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.

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.

TIS Announces P2P Deal with European Biopharma Company

One of Italy’s leading biopharmaceutical companies has selected Top Image Systems' eFLOW platform to  automate its P2P processes. This will include the capture of invoices, orders, contracts, and proof of delivery notes from thousands of suppliers at two locations in Italy. The eFLOW implementation will be integrated with the company's existing SAP and Microsoft SharePoint systems.

Read the full press release.

Perceptivce Lands $1.6M Invoice Processing Deal

Perceptive Software announced it has landed a $1.6 million invoice processing software contract with Doosan Infracore International. Doosan will implement Perceptive's Intelligent Capture (powered by Brainware), as well as Perceptive Content, which will manage workflow. Doosan is a Global 2000 company based in Seoul,  South Korea. It manufactures construction machinery. 

The Perceptive technology will be integrated with Doosan's Oracle and SAP systems. For the complete press release, click here.

“EDI provides a great deal of efficiency in reducing our paper volumes, but it will not work without a clean three-way match, and it’s simply not a feasible solution for our lower-volume vendors—which is to say, most of them,” said Jim Adkins, director of materials for Doosan. “Perceptive Software’s technology offers a great capability for keeping exceptions manageable, standardizing the workload for all territories and converting diverse paper documents to electronic data that is visible and processed with efficiency. We anticipate this project will remove a considerable amount of manual data entry from our routines, giving our staff more opportunities to pursue improvements for the shared services center.”

Andersson Spearheads ReadSoft Acquition Strategy

Since ReadSoft co-founder Jan Andersson stepped down as CEO in 2011 and joined its board of directors, one of his charters has been to guide the Swedish-based capture ISV's acquisition strategy.  Last year, we saw that strategy manifest itself in the acquisition of foxray, a German high-volume document capture specialist. Last week I was in New Orleans for a briefing on how ReadSoft is integrating the foxray capture framework into its business strategy.

foxray is a capture platform that kind of reminds me of a newer version of the InputAccel platform. It's designed to manage multiple capture workflows and can utilize best of breed components. Historically, it's integrated a lot of Kofax technology for example, but now that foxray is owned by ReadSoft, ReadSoft's capture platform will certainly be the first, but not only, option. foxray's Xbound platform also has cool features like the ability to re-use components across multiple workflows (which eases set-up) and the option to use a single verifier for multiple data capture processes. It also provides an end-to-end view of all a user's multi-channel capture processes.

foxray's Xbound system has historically been sold primarily in Germany, but ReadSoft has plans to bring it to North America targeting markets like service bureaus, healthcare, and financial services.

Last week, ReadSoft announced another acquisition that Andersson helped put together. That was of e-invoicing network provider Expert Systems. Based in Sweden, Expert Systems' hosted application is complementary to ReadSoft's thriving software business in extracting invoice information from paper. ReadSoft recently launched a new cloud version of its invoice capture software as well.

According to Bob Fresneda, president of ReadSoft North America, Expert Systems was doing between $1.5 million and $2 million in annual sales -all of which is counted as recurring revenue due to its subscription-based model. ReadSoft paid $6 million for the business.

Perceptive Capture Selected for Invoices by Kohler

Quote from the press release:

"We tested a number of available automation solutions, and Perceptive Software’s platform was able to extract more than eighty percent of field data from Chinese and Thai invoices sight unseen, far better than any of the others,” said Ming Zhang, Sr. Systems Analyst, IT Asia-Pacific Corporate Services for Kohler Co."


Being used for invoices that solution is powered by Brainware software, which Lexmark/Perceptive acquired last year. " The technology will be implemented within Kohler Co.’s SAP enterprise resource planning system over the course of a three-stage rollout to include shared services operations in the Asia-Pacific, North America and EMEA markets."

Kohler is a global leader in the manufacturing of kitchen and bath products, engines and power generation systems, tile and home interiors, and an international host at its award-winning hospitality and world-class golf destinations. For more information on Kohler Co. and its products, please visit www.kohler.com.

TIS Reports 'Q4 Shortfall

Document capture ISV Top Image Systems reported that it's year-end revenue will be approximately 8% lower than the low end of its previously announced guidance. TIS expects to end the year with revenue between $30.9 million and $31.5 million, which still represents 8-10% year-over-year growth, which is about in-line with Harvey Spencer Associates projections for the capture market in 2012. TIS also expects to report a non-GAAP operating profit of $4 million to $4.2 million, which represents 10-15% growth over the previous year.

In a press release, TIS blamed the shortfall on two major factors: delays in closing several major deals (now expected to close in 2013) and the devaluation of the Euro vs. the U.S. dollar (TIS does the majority of its business in Europe, but trades on the Nasdaq.)

From the press release, "In parallel, several orders that were to close in 2012 are expected to be finalized in 2013, and the pipeline of potential sales internationally and in the United States has increased. Therefore, management remains confident regarding its ability to deliver solid growth in 2013 and will announce formal guidance in conjunction with the release of full-year results."

TIS also announced today a win for an invoice processing solution with a large U.K. retailer. The retailer liked TIS' multi-channel approach for ingesting multiple invoice formats: "paper or electronic, in any format – including pdf files by means of the unique eFLOW® PDFR (PDF Reader), xml and other popular e-invoice file types – all via one efficient workflow - integrated with SAP - on one consolidated platform." Click here to read the full press release.

