Why not Bundle Textract with a Network Scanner?

I was doing an interview recently with a scanner vendor which was planning on introducing a new SOHO model, for which they expected Amazon to serve as the primary marketplace. Amazon sells a lot of document scanners. This got me thinking, why not bundle some AWS Textract services with scanners being sold through Amazon?

Introduced in 2018 and released for general availability last year, Amazon describes Textract as a "service that automatically extracts text and data from scanned documents." What more could you ask for with a document scanner? There are different flavors of Textract, from full-page OCR and layout recognition, to forms extraction, to table extraction. Here is a link to an article I did on Textract in 2019, and here's a link to Amazon's Textract site. Did I mention Textract is cheap?

One drawback to Textract, which we have discussed, is that unless a user specifically requests that their images are deleted, Amazon basically reserves the right to utilize them going forward to improve Textract, as well as "other Amazon machine-learning/artificial-intelligence technologies." That can be a non-starter for some, but adoption of the bundled service would be optional or a vendor could limit the bundling of AWS OCR services to single SKU.

So, if I am a scanner vendor, why wouldn't I look at including a year's worth of Textract services with the purchase of the scanner from the Amazon marketplace? Maybe the issue is that Textract is more of an AWS/B2B play than a B2C play like you get more commonly with the Amazon marketplace. But, for a vendor selling their scanners to the SOHO market, maybe there's a fit. And I'm not sure if Amazon works like this, but could you think of a better way to get good positioning with the world's largest e-tailer than supporting one of their up and coming AWS services initiatives, which are a major growth area for Amazon?

So, my proposition is for a scanner vendor to create a SKU, probably for some type of scanner with a network connection, that offers a free year of Textract Services. Amazon already offers a three-month free tier of Textract, so introducing some sort of trial with a scanner would not be that much of a stretch for them.  If anyone does take advantage of this idea, if you'd just give me credit, I'd appreciate it.

Age of Intelligent Robots Approaching

A couple weeks ago, I noticed that when my 13-year old son and his friends were insulting each other, they used the term "bots." I thought this was interesting, because in our industry, we have typically  considered bots to be a good thing -as in you can deploy "a bot" to automate a process. In fact, the rapidly growing billion-dollar RPA industry has been built on bots.

I asked, "Why do you call each other bots as a put down?"

"Because in video games when you play against the computer, even the highest level is dumber than playing against the worst real person," my son answered . "You're playing against a bunch of 'bots.'"

That made perfect sense to me. In fact, a few months back, I realized that despite many people thinking that robots are intelligent, the way they have been deployed in RPA doesn't really manifest that. Sure, RPA 'bots' can copy repetitive human tasks, but when it comes to anything outside of that, well that just hasn't been happening. And it seemed to me that the promise of RPA (especially as it has risen in parallel with AI) is that is should be more intelligent.

Well, this seems to be on the minds of RPA vendors as well. In a recent interview I did with Chad Gailey, VP, channels and ISV partners, Americas, for RPA market leader Blue Prism, he said, "RPA is today, but it’s really simple processing. The future is leveraging machine learning and computer algorithms to mimic and behave in a human manner. We want to infuse vision from AI and cognitive learning platforms into our RPA software to move to our next generation."

Then, a couple weeks later, we found ourselves interviewing Kashif Mahbub, VP, product marketing and global head, RPA for another market leader, Automation Anywhere. He was briefing us on Automation Anywhere Enterprise A2019, the ISV's next-generation RPA platform.  It includes, "infused AI skills and capabilities throughout the platform."

So, RPA is getting more intelligent. Interestingly, document capture has already embraced AI. As their ability to capture data from structured documents became commoditized, document capture vendors introduced AI to help them deal with capture from a wider variety for forms. For some RPA vendors, capture has actually been their first step towards "cognitive automation." Automation Anywhere, for example, markets a product called "IQ Bot" that was presented to me at AIIM as a document capture platform.

So, it seems that as RPA moves toward intelligent automation, there are even more synergies with capture that can be realized. In addition, workflow vendors like Hyland are also looking to leverage AI to automate more processes within their platform, which should definitely create some more crossover and possible synergies with RPA.

