Jan Andersson Leaving ReadSoft

You've probably already seen the report that ReadSoft's Jan Andersson is giving up his position as CEO of the company he co-founded 20 years ago. Instead, Andersson is taking a seat on the board of the $96 million document capture and business process automation specialist. The official word from Bob Fresneda, the managing director of ReadSoft's North American operations, is that Andersson wants to be able to lead from a board position, rather than having to focus a considerable amount of time on ReadSoft's day-to-day operations.

"Taking a company from a start-up to a $100 million company is a different job than trying to double that $100 million business," said Fresneda. "It takes some of the same vision, ability, and desire, but you can't do that while worrying about the day-to-day operations of the company."

That seems like a fair statement. 

Andersson's announcement came after the company announced a successful fourth quarter, for which it reported 7% revenue growth (13% measured in local currencies) over the 2009 fourth quarter and a 73% growth in operating profit. For the year 2010, revenue growth was nearly flat, with ReadSoft reporting a 6% growth when measured in local currencies. Operating profits were up 93% to almost $9 million. Clearly, however, when compared to Kofax's reported 20% growth in software revenue for the final six months of 2010, ReadSoft was losing some market share to its top competitor.

While 2009's 6% growth could be attributed to the economy, flat growth in 2010, while your competition is growing well into double-digits, is tough to swallow.

Andersson has certainly done a great job at ReadSoft for a number of years. ReadSoft was clearly an innovator in document-capture-based invoice capture systems, as the first ISV to realize how important a workflow piece was to the invoice equation, when it bought the SAP-experienced development organization Ebydos. But, in recent years, the rest of the market has been catching up, and ReadSoft hasn't been able to answer with another big move. Maybe Andersson felt it was time to give someone else a shot at doing that as CEO.

There's a lot of speculation I can make, and I'll do some of that in next week's premium issue, as well as have some more insights from Fresneda. For now, we wish Jan and the rest of ReadSoft the best with this transition. As a $100 million software vendor with a worldwide footprint and multiple Global 200 accounts, this is not an organization in trouble, but if ReadSoft wants to keep up with the aggressively moving Kofax, it's probably a good time to make some changes.

BancTec Names President for Americas

Maria L. Allen has been named to what I believe is a new post as the Dallas-area-based document and transction capture specialist. Allen is Banctec's new president for the Americas, as well as a corporate senior VP.

Like a lot of the management staff that BancTec has brought on in recent years, Allen is a former EDS employee who was VP of global financial services outsourcing for HP Enterprise Services (where she oversaw worldwide BPO operations, portfolio strategy, and business development) before joining BancTec in August 2010. For the past six months, she had been serving as BancTec's group VP of global strategy and market development.

BancTec CEO and Chairman J. Coley Clark is also an ex-EDS exec who joined BancTec in 2004. Since Clark has joined the company, BancTec has increased its  BPO revenue more than 10-fold, through a combination of acquisitions and internal growth. In 2009 (the most current public filing), BancTec listed $93 million in BPO revenue. This accounted for more than a third of BancTec's overall revenue of $273 million. BPO is obviously an important part of BancTec's strategy going forward, as the other three areas of its business all reported a decline in 2009.

In 2009, $147 milllion was reported as coming from the Americas region, which Allen will oversee, and $126 million from EMEA.

Document Boss on Metastorm Acqusisition

Because the deal is not closed, apparently Open Text is not saying anymore than they already have (which hasn't been much) about the Metastorm acquisition. I really have not been able to find too much in depth analysis on the deal, but the best work I've seen is this piece from Document Boss.

Here's an excerpt: "BPM is increasingly being seen as the backbone of the ECM and related technology sector  - the glue for managing the processing,collaboration and workflow of documents and data.  Metastorm was a pure play BPM software provider, embracing Enterprise and Business Architecture, Business Process Analysis, and Business Process Management from a pure play platform approach...This acquisition is not only a good bolt- on to allow Open Text to further expand their ECM offering, but it allows them to be positioned as more of a major player in the BPM space, with access to increased market opportunities.


"In addition, the acquisition of Metastorm by Open Text speaks volumes about the importance of BPM and accompanying analytics, and we expect more core ECM companies to add robust BPM capabilities throughout 2011."

Open Text Buys Metastorm

So, by now, you've probably seen the announcement that Open Text has bought Metastorm. The question I have is why. Not that Metastorm isn't a good company in a good market - it's just that this seems like a bit of an odd deal for Open Text - most similar to the ECM ISV's acquisition of IXOS way back in 2003.

