Tuesday, September 09, 2014

What Ray Rice & Donald Sterling can Tell Us about the Future of Capture

For those of you who attended the Harvey Spencer Associates (HSA) Capture Conference last week, you got to see a cool presentation by HP Autonomy's Christopher Surdak on doing automated capture from video files. Examples that Surdak presented included matching license plate numbers with car models to protect against stolen vehicles and analyzing faces taken on video at airports for matches against dangerous persons databases.These aren't exactly examples of the transaction-oriented capture that HSA typically focuses on, but you can see where it could lead. Harvey likes to give the example of being able to take a video of a car engine that is not working right, and sending that video to the cloud - where analysis is done and then the user is sent a list of parts that they can order to fix the problem.

In DIR's annual news review and predictions presentation, I offered my opinion that as millennials and born digitals take over the workforce and smart phones and other computers continue to advance, videos and photos are going to become increasingly important to conducting business. Traditional documents are destined to become so yesterday.

A recent sports news story helps bring the point home about how much more powerful video cam be as a means of communication than traditional text. Many of you have by now surely heard the story of Ray Rice, the Baltimore Ravens running back that has been driven out of football due to his being caught beating up his fiancee this past offseason. Here's the timeline:
  • Story comes out about Rice beating up girlfriend/fiancee. 
  • Rice gets suspended for two games.
  • People get up in arms about the light punishment and NFL commissioner Roger Goodell stiffens NFL's domestic abuse policy - but nothing more happens to Rice
  • Video comes out showing what Rice admitted to
  • Rice's team (Baltimore Ravens) terminate his contract and league suspends him indefinitely
 From this ESPN story on the Rice incident: "The source said that Rice admitted to the Ravens from the start that he was guilty of striking Janay and, for the most part, accurately described what they eventually saw on the video. But the brutality of the assault when seen on the security video made a different impression."

So, basically, until everybody actually saw what Rice was doing, the full impact of the event was not realized. As a text-oriented guy, this kind of disturbs me, because I really wasn't surprised by the video and had a hard time believing many people are just now becoming outraged with Rice's behavior. But then again, we had a similar situation with Los Angeles Clippers owner Donald Sterling earlier this year.

If you remember, Sterling was essentially driven out of the NBA after a recording surfaced with him making racial comments to his ex-girlfriend. Shocking right? Well, not so much.  As far back as 2006, Bomani Jones wrote this article for ESPN's Page 2, entitled "Sterling's Racism Should be News." In spite of this, big name athletes and Coach Doc Rivers continued to sign with the Clippers from 2006 through 2013. Then, they acted all surprised when his racist rants were caught on audio recording this spring.

The bottom line is that apparently, nobody in the mass market pays attention to text media anymore. Which brings me back to my point about multi-media being so much more powerful than text. Maybe traditional documents still have a place in business today, just like there is still print/text media out there being published. But as things move more toward video, audio, and the like in mass media, I don't think there is any question they will also move that way in business transactions. Didn't Blackberry rule the business world before iPhones took over the consumer market and then moved into business? The momentum in favor of video is just too great. Expect more video in business in the next few years!

Wednesday, September 03, 2014

10 Years of Capture Market Evolution

On my way to Harvey Spencer Associates Capture 2014 Conference, where I will be presenting for the 10th straight year. The industry has certainly evolved quite a bit in that time, as has the content of the conference. Here's a look at the agenda for this year's event. Here's an article I did previewing this special 10th anniversary edition of the event.

My presentation this year reflects the history of the conference, as Harvey has asked me to take a look back at how the market has evolved since 2005. I have a fairly detained presentation (that will be delivered in 15 minutes or so, so it will be action packed), but here's a preview of one slide, which includes what I consider to be the five biggest capture trends in the past 10 years:
  1. Consolidation of Capture with ECM
  2. Aggressive Movement of Hardware Vendors into Capture Software & Services
  3. Emergence of Mobile & Cloud Technologies
  4. SharePoint’s Emergence as an ECM Platform
  5. Acceptance of Distributed Capture
 That's just a teaser. Lot more to come in my preso, such as a fairly detailed list of all the major M&A activity in capture market over past 10 years and my opinion on what it tells us.


Tuesday, September 02, 2014

Kofax Aquires Digital Signature Specialist

Kofax, in an interesting move to continue to beef up its "First Mile" and smart process application (SPA) technology portfolio, acquired digital signature specialist Softpro. Headquartered in Boeblingen, in southwestern Germany, Softpro had revenue of $13.3M in 2013, and Kofax is paying $34.7M in cash, so that a valuation of over 2.5x revenue and more than 34x profit, as Softpro reported an EBITDA of $1M for 2013.