We know one thing: that RPA leaders like Blue Prism, Automation Anywhere, and UiPath certainly have a lot of funding to invest in AI technology if they choose to, and it sounds like they are choosing to. There seems to be a bit of an intelligent automation arms race beginning - as part of the larger Digital Transformation market as whole. And as AI more deeply enters into this fray, maybe the idea of "dumb bots" will become archaic. In fact, there is already a well known story about an AI program that beat a champion of the Chinese board game "go." Wait 'til Madden gets ahold of that technology. Thirteen-year-olds will have to most certainly adjust their lexicons and come up with a new insult for dumb. Perhaps something like "paper user," will be in vogue next.

The Importance of Mobile on the Future of Scanning

It seems we have somewhat forgotten about the potential impact of mobile document scanning and capture. Back in 2011, when only 35% of Americans identified themselves as owning a smart phone, Harvey Spencer Associates projected that by 2015, there would be $1.5 billion worth of software sold related to mobile capture, up from $200 million in 2011.

Since then, while smart phone usage has more than doubled, HSA's projected revenue growth for mobile capture software has not been realized. The study identified several potential use cases including field service, transportation, scan-to-the-cloud, home healthcare, assessment/survey/audit, onboarding and mobile check deposit. Of these, while we've seen some traction in markets like transportation and onboarding, the real killer app has been check scanning, which Mitek has made a $60 million-a-year business out of. 

There have certainly been a lot of efforts at developing document scanning apps for mobile devices. A quick search in the Google Play store reveals hundreds--most of them offering some basic functionality, like PDF creation, for free. The challenge has been monetizing this technology.

At the recent ABBYY Tech Summit, VP of Marketing Bruce Orcutt acknowledged that it's very hard to make money off mobile capture as a standalone app, but stressed that mobile is vital to the future of the company, as complementary technology to its capture platform. "Mobile is the preferred channel of end users," he said, meaning that people want to use their smartphones to capture documents. As phones' cameras and processing power continues to improve, this preference will only become more prevalent. 

Mobile is even more vital in less developed markets outside the U.S. During the recent Harvey Spencer Associates Capture I had dinner with Claudio Chaves, Jr., the CTO of IcAPT, an ISV jointly based in Brazil and Orlando, that has developed a cloud-based capture service. Chaves also has extensive experience working with service bureaus in Brazil. 

He explained that in Brazil, legal requirements call for mortgage documents to be printed on paper, which creates a good business for capturing them. However, he noted that one of challenges is that the images are often poor quality because people use their phones to capture them

According to my infoSource data, there were approximately 26,500 document scanners sold in Brazil last year compared to 875,000 sold in the U.S. That's 33 times as many scanners being sold in the U.S. than Brazil, which has a population of 209 million, which is more than 60% of the U.S. population of 325 million. Obviously, Brazil is underserved when it comes to document scanner sales.

But not when it comes to mobile phones. In 2017, it was estimated that there were almost 200 million smartphones in use in Brazil, giving it a penetration rate of close to 100%, considerably higher than the U.S. smartphone penetration rate of 77% (at the beginning of 2018). Like many countries with emerging economies, Brazil seems to be somewhat skipping the desktop era (at least for scanners) and moving right to the mobile era.

I don't think Brazil is unique in this transition. The question is how do we best address it? I think the continued development of better mobile capture technology is the primary way. ABBYY, for example, has shown us some very cool video streaming technology that enables users to capture multiple images of a document and utilize ABBYY's algorithms to determine the best one. I recently saw a commercial for Google's new Pixel 3 phone that offers similar functionality for photographs.

Sure, I know that everyone in the hardware market likes to say that scanning one or two pages might be fine with a mobile device, but I think the market is moving beyond that. I think the market would like to do batch scanning with mobile devices. There is of course the option of using mobile devices to drive scanners, but it doesn't seem like there has been much uptake in that area yet. No, the preference seems to be utilize the smartphone camera. And with memory increasing and the cameras improving, we think this demand will only increase in the future.

