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.

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.

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.

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.

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.

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

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."

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.
  
  
  
   

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."

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.

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....

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

 

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.

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...

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.

Prepping for ReadSoft User Conference, May 14-16

Looks like I'm heading down to this year's ReadSoft User Conference, May 14-16 New Orleans.. Should be a good, fun and productive event. I'm expecting to get an overview on ReadSoft's direction through a combination of attending the sessions, one-on-one interviews with ReadSoft executives and partners, and some good ole' Nawlins networking.

I visited the ReadSoft offices almost a year ago and came away with this overview of their basically two-pronged strategy: expanding their capture and P2P practices. It will be interesting to see how that strategy has evolved over the year, under the guidance of Andrew Pery, who was working for ReadSoft as a consultant when I visited last year, and was later named the company's first CMO.

ReadSoft is coming on an improved first quarter that included 27% YOY growth in software license sales and a 9% increase in overall revenue. ReadSoft's EBITDA was improved, but the ISV still lost money. According to President & CEO Per Åkerberg CEO, as quoted in the press release on the Q1 financials, "Our EBITDA result and our margins have taken clear s teps in the right direction....A gradual change in the reporting of our revenues from our support and maintenance agreements has affected this quarter’s result negatively compared to first quarter last year. This effect means no lost revenue but only a time delay in the reporting of these revenues."

AIIM 2014, Freakanomics, and Freddie Mercury

Just got back from enjoying three days at the AIIM Conference 2014 in Orlando. Yes, the weather was great - especially considering the winter/spring we had/are having up here in northwestern PA. But, as I predicted in my previous post, I ended up spending very little time outside enjoying the weather. Instead, my time was spent mostly indoors at the conference, enjoying great conversations, ideas, networking, sessions, and alright, I had a few beers.

I'll have full coverage of the event in my next premium issue of DIR, coming out next week, but I wanted to go over one thought I had, which was re-enforced by a podcast I happened to be listening to on the way home. That thought is that we in the technology industry often get way ahead of the end users. No, this is not anything strikingly new, but I think we all need a little reminding now and then.

For example, I attended a roundtable on high-volume scanner. Mark Brousseau (a former DIR editor many moons ago) was the host and, as always, he did a great job encouraging audience participation. In other words, he called people out and demanded to know why they were there. Anyhow, the biggest problem among the end users at the roundtable was manual sorting of documents. One user specifically complained about having to print and insert bar-coded separator sheets before scanning, even though they were licensing capture software from a vendor who has an auto-classification option. Heck, there are multiple auto-classification products on the market. I've seen the demos and they seem to work well enough, but as usual, in many cases the users seem to be too heads down with their operations to want to try anything new. Based on my experience covering capture technologies like OCR and IDR, I'm convinced that it's just a matter of time before auto-classification is widely adopted - it's just that that time is not here as fast as many vendors want it to be.

In addition, I heard more than one comment about the lack of technological savvy of many of the conference attendees. I think they may have felt they were talking over the attendees' heads-which they may have been. But, this is a good reality check. It helps everyone realize that the buyers are not as sophisticated as we often want them to be. After all, these attendees each spent probably a couple grand to come to the event, so they weren't there to fool around. They were looking for something - but maybe it wasn't quite the advanced something that many vendors were pitching - at least not yet. Remember, it takes an acorn to grow an oak.

Finally, all of this was re-enforced on my ride home when listening a recent Freakonomics podcast. It is titled "It's Fun to Smoke Marijuana,"and no , that's not the title of an old Cheech & Chong album (well, maybe it is too), but in this case it is referring to what is supposedly being said by Queen when you play their hit single "Another One Bites the Dust" backwards. Basically, if you don't know they are supposed to be saying that, it sounds like gibberish, but if you are listening for it, it's like how could you miss it?

The podcast is about how people's perspectives are skewed by their own knowledge. Because we know so much about advanced capture, we naturally think others should too. This podcast explains that this is not a character flaw - it's really just natural. Anyhow, just something to keep in mind when marketing to all those luddites out there.

Cheers.

Ralph

Heading to AIIM Conference 2014

Have a few minutes as I'm delayed in the Buffalo Airport for another hour it appears. Looking forward to heading down to Orlando for a few days of nice weather - even if I am going to be suffering from the eternal conference conundrum - you are stuck inside (at least) 90% of the time. But, nonetheless I'm certain the company will be good. I have a number of great appointments set up and am looking forward to catching up both on and off the record with multiple people and organizations.

There are also a lot of good conference tracks and roundtables on the agenda.

Free wi-fi in airports is a great development. I'm sitting here plugged in at one of those Southwest counters, working almost as efficiently as I would be at my home office (fingers crossed).

Speaking of hi-tech developments, I'm liking this AIIM app so far. From what I understand they are not going to have any paper agendas distributed at the event, so they are kind of forcing people to use the app. Seems to be working as there is certainly a good amount of activity on it. However, I just went through and tried to select my agenda and some of the events that were listed online seem to be missing in the app agenda. Need to figure this out, although I'll probably end up missing half the sessions I plan on hitting anyhow - as I get caught up in conversations.

Alright, plane is here. Should be boarding in a few minutes. Looking forward to seeing some of you in Orlando later today!

Scheduled for a root canal on Friday

Kofax, QAI, SPAs - Did They Help Fix Healthcare.gov?

This summer Kofax announced a $7M deal with a government agency that was among the biggest in company's history. It included more than $4M in software license revenue and $3.5M for four years of prepaid software maintenance. The deal was to a government agency and was sold through federally-focused Fulton, MD-based systems integrator and conversion services provider Quality Associates, Inc. (QAI).

At Kofax's recent Transform Conference, QAI was recognized by Kofax with its Award for Partner Deal of the Year. A few more details surrounding the customer came out. "The overall contract will help a government healthcare agency manage efforts related to enrolling uninsured citizens in state insurance exchanges, as mandated by the Affordable Care Act (ACA) – millions of paper and electronic applications and other documentation are received, reviewed and verified for completeness and eligibility, and processed in an environment that protects applicants’ personal information."

QAI is presenting this as a First Mile implementation leveraging Kofax's Smart Process Application technology. Of course, this is exactly what I was calling for as I was going through my personal experience trying to sign up for a new healthcare plan at US Government Web site. At least it appears we are all on the same page now, which may have something to do with the sharp decrease in complaints we've heard recently about the onboarding process.

Who is TIS' latest Census Win?

Top Image Systems (TIS) has been a leader in the census capture market for a long time. Recently it was recognized "as an approved vendor for the UNPFA (United Nations Population Fund Agency), the organization responsible for the execution of censuses worldwide." TIS has followed that up with the announcement of a census win that will bring it more than $1M in revenue. This includes implementing a capture and document management system.

The project is for a country in EMEA with a population of more than 15 million. So, who could this be? According to the Web site NationsOnline, there are five EMEA countries that fall between the population figure of 15-20 million (there are five more between 20 and 22 million). Those five countries are:

(We'll guess the Netherlands, but that is just a guess:)

Cameroon

Central Africa

19,406,000

Romania

Eastern Europe

19,043,000

Netherlands

Western Europe

16,733,000

Niger

Western Africa

16,275,000

Burkina Faso

Western Africa

15,731,000