A: Yeah. 

Q: How interesting! 

A: You are going to see us make significant investments in self-service over time. More than we have to date, because we think it is a market without a technology leader and we think we can be that branded technology leader in self-service. 

While clearly we have a bigger business today in self-checkout and that space, we have a fairly large business in travel and airport check-in with Kinetics. InfoAmerica, we hope, will be the vehicle to drive more success in quick service and deli counter, and Galvanon in health care. You will continue to see us roll up small acquisitions over time to maintain the momentum and pace in that space. We are also organically developing solutions for that market. 

Q: What is your fastest growing area in self-service? 

A: Self-checkout. 

Q: Adequate penetration and….. 

A: I don't know the specifics on penetration, but I can give you my general sense. I think self-checkout, to use a Geoffrey Moore-ism, is "crossing the chasm." It has moved from pilot testing and the ‘we think this is going to work' kind of stuff to ‘it's very real.' It does have great consumer acceptance and it has become almost an expectation of consumers that when you walk into a store there will be the ability to self-checkout. 

Certainly airport check-in is about to do the same thing. I think people think that it has already crossed the chasm. My suggestion is maybe it has, but it just had to fit in. 

Q: It depends on the airport. 

A: It depends on the airport, surely, but there is an awful lot of opportunity in airport check-in and, by the way, many other applications can be developed on that platform beyond just checking yourself into a seat and checking your bags in. 

I would put healthcare and quick-service in the category of pre-chasm. Many people are testing and trying to work out the business model. Does it work? Does it not work? Does it have an ROI? I don't really know the answer to that. The fact of the matter is that we are going to make a lot of bets and some will be right and some won't be right. 

In the past, we have not shown the aptitude to make bets that would have paid off. For example the petrol problem, that shouldn't have been an NCR business. Frankly, we had a solution in that space and we got out of it too early because we didn't have the consternation to stick around from an innovation standpoint. That won't happen under my watch. At the end of the day I would rather take some risks in innovation and stick around a little bit longer for what could be a relatively large payday than break out of the thing a bit too early. And there are many, many, many other markets we'd like to participate in that we are not yet, and get back into some that maybe we let go. 

Q: Such as the photo kiosk market, famously one of the more profitable areas? Media download kiosks? Applications a little bit softer than check-out? Might you be getting into or getting back into any of those in any way? 

A: All of those are under consideration, but we are going to very much prioritize what we do and what we don't do. One thing we have to be careful about, because inside a large company like NCR entrepreneurial efforts can just get killed, is how to separate them and incubate them differently. We also have to organize around other self-service opportunities differently than we do today, to set them free so to speak and to fund them properly. So, the answer is yes to the question, we will look at everything, but the essence of a great strategy is not what you don't do. 

We are also going to prioritize how we spend our dollars, where we put our resources, both sales and R&D, in markets where we think there is a better potential return in self-service. It doesn't mean that we won't circle back if we miss it later on and try re-entry, but we can't be everywhere, and I want to really be careful. I want to take some bets, but not too many. 

Q: Explain self-checkout, though. Where is the height of the adoption rate? Is it in the United States or is it internationally? 

A: It is clearly in the United States but growing in Europe. I just came back from Europe and met with several customers who are looking at self-checkout. In Europe, you will primarily find that they have been well ahead in the area of self-scanning aisles rather than self-checkout in an assisted or unassisted lane. 

In the U.S., you are seeing mass rollouts today at Home Depot, Lowes and Wal-mart. I'd say Europe is getting better. It's building in Europe, and we'll see where it takes us. I've been encouraged by the outlook there and in Asia. I'm really hopeful that China and India will one day turn out to be as big a market opportunity as the U.S. and Europe. 

Q: Common-use self-service, airports, travel, hospitality: Talk about your feelings of that burgeoning movement toward getting away from proprietary airport kiosks — ones dedicated to the whole facility and hotels, etc. 

A: I am all for standards. I am all for multipurpose kiosks, because I think the goal of our company needs to be as a software platform that interfaces with anybody's hardware platform. If there was one particular goal I'd have, it's to be the operating system for self-service. 

Q: What is the demographic? If you look at checkout and airport security, have there been any surprises from the demographics? 

A: No, it is what you would expect. You know, the 18-34 crowd certainly tends to be the largest users of self-service technology; however, the one big difference is in airports. Business travelers over 34 use the technology as aggressively as the younger demographic does. 

Overall I think in any technology-adoption, the demographic is what you expect when coming into a new market, and it widens and grows over time based on acceptance, which is what happens with self-checkout. 

