The Importance of Mobile on the Future of Scanning

It seems we have somewhat forgotten about the potential impact of mobile document scanning and capture. Back in 2011, when only 35% of Americans identified themselves as owning a smart phone, Harvey Spencer Associates projected that by 2015, there would be $1.5 billion worth of software sold related to mobile capture, up from $200 million in 2011.

Since then, while smart phone usage has more than doubled, HSA's projected revenue growth for mobile capture software has not been realized. The study identified several potential use cases including field service, transportation, scan-to-the-cloud, home healthcare, assessment/survey/audit, onboarding and mobile check deposit. Of these, while we've seen some traction in markets like transportation and onboarding, the real killer app has been check scanning, which Mitek has made a $60 million-a-year business out of. 

There have certainly been a lot of efforts at developing document scanning apps for mobile devices. A quick search in the Google Play store reveals hundreds--most of them offering some basic functionality, like PDF creation, for free. The challenge has been monetizing this technology.

At the recent ABBYY Tech Summit, VP of Marketing Bruce Orcutt acknowledged that it's very hard to make money off mobile capture as a standalone app, but stressed that mobile is vital to the future of the company, as complementary technology to its capture platform. "Mobile is the preferred channel of end users," he said, meaning that people want to use their smartphones to capture documents. As phones' cameras and processing power continues to improve, this preference will only become more prevalent. 

Mobile is even more vital in less developed markets outside the U.S. During the recent Harvey Spencer Associates Capture I had dinner with Claudio Chaves, Jr., the CTO of IcAPT, an ISV jointly based in Brazil and Orlando, that has developed a cloud-based capture service. Chaves also has extensive experience working with service bureaus in Brazil. 

He explained that in Brazil, legal requirements call for mortgage documents to be printed on paper, which creates a good business for capturing them. However, he noted that one of challenges is that the images are often poor quality because people use their phones to capture them

According to my infoSource data, there were approximately 26,500 document scanners sold in Brazil last year compared to 875,000 sold in the U.S. That's 33 times as many scanners being sold in the U.S. than Brazil, which has a population of 209 million, which is more than 60% of the U.S. population of 325 million. Obviously, Brazil is underserved when it comes to document scanner sales.

But not when it comes to mobile phones. In 2017, it was estimated that there were almost 200 million smartphones in use in Brazil, giving it a penetration rate of close to 100%, considerably higher than the U.S. smartphone penetration rate of 77% (at the beginning of 2018). Like many countries with emerging economies, Brazil seems to be somewhat skipping the desktop era (at least for scanners) and moving right to the mobile era.

I don't think Brazil is unique in this transition. The question is how do we best address it? I think the continued development of better mobile capture technology is the primary way. ABBYY, for example, has shown us some very cool video streaming technology that enables users to capture multiple images of a document and utilize ABBYY's algorithms to determine the best one. I recently saw a commercial for Google's new Pixel 3 phone that offers similar functionality for photographs.

Sure, I know that everyone in the hardware market likes to say that scanning one or two pages might be fine with a mobile device, but I think the market is moving beyond that. I think the market would like to do batch scanning with mobile devices. There is of course the option of using mobile devices to drive scanners, but it doesn't seem like there has been much uptake in that area yet. No, the preference seems to be utilize the smartphone camera. And with memory increasing and the cameras improving, we think this demand will only increase in the future.

What does this mean for the future of scanners? Well, we have already started to see a decline in sales of personal (<$400) scanners in the Americas, according to our infoSource data, while sales of higher end workgroup, departmental, and low-volume production scanners grow or at least remain steady.

Of course, this could be attributed somewhat to former personal leader Neat exiting the market for scanners to focus on software, but part of the reason Neat stopped selling scanners is that they launched a mobile app that they expect people to utilize as on on-ramp. 

It will be interesting to watch how this plays out over the next few years. Will better scanning apps enable users to better capture multi-page documents with their phone? Will the evolution of TWAIN direct and similar "driverless" scanning technologies enable users to take full advantage of document scanners and MFPs for scanning with smartphones? How will the introduction of more AI, NLP, and machine learning into capture and BPM apps affect the market for scanning?

All of this is on the table. Let's just remember that mobile will have a major impact on the scanning and capture markets going forward.

Capture and RPA: Who's the Horse and Who's the Cart?

Is document capture a subset of Robotics Process Automation (RPA) or vice-versa? This question came up at the recent Harvey Spencer Associates Capture Conference - an annual meeting of top executives in the document capture software industry. HSA's Mike Spang presented RPA as a $200 million-plus branch of the $4.1 billion capture industry. That said, by our calculations, just three of the market leading RPA companies, UiPath, Automation Anywhere, and Blue Prism, have a combined market capitalization of $4.4 billion, or more than the whole capture market is producing annually in revenue.

