Monday, November 10, 2014

No Need to be Scared of Paper

As you may have heard, Thursday was World Paper Free Day. Officially, it is AIIM initiative that encourages people and businesses to not use paper for one day. I was Tweeted, I did not go paper free: 





I was writing and on a deadline for my newsletter--and to tell the truth, absent three or four monitors, I just find it easier to compile a story using multiple sources, when I at least have my notes on a paper. Then I can utilize my computer screen for additional research. And the proofreading....I did go paper free for a year, just to see how it worked, and it was certainly possible to publish the newsletter without printing anything. However, I think it is easier to do it when I can print certain items.

Yes, I think there are situations where paper is more efficient than electronic documents, which brings me to the major discrepancy I currently have with the ECM industry--Everyone is always trying to go paperless! All I hear is about how much more efficient and secure EDM systems are over paper. And this may be true on some levels, but certainly not all.

Let's start with security because I think that's more black-and-white. Yes, I think a properly controlled electronic document in an ECM system is more secure than a paper document. This seems obvious. I mean you can pretty much control who accesses it and changes it and track whoever sees it and provide an audit trail. It's harder to do this with paper. 

Of course, this doesn't quite explain why people in the healthcare industry consciously choose to use fax over e-mail. Apparently they still feel that analog is more secure than digital. I'll explore this more in an upcoming issue of DIR

As far as efficiency, I am a fan of paper for many collaborative exercises, as I think it's easier to share because in many cases it represents a least common denominator. I mean you don't have to worry about your paper being compatible with another system. And your annotations, notes, signatures, et al, work across systems as well. And if you need to contact someone in a remote location - a scanned image should work just fine.

Now, I agree that electronic processes are generally more efficient than paper ones - but I also firmly believe that there are times when paper can be more useful - and that we should take advantage of the fact that we have access to such great printing and scanning technology. In fact, I think we've reached a tipping point, where if managed correctly, it really doesn't matter if information comes in on paper or digitally, it can be dealt with just as efficiently either way.

In other words, don't be scared of paper, embrace it where it makes sense. Don't try and eliminate it, try to set up the most efficient processes you can that take full advantage of paper as a medium of communication. There is great document imaging technology out there. Don't be afraid to use it.

And of course, there are these guys.

Cheers.

Friday, October 31, 2014

Kofax Places its Bets on SPAs

As many of us know earlier this month, Kofax pre-announced that its fiscal 2015 'Q1 results would be below expectations. The final results came out yesterday, and, pretty much as expected Kofax's revenue came in at $69.3M (growth of just 2.3%), sales generated from software licenses fell by 3.5%, and earnings decreased almost 50% to $4.3M or just a 6.3% margin.

In a call discussing the pre-announcement, Kofax CEO Reynolds Bish blamed the shortfall on some larger capture deals that did not close as expected. This was the second quarter in a row for which he used to same excuse. Investors were none too happy, and Kofax's stock plummeted - losing almost 25% of its value overnight. The stock has since gained back some of its value, but as of right now, Kofax's market capitalization is around $550M, which is less than two times revenue and about 30% below Kofax's high-water valuation mark reached this summer.

On the follow-up call to the recent final earnings announcement, Bish stated that Kofax had closed one of the two seven-figure deals that had slipped at the end of Q1, as well as several six-figure deals. He also reiterated that mid-market capture sales through the channel remained strong-but that increased scrutiny at the higher end of the capture market, especially in Europe, through both direct and indirect sales channels, was making sales tougher.

While Bish did not come right and say that the capture market, which still accounts for the majority of Kofax sales, was weak, he did restate that new sales reps are primarily being hired to focus on sales of newer/acquired product lines (including mobile), which in Q1 accounted for 35% of Kofax's software license revenue. "Most of the new quota bearing sales reps we've added over the 18 months have been in the mobile and newer acquired products part of our business," Bish said (from the Seeking Alpha transcript of the analyst call).

In the Q&A portion of the call, Bish added some color to comments he had made previously about reallocating resources and expenditures to focus more on the faster growing parts of Kofax's business specifically "mobile and new or acquired products." "There are a number of additional steps that we've taken here more recently to do so and most of them are aligned along the demand generation efforts," he said.

Bish added that because of Kofax's longevity and reputation the capture market, cutting back on demand-generation efforts in that market "hasn't historically tended the impact that business or ability to generate business there."

Bish then added that Kofax's current salespeople, many of whom also have a strong legacy in capture, have been given stogner incentives to sell the newer products. "There are a lot of reps out there, that have been with the company for many years, who certainly find things like Kofax Capture and Kofax Transformation modules to be their comfort zone, and so we've implemented a number of incentives as well as management processes in order to move them faster from the old legacy products to Kofax TotalAgility."

TotalAgility is the platform that Kofax introduced last year, which combines multiple of its acquired technologies in areas like BPM, business intelligence/analytics, application integration, and presumably e-signatures, and combines them with capture and IDR in a single Web-based and mobile platform. Said Bish, "[TA] can program capture functions, but more importantly can also automate the downstream synergistic business processes, provide a much higher value, a much more comprehensive solution and can also ultimately lead into providing true Smart Process Applications."

Attacking this potentially lucrative SPA space, which is squarely addressed with Kofax's First Mile marketing program, seems to where this market-leading capture ISV wants to train its focus, although it's likely that its market presence, technology set, experience, and momentum, will enable Kofax to maintain its leadership position in the enterprise capture space as well.

Focused on the Future
I think it's worth noting that when Kofax says that 35% of its new license revenue is coming from sales of "mobile and new or acquired software products" that does not necessarily mean these are true SPA sales. They may be of technologies that can be leveraged in SPAs, but capture fits under that bill as well. The majority of these sales, from what I understand, are more or less point solution sales - that said, some are into new and exciting markets, like in the case Kapow's data integration technology.

Yes, Kofax seems to be treating capture like a cash cow, but that's not necessarily a bad thing. As we've said several times over the past year, the capture market is maturing, especially at the enterprise level where Kofax often competes. This may have something to do with the delays in larger sales. There is nothing wrong with a market leader taking its profits from a mature technology and investing them in a potentially higher growth emerging market. Let's just hope that the SPA market proves to be the correct bet for Kofax.

