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John Murphy on how Illunis has become a major player in the custom market.

If you can find, off the shelf, a camera that does what you want it to do, then Illunis would urge you to buy it. If you have some special requirement that you can’t find anywhere, and you don’t even know if it’s possible to put all that in the confined space you have available in your jet fighter or production line – well that is the kind of project that interests them. They will not match the price of a mass-produced camera, but what they do is custom design, based on standard hardware modules; everything else is outsourced. So they can be very aggressive on the price of that custom camera, even if you only want 20 of them.

This small and lean outfit from the Midwest of the US has grown up over the past seven years to become a major player in the custom market. It has developed a strong relationship with Kodak, to the extent that it has a camera ready to go as soon as the latest sensor comes off the production line.

Illunis was founded in 2000 by four engineers near the twin cities of Minneapolis and St Paul’s in Minnesota. The four founders – David Krekelberg, Eric Koester, Scott Elhardt and Hod Irvine – were previously involved in a high-end video product company called iRez, which made video and capture cards for laptop computers. They never managed to make money at it, mainly because they did not really have the capital to roll out internationally and were faced with severe competition from countries with low labour costs. All four had backgrounds in the big electronics companies in the area, such as Honeywell, Sperry, and Control Data.

One of the last projects that iRez did was a 1k by 1k video camera for a local film-scanning business. It worked out very well, and Elhardt and Krekelberg decided that there was a good market for high-end, specialised video cameras. They decided to close iRez, but started working on a product line for the high-end video camera business. The product line came together and they found a launch customer – a local company that made forensic standard fingerprint scanners for people like the FBI database. So they decided to start afresh with Illunis.

Elhardt says: ‘The company was having trouble with the commercial camera that it was buying and it was at the point that it was ready to commit to a custom camera development, so we all quit our jobs and formed Illunis. The range of megapixel cameras at the time was very limited, but the main driver for us was the emergence of the CameraLink standard, which made it easier for a smaller company to make something.

‘The other factor was the development of the Kodak Interline range of sensors that did not require a shutter. People were able to solve a lot of problems. We were able to produce a camera that was in a two-inch cube.’

The relationship with Kodak was crucial to the development of Illunis, in a market that is dominated by cameras using Sony sensors. Elhardt says: ‘We really would be a nuisance business to Sony. To this day, its sensors are difficult to obtain. We are very technically competent and we don’t need any technical support, yet it’s difficult to source purchase. The lead-time is 16 weeks to half a year, and, unless you need millions of units, they are not very interested in talking to you. When you are trying to found a company around something, you need to do it around a technology that is available to you and that people want. We did not set out to create a Kodak product line, but that is what people are asking for. There are some significant differences; Sony has better smear characteristics, but the Kodak sensor is faster and has more read- outs. It’s not really a comparison between apples and apples.’


From left: Hod Irvine, Scott Elhardt, Eric Koester and David Krekelberg

The Illunis product line is designed to be very modular, with each camera having at least two of the three boards reused. Typically, the difference between one camera and another is the sensor board and the firmware.

Elhardt says: ‘We decided that we would specialise in making something that was unique; something that would fit in a certain space or that had some custom features. We did not want to capitalise or have a worldwide sales force. Probably what we were best at was development and iteration. We wanted to line up with a few OEMs who would take some volume. We have been successful in certain markets, starting in biotechnology and aerial imaging, and we have gone on to work in other areas such as military.

‘If you are a company that outsources everything, like we do, then you can look at a 20-piece opportunity that is a custom-build, and say we have enough modularity. It means it’s not a huge development, so why not put these folks into production? We spent zero dollars on advertising up until about 18 months ago, and we had no shortage of customers. Our business has grown every year since 2000 and, about 18 months ago, we decided we had some extra bandwidth, so we have been doing a bit more marketing, such as trade show attendance and advertising. We now have a vice president of sales and marketing, Terry Guy from Kodak.

‘We are still running a non-classic model, where we sell direct in the US and through representation overseas. We are still concentrating on custom business through OEMs. We do get some end-user enquiries and we tend to send them to our competitors.’

The company has amassed a library of features that have been developed for customer requirements and are available for reuse. Many of these were developed for demanding military applications and the components used, although commercial standards were chosen to meet military requirements. Elhardt says that this had led to many approaches from industrial customers who need a camera for hostile environments in terms of vibration and temperature range. The harsh environment market is a bit more crowded than it used to be, but Elhardt believes that the key advantage Illunis has is not requiring a huge order to justify a custom development.