What does this mean for the future of scanners? Well, we have already started to see a decline in sales of personal (<$400) scanners in the Americas, according to our infoSource data, while sales of higher end workgroup, departmental, and low-volume production scanners grow or at least remain steady.

Of course, this could be attributed somewhat to former personal leader Neat exiting the market for scanners to focus on software, but part of the reason Neat stopped selling scanners is that they launched a mobile app that they expect people to utilize as on on-ramp. 

It will be interesting to watch how this plays out over the next few years. Will better scanning apps enable users to better capture multi-page documents with their phone? Will the evolution of TWAIN direct and similar "driverless" scanning technologies enable users to take full advantage of document scanners and MFPs for scanning with smartphones? How will the introduction of more AI, NLP, and machine learning into capture and BPM apps affect the market for scanning?

All of this is on the table. Let's just remember that mobile will have a major impact on the scanning and capture markets going forward.

Capture and RPA: Who's the Horse and Who's the Cart?

Is document capture a subset of Robotics Process Automation (RPA) or vice-versa? This question came up at the recent Harvey Spencer Associates Capture Conference - an annual meeting of top executives in the document capture software industry. HSA's Mike Spang presented RPA as a $200 million-plus branch of the $4.1 billion capture industry. That said, by our calculations, just three of the market leading RPA companies, UiPath, Automation Anywhere, and Blue Prism, have a combined market capitalization of $4.4 billion, or more than the whole capture market is producing annually in revenue.

And most accounts we hear have RPA implementations pulling through capture sales when the processes being roboticized run into documents, which seems to be a considerable amount of the time. Earlier this year, Boris Krumrey, the Chief Robotics Officer for UiPath, estimated that about 70% of the RPA vendor's 700 customers were likely candidates for capture. UiPath has a partnership with ABBYY to provide these services and was looking to partner with other capture ISVs as well.

It's also been conjectured by no less than Reynolds Bish, CEO of Kofax (which offers both capture and RPA technology) that there is opportunity for BPA/workflow/case management integration with RPA for better managing processes where human intervention is required. So, there seems to be quite a bit of synergy between the RPA and ECM markets. Going one step further, recently ECM vendors Digitech and Hyland have each announced RPA initiatives that seem to primarily built around automating the entry of information from their applications into third-party applications. So, in these cases ECM is pulling through RPA!

This whole situation kind of reminds me of the Web Content Management vs. ECM division we dealt with around the turn of the century. At that time, I remember there was talk of WCM leader Vignette merging with ECM leader FileNet. There was a similar disparity between market caps and revenue (FileNet with the higher revenues but much lower multiple) to what you are currently seeing with RPA and capture. FileNet (and CEO Lee Roberts) could not come to grips with this disparity and thus never consummated the merger. Not too much later, in 2001, the Web technology bubble burst and Vignette was eventually sold to OpenText in 2009.

I'm not saying the RPA technology bubble is going to burst, but Digitech CEO H.K. Bain recently told me that he felt the development of RPA was a step back from the advanced technology his company was working on related to information management. So, what's it going to be? Are capture ISVs going to be acquired by/merge with RPA companies while their valuation is high? Or, are the ECM companies going to wait it out and see if they can catch the RPA vendors on their way down?

Adding Substance to the Style in the Age of Digital Transformation

Digital Transformation sounds sexy. It’s about taking all your manual and paper processes and making them faster and electronic. The impetus behind this transformation is that everybody is connected today, though wi-fi, satellite networks, mobile devices, and even laptops and PCs. A lot of work has been spent on enabling the UIs on these devices to help users to have a top notch digital experience. However, it seems that back-end systems, where information coming in from these UIs is processed, are still not up to speed. At least this is what we were told when putting together stories for our last [Jan. 26] issue. 

“A lot of companies have mobile apps and digital interfaces, and they are very fast at pre-approving a loan,” Alan Swahn, VP of marketing at ISV and systems integrator AI Foundry, told us. “But, to actually issue that loan, they are still dealing with a lot of paper and armies of people keying in data. So, while the UI may have gone through a digital transformation, everything else is old school.”

