Kofax Introduces New Digital Mailroom Technology

Kofax has introduced a new application called Kofax Mailroom Automation. It basically introduces some of Irvine,CA-based ISV's BPM technology into the world of mailroom capture.

We've been talking about the digital mailroom in the document capture industry for years. In fact, current Kofax CEO Reynolds Bish was one of the first big proponents of the technology in his days back at Captiva. And there have been several implementations of the digital mailroom worldwide to date, in several different fashions. Most ISVs in our industry look at it as an extension of line-of-business capture in areas like claims processing - only adding more lines and document types into the mix. Of course, then there are companies like Earth Class Mail that advertise the ability digitize everything and distribute it electronically - or at least give users the option of turning down paper copies of magazines...it's complicated.

Kofax Mailroom Automation falls into the first category, as Dermot McCauley, VP, solutions product marketing, explained that Kofax is going after primarily transactional documents. Kofax has always gone after these types of documents and even has installed what it calls digital mailroom applications. But, the new application introduces the ability to both track and manage better what comes into the door.

McCauley gave us the example of a customer of a bank applying for a loan and sending in the application in the mail. But, in this case, the customer is a foreign citizen and doesn't realize that the loan application required a picture of his passport is included. With Kofax Mailroom Automation, the bank would be notified that a piece was missing and the customer could even automatically be sent a correspondence asking for a copy of the passport. "The problem with many [capture-only] digital mailroom solutions is that they end up sending an incomplete or erroneous set of documents to a line of business applications, where someone has to deal with it there."

There are also some other new features around tracking and monitoring all mail in Kofax Mailroom Automation. Pricing will be based strictly on page count and will embrace Kofax's multi-channel capture philosophy. 

More in next week's issue of DIR!

Zagami Contracts with Beyond Recognition

Back in September, we did a story on an innovative classification and full-text indexing operation out of Tennessee called BeyondRecognition. Basically, its claim to fame was having successfully indexed 2.3 billion images that were given to it in boxes full of CDs and DVDs with little-to-no indexing information attached to them. BR used some glyph scraping and matching and threw some other semantic type understanding into the mix and successfully completed the project.

BR has productized its technology and is marketing it to the legal space, for help with discovery, as well as anyone else that requires classification and grouping of large volumes of documents. BR also can incorporate innovative data extraction techniques.

BeyondRecognition recently announced that is has signed on former AIIM and TAWPI Chair Bob Zagami as a member of its Advisory Board. Zagami is a veteran of the document conversion services market, most recently serving as an executive with DataBank IMX. For BeyondRecognition, Zagami will act as an authorized sales agent for BR with the intent to focus on large-scale document management processes for Fortune 500 companies. Read the complete press release.

NSi Acquires Print Management ISV

Document Capture ISV Notable Solutions, Inc. has expanded its business with the acquisition of the Enterprise Output Management (EOM) business and operations of Barr Systems. Based in Gainesville, FL, Barr develops software for managing printing from mainframe, ERP, and other data-driven applications. It's software can also be used to direct and control print jobs at both high-volume production and general office printers.

To date, NSi has made its living primarily selling capture software for MFPs. It has reported impressive growth over the past few years and in 2011 landed a multi-million with the U.S. Department of Defense. NSi's main competitor in the MFP capture space is Nuance, with its eCopy software. In 2011, Nuance acquired print management ISV Equitrac and has reported several large wins as a result of the synergy between the two product lines. NSi will position Barr's EOM software in the same way the Nuance positions Equitrac.

In addition to managing print to paper jobs, Barr's software can be used to output reports into the same workflows and back-end systems that NSi's AutoStore capture can. Barr's software can also be used to track print jobs and provide secure printing.

More on NSi's exciting acquisition in the next issue of our newsletter. Here's the complete press release.

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.

Canon Introduces Unit to Enable Wireless Scanning

One of the conversations I've had multiple times over the past year has to do with how behind the times scanning technology is. No, not the scanners themselves, which are smaller, faster, cheaper and produce better quality images than ever before. In fact, in regards to "speeds and feeds," there is not much further vendors can go...But connecting a scanner to PC is pretty much being done the same way it was five years ago, when USB scanning was first introduced.

