SourceCorp, BancTec Merger Makes Sense

This week's announcement that SourceHOV has merged with BancTec made complete sense from a strategic standpoint-although the announcement admittedly caught us somewhat by surprise. Here's a true story: I was in Birmingham last week visiting ibml when the topic of BancTec came up. I said I could not figure out why they did not just merge with SourceHOV, especially since they had a common investor after BancTec was acquired by HandsOn3 in February.

BancTec's story was that HandsOn3 was only a minor investor in SourceHOV and that the plan was to integrate BancTec with the smaller Dataforce, which would create a $300M business combining BancTec's document capture outsourcing with Dataforce's call center business. Well, apparently, plans changed. It seemed that others agreed with my thoughts that it made just too much sense to merge BancTec and SourceHOV, which are in  a similar market and are both headquartered in Dallas.

SourceHOV, which is actually the result of the merger of the former Lason and SourceCorp that happened in 2011, must have been doing about $600M in annual revenue, as the new organization is being touted as having annual revenue of more than $900M. Here's a quote from the press release the discussion the complementary nature of the organization's services operations. " “SourceHOV’s deep domain expertise in healthcare and legal claims processing, alongside BancTec’s 40+ years of banking payment processing know-how, enables the creation of a global powerhouse provider for Transaction Processing Services,” said Ron Cogburn, Chief Executive Officer of SourceHOV and Mark Fairchild, President of BancTec in a joint statement.

As you might guess from the dual-attribution, decisions have not been announced as to who is going to be managing what going forward. Fairchild was only recently appointed president of BancTec in the wake of the acquisition by HandsOn3. Nothing will likely be finalized until the deal closes, which is apparently subject to Hart Scott Rudino review. DIR caught up with Ray Wise, VP Sourcing and Treasury at SourceHOV, who said he doesn't foresee any problems. The press releases states the closing is expected to happen this year. Wise said SourceHOV would like to close it sooner, but a lot depends on how long the government review takes.

HandsOn3 will become the owner of the entire organization, as it is buying out SourceHOV's other major shareholder. Related to the transaction, SourceHOV will receive a new $1.1B line of credit.

Investment Funds Manager Agrees to Buy BancTec

HandsOn3, which is described as "a Santa Monica, Calif., global manager of funds" has agreed to acquire BancTec. Based in Dallas, BancTec has been a long-time player in the document and check imaging hardware, software, and services space. Lately, it has tried to transition more of its business toward document outsourcing, which seems to have been the attraction for HandsOn3. HandsOn3 apparently already owns a BPO organization named Dataforce Group, "whose services include accounts receivable management, end-to-end auto insurance, and expense and benefits management."

The plan is to combine Banctec and Dataforce, which will create a $280 million company. It's worth noting that in 2011, the last year that BancTec filed an S-1 with the SEC, it alone was on target for more than $250 million in revenue. BancTec recently announced it had opened a new BPO center in El Paso to better handle its growing healthcare claims outsourcing practice.

According to the press release on the acquisition, "The current BancTec leadership and management team will remain in place and play a key role in the growth of the combined company."

BancTec executives are not discussing the acquisition until it is completed. In 2012 BancTec had an agreement to be acquired by document outsourcing and software specialist TransCentra, but the deal was never completed. BancTec is a sponsor at this year's AIIM Conference in early April and we are looking forward to catching up with them there.

Cool Stitching Feature in Kodak Alaris-HTI EOB Offering

Yesterday, Kodak Alaris announced it has teamed up with HTI Healthcare to offer an explanation of benefit (EOB) solution. The solution basically involves healthcare providers and third-party bill payers utilizing Kodak scanners and Capture Pro Software to feed HTI's system--which is a cloud-based EOB processing service. HTI then returns relevant extracted data to the providers and billers, along with - get this - "fully indexed patient claim 'stitched' images—a single image showing only the needed patient claim record, including all required EOB header information to identify the payer. Stitched images are a vast improvement over the outdated redaction process that left large gaps in the content of the document." We thought that was pretty cool. Bottom line is that it's good to see continued improvements in the evolving paper EOB processing market. 

BancTec Article on Co-Sourcing

Document and payment processing specialist BancTec has invested a lot of resources in the past few years increasing its footprint in the business process outsourcing (BPO) market. But according to Michael J. Alfonsi, BancTec's managing director of financial transaction processing services & finance transformation solutions, the BPO market has not grown as fast as many people had expected. From a recent article entitled, "Rethinking Document Outsourcing and Co-sourcing:" "One would think the economic downturn would have accelerated the growth in BPO, but it did not. The prevailing view on the reason why is that for many BPO adopters, the so-called low-hanging fruit has already been picked, and the next level of outsourcing, which involves full functions, got stalled as capital was being conserved during the downturn."

