Spigraph Acquires Dicom-Initial Thoughts

In what is being billed as a merger of Europe's top two value-added distributors (VAD) in the document capture space, Spigraph has acquired Dicom. Spigraph, based in France was founded in 1997 and has been expanding rapidly in recent years after taking on some venture capital in 2011. Dicom, which was founded in 1991, acquired the ISV Kofax in 1999 and then was spun off by Kofax in 2011.

When we talked last year with Dicom executives last year in the wake of the appointment of former software executive Rudolf Gessinger as chairman, they positioned a then recent announcement of a partnership between Kofax and Spigraph as non-threatening to Dicom's business. The Dicom execs positioned ALOS (which had been acquired by Spigraph and expanded at VAD's presence significantly in Dicom stronghold's Switzerland and Germany) as primarily in the systems integration business and Spigraph as stronger as a VAD in geographical regions like France, where Dicom was not particularly strong.

This absence of overlap was reenforced in a quote from Joe Froning, CEO of Dicom International, which appeared in the recent press release announcing the merger with Spigraph, "Even though our two companies have been working on the same markets until now, the geographical and functional areas that have overlapped are minimal," he said. "This merger therefore represents a uniting of our respective forces."

Froning will stay with the company as Senior Vice President of Dicom/Spigraph Distribution.Wayne Davey, previously CEO of Spigraph, becomes CEO of the group. The group’s head office will be at Spigraph’s headquarters in Saint-Quentin-Fallavier.

The press release lists the combined company's turnover as €130 million, or approximately $175 million. In its final full fiscal year as part of Kofax (ended June 30, 2010), Kofax reported $125 million was generated from its hardware distribution business. When Spigraph acquired Swiss-German document imaging systems integration specialist ALOS in 2011, the combined entity's revenue was listed at over $65 million. So, there has apparently been erosion in revenue in the past couple years, which is not surprising considering the state of the scanner market today, which is how VADs have historically generated the majority of their revenue.

As prices and margins continue to drop on scanners and related service contracts, VADs, especially in more mature markets like North America and Western Europe, have had to look to new avenues to generate revenue. (Although VADs in emerging markets like the Middle East, such as Forefront Technologies seem to still be growing at a healthy rate.) Gessinger's software background is what made him attractive to the Dicom board, which brought him in. And, Spigraph, through its acquisition of ALOS, has a systems integration practice that helps further diversify that its offerings, which is a good thing.

Between the two organizations, Spigraph and Dicom will now cover a good portion of EMEA, including both mature and developing countries, with a single entity, that offers a combination of document capture-related hardware and software sales, support, and professional services. This variety and geographical infrastructure, along with the resources of a 400-person entity, should make the organization a more valuable asset to resellers and end users, as well as create more profits, than either company would be able achieve on its own.

Partnerships Take Technology into new Geographies

This week both NovoDynamics and KnowledgeLake announced interesting partnerships that will help them expand into new geographical markets. In conjunction with the recent GITEX show, held in Dubai, Novo, a recognition technology specialist, announced that ForeFront Technologies, a VAD that focuses on the Middle East and Africa, will be carrying its OCR software. KnowledgeLake, which develops software for document image-enabling Microsoft SharePoint, announced that PFU will be introducing its technology into PFU's ECM practice in Japan.

Novo, which first came onto our radar screen because of its Arabic OCR technology (it currently supports Chinese, Korean, Russian, Spanish, and English languages as well), exhibited at GITEX. "This show covers all areas of IT and expects over 140,000 visitors before the week is over," reported Art Nichols, Novo's VP of Global Sales, who attended the event. "Forefront is a large Fujitsu and Kodak distributor that also sells Kofax and now NovoDynamics NovoVerus."

Georges Mehchi, CFO and Managing Partner for ForeFront sounded pretty excited about the partnership. As quoted in a press release,  “The intelligence that NovoDynamics has built into NovoVerus’ software truly raises the bar for language detection, recognition and data extraction, taking Arabic and multilingual OCR to an unparalleled level! Introducing this technology into Middle Eastern and African markets will be life changing, not only for Arab nations, but globally.”

 The KnowledgeLake-PFU partnership was a natural, seeing how the ISV is now a wholly owned subsidiary of PFU. Said Ron Cameron, president of KnowledgeLake in a press release, "“This natural progression of our partnership with PFU will extend their already successful ECM practice to include SharePoint ECM. As SharePoint continues to gain momentum in the Japanese marketplace, we hope this partnership promotes the profile and perception of Microsoft’s platform by providing value around its robust ECM capabilities. We are grateful for this opportunity and I couldn’t think of a more suiting partner in this effort than our parent company, PFU."

I don't think there is any question that we are truly working in a global economy today. Yes, there are certainly hurdles to be cleared to be successful doing business in multiple countries, but working with strong partners, like the ones that NovoDynamics and KnowledgeLake have chosen, represents a great way to clear these hurdles.

Dicom and KLake Partnership Paying Early Dividends

Sounds like Dicom's partnership with KnowledgeLake is off to a good start. Today, the European value-added document imaging distributor "reports a consistently growing demand for products and solutions from KnowledgeLake Inc." [Click for press release.] The companies have been working together for almost a year. It was at last year's Sept. DMS show that Dicom announced it would act as KnowledgeLake's distributor for the EMEA territory.

KnowledgeLake is an ISV that specializes in software for document imaging enabling SharePoint. It has grown its U.S. business primarily through direct sales and a handful of resellers. The EMEA business is being pushed primarily through Dicom's extensive reseller channel. KnowledgeLake had one of the first software products added to the Dicom porfolio in the wake of the distributor's splitting with Kofax.

According to today's press release, "Since September 2011, DICOM was successful in closing a whole series of KnowledgeLake partnership agreements with system integrators in Germany, Switzerland, the UK, Netherlands, Denmark, Nigeria and South Africa and managed to win a significant number of projects throughout EMEA. In addition, DICOM also reports a strong pipeline for the month ahead."

According to Joachim Froning, CEO and co-owner of DICOM, "We have been able to draw to the attention of system integrators and VARs in the ECM- as well as the MS SharePoint and Dynamics space to KnowledgeLake. Amongst already signed partnership agreements are renowned integrators like SP Integration, COI, Data One, Sword, Informed Consulting, Innobit, Intervate, FOXit, iSPartners, Infographic and ProActive, just to name a few."

Closing of Sale of Kofax Distributor Delayed

It doesn't seem like a big deal, but apparently the closing of the sale of Kofax's hardware distribution business has been delayed for a couple months. According to this article, the deal, which was announced in January and originally expected to close in March, will now close next month. According to an analyst quoted in the article, "Kofax has confirmed that the delay is due to a combination slightly longer timescales to create the required legal entities and to complete the necessary regulatory filings in order to complete the spin off and transfer of the business to the new owners, Hannover Finanz. The delays have been particular issues in the United Arab Emirates, South Africa and certain other countries."

The sale of the $130 million, slightly profitable business, will net Kofax some $20 million that it is expected to use for acquisition. Interestingly, when I talked with Tony Barbeau of Kodak Document Imaging, we compared Kodak's sale of its microfilm business to Kofax's sale of the hardware distribution business. Both businesses were actually the foundations of the entities that are now selling them. In the early days, profits from each were used to fund new businesses that have now overtaken the legacy operations.

Headway Sold

European imaging distributer Headway has been sold to U.S.-based Avnet. Looks like they paid less than half of one-time revenue for the division that includes Headway.