Smart Partner

2001: The Year We Make Contact IBG

By Chris DeVoney & David Hakala, Sm@rt Partner
December 13, 2000 11:59 AM PT

Chances are, you'll be seeing a lot of HAL—the supercomputer from Arthur C. Clarke's 2001: A Space Odyssey—over the next few months. For more than 30 years, HAL fans have wondered whether we'd achieve true artificial intelligence (AI) by 2001. Of course, many AI components remain purely science fiction. But take a closer look, and you'll find many HAL-inspired technologies going mainstream next year.

Skeptical? Consider the market for biometric authentication devices—which allow users to sign on to secure networks using a fingerprint, an iris scan and so on. Dramatic price reductions are making the technology affordable, and heightened concerns over security and privacy have customers taking a close look at biometric devices. Moreover, government regulations soon may make biometrics virtually mandatory for health-care, financial and e-commerce applications.

Fortunately, biometric work carries the promise of profitability. Hardware sales are projected to grow tenfold to more than $590 million in 2003. Concurrently, biometric consulting and integration revenues could reach nearly $1.8 billion. Solutions providers can expect to earn $3 of high-margin services revenue for every dollar's worth of biometric hardware, according to International Biometric Group (IBG), a New York-based consulting firm.

"It's not an off-the-shelf solution," explains Raj Nanavati, a partner in IBG who notes that biometrics offers the opportunity to "consult and specify" one or more competing technologies from 145 vendors. "Integration work requires understanding of security policy and technology," he adds.

Biometrics consultants must balance many factors, including reliability versus speed-of-recognition and data-storage requirements; space and locations available for scanning devices; and a user group's acceptance of various biometric techniques. Even the volatility of a biometric parameter within a user group is a significant factor; for example, construction workers, who often suffer hand injuries, render finger and hand biometrics unreliable.

Still, the integration of biometric devices into complex IT systems has become much easier, thanks to vendor consolidation, standardization of APIs and abandonment of some unsuccessful biometric parameters. Today, five biometric parameters account for 95 percent of the market. They are: fingerprint, hand geometry, face recognition, voice authentication and iris recognition. We've interviewed a leading vendor in each of those segments to help you understand the state of their respective arts, channel strategies and fastest-growing markets.

Finger-Pointing

Fingerprint scanning is the most widely used and inexpensive biometric technology. Law-enforcement applications must store the complete image of a finger pad. But private-sector fingerprint systems store only a few dozen major landmarks ("minutiae") of a fingerprint and their spatial relationships to one another. It is impossible to reconstruct a complete fingerprint from this partial template, eliminating that privacy concern. Also, minutiae templates can be compared in less time than it takes to type a password, and can be stored in just 200 to 1,000 bytes.

"The average password costs $200 to $300 per year to manage, according to analysts such as the Gartner Group," says Grant Evans, executive VP for Identix, a worldwide provider of biometric verification and live-scan systems. Many users have multiple passwords, compounding the administrative costs. By contrast, Identix's BioLogon server costs $999 per 25-user license, and its finger readers start at $99, including client software.

"We have eliminated 85 percent of our help-desk calls 'since implementing Identix products on 1,500 workstations'," says Michael Sherwood, IT manager for the City of Oceanside, Calif. Other government bodies are using the technology to ensure positive ID of their constituents (e. g., driver's licenses and welfare benefits eligibility cards). Identix licenses its reader technology to such OEMs as Compaq, Dell and Toshiba. The company also works with large integrators, such as EDS and SAIC, providing them with software, training and leads.

"Service providers are now our special focus," says Evans. Those providers include banks, ISPs, wireless carriers and other companies operating on a subscription model. Also, Identix and Motorola are co-developing iTrust, an e-commerce solution that uses finger scanning to secure mobile devices, authenticate network connections, control users' access to network resources and provide an audit trail for non-repudiation purposes.

Hands Up

Hand-geometry systems take three-dimensional measurements of variables such as finger length, distance between joints, shape of knuckles, and even the pattern of blood vessels beneath the skin. They have nothing to do with fingerprints, a point that allays many worries about Big Brother. On the other hand (no pun intended), elderly, arthritic and some disabled users may have difficulty laying their hands flat on a scanner. The measurements are recorded in as few as 9 bytes, enabling storage of many templates on a standalone device. That's good from a cost-per-user standpoint, especially considering hand-geometry readers cost about 10 times more than fingerprint scanners. The 1996 Olympic Games used Recognition Systems Inc. (RSI) HandReaders to control access to the Olympic Village. More than 65,000 visitors were enrolled in the system, which processed 1 million transactions in 28 days.