Added, Ralf Göbel, COO of data capture software and crowdsourcing specialist ScaleHub, “The problem is that the back-end systems used to process this input are not fast enough. The apps and Web sites might be flexible and fast enough to provide a great experience on the front-end, but the back ends at many big companies have not kept up, and they are too slow.”

This is not a new problem. It was back in 2010 that AIIM, with the help of noted technology author and consultant Geoffrey Moore, first started talking about connecting Systems of Engagement (the front end) with Systems of Record (the back-end). Since then it seems the disconnect has only widened, as investments have tilted toward improving mobile apps and UIs, and, as usual, back-end improvements in areas like ECM,  have been often pushed (no pun intended) to the back burner.

Obviously, this would seem to create opportunity for savvy capture and ECM vendors and integrators who know how to package their software and services as part of a total Digital Transformation solution. That said, their systems need to be architected correctly to integrate with multi-channel front-end input avenues, as well as other back-end systems that are driving business decisions.

RPA is an interesting avenue for achieving some of this integration. As we also went over in last week's issue, when Kofax first purchased Kapow, it was presented as application integration software. This capability (as well as the ability to learn by example) seems to be one of the core tenets of products in the emerging RPA space. And indeed, while Kofax has yet to see much crossover between capture and RPA, there are RPA vendors like UiPath, which, through a partnership with ABBYY, have added document processing to their RPA portfolios. 

Kofax has seen a parallel between the capture and RPA markets in the desire by users to introduce workflow automation to data being gathered to RPA and data being captured from documents. This makes absolute sense within the landscape of the Digital Transformation, where the desire is to get things done faster and in a more automated way. So, if you look at it from a process management standpoint, UI, capture, and RPA all should be connected, along with automated workflows and back-end systems. That seems to be the Holy Grail of Digital Transformation.

I'll leave you with one more analogy. Let's go back to my first statement about the Digital Transformation being sexy. Unfortunately, more often than not, however, today it seems to be like the beautiful person you meet at the bar whose conversation might only go as deep as reality TV. Introducing capture, RPA, and workflow could be akin to sending this person to college (and even grad school), where they learn to discuss business, politics, philosophy and all sorts of other interesting topics. Of course, the question is, do you have the budget for that? It's my hunch that if you look at the ROIs for college, and you look at the ROIs for completing the Digital Transformation, they might be similar. At least I'm hoping their both positive, with two teenagers in school and a business heavily invested in the capture and ECM markets.

Is the Digital Mailroom is Making a Comeback?

Yesterday, I was stuck in the Buffalo airport awaiting transportation to a Xerox event in New York City being held today. A lot of new announcements are reportedly on tap and I got to wondering what some of these might be. Xerox, of course, recently separated its "Document Technologies" group from its "Services" group in a major split. Document Technologies, which is basically the old Xerox, carries on the Xerox brand, while Xerox Services, primarily the old ACS, which Xerox acquired in 2009, has been renamed Conduent.

The conference I am heading to is a Document Technologies conference, but, that doesn't mean services won't be represented. Xerox had a pretty healthy document outsourcing business before acquiring ACS and, from I understand, a lot of that has stayed with Xerox. This includes mailroom outsourcing - which led me to wonder if they would be announcing anything on the digital mailroom front.

In DIR, we recently ran a story on a new initiative by Ricoh called the Intelligent Delivery Services (IDS), which we billed as "More than a Digital Mailroom." The gist of IDS is that it combines scanning, analytics and consulting services to help optimize the processing of incoming mail. "“IDS is really focused on improving how people work,” said Nicole Blohm, senior product
manager-product marketing (managed services) for Ricoh USA, as quoted in the story. “It’s not just about opening mail and scanning it. We are trying to optimize mail delivery, reduce processing time, and drive better business decisions."

The first time we heard the term "digital mailroom" was back 2003 when Captiva introduced a prototype of the application at the AIIM Conference and Expo that year. We're not sure Captiva ever sold any of those systems, but they were certainly onto something as far as the concept was concerned. The term "digital mailroom" has been tossed about in our market even since.

