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Houston Business Journal - by Denise Culver
A small Houston company is making a bid to put its stamp on a giant U.S. postal industry dominated by a handful of players.
E-Stamp Corp. has attracted widespread attention with a new type of product to rival the standard postage meter. The E-stamp device is a one-stop computerized postal machine capable of weighing, stamping, coding and addressing outgoing mail in a single operation.
Company President Sunir Kapoor says the E-Stamp system, which consists of software, hardware and an Internet link, is in the final stages of testing and is expected to hit the market in the fourth quarter of 1996.
Kapoor claims that E-Stamp has the potential to bring postal service into the 21st century.
"We've created a system that will revolutionize one of the last archaic business practices still in use," he says. "The USPS (U.S. Postal Service) has changed very little since the 19th Century. Our system would change the way the entire system operates."
Sandra Harding, a spokeswoman for the Postal Service in Washington, D.C., confirms that the agency is anxious to see the final E-Stamp product. If the system works, she agrees, it could overhaul the way the Postal Service currently operates.
"If we approved the system, we would essentially have to change the way we do business," Harding says. "It would mean retraining employees and basically changing a system that has seen very little change for 200 years."
The company plans to have its final product to the USPS by mid-August, where it will undergo a series of tests and evaluations.
In addition to automating the mailing process, the E-Stamp product also has safeguards to protect against fraud, improving its chances for success. The USPS is currently in the process of decertifying more than half of the postage metering machines now in use. An estimated 750,000 machines are being recalled for security reasons.
"As of June 1, people no longer could purchase mechanical metering machines," Harding explains. "We have experienced problems with fraudulent use of those machines, so we're basically taking them off the market. And by 1999, all of the mechanical metering machines in use -- about 750,000 -- will be decertified. That will leave a void that needs to be filled."
Kapoor is betting E-Stamp can do just that. The system's software is designed for Windows 3.1, Windows 95 and Windows NT and is fully integrated with many word processing, database and personal information management applications.
E-Stamp tracks the amount of postage a user purchases and spends, and postage can be bought through credit cards, bank withdrawals or via an Internet site. The machine can compute weight, calculate postage, look up and print addresses stored on an internal CD-ROM database complete with ZIP+4, bar coding and postmark information.
But E-Stamp's security features may be the trump card that ultimately determines the product's acceptance and success.
"Traditional postage meters have a way of getting lost or stolen, and the metering devices are not secure," says Kapoor. "In fact, it's quite easy to illicitly change the amount of postage remaining in a traditional meter without paying for that postage. Another problem is that anyone can copy the current indicia printed by traditional postage meters. So the USPS is recalling the machines and has instructed the manufacturers to create more secure indicia."
Each E-Stamp has an individual serial number that electronically prevents software sharing and can be used to track down stolen machines. In addition, the markings -- called indicia -- used in place of stamps are coded with individual information for each piece of correspondence mailed, making them virtually impossible to copy.
E-Stamp Corp. was formed in 1994 as Post N Mail, and the fledgling company already has raised more than $5 million in two rounds of investment funding. The company boasts an impressive board of directors that includes John Duncan, a director of Enron Corp. and Texas Commerce Bank; Derry Kabcenell, executive vice president of Oracle Corp.; Alfredo Brener, president of American Breco Corp.; and Perry Waughtal, former vice chairman and chief financial officer of Gerald Hines Interests.
The company has yet to come up with a price for E-Stamp, but Kapoor expects it to be under $400 per year, which will include an annual fee for updating the database and upgrading the software. That would be significantly less than the standard postage meters currently on the market.
E-Stamp faces stiff competition in an industry controlled by a small number of large corporations. Pitney Bowes, the industry leader, sold an estimated 40,000 postage meter machines in 1995.
Kapoor says the company will compete by focusing on small and medium-sized businesses, which have traditionally been overlooked in the postage meter market.
"If you consider that there are 6.5 million small businesses in the United States, and you take into account that there are only 1.4 million companies -- both large and small -- with postage meter machines, it's easy to see that there is a severe underpenetration of the market," says Kapoor.
Denise Culver is a Houston-area freelance writer.
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