He says: ‘If you are a large-infrastructure company, your business model is “build it once and use it many”, and that is not us. We have chosen a market where the requirement is for hundreds of units that are unique. The impact of doing a few hundred is not great to us; we just look at whether the development work that we need to do is matched by the upside. If the business case lines up, then we do it.’

He says the lean and mean structure of the company means that the price of a custom camera can often be half what a larger company would charge. Almost everything is outsourced. The manufacturing company does everything from purchasing to repairs and Illunis has access to its economies of scale.

He says: ‘We can be very aggressive on price in the markets where price is important, but also we can take a broader view of an order for five pieces in the military market because we can see commercial applications.’ Beyond the founders, there have only been four additional employees, although the company has plans to expand its engineering capacity. While this keeps overheads down, it has the disadvantage of making the company look like a ‘mom and pop shop’.

Elhardt says: ‘One of the smartest things we ever did is concentrate on what we are good at and let other people do what they are good at. This company is closer to the plan than anything I have ever been involved with in my professional career. We have a very scaleable business model. Everybody here is a renaissance person who can do many things, a bit of hardware and a bit of software. These people are very hard to find but when you see one you know it. When we recruit someone it’s usually because we know them from another experience.

‘I guess our competitors like to characterise us as mom and pop, but I have had the development teams from the largest companies in my office. They have audited us by the best in the business and we always come out OK. In fact, we are not as small as you might think we are when compared to the custom development capacity of other companies. In terms of the production volume, and the number of sensors we buy from Kodak, we actually stack up against the top three in the business.’

The relationship with Kodak is very close and Illunis often receives referrals from the company. It has technical input into Kodak’s development plans and is one of the first companies to get new sensors as soon as they come off the production line. The relationship is obviously important to Kodak, as it needs technically competent designers to create products with its sensors inside.

Elhardt says: ‘They share their road map with us annually and we share our road map with them. We also share the voice of the customer with them, because we have industries asking us for performance improvement, which we then pass on. I think it was a good decision for them to help us get going. Their system of doing business also helps us; for example, their availability is 30 days, which allows us to quote short lead-times without carrying a lot of stock.’

A distinct advantage to the company’s lean structure is the very short line of communication. The same person who was talking to Kodak last week is talking to a customer this week rather than expecting customers to navigate through a corporate structure. Elhardt says: ‘When you call in here, the phone is answered by one of the designers. The bid and proposal process is much quicker and the integration and problem resolution is much quicker because you are not an application engineer away who might have to go and talk to the designers. You are also talking to a guy who knows the business case. We do have processes, but they are very short. We do have specific responsibilities between the partners and we have a weekly meeting to discuss things, but we can also make decisions over the desk.

‘Our strong suit is development and iteration. There are a lot of places where they concentrate on iterating once. We try to make something that is 98 per cent there that you can start working with, and we tweak it until we have something that is ready to go into production. It lines up well. Dave is a brilliant designer and I am good at taking his designs and turning it into a product. Speed to market is critical to people, and there is never enough time.’

The latest development of the product line is to add Gigabit Ethernet and Elhardt says there is a lot of interest from customers who are ordering evaluation units to see exactly what they can do with it. He says there are still a lot of questions around about whether RJ45 can survive in harsh environments, but he points out that when the company was founded Camera Link was a new standard, which took time to evolve. He believes that the cost advantages mean that nobody can afford to ignore GigE, and the long hauls it can handle will open up opportunities where space is a major problem.

The current owners of the company are quite content with the rate of organic growth and see no reason to force the pace by attracting outside investors. They are also content to be the kind of company they like to work for, where the technology is important.

Elhardt says: ‘We are typically at the cutting edge of what is possible with the technology. When Kodak ships us a new sensor, we ship an image back to them the same day because we have hardware waiting for it. We always have the next generation camera on the drawing board, and we are constantly coming up with new features. You would not do this unless you were an enthusiast for the technology. We are technology junkies. We love the challenge of the market and that fuels a lot of what we set out to do as a company; we love problem solving. In the custom market, you can get someone to pay you to do something you would want to do anyway.’

The key to growth over the short term is to develop representation in Europe. So far it has tended to wait for distributors to get in touch, but Terry Guy’s brief has been to take a hard look at the distribution channel and look for new opportunities and coverage in other territories.

Elhardt says: ‘The distributors have to be the right kind of partners who are not just interested in selling a boxed product. They have to be savvy enough to know that there are people out there who need solutions and that will put us in touch with them. We need the first line of defence to be them; we are there to back them up, but they need to be competent enough to handle calls when the phone rings when we are asleep.’