While we saw some success in the U.S. market, particularly in federal government mailrooms in the wake of the Anthrax scares of the early 2000s, more digital mailroom implementations seemed to take place in Europe, where ISVs like Top Image Systems advertised their success in the segment. One theory was that the U.S. postal service already did quite a bit of pre-sorting for its customers, which led to more specialized mail delivery and cut down on the need for the auto-classification technology key to the digital mailroom concept.

Whatever the reason, the idea never really caught on rapidly in the U.S, market, but there are some signs that is changing. Mark Smith, director of strategic alliances at document scanner manufacturer  OPEX, told us he is seeing a renewed interest in the concept. "Related to this, we are seeing a lot of interest in using scanning and capture to cut down the amount of returned mail," he told DIR. "We are working with a capture software specialist, CPT Intelligent Technologies, that is focused on this specific area."

Estimates for the total cost of creating and processing a piece of returned mail are as high as $25. According to the USPS, there were about 1.4 billion pieces of first-class and standard mail returned in 2015. That adds up to a fairly large addressable market.

"One of the things we see with returned mail is that it's fairly uniform," said Smith. "In other words, you should be able to tell what it is depending on the thickness of the envelope. For example, if you sent out a bunch of similar credit card offers, the ones coming back should all be the same thickness. So, you can tell what they are without opening them."

Once the type of returned document is recognized, automated capture can be used to extract the addressee data from the envelope. This can then be fed to an analytics and/or another type of application, which can be used to correct the problem, such as updating the address or eliminating the addressee from the database - potentially saving large amounts of money down the road by preventing future returned mail.

This is the type of ROI that the digital mailroom always needed. "We are starting feel like digital mailroom as a concept is having a resurgence," said Smith. "It has come up in the past, but I don't think it was ready for prime time. People had concerns like they didn't want want the CEO's mail opened in the mailoom. (Modern solutions like IDS have an answer for that.) We are starting to see companies now asking for digital mailroom solutions and will have a marketing message around that at the upcoming National Postal Forum, along with a demo of the concept."

Not sure if Xerox is going to announce anything like that at today's event, but it will be interesting to see how widespread the digital mailroom concept is growing.

A Look at Lexmark's Q3 Results

Lexmark reported its Q3 2016 results this morning. The focus in the news was that overall the company increased profits by 40% YOY, to $49M from $35M last year. Our main focus in DIR is the Lexmark Enterprise Software (ES) division, which over the past few years rolled up several companies covered by us, including, Kofax, Perceptive, Brainware, and ReadSoft.

The Kofax acquisition, which practically doubled the size of Lexmark ES, was completed in Q2 2015, so Q3 2015 represented Lexmark ES' first full quarter including Kofax results. Lexmark ES Q3 2015 revenue was reported at $165M with operating margins increasing to 19% - a positive trend. Of course, these results were released just three days after Lexmark had announced that is was "exploring strategic alternatives to enhance shareholder value." So, a lot has happened between then and now, including, in April, Lexmark agreeing to be acquired by a consortium of Chinese investors led by Apex Technology and PAG Asia Capital.

As Apex's primary business is the manufacture of ink cartridge chips, there have been questions about its use for Lexmark ES, and rumors have been flying that Lexmark ES would be sold in its entirety or piecemeal prior to the Apex acquisition closing, which is supposed to happen before the end of this year. In the meantime, Lexmark ES struggled through a rough first quarter before rebounding somewhat in Q2.  For Q3 Lexmark has reported revenue of $157M or about a 5% YOY decrease. Not great numbers, but considering all the FUD in the market surrounding who is going to own Lexmark ES going forward, not terrible. We didn't get any other numbers, like profitability related to Lexmark ES, as Lexmark corporate is keeping reporting to a minimum, and "will not conduct quarterly conference calls while the [acquisition] is pending."

To us the Q3 numbers indicated that Lexmark ES is still a very viable business, albeit with a run rate closer to $600M than the $700M that was originally projected when Kofax was acquired. ES has a large install base, along with plenty of maintenance revenue, as well as a stack of technology that it continues to invest in. So, what's it worth? Probably not the $1.89B we were speculating on in the wake of Open Text's acquisition of EMC's Enterprise Content Division (ECD). That was based on the projected $700M run rate.