Q: I heard early in the self-checkout evolution that seniors are actually surprisingly high. 

A: They were surprisingly high based on expectations, but even still today you will find that seniors will still be more likely to move to an assisted lane than a self-checkout one. That doesn't mean they don't use it, some actually love it. Our goal over time would be to make (self-checkout) easier and simpler and (I also think it is a matter of time) like the ATM. 

Q: Let me ask you about the retail banking/betting. What are the characteristics of bank-branch networks that are going to be most interested in the self-service approach? 

A: I think every bank regardless of type must have a self-service strategy going forward. I think so because the movement towards off-premise, particularly partnering with retail, is very real and it is going to happen at a more accelerated rate over the next several years. I think regardless of what type of bank you are, there is a huge opportunity to extend your enterprise very inexpensively with the use of somebody else's footprint, to drive more traffic to your bank. Not necessarily for transaction revenue, although I am sure that's attractive, but more so to drive more customers to use your other services in the bank. 

Q: I probably asked the wrong question, but that was a great answer. If we think about the branch member, and we think about remote check-capture, we are looking at another phenomenon where there is going to be a net loss of people coming to the branch. So, I was thinking about self-service installations in the branch, and we are talking about extending the footprint. 

A: OK, so of course this is a big difference for us. While I think that banks will continue to figure out how to move low-value and relatively high-cost transactions, and extend them out to other devices, I do think that the key is then ‘what do you do in a branch?' I'm always looking for new innovations in a branch. There is a definite movement, and there will continue to be a movement, for off-premise capabilities for low-value, high-cost transactions that are not less important to a bank, but that will give the bank an opportunity to do any variety of things. 

Some banks will choose to shut down branches and will choose to get the cost-structure benefit from having fewer branches, but more impact-full service when you walk into a branch. I don't know whether that is the right strategy or not. Some banks, I think, will just convert the talent base, but the capability/competency of people is an issue. I don't know if you can turn a teller into a salesperson, but at the end of the day I think they are going to transition to more of a retail store for financial products. 

Q: I'm thinking about your self-service strategy and I'm thinking for banks there has to be some sort of focus for how much self-service is off-premise. So I am just trying to understand to what extent the self-service focuses off-premise to on-premise. 

A: There is no doubt in my mind that a bank needs to have on-premise self-service solutions because changing human behavior is often times the biggest impediment to technology growth. And changing human behavior is the hardest thing you can possibly do. 

People will continue to walk into a branch for many years to come to do a payment transaction, a deposit transaction, all sorts of low-value/high-cost transactions. What you would want to do then is in the branch have someone on duty to direct them to this technology.Q: One of the things that strikes me about you is you have an almost missionary zeal. Did you have kind of a "Road to Damascus" moment when the light bulb went on for you and this was a revelation that you needed to aim for dominance in self-service? A: [It was] during the interview process, when I was interviewing for this job, over a year ago now. I always knew NCR. Man, NCR has been around 120 years. I knew who they were when they called for the job, you know. I started to do my own due diligence on the job, and obviously before you take any job like this, you better know whether or not there is a potential to grow by innovation and vision.

I've always loved the Teradata business [NCR's data warehousing division] as an operator. You can't not love anything that drops 22 percent to the bottom line, and as a software business it's hard not to love that business … but it's not a very large business in the grand scheme of things. How much can that grow and how fast can that grow. You know, can it carry the rest of the company and of course the answer is no to all of those things, right?

Now, I have been in retail a long time and in financial services, which is where I grew up, so I have lots of contacts in that space—and I called customers, and what I got from them, and where the passion and evangelism comes from is, they're sitting back and telling me, you're missing the boat. You guys are not listening to us. This is what we want, this is what we need, this is where we want to go. We want to go there with you. We want to go there with somebody. People aren't listening. Nobody, Bill, is taking the banner of self-service and making it their own as a tech company.

Then, as I dug into the company back to the operational piece, I saw that we were not optimized to really go after this market, so we were sub-optimized in some ways, and then I looked at the balance sheet and I saw we had nearly a billion dollars in cash, and that got me a little excited, and we have an appetite to spend it. I talked to the board. And the board was very much in sync. When you are going through an interview process, they want to know, where is this new guy going to take this thing, right We want to make sure you are going to take it where we want to go.

I was very clear to the board from day one that the two markets that I wanted to go and take by storm were enterprise data warehousing and self-service, and oh, by the way, I think there is an alignment between those two things.

A: It is. It's also fairly stressful. You don't want to screw this up, to be honest with you. 