Square 9 Introduces A/P Product

In conjunction with the latest version of its SmartSearch software, Square 9 Softworks has introduced a purchase-to-pay (P2P) suite. The new product combines several elements of Square 9's existing product line, including its capture, repository, workflow, and e-forms technology. It also leverages a new Web interface that is designed to help take the New Haven, CT-based ISV's product to the next level.

For higher volume P2P applications, customers can leverage Square 9's partnership with Artsyl Technologies to automate data capture. Square 9 P2P starts at $27,000 for a five-user system. Square 9 CEO Stephen Young said that for 75% of the ISV's customers, accounts payable is one of the use cases.

Square 9 has been growing rapidly since coming onto the scene with an affordable document management systems targeted at MFP dealer reseller channel. "Early on we positioned ourselves as targeting the SMB," said Young. "And, while we can still sell a three-user system starting at 2,300, we are also now focusing on scaling out and selling further upstream."

More on this in our next premium edition.

Brainware Announces another seven-figure deal

A few weeks after announcing a $2 million sale to a European service provider, IDR specialist Brainware has announced a $1 million deal with a "U.S.-based product distributor serving the construction and retail hardware industries." It's an A/P deal initially for handling invoices and expense reports and includes integration with JD Edwards ERP systems.

Brainware CEO Carl Mergele was quoted in the press release: "For businesses that are experiencing growth through acquisition, the effective, efficient consolidation of back office operations can pose a significant challenge, requiring the reconciliation of diverse processes and legacy IT platforms. By providing the ability to capture and reconcile data across diverse transactional and content management applications, Brainware enables complex enterprises to achieve world-class performance in accounts payable without increasing headcount."

Sounds like Brainware is having some success in the emerging enterprise capture market.

Kofax Highlights MarkView Deals

Somewhat interesting announcement by Kofax, highlighting several recent deals - totaling more than $5 million, in which its MarkView A/P purchase-to-pay (P2P) software was included. MarkView is the P2P application that Kofax picked up when it acquired 170 Systems in 2009. Scuttlebutt has been that sales of MarkView have been somewhat underwhelming since the acquisition, and this announcement is probably designed to show that Kofax now has that business headed in the right direction.

When Kofax bought 170 Systems, it was reportedly producing $28 million in annual revenue, although I was later given the impression that a good majority of that was coming from professional services. Two of the three deals highlighted in today's release include the mention of other Kofax software products sold along with MarkView, so I'm assuming the $5 million figure isn't all MarkView.

That said, that type of integration was kind of the point of the whole acquisition - to give Kofax a better competitive offering vs. ReadSoft. However, none of the deals mention integration with SAP, which has been one of Kofax's goals- and an area where ReadSoft is strong. Two of the MarkView deals do mention integration with Oracle software, which is where MarkView has been historically strong.

Basically, I'm glad to see Kofax has something to brag about regarding MarkView, but based on the content of the release, I'm not sure how excited I should be getting.

Top Image Lands U.S. Invoices Deal

Top Image Systems recently landed an invoice processing deal with CNH America LLC, "a leading manufacturer of agricultural and construction equipment and a majority-owned subsidiary of Fiat Industrial S.p.A." The implementation involves some 1.5 million total invoices, including over a half-million paper documents and more than 1 million EDI transactions. The implementation is being integrated with an SAP system.

According to the press release, TIS' "eFLOW EDI Visualization functionality enables CNH to identify errors in EDIs before they are processed."

This is a significant deal for TIS for a couple reasons:
1. It's a fairly large U.S. deal, and the U.S. has not recently been a very strong market for TIS. That said, Fiat is based in Italy and I believe the home office may even being using TIS technology. I actually remember having a conversation with someone from CNH at the 2010 TAWPI/IAPP Fusion event, and they were considering TIS at the time.
2. The SAP and EDI integration is interesting and builds on what we wrote in our last premium issue about capture software technology being used more and more often to handle electronic documents.

ReadSoft Signs Deal with IBM Partner

ReadSoft has announced that its accounts payable solution for SAP is "being jointly marketed and delivered to IBM customers in conjunction with PreferredPartner, an IBM Premier Business Partner specializing in IBM software solutions and IT services." Based just north of Indianapolis, IN, PreferredPartner, specializes in delivering IBM solutions around IBM's Information Management (which includes content management), Tivoli, Lotus, Websphere, and Rational product lines.

From the press release, "We have won major deals with large IBM customers lately, which demonstrate the strength and success of our partnership with IBM to date," says Peter Hörwing, Senior Vice President, Sales and Marketing for ReadSoft. "With this agreement, we will reach even more IBM customers who can benefit from ReadSoft’s SAP-based accounts payable solutions together with IBM’s Smart Archiving Strategy."

Former Perceptive A/P Expert Joins Brainware

Former Perceptive Software accounts payable solutions manager Chuck Kingston has joined Brainware. Kingston helped set up an OEM deal between Perceptive and Brainware to pair Perceptives image management and workflow technology with Brainware's automated capture. In a few discussions with him, I was really impressed at how much he knew about the A/P market. From what I remember, something like 40% of Perceptive's business came in that space.

With Brainware, Kingston will be a product manager. According to the press release, "he will be guiding Brainware’s product strategy and vision, leveraging extensive industry knowledge to deliver new product capabilities, capitalizing on opportunities for effective partnerships and product positioning, developing compelling product demonstrations and ensuring the company’s product development, sales strategies, professional services and technical support are aligned with customer needs." Sounds like a pretty big job.

Perceptive, of course, was acquired by Lexmark last summer and seems to have been investing considerably in growing the business. This is the first higher profile exit that I'm aware of since the acquisition.

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.