Let's scale back that run rate to a more realistic $640M. Applying the same multiple of 2.7x revenue that Open Text paid for ECD, that puts a price for Lexmark ES closer to $1.73B, which still wouldn't be a bad price, considering Apex and PAG are paying $3.6B for the entirety of Lexmark, which is about equal to the revenue that the entirety of Lexmark reported for 2015. So, if they were to get even $1.5B for Lexmark ES, they would still be getting an approximately $3B hardware entity for close to $2B, which seems like a great deal. That said, Apex and PAG may be willing to go even lower on Lexmark ES, depending on what they value that hardware business at.

The bottom line is that Lexmark ES, even with its recent growth struggles, could be had at a relative bargain it seems. The question is, of course, who would buy it? Open Text is presumably out of the picture after the ECD acquisition, but you never know. Hyland owner Thoma Bravo has been rumored to be in play, but at their recent conference Hyland executives gave us no indication that was under consideration. Xerox wanted to buy Kofax before Lexmark did, and Xerox has stated they are on the ECM acquisition trail, but if the $1B price that Lexmark paid topped their original bid, would they be inclined to pay more for something larger, or would Apex and PAG be willing to break off Kofax separately for Xerox and sell it to them at their original bid? Or could Lexmark ES execs like Reynolds Bish and Carl Mergele cobble together enough financial backing for a private equity bid?

We still expect something to happen with Lexmark ES before the Apex/PAG acquisition closes. That would give us a little over two months. Stay tuned!

Today's Financial Services Market Demands Innovative, Stable Capture Solutions

Dell EMC’s Enterprise Content Division (ECD) has been a long-time leader in the document capture software market. It is probably best known for high-volume, back-office implementations, but like everyone else trying to stay competitive in the market, ECD has done a lot to address more modern capture initiatives. This includes the introduction of Web services, cloud, and mobile technology.

Following is a piece I developed with input from ECD, discussing how its software addresses the evolving requirements of today’s financial services organizations:

I recently had the opportunity to attend to a presentation by Chris Surdak, the author of a book titled “Jerk” with the subtitle, “Twelve Steps to Rule the World.” It’s about how to thrive in the emerging era of digital transformation. One of his main premises is that “information is the new wealth,” which he attempted to demonstrate through a slide showing that the three most highly valued public companies in the world today—Apple, Google, and Microsoft—are in the information management business.

Financial services companies, of course, are involved in managing traditional wealth, but that doesn’t mean information management is not important to them. The current movement of big banks toward partnering with Fintech start-ups or launching their own Fintech spin-offs, is an example of this.

Document capture is another area where financial services organizations must stay current if they want to keep pace. Banks and other organizations specializing in wealth management have been long-time users of document capture technologies. But, as the technology continues to evolve, and innovations like agile deployment and mobile capture are introduced, many financial services providers have not fully embraced these advancements. Rather, they continue to operate their capture operations like monolithic, hard-coded silos.

In his presentation, Surdak noted that three pillars for success in this era of information management include immediacy, quality, and intimacy. A modern document capture platform can help a financial services organization build all three. It can help them more quickly turn around customer submissions with more accurate and targeted responses, which will in turn increase their levels of intimacy.

Let’s take a look at some of the characteristics financial services organizations should be looking for in their capture platform:

Openness
It was an ancient Greek philosopher who first came up with the idea that “the only constant is change.” In today’s world of constant information flow, change comes even faster. And customers don’t care if back-end systems can keep up with this change, they just want results. (This attitude was defined by Surdak as “disengagement,” which is another user characteristic in the information economy.)

If a financial services organization needs to make a change, such as adding a capability or workflow to their capture process, they better be able to do it fast. Unfortunately, according to a 2015 World Retail Banking Report by Capgemini, less than 15% of banking executives rate their back-office digital capabilities as “advanced.”

One characteristic of an advanced back-office system would be openness. In other words, how easy is it to integrate a new capability like an OCR engine to handle a different language or to integrate to a different repository to quickly onboard an ECM system that might have been part of an acquisition?