Friday, October 10, 2014

Is HP Split the Right Move?

Last week's big news (well, aside from Kofax pre-reporting disappointing fiscal 15 Q1 numbers) was HP's announcement that it plans to split its software, services, and storage business from its PC and printers business. From what I can tell, it appears to be about an even split revenue-wise. In HP's more recently reported quarter (ended July 31), revenue from Personal Systems and Printing (which will become HP, Inc.) was $14.2B, while revenue from everything else, including Enterprise Group & Services, and Software (which will become Hewlett-Packard Enterprise), was $14.3B. Earnings of $2.7B were similarly split.

So, why is HP breaking up the company? Well, the most straightforward answer was given to me by Chad Stigall, senior manager, solutions portfolio at value-added document imaging distributor Cranel.




And that certainly makes sense, and maybe I'm looking at this from too narrow of a perspective, but my perspective is one that comes the document imaging industry and from the context of that market, I'm not sure splitting up the two business makes sense.

I already felt this way, and then here's the quote I got from Canon's Tom O'Neill last week when working on a story on the latest version of the MFP vendor's uniFLOW fleet management software. "“You’re going to hear more from us on the benefits of an integrated solutions and platform strategy,” he said. “We have several Canon group companies based in Europe, like NT-ware [which develops uniFLOW], I.R.I.S., and Therefore [a document management ISV]—we are able to integrate their technologies with each other, as well as directly into the imageRUNNER ADVANCE platform.

"This will help us create a very strong integrated solutions platform that we believe will relieve a lot of the frustration and pain for our dealers and channel. Nobody wants to have to manage three or four different vendors to create a solution, and Canon understands that. Also, customers aren’t looking to buy a device or software like uniFLOW or Therefore. They are looking to buy solutions to their problems, and we want to provide that to them in a way where the technology is transparent."

So, Canon is talking about combining hardware and software into solutions and HP it talking about splitting up its hardware and software businesses. Lexmark, which continues to roll up software under the Perceptive Software flag, seems to be heading the same direction as Canon. And so is Konica-Minolta, although in its case it is rolling up services businesses to combine with its hardware business. Xerox took a similar approach to KM-although on a much bigger scale when it acquired ACS a few years back, which is now known as Xerox Services and is a very large focus for the copier pioneer.

So, why is HP heading in a different direction than these competitors and spinning off its printer business on its own? Well, for one, the printer business is not being spun off on its own. It's being tied to the PC business--which is ironic if you remember that a few years ago there was a war when some of HP's investors wanted to split off the printer business from the PC business. But, the two were kept together and since then HP has made two huge acquisitions, of EDS (services) and Autonomy (software)--and now the plans are to spin off those two acquisitions as part of Hewlett-Packard Enterprise.

Here's my issue. EDS was acquired in 2008 and Autonomy in 2011- and I really don't think HP has done a good job integrating them into their core business. So, it seems to me they are punting. Really? Is now the time to give up on this integration just when all your competitors are either moving towards this type of model and/or have already achieved it on some levels?

The only plausible excuse for this split from my standpoint is that HP is ahead of the game. In other words, the integration of hardware, software, and services is all a big sham and what every hardware vendor really wants to do is move to a strictly higher margin software and services model and eliminate their hardware. Isn't this what Kofax did when it sold DICOM? And HP is just the first MFP vendor to admit this and dump the hardware-albeit in a fairly graceless fashion.

Now, I'm not saying this is valid, and I certainly don't expect Perceptive to dump the Lexmark hardware business anytime soon, but, really, isn't that what HP is kind of trying to do here?

So, the next move would be for them to pick up the hardware-free Kofax, whose market cap has dipped below $600M and add it to their Hewlett-Packard Enterprise business and move on from there. Where does this leave the MFP/Printer/Scanner business? Well back where it started before any software and services were brought into the mix, and if one is to believe the current trends in the market, that's not necessarily an advantageous place to be.

Tuesday, September 30, 2014

SourceCorp, BancTec Merger Makes Sense

This week's announcement that SourceHOV has merged with BancTec made complete sense from a strategic standpoint-although the announcement admittedly caught us somewhat by surprise. Here's a true story: I was in Birmingham last week visiting ibml when the topic of BancTec came up. I said I could not figure out why they did not just merge with SourceHOV, especially since they had a common investor after BancTec was acquired by HandsOn3 in February.

BancTec's story was that HandsOn3 was only a minor investor in SourceHOV and that the plan was to integrate BancTec with the smaller Dataforce, which would create a $300M business combining BancTec's document capture outsourcing with Dataforce's call center business. Well, apparently, plans changed. It seemed that others agreed with my thoughts that it made just too much sense to merge BancTec and SourceHOV, which are in  a similar market and are both headquartered in Dallas.

SourceHOV, which is actually the result of the merger of the former Lason and SourceCorp that happened in 2011, must have been doing about $600M in annual revenue, as the new organization is being touted as having annual revenue of more than $900M. Here's a quote from the press release the discussion the complementary nature of the organization's services operations. " “SourceHOV’s deep domain expertise in healthcare and legal claims processing, alongside BancTec’s 40+ years of banking payment processing know-how, enables the creation of a global powerhouse provider for Transaction Processing Services,” said Ron Cogburn, Chief Executive Officer of SourceHOV and Mark Fairchild, President of BancTec in a joint statement.

As you might guess from the dual-attribution, decisions have not been announced as to who is going to be managing what going forward. Fairchild was only recently appointed president of BancTec in the wake of the acquisition by HandsOn3. Nothing will likely be finalized until the deal closes, which is apparently subject to Hart Scott Rudino review. DIR caught up with Ray Wise, VP Sourcing and Treasury at SourceHOV, who said he doesn't foresee any problems. The press releases states the closing is expected to happen this year. Wise said SourceHOV would like to close it sooner, but a lot depends on how long the government review takes.

HandsOn3 will become the owner of the entire organization, as it is buying out SourceHOV's other major shareholder. Related to the transaction, SourceHOV will receive a new $1.1B line of credit.

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.

Cheers.


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.