"We sell to two markets via two channels," says Tracy Timmer, support specialist for RSI, an Ingersoll-Rand subsidiary that controls 65 percent of the hand-geometry market.

"Time and attendance 't&A' systems account for 65 percent of our domestic sales," she explains. "There we sell to large partners such as ADT, Chronos and Simplex, who integrate our technology into their T&A systems. They sell direct and through other resellers." Physical access control, she adds, accounts for the other 35 percent of sales. Here, says Timmer, "things have changed dramatically in the past two years. We now sell through system integrators, as well as through our parent company's direct-sales force."

Internet infrastructure companies are RSI's hottest market these days. "Data centers, server farms, co-location facilities and ASPs all need to visibly show their customers that they take physical security seriously," Timmer notes. The Health Insurance Portability and Accountability Act of 1996 (HIPPA) soon may give a further boost to biometrics—and, specifically, to hand geometry. The federal law mandates sweeping regulations of the privacy, security and administration of health-care information; many of these regulations will be finalized by the end of this year.

"Then, hospitals, clinics and doctors' offices will scramble to cope," says Timmer, who naturally views hand recognition as the right way to control who sees which parts of a patient's record.

In Your Face

Most people get a warm, fuzzy feeling when a human bank teller smiles and says, "Good morning, Mr. Smith. What can I do for you?" But what if an ATM did the same—without smiling? What if it followed up with, "I know what you did last summer?" Arguably the least threatening of biometric technologies—no need to stick a finger or hand into a machine, just stand in front of a camera—face recognition is also the most far-seeing and intimate of them all." Distance is just a matter of 'camera' hardware," says Frances Zelazny, marketing manager of Visionics Inc. The company's Face It Smart CCTV software works with any closed-circuit TV system to locate heads in a video stream, zoom in on facial biometrics such as eyes and cheekbones, capture up to 30,000 faces per database, and find a previously identified face in as little as three seconds. A FaceIt-equipped CCTV system could even follow a given face through a crowd.

The possibilities of that system would thrill George Orwell. But face recognition has other, less ominous advantages, notes Zelazny.

"It's the only biometric technology that provides continuous monitoring," she says. Step away from an unsecured PC and it doesn't know you're gone, if you used any other log-in method. Anyone can slip into your chair and use your machine. But FaceIt continuously looks for you; if you leave, it can lock down the PC. When you return, you don't have to do anything—FaceIT sees you and opens things up again. What if someone peeks over your shoulder? "The system can take any programmable action if a second face appears," says Zelazny, "from ignoring the second face to shutting down.
"Imagine a doctor reading confidential patient records on screen," she continues. "If an unauthorized person came into the room, 'FaceIt' could take immediate action to protect the patient's privacy."

Also imagine not having to wait for that ATM to return your card. Just grab the money and run. Innoventry, a joint venture between Wells Fargo and Cash America International, is testing banking kiosks based on FaceIt in convenience stores and supermarkets. It now has more than a million faces in its database.

Zelazny foresees e-commerce as the next big thing for FaceIt. Face recognition could eliminate nearly all of the tedious data entry that online shoppers now endure for all simple purchases. Face recognition could provide irrefutable proof of who ordered all of those videotapes (on second thought, maybe you want to hide your face).
But few PCs are equipped with video cameras—yet. In November, Visionics agreed to supply IBM with FaceIt-enabled digital cameras to be installed on selected laptops. A Pocket PC version of FaceIt was released last May. In August 1999, Intel selected FaceIt as a component of its "Connected E-Home" concept."We work only through partners," says Zelazny, citing such OEMs as IBM, Polaroid and Printrak International, a subsidiary of Motorola. Shrink-wrapped camera/software products, meanwhile, are available from Keyware Technologies and Safelink to satisfy large-volume enterprise integrators' needs. Software developers can obtain a software development kit based on ActiveX and COM objects.

Let Me Hear You! 

Voice authentication differs from the other biometric technologies discussed here, primarily for three reasons:

First, it relies on behavioral as well as physical characteristics. It's not just the shape of your vocal cords, tongue and lips, but also how you use them that creates a unique voice print. Second, it's the only biometric that can be used at really long distances. And third, it requires no special end-user hardware—just a phoneNuance's Verifier 2.0 voice-authentication software was the breakthrough that Home Shopping Network (HSN) had been waiting for. HSN handles 160,000 shoppers' calls per day. All customers received ID numbers to safeguard their credit card information, but 30 percent of them couldn't remember their PINs when they called again. Those calls had to be taken by live operators who played 20 questions to verify a caller's identity.

