Wednesday, July 31, 2013

Kapow Helps Kofax Address SPA/First Mile

Okay, so here's my first stab at explaining Kofax's acquisition of Kapow Technologies which was announced earlier today. Based in Palo Alto, Kapow is a data integration ISV with some $16 million in annual revenue. Kofax agreed to pay a net of approximately $46 million. (We'll get into more of the financial details in our next premium issue of DIR.)

On a conference call today, Kofax CEO Reynolds Bish explained that Kapow has three primary lines of business:
  • enterprise application integration
  • content migration from one ECM-type system or database driven application to another
  • competitive or marketing intelligence involving monitoring social networks and tracking trends occuring on them
He also noted that over the past four years, Kapow has transitioned from an on-premise software model to a subscription model and that, including maintenance, more than 70% of Kapow's revenue is currently generated through a recurring billing cycle. Kofax plans to continue to sell into all of Kapow's current markets.

But, the really exciting part from a Kofax standpoint is how Kapow's software will help Kofax better pursue its Smart Process Application (SPA)/First Mile of the customer interaction strategy. SPA is a market defined by Forrester sometime between late last year and early this year. Kofax embraced it because of its higher growth potential than document capture.

 Here's some of what Forrester principal analyst Craig LeClair had to say about SPA (excerpted from a previous DIR article.): “SPAs are packaged apps designed to address end-to-end process needs. They can be used to address processes that businesses have been struggling with like invoice and claims processing, and customer onboarding....SPAs combine capture, BPM, social tools, and analytics as enablers to build focused applications."

Kofax is then trying to combine an SPA focus with its aforementioned strategy of addressing the "First Mile" of customer interactions. Here's how Kofax CMO Martyn Christian described this "First Mile:" “The First Mile is really that bridge between systems of engagement and systems of record,” he said. “It involves processes like scanning paper, but it could also involve an app on a cell phone. Our goal is to capture customer information and start to look at building cases and collaboration around it, before the data ultimately ends up in an ERP system or whatever system of record it’s headed towards.”

Basically the First Mile is about most effectively connecting systems of engagement on the front end with the back-end systems of record. But, one of the catches to doing this is that it involves connecting multiple disparate systems - something which Kofax, as primarily a document capture ISV, didn't really have a legacy in.

So, the first step in addressing this shortcoming was acquiring BI and data analytics ISV Altosoft. Altosoft gave Kofax the ability to pull data from disparate system for analyzation and decision-making. The acquisition of Kapow builds on that by enabling Kofax to more easily connect to multiple applications.

During today's conference call, Bish did a fairly good job of explaining the advantages of simplifying application integration when you are competing in the SPA space. "When we talk about SPA, we talk about being able to bridge the gap between systems of engagement and systems of record," he said. "To do that means we have to integrate our technology with both of those types of systems. For example, as part of an SPA you might have to do look-ups into your systems of records to validate information coming from your system of engagement. You also have to export data to a system of record or some other repository.

"Historically, to make those connections, we've had to rely on API programming, which can be time consuming as well as expensive, as it can require extensive professional services. Kapow will enable us to do integrations better, faster, and cheaper, which will accelerate deployment of SPA solutions. Reducing our professional services will also enable us to remove some potential barriers to selling SPA solutions."

The bottom line is that the Kapow acquisition seems to be an important step toward Kofax's goal of transitioning from a document capture specialist to an SPA vendor with a broader market to address. It is another example of how Bish continues to push the company forward through investment in new technology of the profits earned primarily through Kofax's current capture business. Clearly Bish (and the Kofax board) see the capture market as evolving and are not satisfied and stand pat and let it pass them by. 


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