Tuesday, July 15, 2014

Nuance Buys Notable Solutions

Nuance has acquired its primary competitor in the MFP capture space - Notable Solutions, Inc. Burlington, MA-based Nuance, which is currently best known to the world at large as the unnamed developer of the voice recognition technology behind Apple's Siri, has made a move to beef up its Document Imaging Division. Nuance is actually one of the leaders in our market, with $250M in annual Document Imaging Division revenue (although that represents less than 15% of Nuance's overall revenue). The acquisition of Notable Solutions brings about a consolidation of the leaders in the document capture software for MFP space.

Notable Solutions (historically known as NSi) began life in this market as an HP partner, with its AutoStore software primarily utilized in conjunction with HP's Digital Sender, at one time a very popular network scanner. But, after its exclusivity contract expired, Notable Solutions branched out to work with other MFP vendors. Today, Ricoh is its largest partner and Notable's Web site lists integrations with devices from more than a half dozen vendors.

Historically, Nuance's eCopy has been the leader in the market for MFP capture software from a third-party vendor, but in recent years, it seems Notable has been making inroads. "I think the acquisition of Notable Solutions dovetails nicely with Nuance's eCopy business," said Harvey Spencer, of Harvey Spencer Associates, an analyst firm which covers the capture market. "I never really felt the two companies competed. They are not really in the same market.

"eCopy's technology has historically been primarily aimed at the SMB. It's a turnkey system focused on cost controls, scanning and storing, and scanning to e-mail. Notable Solutions has been much more up market. It's more of an enterprise solution, while eCopy is a box solution. This acquisition broadens Nuance's addressable market quite dramatically."

I'm not sure that Nuance's marketing people would agree with Spencer's characterization of eCopy, as even before it was acquired, eCopy was trying to move its product upstream--to ward off infringement by the copier vendors themselves, who continue to include more scanning technology with their devices. That said, Notable Solutions always had a bit of a different vision than eCopy. While eCopy focused on scan-enabling devices, Notable always focused on connecting devices to a server where business processes were executed--typically utilizing items scanned at the copier.

There is no doubt however, that the two companies considered themselves competitive. In late 2013, in fact, Notable acquired Barr Systems to give it a complementary print management offering that enabled it to better compete against Nuance's eCopy-Equitrac combo. Notable also further diversified itself with the introduction of a mobile app that includes not only capture capabilities but also features like e-forms and secure print.

Concluded Spencer, "This acquisition shows that Nuance is investing in its document imaging business. Traditionally many people have looked at imaging as something that Nuance uses to fund other stuff. This acquisition is good news because it shows a commitment to this market."


By the way, it's unclear why Nuance has chosen not to publicly announce this deal, but it is not unprecedented. A year and a half ago, Nuance bought print management ISV Copitrak, a deal it also kept fairly quiet, at least initially. And while Copitrak was complementary to Nuance's previous acquisition of Equitrac, Notable Solutions, which is based in Rockville, MD, is complementary to Nuance's eCopy acquisition, which was completed in 2009.

Indications are that Nuance will be doing a briefing at some point following the announcement of its fiscal Q3 (ended June 30) results. For now, from what we understand, it remains business as usual at Notable Solutions.

Monday, July 14, 2014

Despite Efforts, Kofax Still Over-reliant on Big Ticket Sales

Following the tried and true PR strategy of announcing bad news on a Friday, at the end of last week, Kofax announced preliminary fiscal 2014 (year-end June 30) numbers, "which reflect software license revenue, total revenues and adjusted EBITDA levels below the guidance previously provided to the financial community." For the year, Kofax reported that total revenue will fall between $287.5 and $290.5M, which would represent an 8% gain over Kofax's fiscal 2013, but also a disappointing Q4.

By our calculations, this means fiscal Kofax's Q4 2014 revenue would come in at around $72M, which would represent a drop of approximately 7.5% from the previous year's Q4. This is very disappointing for a company that through nine months was 11.7% ahead of its 2013 pace. Kofax CEO Reynolds Bish blamed the shortfall on some large deals that fell through. On a positive note, he indicated the bulk of those deals will close very soon.

"Kofax is very disappointed with the results," Bish said on a conference call with financial analysts. "The shortfall can be primarily attributed to several seven figure software licensing transactions that slipped into future quarters. We believe we will close these deals in the first and second quarter of fiscal 2015. We expect to close $3M of sales in the next week and another $1.5M in the next two weeks."

Bish blamed Kofax's continuing reliance on seven figure deals for problems--something which Kofax has attempted to address be realigning its sales force over the past year. "In the fourth quarter, we are especially subject to this sort of result," he said. "We did increase significantly the number of six-figure deals we closed in the fourth quarter, but we only closed two seven-figure deals."

Bish said all the deals that slipped were in Europe and  North America and involved Kofax's core capture technology. "Core capture still makes up more than 70% of our sales and accounts for many of our large deals," he said. "So, that is naturally what are larger deals that slip are going to involve. I don't see any core weakness in the market, or change in the competitive environment, or increased pricing pressure. However, we are seeing procurement processes take longer.

Bish indicated that sales of Kofax TA 7 smart processing application platform are gradually ramping up. Bish added that he will issue guidance in September when Kofax publishes its official year-end results and doesn't expect any changes to the long-term numbers.

Thursday, July 10, 2014

Hyland Feels It has Voided Lexmark's Current Offer for ReadSoft

Lexmark's original offer for ReadSoft includes the following statement: "Completion of the Offer is conditional upon:
1. the Offer being accepted to such an extent that Lexmark International Technology becomes the owner of shares representing more than 90% of the shares in ReadSoft."

Which is why Hyland made such a big deal out of the fact that prior to making their new offer, it had acquired almost 11% of ReadSoft's shares. I recently caught up with Lars Wahlström, who is based in Sweden and advising Hyland on its bid for ReadSoft.

If you remember, there was also a provision in the Lexmark bid that said that the ReadSoft board could not consider another offer unless it was 7% higher than the Lexmark offer, which Hyland tried once. Hyland is now of the opinion that ReadSoft will have to respond to their new bid, even though its only 4.7% higher than Lexmark's second bid- because as Hyland is considered, Lexmark's offer should now be off the table due to the 90% rule.