As a solution to this, Alfonsi is suggesting BPO providers expand their business into the area of co-sourcing.  "BPO is no longer an either/or proposition, and companies now can have both/and," he says. "Both/and is a graduated solution in which basic tasks go to the outsourcer, but both the outsourcer and the client discover the right point at which the analytics or the expertise – the very productivity – is optimized for the partners."

For more details on how to create a successful co-sourcing strategy, check out Alfonsi's full article. 

Brainware Announces $2 Million Deal

Intelligent data extraction specialist Brainware has announced a $2 million deal with a European service provider. This customer specializes in financial and accounting processes and Brainware's software will be used for invoices and "other financial documents." This represents that latest of several large deals for the Ashurn, VA-based ISV that has seen some impressive growth in the past few years. It is also a nice size win in a European market where some have speculated there is weakness due to macro-economic conditions.

SourceCorp Merging With HOV Services

SourceCorp, which began life as a document imaging service bureau roll-up, has entered into an agreement to merge with HOV Services. HOV Services is an India-based document services outsourcing specialist that acquired SourceCorp competitor Lason back in 2007. Back in the late 1990s, Lason and SourceCorp (then known as FYI) engaged in a bit of a bidding war for service bureaus. SourceCorp, which was founded by executives from outside our industry, took a more fiscally responsible to the roll-up. I remember a conversation with a few SourceCorp execs at AIIM 1998, who accurately predicted the impending fall of Lason - which actually had three ex-execs go to jail for stock fraud, or something along those lines.

Lason was eventually bought by the investment group Charterhouse for something like $25 milllion and some assumed debt. Charterhouse, which also had an investment in document capture ISV Top Image Systems, then flipped Lason for $148 million to HOV three years later. At the time, the combined company was estimated to have more than $200 million in annual revenue. SourceCorp, which reported revenue of greater than $400 million in 2005 as a public company, was sold to the investment firm Apollo Management in 2006 for $475 million. I thought SourceCorp had dispersed some of its businesses since then to narrow its focus, but we'll estimate that the new HOV/SourceCorp entity is worth at least $500 million annually. Definitely an interesting starting point for a BPO business.

InfoTrends Releases Document Outsourcing Forecast

The Questex-owned analyst firm InfoTrends has issued a new Document Outsourcing Forecast for 2008 – 2013. The press release about the new report, predicts a rebound in the market as the economy rebounds.

Alex Sumarta, a Director at InfoTrends, had this to say about the expanding breadth of services we have observed BPO vendors in the market offering, "Existing and new players are responding to the shifting demands of the market by offering an expanded services portfolio that increasingly addresses the entire document lifecycle, as well as other related business communications services beyond print. More importantly, these service providers are becoming process owners and value chain managers.” 

ACS cuts costs in Illinois child support payment ops

ACS continues to do very well in the area of processing child support payments. As we've said many times, ACS does a great job leveraging imaging/capture/OCR technology as part of a larger business process improvement initiative.

Lason Spin-Off Acquired by DTI

Active Data Services, which spun out of Lason in 2002 via a management buyout, has been acquired by Scranton, PA-based Diversified Information Technologies (DIT). DIT is a $35 million service bureau with scnaning, data capture, and records management offerings. Active Data Services is a Raleigh-Durham-based entity with a combination of document input and output services, and a speciality in the healthcare vertical. It is run by former Lason employee Ken Eller. Its 2008 revenue was reportedly $15 million.

ACS Q4

There has been a lot of talk about how outsourcing/BPO services will benefit in a down economy as businesses look to cut costs by hiring other people to perform their non-core functions. Document management is, of course, one of the functions. In our last issue, we did a pretty extensive story on document management outsourcing specialist DataBank IMX. Databank CEO Dick Aschman explained how the down economy has been a bit of a mixed blessing - as business are certainly willing to outsource more, but that some of Databank's current customers had reduced volumes due to a fewer number of transactions. ACS' year-end/fourth quarter results would seem to confirm this, as they report a record amount of revenue coming from new contracts, but only a 6% growth overall. Now, granted a 6% overall growth is nothing to scoff at from a multi-billion company like ACS, but I'm guessing their overall growth figures would have been higher in a normal economy.

Any thoughts.

ACS--Vertical Focus Success

Affiliated Computer Services became one of the leaders in outsourced data capture by understanding that to utilized document imaging to its fullest potential, it needs to be thought of as a piece of vertical solution and not an end in itself. I think our industry still struggles sometimes to get this right today. Here's an example of ACS discussing a large outsourcing contract they won, where it appears imaging will be a very important part of the services provided -but it's never mentioned in the press release. Rather, the focus is on the business process of helping the state of Texas find these property owners. And from some of the vendors we talk to, whose technology is licensed by ACS, it sounds like they have some pretty top notch imaging technology. They just realize, to be really successful, you have to remember it's an enabler, not an end in iteself.