Why is the deal odd? Well, Open Text, which usually drives a pretty hard bargain, agreed to pay $182 million in cash for Metastorm, which depending on who you believe is 2 to 2.5 times Metastorm's annual revenue. My information had Metastorm on track for more than $90 million in 2009. The Seeking Alpha Web site apparently had the same info that I did, but is also reporting that "Open Text indicated that Metastorm was generating $70-75m in sales....However, we suspect that guidance assumes a bit of revenue write-downs and (perhaps) a bit of sandbagging."

Either way, Open Text does seem to be paying a bit of a premium by its standards, even if Metastorm has shown some impressive growth- it was reportedly a $25 million company just five or six years ago - and is in the fairly hot BPM space. The fact that Open Text is buying anyone that large for 2 to 2.5 times revenue in a still shaky economy comes as a surprise. I remember being similarly surprised by the 1.5 times revenue premium Open Text paid for IXOS eight years ago (IXOS was not in a hot space), but that deal's primary driver was that it gave Open Text an in with SAP, which it has certainly leveraged successfully.

Was the Metastorm deal something orchestrated by SAP, similar to Open Text's acquisitoin of Captaris for the capture technology that was immediately embedded in an SAP OEM offering? I don't know, but I certainly suspect there is more to this deal than meets the eye.

Any thoughts?

Xerox Acquires ISV/SI

Last week Xerox acquired DocuShare systems integrator WaterWare Internet Services. Water Ware, which is based in Northern California, near the Palo Alto Xerox office where DocuShare is developed, will do professional services and software development related to implementations of Xerox DocuShare implementations. They were doing this on their own previously, but now will do it in conjunction with the Xerox sales team.

WaterWare has already developed some software applications around  DocuShare, including at least a couple that include some document capture functionality. We did a story last year on one of WaterWare's implementations at an L.A.-area hospital. WaterWare is named after founder Mark Waters who is now Xerox's DocuShare Solutions manager. We'll have more on this in our next premium issue.

The acqusition of an ISV/SI like WaterWare is another indication of MFP vendors' desire to move more deeply into software and services. I'm not sure that this fufills my beginning of the year prediction that an MFP vendor will buy a capture ISV, but on a small scale, this is certainly an example of that.

Kofax Posts half-year results

The much-anticpated Kofax six-month results have been announced. As expected, they are impressive. Kofax reported 20% growth in its software business, up to $121.7 for the half-year period ending Dec. 31. Kofax also reported an adjusted EBITA of $23.5 million - up 192% from the previous year's six-month period. Kofax now has $69 million in cash (and from what I gathered talking to him a couple weeks ago, CEO Reynolds Bish is itching to invest that money, plus the $20 million from the distribution business sale, in an acquisition.)

Bish said in a press release related to the results that he expects, "our software business revenues to grow by approximately 14% on an organic, constant currency basis during this current fiscal year....we have now raised our longer term, sustainable target closer to a 20% margin."


CFO J.R. Arnold had this to say on Kofax's renewed success through its channels, "We continue to realize benefits from our hybrid go-to-market model with revitalized performance in our indirect channel, which generated 56% of applications software license revenues....OEM/POS revenues increased 6% to $12.7 million from $12.0 million in the prior year, reflecting a continuing recovery in this area of our business."

The hardware business, which was recently sold, continued to struggle. Said Arnold, "Revenue in the hardware business decreased 10% to $59.9 million in the first half of fiscal year 2011 from $66.8 million in the prior year, and its adjusted EBITA decreased to $0.2 million from $2.0 million."

Bish had previewed some of this success a couple weeks ago, but apparently for investors, the proof is in the pudding. As of this post, the stock had jumped 18% today, from somewhere around 3.5 pounds per share to over 4.25. Good momentum at Kofax. Let's hope it's a sign of strength throughout the industry...although at the recent Transform event in San Diego, Bish did say his goal was to "crush the competition."

OCR Accuracy Benefits

One of the often under-rated benefits of automated data capture technology is the accuracy improvement it can bring to a process. I was just typing a colleague's business card info. into Outlook (yes, I still sometimes use Outlook), and I accidentally typed the fax number into the field for cell phone. Luckily I caught it and saved myself the pain of hearing a loud screeching sound when I thought I was dialing a mobile phone number. As I typed in the correct number, I realized that would not have happend had a I scanned the card and used my OCR-enabled business card software, which I typically use for batch capture only.