Hyland's official offer document is due to come out on Monday. We expect to hear more after that, from ReadSoft, Lexmark, or both.

Wednesday, July 09, 2014

A Look at Hyland's Latest Bid for ReadSoft

It is presently unclear to me exactly what Hyland's latest bid for the ReadSoft means for the Swedish based document capture and invoice processing specialist. If you remember, in May, Lexmark made a $182M bid to acquire ReadSoft. It's plan was add it to its Perceptive Software business, where it would complement Lexmark's Brainware acquisition from a couple years previous.The ReadSoft board unanimously recommended accepting the offer,  with co-founders Lars Appelstål and Jan Andersson abstaining from getting involved (due to conflict of interest as together they own more than 20% of the company's shares).

The board's recommendation seemed to be based on more than just getting the best price. It also took it into account the future of ReadSoft employees.

In mid-June, Hyland stepped in with a higher bid of $198M - which met the requirement of being 7% or higher than the Lexmark bid in order for a new bid to be considered. Almost immediately, Lexmark countered Hyland's initial bid with an incrementally higher bid of $200M, which the ReadSoft board unanimously recommended - once again with Appelstål and Andersson abstaining. With the acceptance/recommendation of Lexmark's new bid, once again the provision was put in place that a new bid would have to be 7% of higher for the board to consider it.

This week, Hyland apparently decided to end run the ReadSoft board with a bid of approximately 4.5% higher (exact prices in US Dollars are a little hard to calculate because they depend on the value of the Swedish Krona, which is the currency bids are being made it, but safe to say that Hyland is now bidding in excess of $200M) than Lexmark's last bid. So, the board officially can't consider the bid, but shareholders can. And in a press release issued by Hyland UK, which is actually making the bid for ReadSoft (probably due to tax purposes, as Hyland is based in Cleveland, Ohio, US), said that since its initial bid, Hyland has acquired approximately 8% of ReadSoft's outstanding shares, bringing its total holdings to 11%. I'm not sure what percentage they need to complete a deal.

At last report, Lexmark had acknowledged the new Hyland bid and weighing its options.

I'm not really sure how this all going to shake out. As we said in our last issue of DIR, it seems that Lexmark and ReadSoft are kind of destined to be together, so we wouldn't be surprised if Lemark upped its bid to top Hyland once again, but as industry analyst Harvey Spencer pointed out in a conversation earlier today: when does it stop?

From a strategic standpoint, acquiring ReadSoft probably makes even more sense for Hyland than it does for Lexmark, so Hyland may be inclined pay an even higher price. Perceptive already has Brainware, which like ReadSoft is strongest in the invoice capture space, so there is clearly some overlap between the two organizations. While Hyland has AnyDoc, ReadSoft would give Hyland a great boost in the mainland (non-British) European market due to its large customer base and sales staff there, as well as its strong presence in SAP environments. Perceptive already greatly strengthened its European presence last year with the acquisition of Saperion and has also been utilizing Lexmark's European presence to advance sales in that region. Not that ReadSoft doesn't make sense for Lexmark on many fronts, it just may be that it makes even more sense for Hyland.

Anyhow, this is all exciting stuff for ReadSoft I'm sure, and also exciting for the capture market, because about a month ago, I was bemoaning the fact that ReadSoft was going for such a low price. Things are definitely looking up, and hopefully ReadSoft will end up a winner with either vendor.

Tuesday, July 08, 2014

Top Image Systems to Buy eGistics

Document capture ISV Top Image Systems (TIS) has announced plans to acquire cloud archiving specialist eGistics. TIS will pay approximately $18M for Dallas-based eGistics, which had 2013 revenue of $10.6M. eGistics has historically focused on the financial services market - which has also been the primary focus of TIS' recent North American efforts. TIS has also positioned itself as a cloud player in the capture space, so this acquisition dovetails nicely with what it has been trying to do.

TIS plans to leverage eGistics cloud infrastructure to rollout several of what is terms "smart processing applications" in areas like invoice processing, the digital mailroom, bill paying, account opening, mortgage processing, and employee onboarding. We recently detailed how TIS is partnering with workflow ISV K2 on SPAs that it is bringing to market. TIS also has plans to market its software to eGistics blue chip customer base, which reportedly includes "4 of top 5 U.S. banks."

The acquisition will triple TIS' U.S. headcount to more than 65 employees. According to TIS Executive Chairman Izhak Nakar, as quoted in a press release, "As a result of this powerful strategic combination, TIS Americas will be the largest business unit in terms of revenues. Reinforcing our commitment to growing our presence in the U.S. market, the acquisition significantly accelerates this important strategic initiative, giving us tremendous talent, two offices, and a more comprehensive suite of offerings to cross-sell to a broad installed base.”

The acquisition is expected to close in Q3 and be accretive to TIS' bottom line as eGistics reported a 2013 profit of $1.52M. eGistics shareholders will receive 50% cash and 50% stock from TIS. As of the end of Q1 2014, TIS had $15.7M on its balance sheet - more than $13M of which came from a recent public offering of ordinary shares.

Tuesday, June 24, 2014

Study on Healthcare Payments Processing Re-Enforces EOB Opportunity

The study was commissioned by Orbograph and conducted by BroadTrust.

Great quote from VP of Marketing Joe Gregory in press release that came out today: “There appears to be a paradox in the industry. One half of the respondents were still processing 25% paper and the overall electronic payment penetration is estimated to be near 60%. Meanwhile, satisfaction levels toward EDI adoption with hospital revenue cycle managers are 91%! There is a clear disconnect between expectations of industry influencers and actual achievements.”

If you remember, I came away from the recent IOFM Payments Summit with a feeling that there is a big opportunity in capturing paper EOBs when combined with the right additional processes - mainly in the area of payment processing. I think the results of this study re-enforce that view.

Great ideas that transform paper-burdened operations to fully automated platforms need greater visibility,” - See more at: http://www.orbograph.com/orbograph-underwrites-2014-strategic-healthcare-payments-research-initiative.htm#sthash.0EOnFcrI.dpuf
"Great ideas that transform paper-burdened operations to fully automated platforms need greater visibility,” said John Casillas, CEO of BoardTrust.

