April 13, 2004

Briefing: Dr. Christoph Fröhlich, Managing Director, Z+F

April 13, 2004 – We revisited Dr. Christoph Fröhlich, managing director of Z+F, to clarify some of the points raised in last week’s interview with him.
How do you see the new workflow, directly using point clouds in CAD systems?

There are obvious potential benefits to this workflow in terms of the friendliness and familiarity of the CAD user interface. Given the inherent appeal of this workflow, users have been importing, or trying to import, point clouds directly into CAD since the very beginning of commercial laser scanning back in 1998. In the early days (and even today) some users did this, or attempted to do this, by decimating point clouds and/or breaking up point clouds into several smaller files that CAD applications could handle. However, many users considered this office workflow cumbersome and not very practical with large data sets such as those produced by phase-based scanners.

The first commercial software that allowed direct use of large data sets within a CAD session was BitWyse’s LASERGen in 2001. Shortly after came Cyra/Leica’s CloudWorx software products followed by our LFM solutions. So, you can see that there is a solid trend in this direction.

It’s been six months since the announcement of your cooperation with Leica at Intergeo in September 2003. What is your early assessment of this relationship?

At the moment, speaking for the worldwide cooperation with Leica, we are in the starting phase and are happy with the interest we generated through this cooperation about our products in the market. We can see the potential for laser scanning in the world market better through Leica after 6 months already, as we reached only a limited market before due to limited sales and marketing resources.

To be honest, with a new cooperation it always takes time to ramp up to reach the levels we are ultimately expecting. The sales through Leica can be seen already today. Especially the integration of the HDS4500 scan control interface into Cyclone 5.1 (announced for release in May 2004) will certainly help to increase the sales through the Leica distribution network worldwide.

Today, we from our side think it was the right decision for both, Leica and ourselves, to enter into this strategic cooperation. Our partnership provides high definition scanning products for the entire market at a high quality level – this is what the market and the service providers are looking for.

Strategically we are looking for other OEMs for market niches as Andrew Bailey stated, being complementary to the ones we already have worldwide, e.g. with Amberg for the rail and tunnel business.

In addition, distributing the IMAGER 5003 and Light Form Modeller (LFM) software for high density point clouds through our own sales channels provides independence for Z+F and access to other market niches.This SparView is the third in a series of interviews with chief executives of companies that provide existing-conditions capture services. To our knowledge, Z+F is unique in the laser scanning industry in providing scanning and point-cloud processing services in addition to both hardware and software products. A manufacturer of electrical and industrial products established in 1963, Z+F became involved in laser scanning in the first half of the 1990s through the doctoral research of Christoph Fröhlich, the son of company cofounder Hans Fröhlich. Since then, the company reports it has executed some 200 laser scanning service projects. We interviewed Dr. Fröhlich, now managing director of Z+F and a technical authority on the application of lasers to range measurement for industrial purposes, to understand his company’s involvement in the services business, how this has shaped its development, and where he sees the industry going.

Your business model is to provide both services and products. Why did you choose that mixed model?

When we first became involved with laser scanning in 1993, the technology was totally new. Nobody understood what benefits it could bring to the market. We had to show customers that laser scanning
technology was something that really worked, and that people could really use it. I personally will not buy a product if I’m not convinced firsthand that it works. So we had to show customers that the instruments worked, and that the results were the quality they expected. When we did that with our services business, then customers became willing to invest further. For us, the services business was a catalyst to drive product sales and growth in demand.

And that’s still true today. We’re a 40-year-old company, we have 150 employees, and we’re a product-oriented hardware and software company based in Germany, UK and USA. But services are still a
catalyst for growth, even in these days when we focus more on developing and selling products than on services.How did you first become involved with laser scanning?

I personally got involved with lasers in 1989 as a graduate student at the Technical University of Munich, doing work in the field of autonomous robots. I was developing vision systems based on laser scanning. In 1993, when I left the university, there was demand from the railway industry to deliver a laser scanner for 2D profiling applications. So in 1993 we delivered the first system to a service provider here in Germany, Spacetec, which is still providing services using that system.

Then through 1996 we developed additional tunnel measurement systems for the railway industry. In that work, we were always headed toward high-speed scanning. When you scan from a train moving
through a tunnel or network, you have to collect as much data as rapidly as possible. Today we develop both high-speed systems for rail applications that measure up to 300 profiles/sec. (train speed up to
120km/h) and flexible, mobile systems like the GPR5000 together with Amberg.

After rail, what industries did you move into, and why?

We asked ourselves the question, why are we using this laser technology only for 2D profiling systems? Why not move into the 3D scanning world? Through the industrial side of Z+F’s business, I saw the need for this in the automotive, process and nuclear industries. We have key employees with particular expertise and knowledge of the process and automotive industries, and this helped us understand and
meet the needs of the relevant engineers and project managers. In working with customers of our industrial products, we saw how we could provide them with 3D information. We developed, together with 
Quantapoint, the SceneModeler in 1998 (this single-point laser measuring system from Z+F is still in use today) and started a pilot project for services here in 1998. In 2001 we introduced our first 3D laser imager, IMAGER 5003 (HDS4500).

The first 3D laser scanning project I executed was in the automotive industry, for Volkswagen. That was when we first conceived of applying the technology for auto makers, to scan both the manufacturing
equipment and the manufacturing facility. We scanned using our hardware, then we used our LFM software to convert the point-cloud data into CAD models. To the customer we delivered  
CATIA and MicroStation files. VW used that data to carry out simulations in the ROBCAD software from Tecnomatix (now called eMPower).Where do you see the technologies going next?

