File This Firm Under 'Success' : Document Storage Company 'Ready to Take Off'

Times Staff Writer

In late 1981, Ted Smith was a 50-year-old former high-tech executive looking for a place to land after an acrimonious parting with his old boss. But he was hardly a run-of-the-mill member of the jobless ranks.

Smith had earned a reputation as a tough, results-oriented executive from the six years he spent as president of MAI Basic Four in Tustin, a computer maker whose sales jumped from $40 million to $200 million during his tenure in the executive suite.

"I wanted to start a business in an industry that wasn't overrun with competition," Smith said in an interview in his modest Costa Mesa quarters. "I wanted to find a market with a huge potential where we could build a strategic lead."

Surprisingly enough, the search didn't take long. By 1982, Smith had zeroed in on the market for document storage on optical disk, hired a staff of about 10 and lined up an initial $4-million commitment of venture capital.

And thus was FileNet Corp. born. Although not the first to develop an electronic, optical-disk device that copies and stores office paper work, the FileNet system has earned high marks in its 18 months on the market and propelled the small company into a leadership position in its tiny market niche.

"Theirs is the state-of-the-art machine," said Lee Elizer, vice president of Freeman & Associates, a Santa Barbara consulting firm that tracks data storage systems.

Nancy Bryan, an office automation consultant for Deloitte Haskins & Sells, added: "They're in the right place at the right time with a reasonable product. The sales curve should be about ready to take off."

According to Smith, privately held FileNet, which has since generated a total of $30 million in venture capital investments, had revenue of about $10 million in 1985, its first full year of sales.

Projections for 1986 call for sales of between $40 million and $60 million, an amount that would give the company a 25% share of the market for optical-disk storage systems. Plans also call for the company to make an initial public offering of stock early next year.

Analysts agree that the particular strength of the FileNet system, which sells for an average of $500,000 per installation, is its unique "Workflow" computer software package that allows office workers to process vast numbers of documents without ever touching a piece of paper.

The system copies up to 20 pages per minute onto one of the 64 optical disks housed in its storage bin. Then, within minutes of copying, an exact image of the document can be called up onto any computer terminal connected to the disk player.

And workers can do more than just view a document.

The special software allows a worker to view the document on a part of the computer screen and write a report, letter or memo on a another part of the same screen. The newly written material can be added to the document electronically with a push of a computer button.

FileNet's early customers, which number about 20, say the system's greatest appeal is the fact that employees can have immediate access to any document in its files and can electronically "send" documents to their supervisors or the next layer of review without leaving their desks.

"There's instant transmittal," said one CitiCorp official in charge of evaluating FileNet systems for several possible uses within the financial services company's operations. "There's no lost time or lost files."

Smith, whose staff now numbers about 170 employees, said interest in the machine is building, with inquiries over the past 18 months totaling about 10,000. And Smith couldn't be more pleased.

"I enjoy building a business," he said, noting that he didn't have to return to the work-a-day grind five years ago. "It beats playing golf and bridge."

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