PC Open Inc., a Spokane-based manufacturer of security-related electronic equipment, says its preparing to make its third major move in the last several years to accommodate continued fast-paced growth.


One only needs to walk through PC Opens cramped quarters, east of downtown at 165 S. Pine, to see why its moving soon to a larger facility in Liberty Lake. The companys current, roughly 15,000-square-foot leased building is brimming with equipment, and employees work busily to assemble the specialized digital video recorders (DVRs) it makes and box them up for shipment to cities as far away as Hong Kong and Dubai.


Weve definitely mastered the whole Tetris thing, quips Rick Sheppard, the companys CEO, as he steps through a maze of boxes and electronic equipment. In the video game Tetris, the player constantly attempts to manipulate as many different shaped objects as possible into a box while working frantically against the clock.


PC Open, which now operates under the name PCO, was started in 1998 by Sheppard and Alan Aldous, two Gonzaga graduates, who initially assembled computers in the basement of the house they shared. Since then, the company has grown to employ roughly 50 people, and its looking to hire three more employees currently.


Last year, PCO had revenue of $22 million, Sheppard says. PCOs sales through May of this year are 30 percent higher than in the year-earlier period, and the company expects to finish the year with at least $26 million in revenue. PCOs growth landed it on Inc. Magazines list of the 500 fastest-growing companies in 2006.


In early August, PCO plans to move to a roughly 27,000-square-foot building at 23221 E. Knox, in Liberty Lake. The company bought the building last month and has been doing some remodeling work there. Overall, it will invest $2.4 million in the building. Cornerstone Property Advisors LLC, of Spokane, handled PCOs purchase of the structure, and Wells Fargo Bank financed it.


PCO moved to its current location in 2003 from a 6,000-square-foot building nearby at 328 E. Sprague that it had occupied since 1999. Prior to moving into that building, the company had operated out of a small office space on Spofford Avenue, Sheppard says.


Although the company got its start assembling computers, mostly for local school districts, from standard components made by other companies, it now has shifted its focus almost entirely to making DVRs for use with surveillance cameras for security. PCO still offers support services to school districts here that have large installation bases of its computers, but has stopped promoting its computer manufacturing services.


Its DVRs are similar to the ones used in homes, but can collect images from a larger number of video feeds and records those images on high-capacity storage media included in the devices. They also can burn the images onto a DVD for archiving, and can transmit the images over the Internet or via a companys internal computer network to desktop computers, where they can be viewed and managed by others. PCO customizes the devices based on an end-users needs, then ships them directly to that user in its own packaging or in packaging provided by clients for which it assembles DVRs under contract.


The company sells DVRs under its own brand name, Open Eye, as well as under the name of two giant electronics manufacturers, which Sheppard declines to name due to contractual agreements. The devices retail for between $3,000 and $15,000. The company sold about 6,000 of them last year and expects to sell more than 8,000 this year, Sheppard says.


Sales of products under the Open Eye name make up about a third of PCOs DVR sales, and the company is focusing on growing that part of the business, he says. Under the Open Eye brand, some of PCOs current Spokane-area customers include Allied Fire & Security, Argus Tech Systems, and A-Tec Inc.


Were really satisfied with the contracts we have with the manufacturers, Sheppard says. He adds, though, that the company plans to beef up its Open Eye business.


As a result of a partnership established last fall between PCO and an Australian company, the Spokane concern now also is offering a video analytics technology called computer vision as an optional feature for its DVR devices, he says. The technology enables a computer program to monitor a video stream from a surveillance camera, and to analyze images on the video stream for predetermined alarm criteria, such as loitering or someone crossing an invisible boundary.


The big expectation is that this technology will change our industry by reducing the number of people required to monitor and review video, Sheppard says.


One of the companys clients recently installed DVR devices equipped with the computer vision technology for a public utility in the Seattle area, he says. Currently, PCO offers the product as a bundled package with its DVRs, but in the future, it plans to offer aspects of the technology as part of its standard DVR product, rather than tacking on an additional charge.


Its still taking some time to get going, but our reseller partners have shown a lot of interest, and were aggressively training and selling the market, which you have to do to drive awareness, Sheppard says.


Technology conversion


The company also is working on converting from DVR devices to network-based video recorders, or NVRs. While DVRs digitally compress analog video feeds and store them on a hard-drive, the devices must be located relatively close to the analog surveillance cameras that produce the images. NVRs accept digital video streams and thus can be located anywhere in a computer network, or even in another location that has a high-speed Internet connection. NVRs also can record and replay simultaneously, and recordings on one machine can be remotely viewed by a number of operators across the network.


Within the last year, PCO has hired several developers who are working solely on the conversion, Sheppard says. The company introduced its first NVR device, which can collect images from 32 cameras, in April. It plans to introduce a next-generation NVR, which can collect images from up to 128 cameras, late next year. The company plans to continue offering DVRs until 2011.


Its a big undertaking, he says. The market is slowly transitioning from analog to network-based video technology, and we wanted to make sure we could continue to offer cutting-edge technology.


Three years ago, PC Open formed an affiliated company, called Securgen LLC, to develop NVR technology to be used in computer servers and software in the residential market. Since then, the company has encountered more struggles with getting Securgen off the ground than it had anticipated, Sheppard says.


The technology Securgen LLC developed used Microsofts Vista operating system, which arrived on the market later than anticipated and has been slow to take hold in the market, he says.


The problems and introduction delays with Vista hurt us in the residential security arena we were targeting, Sheppard says. It was a pretty big setback.


Sales of Securgens products make up just 5 percent of PCOs total revenues, he says. The company has reassigned Securgens three employees to other divisions within the company. For now, PCO is focusing on developing NVR equipment for commercial uses, rather than on growing Securgen.


The setback with Securgen notwithstanding, PCO has been riding a wave of heightened demand in the security industry, which has grown at a double-digit rate since 2000, Sheppard says. The company, which Sheppard says has been growing at an even faster clip than the industry, is fortunate to find plenty of qualified people here in the local market to hire.


As the industry grows, though, so does the competition. A surplus of low-cost, low-quality products from China has been flooding the market, Sheppard asserts. While PCO doesnt compete in the low-cost segment of the industry, that trend has been putting price pressure on the entire market, he contends.


Meanwhile, the company must invest continuously in developing new products, such as NVRs, to survive in an ever-evolving industry, he says.


Its a major challenge to stay on the leading edge without bleeding yourself dry, Sheppard says.


One trend that has boosted PCOs international business has been the devaluation of the U.S. dollar against other currencies over the past several years. That shift has made PCOs products cheaper for customers abroad. Exports now make up 25 percent of the companys shipments, compared with about 10 percent a few years ago, Sheppard says. PCO now has significant product installations in every continent except Antarctica. Cities in the Middle East and Asia, such as Dubai and Hong Kong, are particular hot spots, he says.


Its harder to buy components, but now were better able to compete in the world market, Sheppard says.


Contact Emily Brandler at (509) 344-1265 or via e-mail at emilyb@spokanejournal.com.