(FORTUNE Magazine) – I remember when my father brought home his first Polaroid instant camera. It was a thrill when he snapped a picture and pulled out the film. The kids would fight over who got to hold the film's covering while it developed. We'd time 60 seconds, rip off the cover of the pack, and watch the picture emerge before our eyes.

One thing I have absolutely loved about spending the past 15 years involved in the computer industry is how often I've been able to feel that kind of thrill. Spreadsheets. Desktop publishing. Electronic mail. Web browsing. Just to mention four big ones.

It's happening again, with digital photography, which is about a lot more than the ability to see a snapshot develop right after you've snapped it. This is about an entire image production, manipulation, and display system that resides in your computer. In terms of the photo industry, this is a really big deal. To be completely honest, digital photographs will eliminate the need for photo processing, a multibillion-dollar business, and will change the way people buy cameras, since how a camera integrates with a PC will be more important than which Japanese company has mastered the industrial art of grinding lenses.

I'm getting ahead of myself. The thrill of computing comes whenever the industry figures out how to replace an entire analog system. The spreadsheet was a thrill when the developers of VisiCalc combined their software with an Apple II computer to create a viable alternative to the old pencil-paper-calculator way of doing business analysis. Desktop publishing became a thrill when the developers of PageMaker combined their software with the Macintosh and the LaserWriter printer. Web browsing became a serious thrill when the developers of Mosaic used Tim Berners-Lee's document format and the physical network developed for the U.S. government to create an easy way to view documents on the Internet.

People in the computer industry have been talking about digital photography for years, even before Apple introduced the first digital camera for consumers, the QuickTake 100, early in 1994. A digital camera was but a first step toward profound change. What was needed was a system of products that could work together to help us take, store, manage, and display pictures, both on PCs and in familiar snapshot form. That system has finally come together, with the recent introduction of the Hewlett-Packard PhotoSmart printer. The system has five basic components:

--Digital camera. Apple introduced the first for consumers, and Kodak introduced the first for professionals. They have now been joined by virtually every camera vendor and consumer electronics company, as well as Hewlett-Packard. A digital camera is essentially a little computer. Instead of film, it has memory; instead of sending in film for processing, you copy the pictures you want onto your computer's hard disk, which can hold a lot more pictures than the camera. I bought Nikon's Coolpix 100, because it has a built-in PC Card interface that lets me plug the camera directly into my computer and see the pictures I just took. Picture quality varies from camera to camera--none is quite as good as a regular camera yet.

--Scanner. Since we've been taking pictures with film cameras all our lives, we need a way to convert existing photos to digital form. By concentrating on photos, a little company called Storm Software in Mountain View, Cal., cracked this nut two years ago. Plenty of companies had built scanners, but they were designed for documents, not photos. Storm introduced a device it now calls the EasyPhoto Reader, which converts a regular three-by-five-inch or four-by-six-inch snapshot into a digital form that you can store on your PC. After two years of using it, I can say this thing is idiot-proof. Storm has since developed another scanner called PhotoDrive, which can be installed inside a computer like a disk drive. It comes pre-installed on some Hewlett-Packard PCs.

--Printer. Epson's Stylus Color was the first reasonably cheap printer that could print photographs. Epson, ALPS, Hewlett-Packard, and other printer makers all now offer upgraded machines that can print photo-quality images on regular paper. And then HP changed the game completely, by introducing the PhotoSmart Printer, which prints snapshots on glossy photo paper. Photos printed on the PhotoSmart from today's digital cameras and scanners look pretty darn close to the snapshots you get back when you leave your film at the local drugstore.

Unfortunately, Hewlett-Packard's novel idea is compromised by some major problems. The company couldn't bring itself to make a printer small enough to print snapshots, so the PhotoSmart uses 8.5-by-11-inch paper. I know almost nobody who takes pictures good enough to deserve that much space. What's more, the paper is expensive, and the printer is very large--too large to be the second printer in most homes. And since it also prints on plain paper, salespeople in stores don't understand how to sell the PhotoSmart and tend to recommend less expensive products. In other words, HP has yet to turn its really good idea into a really good product. Once some company figures out how to make a real photo printer (a small one that's cheap to buy and operate), we will finally have a usable digital photography system.

The very idea that you can easily manage your snapshots all by yourself is compelling. Just think: After you spend a sufficient amount of money (at today's prices, about $2,000 for a computer system, $400 for a digital camera, and $400 for a photo printer), you can use the computer to do everything you ever cared about doing with pictures--taking them, keeping track of them, showing them to family and friends, assembling them in albums.

In return, you get some major advantages. Forget negatives. Forget trying to match negatives to prints. Forget making double prints. Forget that little black-and-yellow slip of paper that lets you pick up your film. Forget spending $5 for film and $10 for processing for every 24 pictures. (Indeed, simple math shows that you can pay for the extra computer stuff--assuming you already have a computer--in three years if you typically shoot two rolls of film a month.)

But what makes this really compelling is that it lets you go way beyond what you already do with pictures. The future comes in two parts: editing your photos to make them better (or funnier or more interesting or cuter or whatever) and using the Wonderful World Wide Web to show them to other people.

--Editing. Software developers have known for years that there is money to be made creating programs to edit pictures, even though printing them out has been expensive and problematic until recently. Adobe Systems has turned PhotoShop into a program that serves professional photo editors and graphic artists. Now there is a slew of programs designed to enable normal people to tweak their photos at home, with names likes Picture It, PictureWorks, Live Picture, and PhotoImpact. Even Adobe offers a program simpler than PhotoShop, called PhotoDeluxe. The most amazing feature of all these programs is "Red Eye," which lets you remove the red eyes from all those snapshots you've taken over the years where the flash has turned people's eyes into those of wicked devils. You can also edit out scratches--or unwanted in-laws and former spouses.

--Digital photo album. The most compelling part of digital photography is the idea of showing pictures to people wherever they are, as long as they are in front of a computer connected to the Web. Sit down at your PC, fire up your Web browser, and go to right now. There you'll find photos of several of my venture capital partners in our Menlo Park, Cal., office, displayed in a digital album created and stored by a little Sunnyvale, Cal., company called Pictra.

Pictra sells a very cool $50 program called Pictra Album, which lets you assemble photos in a digital album that you can then send to Pictra's Website for others to look at, either publicly or privately with a password you select. In a matter of minutes, I took the pictures you see at Pictranet with my digital camera, transferred them to my computer, assembled them into an album, and published the album as you see it. (Another company, NewSoft, has a program called Presto! PhotoAlbum that lets you assemble albums but does not offer a Website for posting. Several photo-editing programs can also help you compose albums.)

Even though Pictra released its software only in May, hundreds of people have discovered its site and posted photo albums. Wander around. Check out their albums. And think about the way you take photos. You'll begin to see why this idea of digital photographs is compelling, so much so that people will search it out even if it's not quite ready for prime time.

Sort of reminds me of when my father would try to stick those Polaroid snapshots into photo albums. They never fit because they were a different size than regularly processed photographs, so he went and got albums designed to hold Polaroid snapshots. If an idea is thrilling enough, people will go to great lengths to make it work.


STEWART ALSOP is a partner with New Enterprise Associates, a venture capital firm. Neither he nor his partnership has financial interests in the companies mentioned. Alsop may be reached at