So, yes, while we usually like to stress the productivity benefits - less manual keying - of OCR applications, there are certainly accuracy benefits as well, that can potentially further contribute to the ROI - how much depends on the value of your downstream data. Which brings me to a second instance of inaccurate data entry that I ran into this weekend: My wife had recently purchased a memorial service (I don't know if purchased is the right word, but...) for her father-in-law in our family's name. Well, wasn't it quite a surprise, when I received the church bulletin this week and saw the service was being held in memory of me! Whoops. The flowers have certainly brightened up the house though.

Recent ECM Headlines

Lot of great news stories moving over the past few weeks, that you'll see links to in our free e-mailer tomorrow. If you're not getting it, you can sign up by signing up for a free trial subscription to our premium newsletter.

Some of the featured ECM headlines in tomorrows e-mail will include:

IIS Secures Venture Funding


Open Text Earns DoD 5015.02 Joint-Certification with SharePoint 2010

Major Publisher Licenses CVision's PDFCompressor

Square 9 Softworks Partners with Pintey Bowes Canada

New Kennedy Digital Archive

Today is being celebrated as the 50th anniversary of John F. Kennedy's inaugural address. That is the one that contains the line, "Ask not what your country can do for you – ask what you can do for your country," among others. In honor of this anniversary, last week, the John F. Kennedy Library Foundation and the National Archives and Records Administration unveiled a digital presidential archive "providing unprecedented global access to the most important papers, records, photographs and recordings of President John F. Kennedy’s thousand days in office."

The new archive contains approximately 200,000 pages, 300 reels of audio tape containing over 1,245 individual recordings of telephone conversations, speeches and meetings, 300 museum artifacts, 72 reels of moving images and 1,500 photos. Technical details are available in this white paper. Technology partners participating include AT&T, Raytheon, Iron Mountain, and EMC. There are plans to digitize more materials as "staff and resources" become available. The library can be accessed at www.jfklibrary.org.

We'll conclude with this visionary quote by Kennedy, who seems to have predicted the rise of the document imaging industry, "through scientific means of reproduction…and this will certainly be increased as time goes on, we will find it possible to reproduce the key documents so that they will be commonly available…” Who knew?

Kofax Sells Hardware Business

As previewed on our blog yesterday by an Anonymous poster, Kofax has sold its hardware business. The price is listed at $23.2 million, which seems startling low what was reported as a $126.6 million business for Kofax's fiscal 2010 (ended June 30). Of course, the EBITDA was only $1.8 million, for a 1.4% margin, down from $8.8 million the previous year.

We all knew Kofax wanted to sell this hardware distribution business, which operates primarily in Europe, for some time. For a couple years, Reynolds Bish cited it as a profitable entity that helped contribute to Kofax's bottom line, but those tight margins last year, were likely the tipping point that made Kofax finally go ahead with the sale.

I guess the Anonymous poster already pointed out the irony in the fact that Dicom, which was basically the distribution business, bought Kofax in 1999. A couple year's ago, the entity's name was changed to Kofax, and now Kofax is selling off the former Dicom business, which is going to be renamed Dicom.

According to the press release, "Joachim Froning, Senior Vice President of Hardware Distribution Sales at Kofax and the anticipated Chief Executive Officer of Dicom International AG." The deal was mainly financed by Hannover Finanz, "a private equity firm headquartered in Germany." We wish the new owners the best of luck and hope they will be able to reverse the trend of declining profits.

There was also this interesting quote in the press release (from Kofax CEO Reynold Bish): “The proceeds from this transaction and the planned restructuring will better position us to focus on and further grow our software business revenues and earnings both organically and via our acquisition strategy. This is particularly timely as we recently concluded a successful half year that is materially better than the expectations previously conveyed in our Interim Management Statement dated November 4, 2010. We look forward to announcing these results on February 7.”

As of this posting, Kofax's stock shot up almost 5% following this morning's (London time) announcement of the deal. I guess for Kofax this equals addition by subtraction.

SaaS-Based Capture

One of our predictions for 2011 was an increasing availability and use of Cloud-based capture applications. Well, a couple days after our predictions came out, ABBYY announced a new portal to make its OCR and translation technology available on the cloud. In addition, we received a follow-up e-mail from CAPSYS with a link to this video on Ty, Inc., the Beanie Baby makers, discussing their SaaS-based capture and document image management implementation.