From a technology standpoint,  the acquisition a great fit. As Kofax transitions from paper toward capturing more types/channels of electronic information, digital signature technology is a natural way to extend its portfolio. Softpro actually has two types of digital signature technology - both of which dovetail nicely in to the Kofax technology stack. The majority of Softpro's revenue comes from enterprise e-signature technology packaged under the SignDoc brand. Softpro also has strong signature fraud detection technology, branded FraudOne, which is utilized by many large banks.

SoftPro fits nicely into Kofax's emerging smart process application (SPA) play.  For example, Grant Johnson, Kofax's CMO explained to DIR, how it's a natural fit with Kofax's recently announced Mortgage Agility solution. "E-signatures really helped facilitate digital business and transactions," said Johnson.

"It's a great fit for any SPA where there is customer onboarding and it's essential for a signature to be part of the documentation," added Dave Caldera a senior VP with Kofax.

While FraudOne has its place within an SPA hierarchy, it's also a nice traditional capture add-on. In addition to being used for checks, the technology can also be utilized for applications like verifying signatures on contracts. (Coincidentally, Parascript, which recently announced a FormXtra for Kofax Capture module, has touted success in similar types of applications.)

Bottom line is that Kofax paid a bit of a premium to increase its footprint of multi-channel capture/SPA technologies. Kofax CEO Reynolds Bish has said that he will not buy capture market share- and Kofax certainly is not doing that. Instead, as with its other recent acquisitions, with Softpro, Kofax is buying technologies that complement its strong traditional document capture stack and help it evolve as the market continues to increasingly embrace digital transactions over paper ones. I think the M&A landscape has shown that the more digital-transaction-oriented a vendor is, the higher valuation it will achieve.

Wednesday, August 20, 2014

Nuance Numbers Reveal Acquisition Motive

Nuance's Document Imaging division revenue was down significantly in its fiscal Q3 2014. For the three months ended June 30, the Burlington, MA-based ISV reported $52.4M in revenue for the division, a drop of 16% compared to last year's Q3 results. According to Nuance's prepared remarks associated with its financials release (which came out on Aug. 11), " Bookings strength was supported by two new partnership extensions with HP and Lexmark. Growth from these partnerships was tempered by weakness in the MFP scan business."

This would explain Nuance's decision to acquire Notable Solutions, Inc. last quarter, which was its main independent competitor in the MFP scanning market.

Monday, August 18, 2014

How Google's Acquisition of JetPac is Relevant to You

One of the sessions at the upcoming Harvey Spencer Associates Capture Conference is entitled "Photo and Video Understanding: Augmented reality used in transactional information." It is being presented by (and this is a pretty long title, so get ready) Christopher Surdak, Global Subject Matter Expert, Information Governance, eDiscovery and Analytics, HP Autonomy. Anyhow, Harvey gave me brief explanation of why he felt this is relevant to his audience of mainly capture ISVs.

"[Surdak] is going to talk about some things I think are exciting," said the principal of HSA. "This includes the ability to lift up the hood for your Nissan, take a picture, and have an application figure out what engine parts you need and then take you to a list where you can order them. The ability to place the order and have it fulfilled is what creates the transaction. The subject matter is basically about capturing photos and video, instead of a static document, to trigger a transactions. Insurance claims adjustment is another example where this is relevant."

I was thinking about this session (HSA Capture is being held Sept. 3-4 at the Glen Cove Mansion on Long Island), this morning when I read that Google had acquired image recognition start-up JetPac. JetPac apparently makes technology that can analyze facial expressions on sites like Instagram and use those analytics to make recommendations about the best places to go (for example, best bars) in a geographical area. This is interesting because it also combines another topic that was covered at HSA last year, which was "sentiment analysis." Last year Brian Garr of LinguaSys, presented on how his company analyzed the sentiment expressed in texts on social media sites and is able to let businesses know what people are saying about them. When you think about combining the power of JetPac and LiguaSys and introducing it into current capture applications, the possibilities are fairly powerful. Let's just say it could make Smart Process Applications even smarter.

As we wrote in a recent article in our premium edition of DIR, the capture market sure has come a long way in 10 years.

Thursday, August 14, 2014

A Look at the New Face of ECM

Smart Process Applications (SPAs), iBPMS, and dynamic case management are all relatively new terms that have come about the describe a next generation ECM solution - based on what we have historically called workflow. Like workflow, they are all designed to get the right information to the right people.