That doesn't mean success, though. It does not mean success because in a company like ours the headwinds you face when you shift from the strategy of the past to the strategy of the future, to be frank with you, are capability and capacity. Are the right people there to shift from this set of core skills to those sets of core skills? Can they be retrained? Will they become antibodies to change and maliciously compliant to change because they don't have the skills? They don't know that is where we were and this is where we are going. I mean, you can't predict what is gong to happen macro-economically, geo-politically that can just shut you down or at least slow you down. So you've got those unpredictable headwinds. And then you have cultural-change headwinds. 

We were very much a technology-out company, and while we need to continue to be very innovative and deliver great technology we need to be more of a customer-in kind of company. You have to listen very well. You have to transform the company into much more of a customer-led, customer-focus, customer-driven company. And that's another set of headwinds that we are going to be faced with. 

The last bit of headwinds we have is our internal capacity to build a competitive cost structure. You know, you would think that NCR, at 28,000 people and around 120 years, would be very process-rich, but it is quite the opposite. Our supply chain is largely inefficient and largely unproductive. Our worldwide customer-services delivery capability is also too high-cost without the kind of quality we need. And our quote-to-cash processes internally in the company are very expensive and very mundane. It has cost me $65 million a year, and what I get for it is lower self-productivity and less customer satisfaction because we can't seem to get an invoice right. So at the end of the day you have internal operation issues, which have to be understood. 

The good news is that all my competitors have the same issues. They are no better than we are, and in certain circumstances we may be better than they are. That is not a birthright, to sustain competitive events in the future. So you have to sort out very quickly what you don't do, and what you do do, and then you have to communicate with mind-numbing consistency inside the company what it exactly is you're going to do, and you have to get people not just neck-up intellectually, to buy in to where you're going. Boy, they have to know what is in it for them, and that takes time. That's not something that is simple, and unless you are willing to go through that process, companies like NCR won't transform into what we could be and will fail. 

So there are lots of headwinds and risks, but at the same time, I think there is the right layering of support and focus, and you need that as an ante in the game to get there from here. It's brutally honest, but I am trying to give you a real honest perspective. 

Q: Can we talk about the growth of your customer segment? Who are the faster growing? Which are the faster growing segments? 

A: The fastest growing segment in the company is other self-service outside of ATM, self-checkout being the fastest today, at any kind of revenue volume. I can say airport check-in is the fastest growing business, but you are talking about service vs. revenue and I want to be more specific with you. Other self-service outside of the financial/ATM space is the fastest grower. The second fastest grower is Teradata inside the company, and the third fastest grower if we can say it, hopefully the achiever, is the ATM business, and the rest isn't growing. It is mostly declining. 

Because the ATM market is also largely a replacement market, there are some years where you are experiencing growth because many banks are replacing ATMs, and there are some years where you will be down. All in all, it is a relatively flat kind of market. The thing that will transform, that we hope will transform, and we're going to use to drive the ATM market, is putting more applications on these devices and transforming them into self-service kiosks and not just cash-dispensers and deposit boxes. 

Q: Is anyone doing that yet? 

A: You would be surprised. There are lots of customers in the financial-services space moving into the realm of personalization. This is what I would consider to be an early day's innovation and other application: You coming up to a machine, swiping your card, and it knowing it's you. The ATM largely personalized for you. 

A second application is creating a real-time marketing offer for you on the machine. Or informing you, to create stickiness with you, of an event, so you now walk up to that machine, and it says, "Denise would you like your usual $200 transaction? Press yes." You press yes and don't get a receipt because you have already pre-programmed it for that. And then a message comes up, "Denise did you know your certificate of deposit is going to mature on that date?" or "Denise we recognize that you were interested most recently in car loans based on your activity on the Web or the call center. Would you like to print out more information about a special on car loans?" So on and so forth. 

Q: They are very nice for doing top-ups for credit cards. 

A: OK, you look at the U.K., and they are doing mobile top-ups. They are doing the utility payments/bill-pay. They are doing all sorts of other transactions. We have many customers doing new transactions like that. Mobile-phone top-up is a big application today. Bill-pay on kiosks is a big application today. Verizon and certainly Sprint are two of our largest customers that do bill-pay now. Over a billion dollars each year in revenue goes through our machines. 

Q: Now, are these at the bank again, or are they at the 7-11s? 

A: They are through a classic NCR self-service kiosk that is specific for bill-pay. It doesn't do cash dispense, it doesn't do deposit, it doesn't do what the Vcom thing at 7-11 does. We also, of course, have customers like 7-11s and others that do money-transfers, that do all sorts of ticketing applications, etc. So you're seeing them, but the mass volume of these applications is not there yet. People are dabbing their toes in the water, particularly in the U.S. 