With Verifier 2.0 installed, callers simply recite their phone numbers; the software verifies their voice prints and passes authenticated callers to HSN's IVR (interactive voice response) ordering system—which is also a Nuance product. Now only 5 percent of callers must be handled by live operators, saving HSN an estimated $1.9 million per year. >> >> Blocking unauthorized calls is the other side of voice authentication's coin. Companies lose millions of long-distance dollars annually as a result of personal calls made from phones that were not denied long-distance access, and of "phone phreaks" who hack into PBXes and call porn lines in Bangkok. By blocking people instead of lines, Verifier saves money—and doesn't inconvenience the CEO.And an CLECs see this as a value-added service for parents of teenagers? You be the judge.

Nuance sells exclusively through system integrators and software developers. A developer's network, downloadable software development kit and vertical-market applications support Nuance's partners.

Look Into My Eyes 

Patents make perfect. Iridian Technologies owns a global patent on the concept that everyone's iris bears a unique pattern. The firm licenses its technology to system integrators that incorporate it in larger systems.
Iris recognition lacks the Orwellian overtones of face scanning but shares the same non-threatening hands-off approach. Just look into the camera, but first remove your sunglasses. Clear glass, even a clean car window, presents no problems for a camera up to 30 inches away. "We've had no misreads 'false acceptance or rejection' in eight and a half years," notes Lou Sassano, Iridian's VP of sales. Iridian could be a ground-floor opportunity for integrators. "We're exclusively going via the channel now, no more direct sales," he says. At Comdex/Fall 2000, Iridian introduced its Authenticam mass-market product, a $200 5-inch- tall solution for enterprises and consumers. The company just received first-round funding and plans a $6.5 million advertising campaign.

Sassano says the company is looking both for system integrators to embed Iridian technology in total solutions, and for low-margin resellers—ASPs and Web hosts among them—that can employ Authenticam to migrate into profitable service niches. Iridian can scale to millions of users per database, concludes Sassano, and the "price is right" for consumers and small to midsize businesses.

Catch The Wave

Biometrics is just starting to climb the steep side of the classic product life cycle. Potential customers now understand the benefits. The overcrowded vendor field has thinned out, leaving clear-cut technologies and a few strong suppliers. Venture capital is beginning to pour into biometrics, enabling serious marketing and product development efforts.
HIPPA and the Financial Services Modernization Act of 1999 are putting pressure on health-care and financial institutions to adopt privacy and security measures that are well met by biometrics. After all, it never hurts to have Uncle Sam on your side.

And, finally, consumers are growing weary of data entry, they're afraid of identity theft and they're warming up to e-commerce. Taken together, all of those factors should place biometrics high to your "things to learn" list for next year.
Oh, and if you've read this far but still don't know who HAL is, do yourself a favor: Buy Clarke's book or rent the movie. Once you do, you'll never look at your PC, an ATM or your Pod Bay Door (a.k.a. garage door that's opened remotely) the same way again. Feeling spooked? You're not alone. Send your thoughts about biometrics to smartletters@ziffdavis.com.

Fingerprint
Market Share: 34 percent
Vendors: 90
Applications: Law enforcement; civil government; enterprise security; medical and financial transactions
Key Vendor: Identix Inc. (www.identix.com)
Channels: OEM, large integrators, xSPs

Hand Geometry
Market Share: 26 percent
Applications: Time and at ten dance systems, physical access
Key Vendor: Recognition Systems Inc. (www. recogsys.com)
Channels: System integrators, direct sales

Face Recognition
Market Share: 15 percent
Vendors: 12
Applications: trans action authentication; picture ID duplication prevention; surveillance
Key Vendor: Visionics Corp. (www.visionics.com)
Channels: System integrators, direct sales

Voice Authentication
Market Share: 11 percent
Vendors: 32
Applications: security, V-commerce
Key Vendor: Nuance (www.nuance.com)
Channels: System integrators, IVR developers, VARs

Iris Recognition
Market Share: 9 percentVendors: One
Applications: Banking, access control
Key Vendor: Iridian Technologies (www.iridiantech.com)
Channels: System integrators, hardware resellers

Source: International Biometric Group
1999 Biometric Revenue
Total 1999 Revenue: $58.4 million

At first glance, the biometric market is quite small; $58.4 million is hardly enough revenue to keep a small group of integrators loyal. But take a closer look, and you'll see that the actual market is quite large. Revenue is expected to surpass $590 million by 2003, and integrators will make $3 for every $1 that a customer spends on biometric gear. In other words, we're talking about a $1.8 billion services opportunity by 2003. Not too shabby.—Staff Reports