From what I can tell, there are two key differences in definitions of these new terms and what we have traditionally called workflow:
  1. timeliness: Not that workflow didn't always tout improvements in timeliness as one of its benefits, but it seems the goal now, as opposed to just improving processing times, is to provide near instantaneous turnarounds. For example, if I am applying for a loan, leveraging one of these new technology sets, can I get instantaneous feedback on whether I qualify or not, as opposed to waiting a week?
  2. multi-channel capture: Instead of starting a process with a paper or even an e-form and combining that with some supporting documentation, these newly defined ECM processes can be initiated and fed through not only paper and e-forms, but also social media, mobile devices, data from other systems, and more.
These two factors bring these next-generation ECM systems into direct contact with what Geoffrey Moore has defined as "systems of engagement" and what, on some level at least, I understand to be Customer Experience Management (CEM) systems. I have to admit I was wholly unfamiliar with the acronym "CEM" until recently, when it showed up on the agenda for the upcoming Harvey Spencer Associates Capture Conference.Then, earlier this week, I received an offer from an industry pundit who wanted to contribute a piece on CEM meeting case management. So, this seems like this is something we are going to be hearing more about in the future.

I'm going to now try and put all the pieces of the puzzle together:
  1. Looking to communicate with an organization, you have customers, partners, vendors, analysts/media and some others.
  2.  These communicators interact with the organization through a number of channels, including Web sites, e-forms, paper documents, social media, call centers, and mobile devices.
  3. All communications require a response, and the best way to manage that response is through a structured workflow - fed by a multi-channel capture system.
  4. This workflow must be two-way street. ECM has always had the ability to connect with back-end systems, but now, it must be able to take information from these back-end systems (ERP, CRM, etc.) and feed it back to the communicators through multiple channels. This loop must be maintained until a transaction is completed.
  5. The ECM system must also act as a system of record and catalog all information and documentation related to a transaction- while it's going on, as well as when it is completed. That record must remain open and interactive to be able to incorporate additions to the transaction or future related transactions.
  6. There is also some stuff that can be done with predictive analysis of processes to help automate this loop.
Anyhow, that's my understanding of this new wave of ECM - whatever you want call it. I think it's also important to note that the key components continue to be capture, workflow, and records management, albeit in an evolved form. Your thoughts?

Tuesday, August 05, 2014

Lexmark, Hyland Still at it for ReadSoft

We had heard rumors that Lexmark executives have been saying that they will not be outbid for ReadSoft, but Hyland Software sure is trying. Yesterday, the Cleveland-based ECM ISV attempted to trump Lexmark's offer for the Swedish capture vendor for a third time. This time,  Hyland topped Lexmark's bid by 10%, offering the equivalent of $246M for ReadSoft. This was significant because it showed that Hyland was once again willing to play by Lexmark's rules.

If you remember, Hyland's previous bid offered only a 4.7% premium over Lexmark's previous bid - even though ReadSoft's board had stipulated that it would only consider other bids if they were at least 7% higher than Lexmark's previous bid. Hyland felt they had worked around this stipulation by acquiring an 11% stake in ReadSoft, which meant that another provision of the Lexmark bid (that it acquire at least 90% of the outstanding shares) could not be met. Lexmark countered by topping Hyland's offer (and allowing for the 90% provision to be waved).

Well, Hyland was quiet for awhile and it seemed like the matter was done - even though I have always been of the opinion that ReadSoft would provide a bigger strategic boost for Hyland than it would for Lexmark. After all, Lexmark already has the Brainware product line that clearly competes with ReadSoft in the invoice capture space. Yes, Hyland has AnyDoc, but from my perspective, Lexmark has invested a lot more in Brainware (including a much higher acquisition price) than Hyland has in AnyDoc. There are other reasons as well. (Here are some of Hyland's reasons why they think ReadSoft is a good fit.)

But, on the other side, Lexmark is a profitable multi-billion dollar company that has deeper pockets than Hyland-which does a few hundred million in annual revenue. And leveraging those resources, Lexmark has quickly countered Hyland's latest bid, if only by less than 1%.  The bottom line is that ReadSoft's actions, if not their words (well maybe some of their words too) have made it clear that they would prefer to be acquired by Lexmark, but you have to give Hyland credit for their continued efforts. Plus, they have helped drive up the price of ReadSoft to a much more respectable 2.1x revenue than Lexmark's initial bid, which was worth slightly more than 1.5x ReadSoft's 2013 revenue of $117M.

And it's my opinion that Hyland is not done yet. They've known they were behind the 8-ball from the beginning and yet continue to put effort into making bids. Maybe they are just trying to drive up the price to weaken their competitor - Lexmark's Perceptive Software. But, then again, maybe they have some legal action plan, because it doesn't really seem fair that Hyland has to make a bid at least 7% higher for ReadSoft's board to consider it, and then Lexmark's can just come in with a nominal raise on Hyland's bid and have the ReadSoft board automatically give its blessing. But then again this isn't poker, which apparently has more rules than the  M&A game. Anyhow, it's my opinion that Hyland may have an ace up its sleeve, that it is waiting to play.