The U.S. is still 80-percent cash dispense. Simple mundane cash dispense, whereas overseas, in Asia and Europe, it's a little bit different. They are moving more quickly with newer applications. In the U.S. my customer meetings recently have led me to believe there is an absolute desire on the part of banks to look at multi-purpose or multi-application kiosks now as opposed to just cash dispense and deposit. But after deposit, get the deposit done, get it done right, get these transactions out of my branch onto a machine, and we'll start discussing the next wave of applications and we'll start discussing them in a way that they are relevant by geography. This is the interesting thing about applications: They are very geographically sensitive. 

A large bank in Europe recently said to me, "Hey, you know we'd like to do MTA subway card top-up." Now you would only do that where you have subways in your city. You wouldn't do that in other cities or other states. That was interesting to them. They go to New York and there is the MTA card and it takes you time to stand in line, to go get that thing refreshed, regenerated. So they said, "Why can't we do that in partnership with MTA on one of our machines, just swipe it and $24 for your subway thing?" So that's one unique application or one example of a geographically proximate application. 

So what you are going to see in the future are applications that are developing based on customer need by geography, or by demographic segment. 

Q: You did not mention, relative to your hopes for ATM growth, the acquisition of Tidel and perhaps doing more or better with the ISOs. How does that play into your expectations? 

A: Pretty good. I haven't mentioned it because I am a relative pragmatist when it comes to operational traction and it is a relatively small business today that has potential. Whether it takes off or not, I don't know. 

Now we are putting a lot of energy into building an indirect channel around Tidel as opposed to an expensive sales force that's direct in nature selling it. And I'm hopeful that it will rival that of a Tranax or a Triton. You know, Triton does a big business by the way. That market today is about $250 million a year, of which we do a very small percentage. So while it offers growth to us, I'd like to make sure we have the right channel play. 

Now where it does help is with the ISOs, of course. Most importantly, it helps us in turnaround on the manufacturing side. Because it is a lower cost platform, it's a different product. If we could get that product built and/or get that product streamlined, it also might help us in India and China, where cash dispenser, per se, down and dirty cash dispensers, will be the rule of the day in rural communities. And so I am also interested in helping us in that vein longer term, where price-sensitive environments like China and India become more of an opportunity. 

Q: You said you're looking for growth in deposit-automation, which should come from financial institutions. What are you going to do to get financial institutions increasingly focused on deposit-automation? 

A: Yeah, I have to tell you deposit-automation is a year away from significant, potentially significant revenue uptakes for all of the companies that participated in this space. Every bank is looking at deposit-automation or piloting deposit-automation today, and it's just a matter of time. What's holding back deposit-automation isn't the capability of the ATM at the present time, it's the back office application that is required to do deposit-automation in the data center. They're much more complex. That is the key that is holding back deposit-automation. 

I have to tell you our pipeline for deposit is growing and our customer's interest for deposit is growing. I think it is one of these technologies that every bank is going to have a substantial portion of their estate deposit-capable, and I think in five years every ATM will be deposit-automation capable. So I believe in it as a growth opportunity for all of us in the market because of the impact it has on a bank. 2007 and 2008 will be the big years for deposit-automation. 

Q: You said in five years, "every ATM will be deposit" … 

A: I think in five years most ATMs will be deposit-automation capable. I say most because I don't think the lower-end Tidels, Tritons or Tranaxes will be deposit-automation. I'm talking about in the larger banks then. I think most of them will be deposit-automation capable. So it's going to be very mass marketed. 

Q: You said in just an aside that the data-mining, and all the applications required are going to require data storage. Who is sufficiently focused on that? 

A: Again, my customer feedback on this is strong. All of them, without question, understand that the ability to do personalization, the ability to do marketing offers, the ability to create relationships with customers require them to have an enterprise data warehouse capability on the back-end of those front-end systems. And they would like for that system itself to be very much a closed-loop, self-learning system. Whether it is the ATM channel, the Internet channel, the Web call-center channel or the store channel, I think enterprise data warehousing is going to be dramatically affected by this whole movement towards personalization and creating greater customer intimacy with bank investors. It's a must. 

Q: So you expect that in terms of spending? 

A: Yes, yes. Interestingly, it may slow things down a little bit vs. speed them up. It's the back-end that is always harder to do than the front-end. But that's OK because I think for us we are on both sides of that ship. We're the only vendor in tech, the only high-tech company, that has front-end point-of-sale systems, ATMs, and self-service kiosks. 

Q: I'm smiling because do you think your customers would be surprised to hear you describe NCR as a high-tech company?