"The data affirms that there is still a lot of untapped value in transforming revenue cycle operations from paper-based to digital processing. Our action item from this survey is to develop additional educational programs on the benefits of electronification and methods to achieve straight-through-processing of payments and remittances," added Barry Cohen, co-president of Orbograph.

The 2014 Strategic Healthcare Payments Research Initiative is available on the Orbograph website, and can be downloaded at www.orbograph.com/ 2014-strategic-healthcare-payments-research-initiative.htm. - See more at: http://www.orbograph.com/orbograph-underwrites-2014-strategic-healthcare-payments-research-initiative.htm#sthash.0EOnFcrI.dpuf
The 2014 Strategic Healthcare Payments Research Initiative is available on the Orbograph website.
When leaders of organizations are willing to throw
“there appears to be a paradox in the industry. One half of the respondents were still processing 25% paper and the overall electronic payment penetration is estimated to be near 60%. Meanwhile, satisfaction levels toward EDI adoption with hospital revenue cycle managers are 91%! There is a clear disconnect between expectations of industry influencers and actual achievements.” - See more at: http://www.orbograph.com/orbograph-underwrites-2014-strategic-healthcare-payments-research-initiative.htm#sthash.0EOnFcrI.dpuf
“there appears to be a paradox in the industry. One half of the respondents were still processing 25% paper and the overall electronic payment penetration is estimated to be near 60%. Meanwhile, satisfaction levels toward EDI adoption with hospital revenue cycle managers are 91%! There is a clear disconnect between expectations of industry influencers and actual achievements.” - See more at: http://www.orbograph.com/orbograph-underwrites-2014-strategic-healthcare-payments-research-initiative.htm#sthash.0EOnFcrI.dpuf
“there appears to be a paradox in the industry. One half of the respondents were still processing 25% paper and the overall electronic payment penetration is estimated to be near 60%. Meanwhile, satisfaction levels toward EDI adoption with hospital revenue cycle managers are 91%! There is a clear disconnect between expectations of industry influencers and actual achievements.” - See more at: http://www.orbograph.com/orbograph-underwrites-2014-strategic-healthcare-payments-research-initiative.htm#sthash.0EOnFcrI.dpuf
“there appears to be a paradox in the industry. One half of the respondents were still processing 25% paper and the overall electronic payment penetration is estimated to be near 60%. Meanwhile, satisfaction levels toward EDI adoption with hospital revenue cycle managers are 91%! There is a clear disconnect between expectations of industry influencers and actual achievements.” - See more at: http://www.orbograph.com/orbograph-underwrites-2014-strategic-healthcare-payments-research-initiative.htm#sthash.0EOnFcrI.dpuf

Thursday, June 19, 2014

Lexmark, Hyland, ReadSoft Update

Here's what's going on:

1. Last month, Lexmark bid $182M to acquire Swedish-based document capture ISV ReadSoft.
2. ReadSoft's board unanimously recommended that shareholders accept the bid, which represented a 118% percent premium over ReadSoft's share value on the NASDAQ OMX Stockholm at the time.
3. Despite this high premium over ReadSoft's share value, DIR speculated that the offer seemed relatively low for a capture ISV with $117M in annual revenue.
3. The acceptance period for the offer was scheduled to end on this upcoming Monday, June 23.
4. There was a provision that ReadSoft could consider another offer if it was more than 7% higher than Lexmark's offer.
5. DIR speculated that an ECM ISV like Open Text (which competes with ReadSoft in the SAP invoice processing space) might think $195M is still a bargain, although ReadSoft management countered that there was more to the purchase agreement than just getting the highest price.
6. Yesterday, June 18, Hyland Software, which competes with Open Text in the ECM space, announced a bid of approximately $198M for ReadSoft.
7. According to industry analyst Harvey Spencer, the bid made sense for both sides for a number of reasons. "Hyland has almost no presence in mainland Europe to speak of and ReadSoft would definitely help them with that," he told me. "And Hyland's strong vertical market position in healthcare does not translate to the European market. If they want to expand in Europe, Hyland needs to find new markets and leveraging ReadSoft to increase their presence in the SAP space would be one way to do that."
8. Today, Lexmark up its offer slightly to approximately $200M. According to a WSJ story, "Lexmark's tender offer, which requires acceptance by more than 90% of ReadSoft's shares outstanding, was extended to July 14."
9. Once again, the ReadSoft board unanimously recommends that shareholders accept Lexmark's offer. It's unclear if, for any additional offers to be considered, they need to trump Lexmark's current bid by 7%, which would still only represent a $214M offer, or less than 2x ReadSoft current revenue. - According to Johan Holmqvist, VP, Corporate Communications, ReadSoft, "Hyland or another bidder, need to increase the [new] Lexmark offer of 43 SEK with 7% in order for the Board to consider it/be able to recommend it."


Tuesday, June 17, 2014

Follow-up on IOFM Payments Summit

Two weeks ago I had the opportunity to attend the second IOFM Payments Summit in Baltimore. As detailed in an article in last week's DIR, I left with two major takeaways for our industry from the event, which was attended by 230 people - a 70% increase over attendance at last fall's inaugural Payments Summit. Here is a condensed version of what we wrote (let me know if you'd like to see the full article):
  • Automated EOB capture is very much alive and well in the payment processing space: There was a time when we believed that EOB capture might be the second killer app in the IDR (intelligent document recognition space) behind invoice capture. In the document capture market that idea came and went as ISVs struggled to gain a significant number of installs.

    What many in our industry failed to recognize is that like capturing invoices, capturing EOBs is more than just an OCR/data entry operation. EOBs are part of a healthcare billing process and EOB capture must be addressed as part of that process. Improving payment processing in healthcare through technology is currently a hot market and EOB capture is a part of this. However, it’s often not the traditional ECM players that are supplying these solutions. Rather it’s the payment processing organizations, banks, and lockbox providers (and ISVs that sell to them), that are stepping up because of their experience with receivables.