Early returns indicuate that this prediction is on target.

Oh yes, finally we will have a feature in our next premium issue on DocSolid, which is launching a cloud-based MFP-capture solution designed to be bundled with mangaed print services implementations.

Kofax Stock on the Rise

Not sure what is going on at the Kofax's European user/reseller event being held this week in Barcelona, but since Friday the company's stock value has risen more than 12%. Kofax, which is based in Irvine, CA, but traded on the London Stock Exchange due to its roots as a European hardware distributor (Dicom, which bought U.S.-based ISV Kofax in 1999), closed today with a value of 325 British pounds per share and a market cap of close to $440 million US dollars (up more than 20% from when current Kofax CEO Reynolds Bish was hired in late 2007.)

There was this announcement, which sums up some of the improvements made in various Kofax products like VRS, the KTM modules, and the MarkView for Accounts Payable software acquired with 170 Systems, but it doesn't seem like anything major. We'll look forward to catching up with Kofax execs at next week's North American Transform event. Hopefully we'll have better luck getting there than we did this week, when editor Ralph Gammon was grounded in Erie, PA on his way to the Laserfiche Institute event in LAX.

Cost of SharePoint

Spealking of the Real Story Group, parusing their blog, I came across this post from Alan Pelz-Sharpe, discussing some of the expenses associated with SharePoint implementations. Here's an excerpt that I found interesting: "The truth is that SharePoint is not a cheap option, no more so than any other document management or ECM system....What surprises both us and our customers is that SharePoint can sometimes present the most expensive shortlisted ECM option after a full cost analysis is undertaken."

This is not something I have heard many other places, but something I've always suspected. I think we need more cost analysis on SharePoint implementations in the transactional content management world.

ECM/DM Split

Received an interesting update from the Real Story Group regarding their observed split of the document management and ECM market. Real Story is a Boston-based analyst firm, formerly known as CMS Watch. It's contention is that the "ECM)technology marketplace has split into two distinct and separate segments:
1. ECM Infrastructure Vendors, that position their platforms as a set of lower-level technology services to manage high-volume, process-centric needs, such as processing insurance claims

2. Document Management Application Vendors, that configure their products to accommodate specific needs

I'm not sure I agree 100% with definition, as I think processing insurance claims is a document management funtion, but I get the gist of what they are tyring to say. It's the enterprise platform vs. line-of-business positioning. I think I would say that document management applications like insurance claims processing can be built on top of ECM platforms.

Here's the vendor positioning chart that Real Story came up with. Here's the text they included along with it:

"ECM infrastructure deals are large, but less common, as complexity and cost limit their appeal and usefulness. ECM infrastructure vendors Autonomy, Oracle, OpenText, IBM, and EMC have been acquisitive and are likely to remain so in 2011. As a result, these vendors often represent a relatively higher risk to buyers.


"In contrast, the marketplace for departmental and process-specific Document Management products is a blend of a diverse set of players, ranging from vertical and horizontal options (e.g., patient billing in healthcare), to broader, open source and low-cost cloud offerings. Example vendors include Hyland in the US....and Fabasoft in Germany. With mature product and service offerings and strong vertical expertise, these vendors often represent a relatively lower risk for buyers."

Does EMR Work?

Here's an interesting article, which the TAWPI Link-in Forum originally linked me to. It's on a study by UC-Davis about the effect of electronic medical records (EMR) on physician productivity. The bottom line seems to be that the increase in data entry required by new EMR implementations is often a hindrance to medical personnel getting their jobs done. Clearly, there is some ramp-up period, and in many cases, the systems to seem to help productivity slightly in the long-run, but not in call cases. Definitely sounds like an opportunity for better capture technology.

It's probably important to note that this study only looks at physicians productivity and not back-office administrative/billing stuff, where imaging has certainly been proven to increase productivity.

ReadSoft's Fresneda Predicts More A/P Structure

Steve McMair of the Transaction Directory published 2011 predictions from a number of transaction processing players today. ReadSoft U.S. president Bob Fresneda was among those featured. ReadSoft, a Sweden-based ISV, made its mark in North America with invoice processing solutions combining its automated data capture technology with SAP-centric workflow. In truth, its U.S. sales never really took off until the workflow component was introduced.

