and order out-of-stock books, while Fidelity Investments
clients
can set up new accounts and make automatic deposits through Netkey
kiosks in the
Boston company's retail outlets.
Alex Richardson, Netkey's chief executive officer and founder, says the
main
benefit for store owners is cost reduction: An Internet kiosk "runs 365
days a
year without a coffee break," he notes. The kiosks also provide the
opportunity
to showcase current inventory and sell additional products, he adds.
Analysts say the kiosk market is poised for huge growth. Frost &
Sullivan, a San
Jose, Calif., market-research firm, predicts there will be 446,000
Internet
kiosks world-wide by 2006, up from 151,000 units this year. Jupiter
Media
Metrix, New York, projects that sales associated with kiosks will soar
to $6.5
billion by 2006, compared with $200 million this year.
NCR Corp. and International Business Machines Corp. also have developed
kiosk
products, according to Rufus Connell, a Frost & Sullivan industry
business
manager, but have tended to "specialize" while Netkey has pursued a
broader
strategy. In fact, NCR in January said it would begin selling Netkey
software as
part of its Web-kiosk product line. Netkey "has been one of the
acknowledged
leaders in terms of market share and technology," Mr. Connell says,
while
cautioning that it is too early to know for sure who the winners will
be: "The
market's still pretty small -- one or two major projects could make a
big
difference."
Indeed, Netkey's biggest obstacle at this point is "ignorance," says Mr.
Richardson, 44 years old. Most retailers have been too busy building out
their
e-commerce operations, dealing with year-2000 compliance and "putting
out other
fires" to consider installing Internet kiosks, he says.
Still, Netkey has signed a string of high-profile clients. All 340
Borders Books
& Music retail stores have Internet-connected kiosks and computers that
run
TitleSleuth -- a search application developed by Borders that was
previously
available only to salespeople -- and Netkey, which keeps customers out
of other
applications and Web sites.
Borders is testing new features with Netkey, including online buying and
self-service checkout, says Kate Harding, senior manager of consumer
systems at
Borders. Although Borders hasn't decided if or when it will roll out all
of
these features, she says, "We consider Netkey part of overall
TitleSleuth
architecture."
Microsoft Corp. has used Netkey's technology in its trade-show booths,
while
Yahoo! Inc. has a few Netkey-based kiosks that offer e-mail and Web
access
through the Yahoo portal. Jiffy Lube, a unit of Pennzoil-Quaker State
Co., has
introduced Netkey at a few of its franchises, offering customers Web
surfing and
e-mail access while they wait for their oil change.
Netkey originated as a product of Lexitech, a professional-services
company that
developed simplified mainframe-computer-system interfaces for
telecommunications companies and the government.
About five years ago, some of Lexitech's clients were abandoning
mainframes and
migrating to Web-based computing. So in 1997, Lexitech developed and
patented a
software application that allowed companies to display a controlled
version of
their Web site on a personal computer.
Although the software wasn't part of Lexitech's core-product offerings,
its
sales quickly eclipsed the company's professional-services revenue. So
"we
imploded the old company," says Mr. Richardson, who started Lexitech in
the
early 1980s with $50,000 in private-investor seed cash while attending
the Yale
School of Management.
In 1999, Lexitech was relaunched to focus solely on the kiosk software.
On July
24, 2000, the company announced it had officially changed its name to
Netkey.
Since the relaunch, Netkey has grown to about 80 employees in
Connecticut, San
Francisco and New York. (Lexitech had about 20 employees in its New
Haven,
Conn., headquarters.)
Netkey raised $5 million in February 2000 from investors including Zero
Stage
Capital, Cambridge, Mass., and Cyberstarts DC, Atlanta. Netkey used the
money to
attract new managers, including Rajeev Singh, a former Oracle Corp.
executive
who joined Netkey as chief product officer.
Last winter, Netkey decided its software needed an overhaul to offer
more
advanced multimedia features -- streaming video and audio, for example
-- as
well as a refined interface. To fund the upgrade, Netkey raised an
additional
$10 million in February from Hudson Ventures Partners, New York; Fleet
Development Ventures, Boston, a unit of Fleet Boston Financial Corp.;
Connecticut Innovations, Rocky Hill, Conn.; and Christian & Timbers,
Cleveland.
Mr. Richardson projects that Netkey's sales, which come from software
licensing
as well as design consulting and project management, will triple in 2001
to $10
million.