    That said, I'm not sure how good some of their automated EOB capture technology is, as a lot of it is homegrown by the payment processing ISVs. Clearly, it's better than not using any OCR at all, but when Orbograph's Bryan Bruton told me about the recognition improvements his start-up gained after it was acquired by Orbograph, it got me thinking that there may be opportunity out there for other document recognition specialists to license their EOB capture to some of these payment processing specialists.
  • Payment processing organizations are struggling with the increasing trend toward electronic payments:  The general consensus is that it is the easier-to-process payments, like utility bills, that are moving online first, but there is also a desire by organizations to utilize imagng on a greater variety of documents. The result a dichotomy in the payments market as related to imaging. On one side, paper payments are decreasing. On the other side, more organizations than ever are recognizing the value in digitizing their transactional documents as soon as possible to transition from paper to electronic workflows. So, while imaging of traditional remittance payments may be on the decline, imaging in general is on the upswing. And payment processors that can address a greater variety of imaging applications, including full page capture and workflow, appear to be emerging as the winners--which represents another opportunity for traditional document capture vendors to sell into the payments processing space.



     

Tuesday, June 03, 2014

K2 and TIS Team up for SPAs

Remember when we all thought Kofax was going to be SharePoint BPM specialist K2? Well, that was the rumor floating around at least until Kofax announced it was actually going to buy Singularity, a smaller competitor in the same space. Kofax went on to leverage the K2 platform to create Total Agility 7, its new platform for deploying smart process applications (SPAs) designed to connect front-end systems of engagement effectively with back-end systems of record.

In the meantime, it appears that a relationship has percolated between K2 and Top Image Systems, which competes with Kofax in the document capture market. K2 and Top Image apparently already have 10 joint customers and yesterday announced a strategic partnership. They are billing their combined technologies as a way to create SPAs. Apparently they have already had success in Europe and Asia-Pac in applications like the digital mailroom. According to the press release, "Joint customers are able to automatically process millions of documents per year with virtually no human intervention.  The solutions deliver information to the right people at the right time, with everything needed to make smart decisions."

Top Image exhibited at the recent K2 User Conference. Said, Michael Schrader, Top Image Systems COO. "After seeing success with our joint solutions in Asia-Pacific and EMEA, we are looking forward to expanding that success to North America."

Monday, May 19, 2014

Follow-up on Health of Capture Market Article

As you can imagine, at last week's ReadSoft Conference, I received quite a bit a bit of feedback on the article I ran in our last premium issue (May 9) asking the question "Is the Capture Market in Trouble?"  Basically, the article asked the question if in light of Lexmark's recent offer to acquire ReadSoft, for approximately 1.5x revenue, coupled with Kofax's recent fiscal Q3 quarterly report (for 3 months ending March 31) - which included a YOY decline in sales of core capture products - might indicate that the document capture market had lost some of its luster.

Thankfully, Top Image Systems, although significantly smaller than Kofax and ReadSoft, recently reported numbers that are a positive sign for the industry. Highlights include
  • 19% increase YOY in total revenue to $8.1M
  • license revenue growth of 43%
  • growth in all regions, including 100% growth in the Americas were revenue reached $1M
  • almost .5M in SaaS sales, which led to a 36% YOY growth in recurring revenue (COO Michael Schraeder from Seeking Alpha transcript of financials conference call on the SaaS revenue: "This amount will be paid again regularly over the next 10 quarters dealing up with solid growing base of returning revenues. The total license revenue of these contracts is equivalent to approximately $4.4.")
  • projected double-digit revenue growth for 2014

TIS also raised $13.7M in capital during the quarter through a "public offering or ordinary shares" that will be used to fund potential acquisitions. " At present we are actively targeting growing accretive assets that consolidate our cloud SaaS and mobile organically strategies," said Schaeder.

Of course, unlike Kofax, TIS includes does not break out its mobile capture revenue as separate from its "legacy products," so it's quite possible that TIS and Kofax are experience more similar growth rates that at first glance, as both seem to be reporting robust and healthy mobile capture practices.

Some ReadSoft Acquisition follow-up
As far as the ReadSoft price goes, Bob Fresneda, president of ReadSoft NA and SVP, Americas and Asia Pacific, stressed that ReadSoft's owners and co-founders did not just seek out the highest price for the organization. "Lexmark is a nice landing spot for ReadSoft to be drafted by a company that is willing to invest in the technology and the people," he told us.

ReadSoft CEO Per Åkerberg stressed that Lexmark has plans to enable ReadSoft to continue to operate as a "standalone company."

All that said, it was pointed out that there is a provision in the acquisition agreement that enables ReadSoft to do another deal of someone offers a bid that is at least 7% higher than Lexmark's before the acquisition closes, which is supposed to occur in about a month. 

In our opinion, ReadSoft would make a great takeover target for Open Text, which is its main competitor in the invoice processing space in SAP environments. ReadSoft also has a strong install base - an asset that Open Text typically covets in its acquisition targets. And 7% over $182M would only be $195M, which still seems like a bargain for ReadSoft. Of course, Open Text doesn't exactly have the reputation as "a nice landing place" for acquired company, so I don't know how the board would take to an offer. It might just server to drive up Lexmark's offer.


Thursday, May 15, 2014

EPM & Kodak Alaris in Complicated Relationship

So, on one hand Kodak Alaris and Eastman Park Micrographics (EPM) have struck a deal, through which Kodak Alaris is going to continue to provide sales and support for EPM equipment in Europe, Asia, and Latin America. On the other hand, EPM is suing Kodak Alaris for soliciting business from EPM's North American customers, whose service contracts are currently being taken over by Imaging 411, the document imaging service provider that EPM acquired late last year.

Apparently, it's complicated....

Tuesday, May 13, 2014

Ensuring Security in Document Capture Applications

Not something a lot of people consider.

Check out this excellent contributed article by Parascript's Don Dew on the some of the ways organizations can ensure that their data entry operations are as secure as their back-end data systems.

New Customer Account Applications: Ensuring privacy and security in capturing sensitive information

Paperwork is often part of the first interaction point with a new customer – whether it’s new account applications or enrollment forms for employment, a credit card, or even Medicare. Because of this, information needs to be captured and entered quickly and seamlessly to provide responsive service at an important initial relationship-building stage. And, because these forms contain critical customer information – such as date of birth, social security number, and even payment data – they also need to be processed safely.
Information on applications and forms can generally be classified into two types of data: personal identifiable information (PII), and non-identifiable information (NII).  