One example of an open capture platform is ECD's Captiva. From its early days, the software has been designed to accommodate third-party services, and over the years the APIs have matured and become even more accessible. Captiva offers its own set of services that can be inserted where needed and its platform can also leverage third-party software to add capabilities like handwriting recognition, foreign language OCR, specialized PDF processing, advanced forms recognition, and more.

Cloud
To complement its on-premises Captiva application, earlier this year Dell EMC’s Enterprise Content Division (ECD) announced Snap as part of its new LEAP cloud ECM platform [a brief video presentation on Snap]. Optimized for lower volume distributed capture applications, like account opening at a branch office, Snap doesn’t offer Captiva’s complete breadth of capabilities. But it’s designed to be very easy to deploy—with a target time of five minutes to configure a new document type. To assist with set-up, ECD is offering an option of outsourced document capture design available through the Snap interface.

The simple and fast set-up of Snap has two big advantages in today’s information age. If everything works well, an organization will have improved both accuracy and the turnaround time compared to manual capture operations. If it does not work out, which we all know is the case all too often with capture, the user finds out quickly and can try again. The concept of reducing time to failure is gaining traction in this age where there is so much pressure to reduce turnaround times in all areas.

The bottom line is that Snap offers a relatively inexpensive and quick way to launch multiple document capture workflows. This enables a financial services organization to keep up with business models that also need to be able to change rapidly based on intelligence being gained from an ever-increasing influx of information.

Mobile
As the volume of transactions completed over mobile devices continues to gain momentum, mobile document capture can’t be far behind. After all, the primary reason people implement document capture is typically related to some sort of business transaction. For a financial services organization this might be new account opening, a money transfer, or applying for a loan. Well, guess what? As more users embrace mobile banking (According to the Federal Reserve’s 2016 Consumers and Mobile Financial Services Report, 43% of adults that have both mobile phones and bank accounts reported using mobile banking—up from 39% a year earlier ), more financial services transactions are also going to move to mobile.

Users have already proven they are comfortable depositing checks into their accounts utilizing their smartphones. According to the 2016 Mobile Deposit Benchmark Report, about 41% of banking customers have used a mobile deposit service. Because of their small size and relatively simple and consistent layout, checks were a natural place to start with mobile capture. Technology has now advanced to the point where automating capture of data from larger and more complex documents is also possible.

What if a customer is applying for a loan through their smartphone, for example, and the bank requires copies of W-2s and recent pay check stubs? Or what if an insurance company is asking for proof-of-loss documentation to settle a property damage claim? There is technology, like Captiva Mobile Capture, that can enable users to easily and successfully capture high quality images of these types of documents. Captiva Mobile Capture can be integrated with Captiva’s RESTful services or with an automated data extraction application on a server to complete the transaction processing. This type of integrated system can be configured to provide an end user with immediate feedback on if their document was received, if it included the appropriate information, and whether or not their submission can be moved along to the next step. This is the type of turnaround that people are seeking in today’s world.

ECD Capture – innovative yet mature
A lot of what we are talking about is cutting edge and modern technology. As a long-time capture market leader, ECD might not be the first vendor you think of as developing next-generation technology. ECD’s duplicity, however, is one of the advantages to working with them. They not only can address and understand high-volume traditional back-office capture applications, they can also help organizations move forward with their cloud and mobile initiatives. As so often happens during a period of transition, there will also be instances where legacy applications and modern initiatives will need to be weaved together. As one of the few vendors with interests on both sides, ECD can be counted on not only to provide expertise across the board, but also to be impartial with respect to the type of technology being deployed.

So, if you are a financial services organization looking to move your capture technology to the next generation, don’t look at ECD as purely a legacy vendor. Yes, their history in the market guarantees they are that, but their introduction of a modern architecture, as well as cloud and mobile capabilities, demonstrates that proven technology vendors can also drive innovation.

Based on ECD Deal, what is Lexmark ES Worth?