Not surprisingly, ReadSoft is now looking for ways to expand its process management expertise, with purchasing being a natural place to go, following invoices. In his 2011 prediction, Fresneda states, "The Aberdeen Group estimates that U.S. companies are losing nearly 25% of every dollar they spend due to maverick purchases that miss out on preferred pricing....As a result, I anticipate companies looking to standardize their order-to-cash and purchase-to-pay processes within their ERP systems in 2011."

In fairness, Fresneda isn't the only one touting the expansion of invoice processing applications into purchase-to-pay management. E-invoicing systems vendors are seeking the same type of expansion and other hosted "services" providers are diving into this realm as well. Certainly something that bears watching.

KLake Introduces Fast Search Option

Hope everyone is enjoying a good holiday season.

KnowledgeLake, the St. Louis-based ISV that specializes in document imaging for SharePoint applications has introduced a new version of its flagship software platform. Version 4.1 integrates Microsofts FAST search technology to deliver better results to users looking for documents. KLake also introduces a new document viewer that integrates into SharePoint via Web parts and can be accessed from any SharePoint Web page.

Perceptive Offers New Angle on ROI

We've certainly heard a lot of cost justifications for document imaging systems over the years. Improved workflow is probably the most significant one, with compliance/improved records management being number two. Lately, there have been efforts made to link document imaging to green initiatives. Perceptive Software recently came up with a new benefit - healthier employees. This is achieved by elminating the mold associated with box-stored documents.

From the press release:“'We had over 800 boxes absolutely loaded with education records that we didn't need to keep,' said said Doug Wamer, Antioch University Director of Record Administration and Compliance Officer."'With ImageNow, the institution felt safe eliminating the hard copies and moving to the digital form so we could access the information more quickly and better serve our customers.'

"Wamer said many of the stored boxes were filled with mold. Employees who frequently worked with the documents were getting sick, missing days of work and experiencing a range of health problems.

“'Some of our employees working with those documents would get sick for days. Getting rid of the old, moldy paper in storage was a milestone for us--it made for a better, healthier work environment where employees were able to work more efficiently,' said Wamer."

There you go.

SaaS-Based ECM

This was one of the hot areas of growth I predicted at the Harvey Spencer Document Capture conference earlier this year. I based this primarily from what I had been hearing from service bureaus, who are certainly moving a lot this way, as well as ISVs like Hyland Software and Digitech, who both seemed to be exceeding ECM industry growth rates with their SaaS businesses.

My views on the emerging strength of this market segment were reinforced by a recent conversation with SpringCM. SpringCM was a small vertically focused SaaS business that a few years ago made a big splash by launching a more general ECM-targeted SaaS business. From what I understand, they took on some venture funding, invested heavily in an improved, true-SaaS, modular architecture, and brought in former iManage/Interwoven executive Dan Carmel to run the whole thing. Carmel is a great promoter and did garner SpringCM a lot of publicity, but after I found out he was no longer with the company, I thought perhaps they had scaled back their efforts.

Does not seem to be the case.The new CEO, Chris Junker (who started this summer), is also a former Interwoven/iManage and Autonomy guy. And SpringCM is reporting a 100% growth in subscription revenue for 2010, and expects to duplicate that in 2011. They gave me some figures from Gartner  - like an estimate that in 2011, 10% of the software market will be cloud-based in 2011 and 40% of all new software purchased will be cloud-based by 2014. I got a lot more interesting stuff from my conversation with VP of marketing Roger Bottum, which I will include in an article in my next premium issue.

I will tell you that we discussed the fact that ECM is a bit more complex than many other software apps, which makes it harder to manage in a SaaS model. However, it seems it can be simplified by being packaged into vertical or horizontal apps, and imaging-based apps like contract management and invoice processing seem to be hot areas for SpringCM right now.

Docuement Security Issues

The recently publicity WikiLeaks has been generating should be bringing the issue of document secuirty to the forefront. Here's an editorial I authored for my last premium issue, wondering about the security around the recently released "cables." Basically, it's a call for more market education around the capabilties of document managment software.

Coincidentally, Toshiba America Business Solutions, one of the companies featured in the editorial because of their focus on document security, is putting on a Webinar this week on that topic. "You'll hear from Bill Blake, noted Document Security Specialist and President and COO of edocument Sciences, LLC, a  key Toshiba business partner. Bill will share strategies to effectively control and protect your organization’s critical information and avoid a WikiLeaks-type disaster in your company."