The hardware, as you can see at exhibitions worldwide, is in a pretty good state of development at the moment. But the software still has to advance so that the modeling cycle can speed up. I think that’s the next step for the technology – software development has to face that problem of how to save money in the modeling cycle. For our part, we just introduced LFM Server, which has a direct link into AutoCAD and MicroStation, to eliminate the need for manual modeling before exposing the points. Think about the BitWyse approach – ours is similar. The key thing is to make the scan data high-resolution so that it provides sufficient detail to be useful to the user. The software then needs to
provide a work process that integrates with the customer’s current work process – this is essential to adoption of the technology. I think the recent software developments in making point cloud data accessible on the standard CAD platforms will really drive the adoption of the technology forward. This is because it will increase the cost-effectiveness, and it will also reduce the customer’s perception of risk in adopting “something new.”

This approach was first seen with the CloudWorx concept from Cyra, and now this has been moved on to the next level by companies like ourselves and BitWyse developing the ability to view many scans in high resolution. We are now able to hold up and view up to 250 high-resolution scans together, each containing some 50 million data points within our database module of LFM Server. We could not dream of this level of performance with laser scan data even two years ago. When the customer can navigate around data like this within their native CAD packages like MicroStation and AutoCAD, then that becomes a huge advantage to encouraging the adoption of the technology.

Back to the hardware – it has to be open, so that scan data can be exported to several software packages. This will help speed adoption and is key to a standardization of data formats in the laser scanning industry. For example, we have interfaces to many software packages including MicroStation, CATIA, AutoCAD, PDS, PDMS, AutoPLANT – essentially any package that is MicroStation- or AutoCAD-based. Also PolyWorks, CYCLONE, TORNADO, Reconstructor as well as, in the rail
ClearRoute from Laser Rail, TuView from Spacetec and HelixView from Amberg.

What job are you most proud of – where were you able to make the biggest impact?

About 40% of our projects have been in the automotive industry with all manufacturers worldwide, at least another 35% in the process industries, and the rest spread among other industries, particularly the rail industry and heritage. Some of our most technically advanced services work at present is our involvement with BMW. In one project we’re scanning more than 600,000 square meters for them. There, we will introduce other service providers as well. We are doing some of the scanning, but we’ve subcontracted with other service providers to learn how to use our technology, then go ahead on their own. The objective of the project is to develop a 3D model and 2D documentation of all the space available in that plant. The facility is their Dingolfing (Germany) plant, where they produce the 5 Series.What about a job that went wrong – what happened, and what did you learn from it?

To be honest, in the beginning we had service project involvements where we had problems because the technology was new and we had to learn how to apply it. What we learned, we immediately used to
improve the products. The biggest difficulty was to understand the needs of the surveyors – what they need to operate effectively in a big industrial plant. Laser scanning technology today is easy to use, everybody can use it, but it’s still important to understand what you are scanning, why, and what you need in order to do your work, to get the results you are looking for. The key to further adoption of laser scanning will be the ease of integration into the customer’s work processes.

Has laser scanning crossed from a market for the technologically curious, to one driven by the business benefits?

The business benefit is absolutely what is driving the customers. Companies are truly realizing what the benefits are – that capturing data with high-speeding scanning saves them a lot of money, and saves
them having to go to the site three or four times because they forgot to measure something. Customers are also understanding the possibilities in having the scan data available to use later. Because they
have so much information captured, if the customer needs a little more detail, it can be easily delivered without big added costs.

Laser scanning is following the typical market development pattern. We are now in a phase where we have the early part of the majority market starting to use it. Think about the market curves. You have the early adopters; I would say that was in 1998. Then normally it slows down a little bit, and now I think we are in the phase where the majority is really looking at it, especially with companies like Leica and Trimble marketing the technology worldwide. Especially the OEM agreement between Leica and Z+F signed in 2003 serves the market needs in both high-speed and high-precision laser scanning applications and shows the need for different laser scanning systems for different applications.

In fact the market development is similar to what happened with GPS. It’s becoming an investment that companies have to make. All over the world, investment slowed down over the last two years, starting after 9/11. But that’s the only constraint that I see on growth of 3D laser scanning today – just the global economy, nothing intrinsic to the technologies.About your relationship with Leica, you’re six months into it. How’s it going? And this is not your first OEM agreement – what’s your OEM strategy? [We posed this to Z+F
sales and marketing director Andrew Bailey, who offered the following.]

At the moment unit sales are low, and that would be expected at this stage because the Leica sales force are just getting used to selling it. We are at the stage with Leica where we are assessing how well it is going, and are working to assist Leica in selling the HDS4500 more effectively.

It’s not quite the same as our past OEM arrangements. With Spacetec, Z+F supplied laser ranging technology for them to use in their rail profiling systems many years ago, and those systems continue to be used. In our work with Amberg, they offer a trolley with a Z+F profiler mounted on it. Those companies integrated our technologies into their products, whereas the Leica HDS4500 is precisely the same as the Z+F IMAGER 5003, but in a different case.

As for our OEM strategy, Z+F is a product-based company that uses services to maximize its markets in early stages, as Christoph mentioned. As such, Z+F will continue to focus on its niche markets of
high-speed laser scanning data capture, and will work with OEMs that offer a chance of expanding those markets. Z+F does not want to do something itself where another company has resources and presence. We are happy to integrate our high-speed scanning solutions into other companies’ offerings, and keen to work with OEMs whose solutions complement ours.

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