Security, policy, and technical requirements set PII apart from NII. PII includes information such as name, address, social security number, telephone number, diagnosis, credit card accounts and email address.  The loss of PII can result in identity theft or fraudulent use of information. Meanwhile, NII includes anonymous information such as gender or age, does not identify a specific person, and, therefore, can be easier to process. 

A number of regulations make keeping personal information secure a requirement for businesses and organizations:  

  •  The Freedom of Information and Privacy Act requires the disclosure of federal documents and makes it necessary for government agencies to completely remove or redact confidential information from released files.
  • In the health care industry, companies and their contract providers must also comply with HIPAA in order to protect the privacy of individually identifiable health information. 
  •  Financial institutions have to comply with The Gramm-Leach-Bliley (GLB) Act, which requires companies to ensure the security and confidentiality of information such as names, addresses, phone numbers, bank and credit card account numbers, income and credit histories, and Social Security numbers.
  • · Many businesses also must follow PCI Standards, which provide a framework for developing a robust payment card data security process, including prevention, detection and appropriate reaction to security incidents.
With the potential for fines, penalties, lawsuits and/or embarrassment for leaking vital information, companies and government organizations are compelled to stay on top of requirements to protect sensitive information. Once this information has entered a business system, privacy is most easily managed through software encryption and permission management. However, getting information off of physical documents and into that system offers multiple opportunities for breaches, including: 1) access to information as it is being keyed in by data humans, sometimes located overseas, and/or in high turnover jobs 2) access to information located in imaged archives, and 3) access to paper originals.
Assuming that access to the original paper has been dealt with via careful retention and destruction policies, the other two scenarios can be successfully mitigated with security features built in to document capture software, acting as a first point of defense. Examples include:

Restricting access to information by only providing ‘snippets’ to validators/keyers – Document capture and recognition software solutions can enforce security at the field level, such as providing only a snippet of each form to a single operator. First name fields, for instance, can be given to one validator/keyer, social security numbers to another and diagnostics to still another, so that each piece of information on its own is benign.

Decentralizing access to information by distributing the validation/keying function - To go one step further, the information can be sent to multiple sites within the same company, completely removing and practically eliminating any chance of a security breach or misuse.
These processes ensure that any back-office human validation of forms restricts personally identifiable information by limiting the context in which it would be useful.

Preventing future information leaks through redaction – In cases where document images must be retained for archival, redaction removes sensitive information by digitally obscuring it to make documents secure for distribution. Redaction can often be efficiently achieved during the document capture process, just as sensitive information is entering an organization. Incoming documents are scanned and keyed, then sensitive fields, such as account, drivers’ license and social security numbers are automatically located and redacted by capture software, and sent to archives through a secure digital workflow.  This helps to ensure confidentiality and protect key information.  Redacted information in the archive can't be accidentally or maliciously accessed years later.

Customer onboarding is a document heavy, critical moment in the account lifecycle.  Companies need to be both responsive and protective of information that customers entrust them with on new account applications. In addition to being the law, safeguarding customer information also makes good business sense. And, with greater access to information, in a secure environment, companies can provide better service and help boost the bottom line. 

For more information, check out these videos on advanced data validation and security and locating content to protect sensitive data.

Don Dew is Director of Marketing for Parascript, a leading recognition solutions provider, online at www.parascript.com
 

Tuesday, May 06, 2014

Initial Thoughts on Lexmark's Offer for ReadSoft

The buzz this morning is all about Lexmark's a bid to acquire ReadSoft.

Here are some initial thoughts:
  •  It appears like a done deal, as the acquisition has been unanimously recommended by ReadSoft's board of directors and, according to ReadSoft, "shareholders representing 22.9% of the shares and 41.5% of the votes have undertaken to accept the offer."
  • It's a fairly attractive offer for ReadSoft shareholders considering it represents a 117% premium over the shareholder value when the market closed on yesterday. (The offer is $6.11 in cash for each Series A and Series B share of ReadSoft for a price of approximately $182 million, net of cash acquired.) ReadSoft shares closed May 5 on the Stockholm exchange (where the Swedish-based company primarily trades) at less than $3 per share, a value they had basically held for the past three months - which was about half of the company's 52-week high, reached last summer,
  •  It's not that attractive of an offer if you consider that two years ago Lexmark paid $148M to acquire Brainware, a capture ISV about a quarter the size of ReadSoft. ReadSoft reported $117M in revenue in 2013 - although it has struggled recently with growth and profitability - which likely drove the share value down over the past year.

How do you integrate Brainware with ReadSoft under Lexmark's Perceptive Software practice? This is the $100M plus question and here are some thoughts:
  • ReadSoft is clearly larger and more established, but Perceptive has certainly invested a lot into Brainware.
  • Both ReadSoft's and Brainware's strongest market has been A/P, but I'm not exactly sure that they are direct competitors. ReadSoft really only took off in the A/P space after it acquired the Ebydos SAP workflow technology, and has since added similar workflow for Oracle Financials. Brainware always touted its ability to do "straight-through" processing based on three-way matches, which theoretically eliminates the need for workflows. So, Brainware's technology always seemed like a better fit in PO heavy environments where there were not a lot of exceptions, while ReadSoft was great when there were more workflow requirements. Of course, when Perceptive acquired Brainware, it touted the ability to introduce Perceptive's ImageNow worklfow into the equation and even things out a bit. I'm not sure how much that has been a factor. The bottom line, however, is that both companies compete primarily in the same horizontal market.
  • Geographically, it seems that Lexmark is counting on ReadSoft to increase it presence in Europe, where ReadSoft generated approximately 70% of its revenue in 2013. Even though Brainware's development team is in Europe, its sales and marketing were always based in the U.S. This reminds me somewhat of Perceptive's acquisition of German ECM ISV Saperion last year, which has technology similar to Perceptive's legacy ECM platform, but was acquired to give Perceptive a stronger European ECM base.
  • Along those lines, in our latest issue we ran a brief discussing how Perceptive was going to leverage its new Evolution Hybrid Cloud environment to potentially bring its two ECM platforms together. Perhaps it will eventually do the same with its two capture software platforms.
  • Perceptive also gains the XBOUND document capture workflow platform, which ReadSoft acquired with foxray a couple years ago. A recent conversation with ReadSoft CMO Andrew Pery indicated that the foxray sales pipeline is improving and evolving as ReadSoft has continued to productize what had historically been software geared mainly toward customized one-off type implementations. ReadSoft had been targeting the service provider and mailroom markets with XBOUND - not necessarily a strong market for Perceptive historically.
Finally, I'm looking forward to catching up with top ReadSoft (and maybe Lexmark?) executives at ReadSoft's user conference next week.