Basically, you load a driver, plug in your scanner through the USB port and scan to your computer. Of course, there has been a movement toward capturing document images with mobile phones designed to circumvent scanners altogether. But, the problem with mobile phone cameras is that image quality isn't nearly what you get from a dedicated document scanner. In addition, if users are capturing more than one or two pages, it can become very cumbersome.

A few years back, at AIIM 2010, I asked for some technology that could possibly connect the high-quality mobile scanners that were being produced with smartphones which were beginning to flood the market. Well, since then, Visioneer has introduced Eye-Fi technology into its Mobility scanner for wirelessly capturing JPEG images directly to smartphones.

Canon now has introduced a device that can wirelessly connect its personal scanners wirelessly to PCs, MACs, and mobile devices like smartphones and tablets. The new WU-10 has a USB port a scanner plugs into. It powers the scanner (through a rechargeable Canon camera battery) as well as sets up a wireless network connection between the scanner and a user's device of choice. With a PC, a user can scan just like they had a wired USB connection. With a mobile device, they can scan through a free downloadable app.

Canon will be showing the WU-10 at the CES show in Las Vegas. It lists for $169. The device has been available in Europe for a few months, but according to Canon executives, it's still too early to tell if there are any particular markets where it is gaining traction. That said, it seems like a great way to combine the high-quality images produced by dedicated document scanners with the mobility of tablets and smartphones.

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. 

A Crowdsourcing Capture Acquisition

At Harvey Spencer Associates annual Capture Conference this past September one of our fearless predictions was that the crowdsourcing market would converge with the recognition applications. While we're not quite there yet, but we are definitely getting closer. Waltham, MA-based Lionbridge, one of the market leaders in crowdsourcing solutions, yesterday announced it had acquired Virtual Solutions. While not an automated recognition ISV,  Virutal Solutions, which is based in Camp Hill, PA, near Harrisburg, is clearly in our market. Historically, it has offered a document imaging-based service for capturing data from primarily state tax forms.

Virtual Solutions has some pretty cool technology for distributing only snippets of documents to ensure security and also has a team of home-based keyers in the U.S. to satisfy the requirements of state tax agencies. Coincidentally, we published a story this past August, in which we discussed Virtual Solutions as a crowdsourcer, even though they didn't advertise themselves as such at the time. 

Lionbridge is a $450 million organization that does the bulk of its business in translation services. It has recently expanded into more general crowdsourcing services and offers its technology as an alternative or compliment to BPO or traditional outsourcing services. It plans to leverage Virtual Solutions' task management platform to help it grow its crowdsourcing business. It also looking at expanding into document imaging-related market like claims and mortgage processing.

According to the press release, "Lionbridge expects to acquire Virtual Solutions, Inc. for a total estimated purchase consideration consisting of $3.6 million to be paid upon closing using Lionbridge’s existing cash resources, $1.0 million of deferred cash consideration, and a $3.0 million earn-out potential payable in cash over the course of three years, subject to the attainment of certain annual revenue metrics."

More on this, including interviews with principals from both sides in an upcoming issue of our newsletter.

Bish Puts Positive Spin on Kofax Results

Kofax's Q1 fiscal 2013 results were announced today. Certainly not great numbers by any means. Total revenue of $60.1 million, which represented slight (2.8%) net growth, but a .8% decline when measured in organic constant currency. Software license sales and professional services numbers were down with only increasing maintenance revenue preventing a more serious dip in revenue. And, historically, relying on increasing maintenance to drive revenue growth has not been a good sign for an ISV.

Here's an article from a U.K.-based tech Web site that does a nice job summing up Kofax's performance. Although the company is now headquartered in Irvine, CA, it still trades publicly on the London Stock Exchange.

It is worth noting that Kofax's adjusted EBITDA for the quarter was pretty much the same as last year and the company still generated $11 million in cash, ending the quarter with $90 million in the bank.