And most accounts we hear have RPA implementations pulling through capture sales when the processes being roboticized run into documents, which seems to be a considerable amount of the time. Earlier this year, Boris Krumrey, the Chief Robotics Officer for UiPath, estimated that about 70% of the RPA vendor's 700 customers were likely candidates for capture. UiPath has a partnership with ABBYY to provide these services and was looking to partner with other capture ISVs as well.

It's also been conjectured by no less than Reynolds Bish, CEO of Kofax (which offers both capture and RPA technology) that there is opportunity for BPA/workflow/case management integration with RPA for better managing processes where human intervention is required. So, there seems to be quite a bit of synergy between the RPA and ECM markets. Going one step further, recently ECM vendors Digitech and Hyland have each announced RPA initiatives that seem to primarily built around automating the entry of information from their applications into third-party applications. So, in these cases ECM is pulling through RPA!

This whole situation kind of reminds me of the Web Content Management vs. ECM division we dealt with around the turn of the century. At that time, I remember there was talk of WCM leader Vignette merging with ECM leader FileNet. There was a similar disparity between market caps and revenue (FileNet with the higher revenues but much lower multiple) to what you are currently seeing with RPA and capture. FileNet (and CEO Lee Roberts) could not come to grips with this disparity and thus never consummated the merger. Not too much later, in 2001, the Web technology bubble burst and Vignette was eventually sold to OpenText in 2009.

I'm not saying the RPA technology bubble is going to burst, but Digitech CEO H.K. Bain recently told me that he felt the development of RPA was a step back from the advanced technology his company was working on related to information management. So, what's it going to be? Are capture ISVs going to be acquired by/merge with RPA companies while their valuation is high? Or, are the ECM companies going to wait it out and see if they can catch the RPA vendors on their way down?

Insights into Current ECM Market from DocuWare's President

Today, DocuWare announced the first two applications in its Kinetic Solutions program. Kinetic Solutions are pre-configured to manage specific business processes and sit in the DocuWare cloud. The first two iterations are for accounts payable and human resources.

These are not surprising places to start - as they are two of the most popular areas for businesses to begin their ECM implementations. DocuWare is a Germany-based ECM vendor that has been successful in the U.S. through a strategy of first buying one of its early U.S.-based solution providers (ALOS) and then focusing on recruiting MFP dealers to form the bulwark of its reseller channel.

DocuWare was also one of the first traditional ECM vendors to recognize the significance of the cloud. In 2010, the company earmarked one million Euros for Web-based and SaaS initiatives, which eventually led to the launch of the DocuWare Cloud in 2012. Cloud adoption ramped up gradually but by the end of 2017, the ISV was projecting the over half its new customers would be choosing the Cloud - a high rate compared to most legacy ECM vendors.

So, to us it seems that DocuWare's leadership has proven to have some keen insights when it comes to ECM adoption trends. And, in its latest press release announcing the first two Kinetic Solutions, President Juergen Biffar offered his views on three current trends he is seeing. “We are seeing three signals in the market,” he said. "First, because of its attractive economics and simplified IT impact, there is escalating demand for cloud services versus traditional on-premises software. Second, functional utility is not enough – clear, intuitive usability is now expected. Third, companies are more inclined to deploy a narrow, departmental solution versus trying to configure complicated, legacy software. Enterprise-focused software that requires lengthy and complicated professional services is witnessing softer demand."

There has been a lot of talk in the ECM market about the emergence of "content services" and breaking down monolithic ECM solutions into "microservices" that can be consumed in smaller bits and used to assemble process-specific applications. With its Kinetic Solutions, DocuWare has kind of taken this approach, but instead assembled the microservices on its own into "micro-solutions" designed to be more manageable than a traditional ECM platform. This makes perfect sense for the mid-market businesses that they target who probably want something more "out-of-the-box" than a series of configurable ECM services.

This seems to be a good approach on DocuWare's part and should help the ISV continue to increase its percentage of cloud sales, which should also lead to continued success into the foreseeable future.

Adding Substance to the Style in the Age of Digital Transformation

Digital Transformation sounds sexy. It’s about taking all your manual and paper processes and making them faster and electronic. The impetus behind this transformation is that everybody is connected today, though wi-fi, satellite networks, mobile devices, and even laptops and PCs. A lot of work has been spent on enabling the UIs on these devices to help users to have a top notch digital experience. However, it seems that back-end systems, where information coming in from these UIs is processed, are still not up to speed. At least this is what we were told when putting together stories for our last [Jan. 26] issue. 