Friday, May 02, 2014

Notes from Mitek Q2 Earnings call

As I Tweeted earlier @DIREditor, capture ISV Mitek Systems, which specializes in mobile imaging technology, recently reported strong growth for its fiscal Q2 ended June 30. But the company continues to burn through cash. It's revenue for the quarter was $4.5M (40% YOY growth), but this came with a GAAP net loss of $2.2M and a non-GAAP loss of $1.3M.

Russell Clark, Mitek CFO, from the transcript of the conference call as recorded by Seeking Alpha: "Total operating expenses were $6.7 million compared to $5.6 million in the year ago period. This year-over-year increase was primarily driven by investments in sales and marketing personnel as well as litigation costs related to protecting our IP....Q2 litigation expenses were higher than previous quarters due to the timing of expert testimony moving into Q2....It's also important to note that the $1.2 million in litigation expenses in Q2 of the current year comprised almost all of the $1.3 million non-GAAP net loss in the quarter. Our non-GAAP results will be very close to breakeven if not for these expenses."

Regarding the litigation,CEO Jim DiBello said, "We have patents infringement losses against Top Image Systems and USAA, both suits are ongoing. In the USAA lawsuit the deadline to file motions for a summary judgment is mid May with the trial date set for early September."

So, maybe things are as bad as initially appear when a company's net loss is about half its revenue. Mitek still has $31.5M in assets listed on its balance sheet, including $26M in cash and short term investments. This second figure is down a little less than $3M from six months previous.

However, in that six-month period (specifically in the last three months), Mitek's stock value has certainly taken a beating. After peaking at more than $7 per share in late January, it is now trading at less than half that, with the company's market cap, falling all the way to $95M. When you consider the $26M in the bank - it's net value is around $69M - which may actually bring them into potential acquisition territory - hostile or otherwise. However, the question is, do savvy investors know something more about the USAA case than we do? Or are they just panicking? If I was a betting man...


Thursday, May 01, 2014

News on Upcoming Events from IOFM, Notable Solutions, HSA & Kofax


IOFM Preps for Second Payments Summit
Building on success of last year’s inaugural event, the Institute of Finance andManagement (IOFM) is gearing up for its second annual Payments Summit. The event, which focuses on B2B and C2B payments, is being held June 2-4 at the Hyatt Regency on the Inner Harbor in Baltimore. It features a day and a half of conference sessions, as well as an exhibition area.

Last year’s event had 100-150 attendees and IOFM organizers are expecting more this year. “Sign-ups have been steady, but we are still looking for more attendees and also have openings for exhibitors,” said RD Whitney, Executive Director for IOFM, which is owned by Diversified Business Communications. “We think we have the only event that focuses on the full spectrum of payments and provides a holistic view of payments automation.”

The Payments Summit was launched last year targeting former TAWPI members who felt alienated by the direction of IFO (the Institute of Financial Operations), which bought the TAWPI trade organization in 2011. IFO incorporated the former TAWPI show in its Fusion event, which is primarily focused on accounts payable. IOFM also hosts an accounts payable conference, but feels it is filling a market need with a dedicated A/R conference.

Last year’s Payments Summit was well received, and once again former TAWPI executive Mark Brousseau will be emceeing this year’s event. There is no headliner keynote, but the agenda features a steady stream of panels and end user presenters designed to provide peer-to-peer education. Last year’s hot topics included the challenges of managing multi-channel payment streams, as well as automating capture from full-page documents like EOB forms.

IBML is signed on as the title sponsor. Other exhibitors that Document Imaging talk readers may be familiar with include OPEX, BancTec, eGistics, Creditron, Data Dimensions, Fairfax Imaging, MAVRO, Open Scan, and Orbograph. Early attendee sign-ups include executives from industries like banking, telco, healthcare and retail, as well as trade associations and third-party payment processors.

Notable Solutions hosts inaugural US event
Capture and print management ISV Notable Solutions will be hosting its inaugural North American end user event that same week as the Payments Summit, also on the Inner Harbor in Baltimore. eNgage 2014 will run June 4-5 at the Pier 5 Waterfront Hotel. Keynote speakers include Bob Larrivee, director custom research at AIIM and Feri Clayton, director, ECM, IBM Software Group. Notable Solutions end uses from organizations like Toyota, Tulane University, and Fairfax County Government will also present.

“This event is in response to numerous requests from our customers and partners to bring together industry experts to discuss the key challenges facing organizations today,” said Mehdi Tehranchi, Notable Solutions CEO, as quoted in a press release. “We also plan on sharing the successes of those customers who have raised the bar by implementing cost-efficient systems to securely manage and gain greater participation in their business processes.”

Why Kofax Transform is Moving to Las Vegas
Kofax has apparently outgrown the locations at the San Diego Bayfront Hilton where its annual Transform event has been held the past four years. Transform 2015 will be held at in Las Vegas, March 8-11. The 2015 AIIM Conference will then be held in San Diego March 18-20. Kofax is hoping to attract a more international crowd and feels Las Vegas is a better location for that as well. Apparently, AIIM checked with Kofax before scheduling their event in San Diego, so there is no conflict here.

HSA Capture Agenda Shaping up
Finally, once again I have been invited to give my news review and predictions at this year's upcoming Harvey Spencer Capture Conference. The event is being held Sept. 3-4 at its usual location at the Glen Cove Mansion on Long Island. Other topics on the agenda include Big Data, Computational Linguistics and Semantic Understanding, and Photo and Video Understanding. Hope to see you there.