Big day today for M&A in the enterprise content management (ECM) space. No less than three significant announcements:

1. Open Text announces plans to buy EMC's Enterprise Content Division (ECD) for $1.62B or 2.7x ECD's fiscal '15 revenue of $599M.
2. Apparently Bloomberg News is reporting that Apex Technology Co. and PAG Asia Capital, which in April announced plans to acquire Lexmark, "are in talks with a number of private equity firms about a sale of [Lexmark Enterprise Software (ES)]."
3. Finally, HP announced plans to buy Samsung's printer business for $1.05B. 

Not that this last item is insignificant, but, despite some recent efforts, Samsung had yet to emerge as a real factor in the ECM/document capture space. So, in this post, we'll focus on the significance of those first two announcements. 

ECD had been rumored to be for sale since it was first announced that Dell was planning to acquire EMC. There were two reasons that were offered for the rumored sale: 1. Dell wanted to focus on storage and ECD did not fit with that strategy. 2. Dell reportedly needed to generate some cash to help with the financing of the deal. Well, there must have been some truth behind this talk, as less than a week after the Dell/EMC deal closed, the deal with Open Text for ECD was announced. The ECD sale to Open Text is expected to close within the next 3-4 months.

Open Text has done a lot of acquisitions over the years, and I'd have to say that the $1.62B price tag and 2.7x revenue multiple represents a pretty good premium for them to pay. So, Open Text obviously thinks they are getting something of value. ECD is, of course, a good fit, as Open Text and ECD are both serious ECM players with some overlapping, but also a lot of complementary, technology. The move pushes Open Text forward even further as a market leader. 

It also likely removes Open Text from the bidding for Lexmark ES, which Open Text had been rumored to be looking at fairly recently. So, with rumors obviously still floating around that Lexmark ES is for sale, who is out there to buy them? The other name I have been hearing is Thoma Bravo, which owns Hyland. Coincidentally, I am going to be at Hyland's CommunityLive Conference this week. 

One of the big story lines associated with the conference is that this is going to be former CTO Miguel Zubizarreta's final event with the company where he has worked practically since it was founded. Zubizarreta has always had a reputation of wanting to build rather than buy technology, so the fact the Lexmark ES is now on the market as he is retiring could be a fortuitous coincidence - if indeed it's a coincidence at all. I hope to get some insight into Hyland's direction over the next few days.

So, how much would Thoma Bravo have to pay to pick up Lexmark ES, or even just the Kofax piece, which is rumored to be on the market separately as well? Well, first off, let me say that the Bloomberg article's statement that Lexmark ES "could fetch as much as $1 billion" seems to be way off. Remember, from 2010 to 2015, Lexmark invested approximately $2B in rolling up the components that make up ES, so to think they would turn around and sell it for less than what they paid just for Kofax last year ($1B), seems preposterous. (Of course, EMC paid $1.7B for Documentum alone in 2003, not to mention $275M for Captiva two years later, plus more for some other stuff included in ECD, but those acquisitions and valuations were a long time ago compared to the Lexmark ES acquisitions.) 

Okay, so what can Lexmark's investors expect to get for ES? Well, in my opinion, Lexmark ES lines up pretty closely with ECD. They both own market leading capture software (Kofax and Captiva, respectively) as well as large ECM practices - Perceptive and Documentum. Granted, Documentum is a higher end business than Perceptive traditionally has been, but Perceptive has traditionally been one of Hyland's most direct competitors, just as Documentum has been one of Open Text's. 

So, let's just say Lexmark's investors want to get a premium similar to what Open Text paid for ECD. To start, we'll value Lexmark ES as a $700M a year business, as that's about the run rate that was being projected when Lexmark bought Kofax last spring. Using that 2.7x revenue multiple that Open Text paid, that would value Lexmark ES at $1.89B, which is not a bad number, because it enables Lexmark to save some face on their $2B investment. (Kofax made up about half the ES run rate, so based on the ECD revenue metric, a Kofax sale would be about $950M). I guess it just depends if Thomas Bravo or whoever is going to make the purchase agrees that Lexmark ES is worth what ECD was worth. If they do, I bet a deal gets turned pretty quickly.