“A lot of companies have mobile apps and digital interfaces, and they are very fast at pre-approving a loan,” Alan Swahn, VP of marketing at ISV and systems integrator AI Foundry, told us. “But, to actually issue that loan, they are still dealing with a lot of paper and armies of people keying in data. So, while the UI may have gone through a digital transformation, everything else is old school.”

Added, Ralf Göbel, COO of data capture software and crowdsourcing specialist ScaleHub, “The problem is that the back-end systems used to process this input are not fast enough. The apps and Web sites might be flexible and fast enough to provide a great experience on the front-end, but the back ends at many big companies have not kept up, and they are too slow.”

This is not a new problem. It was back in 2010 that AIIM, with the help of noted technology author and consultant Geoffrey Moore, first started talking about connecting Systems of Engagement (the front end) with Systems of Record (the back-end). Since then it seems the disconnect has only widened, as investments have tilted toward improving mobile apps and UIs, and, as usual, back-end improvements in areas like ECM,  have been often pushed (no pun intended) to the back burner.

Obviously, this would seem to create opportunity for savvy capture and ECM vendors and integrators who know how to package their software and services as part of a total Digital Transformation solution. That said, their systems need to be architected correctly to integrate with multi-channel front-end input avenues, as well as other back-end systems that are driving business decisions.

RPA is an interesting avenue for achieving some of this integration. As we also went over in last week's issue, when Kofax first purchased Kapow, it was presented as application integration software. This capability (as well as the ability to learn by example) seems to be one of the core tenets of products in the emerging RPA space. And indeed, while Kofax has yet to see much crossover between capture and RPA, there are RPA vendors like UiPath, which, through a partnership with ABBYY, have added document processing to their RPA portfolios. 

Kofax has seen a parallel between the capture and RPA markets in the desire by users to introduce workflow automation to data being gathered to RPA and data being captured from documents. This makes absolute sense within the landscape of the Digital Transformation, where the desire is to get things done faster and in a more automated way. So, if you look at it from a process management standpoint, UI, capture, and RPA all should be connected, along with automated workflows and back-end systems. That seems to be the Holy Grail of Digital Transformation.

I'll leave you with one more analogy. Let's go back to my first statement about the Digital Transformation being sexy. Unfortunately, more often than not, however, today it seems to be like the beautiful person you meet at the bar whose conversation might only go as deep as reality TV. Introducing capture, RPA, and workflow could be akin to sending this person to college (and even grad school), where they learn to discuss business, politics, philosophy and all sorts of other interesting topics. Of course, the question is, do you have the budget for that? It's my hunch that if you look at the ROIs for college, and you look at the ROIs for completing the Digital Transformation, they might be similar. At least I'm hoping their both positive, with two teenagers in school and a business heavily invested in the capture and ECM markets.

The Future of the Scanning Hardware Market

As the editor and publisher of DIR, and more recently, Americas regional manager for infoSource, I've spent a lot of time covering the document-related hardware market. When I started back in the late 1990s, high-volume scanners were the primary market drivers with vendors like Kodak and Bell + Howell leading the industry. In the 2000s, we saw the rise of "distributed scanning" and explosive growth in the workgroup ($500-$2,000) segment of the market. More recently, we've seen the emergence of the personal segment (sub-$500) of document scanners, as well as more scanning on MFPs, as the act of document scanning truly becomes democratized. Of course, being able to take a picture of a document with a mobile phone, potentially puts a document scanner in everyone's pocket.

So, where is this all going? It's our opinion that the market is too fragmented and document scanning technology needs to become more standardized for it to take the jump to the next level and truly be considered mainstream technology. Basically, we need more consistent images and image onboarding/management processes to truly cross the chasm. So, how do we get there?

The new TWAIN Direct initiative is a step in the right direction. TWAIN Direct is designed to remove traditional drivers from the scanning process and enable scanners to be found on a network, similar to other peripheral devices like printers. The scanners would have to be running some bit of code in their internal memories that would enable them to connect with TWAIN Direct scanning applications, but it should be lightweight and not require a PC to act as an intermediary like document scanner drivers do today.

This is exciting because MFPs and apps on mobile devices could conceivably run similar code that would enable them to talk to those same applications. This could reduce the variety of connections that scanning software vendors have to create and upkeep and also serve to somewhat standardize the scanning process. Once we get that far, the scanning application vendors can invest their resources in what they are going to do with the scans once they get them.

I am not saying TWAIN Direct is the only way to accomplish this, but I would like to see some sort of standardized way to capture images across document scanners, MFPs and phones. They all have their place in the scanning hardware hierarchy, but for the industry to truly thrive, it is better if it's a connected, graduated hierarchy, vs. a lot of individual scanning platforms.