Here was CEO Reynolds Bish's spin on the numbers, "Our first quarter produced seasonally weak software license and professional service revenues and continuing growth in maintenance service revenues due to increasing renewal rates with total revenues being consistent with historical trends. This was accomplished during a quarter in which we changed our head of global sales and services in order to strengthen leadership in those areas and began implementing initiatives to gradually improve sales execution and productivity. We’re therefore pleased to report essentially the same EBITDA as that realized in the prior year period and strong cash generated from operations."

Bish also reaffirmed his guidance for the whole fiscal 2013, "which is for mid to high single digit total revenue growth on a constant currency basis and an adjusted EBITDA margin of at least that reported in fiscal year 2012."

It's my opinion that capture market conditions are changing and although Kofax is pushing forward with more cutting edge products like Mobile Capture and Web Capture, which are both highlighted in the press release on the financials, Koafx still has a large legacy traditional client/server-based business to support. Not that the market for client/server capture is dead by any means. But, trying to support this quarterly $50-million-plus  legacy business, while ramping up in new areas that might be influenced by subscription-based pricing - well, it's a bit of a conundrum. We kind of agree with Bish that the profitability number is impressive, especially (and he doesn't mention this, at least in the press release [haven't listened to the conference call  yet])  when you consider the investments Kofax is making in its new products lines and potentially new business models.

Percetive Growth Still Not Fast Enough for Lexmark

This week's issue of the DIR newsletter features a cover story on the re-branding that is underway at Perceptive Software. Perceptive was an ECM vendor that was acquired by Lexmark in 2010 and is now operates as the Enterprise Software Group within Lexmark. Its ECM suite has been fleshed out by a series of software acquisitions that Lexmark completed in 2011-2012. These include capture, search, and BPM technology, as well as vertical market specialist ISV. The details of how these products are being integrated, as well as still taken to market separately, are in the DIR article.

This week Lexmark reported its third-quarter results, and Perceptive's quarterly revenue came in at $41 million, which represented 88% growth from the previous year's third quarter. A good bit of that was due to the aforementioned acquisitions, but organic growth was still 22%. This is no doubt above market growth rates, but, it is apparently significantly below what Lexmark had budgeted.

According to Rooke (as quoted in a transcript of Lexmark's recent conference call to discuss quarterly results, "While Perceptive Software's revenue was up strongly year-to-year, it was less than we expected, driving a larger-than-expected operating income loss as we continue to invest for growth. Now for the next several quarters, we plan to limit Perceptive Software's expense levels to allow expected revenue growth to catch up and deliver positive operating margins in 2013."

Unfortunately, despite Perceptive's growth, Lexmark reported that its segment operating income was negative $8 million. This begs the question: What kind of growth is Lexmark expecting?

Lexmark certainly paid a good premium for Perceptive and some of the complementary ECM technology it bought, so it obviously was expecting some significant returns. But, to tell the truth, a lot of people I talked with thought an MFP hardware vendor like Lexmark could not successfully run an ECM software operation like Perceptive. But, to date, it seems that Lexmark has done everything it can to nurture Perceptive's business, buy acquiring complementary technology, while also allowing it to operate fairly autonomously. And this has worked to the tune of 22% organic growth - which certainly seems like a far cry from failure. Let's hope that unrealistic expectations don't spoil this success and that limiting expenses doesn't end up limiting Perceptive's success.

 
Rooke added that Perceptive's growth reflects, "slower growth in EMEA than expected and the delay in the closure of a number of large transactions in North America. With regards to EMEA, we continued to make progress, although slower than expected, and are making changes in sales leadership that we believe will accelerate growth. In North America, although we are disappointed that several large transactions did not close in the quarter, the majority of them, we believe, were deferred and not lost, and we expect them to close over the next several quarters."

PPO Using Perceptive Cloud Apps

PPO (Preferred Provider Organization) Preferred Health Professionals (PHP), based in the Kansas City-Topeka (Kansas-Missouri border area) has selected Perceptive's hosted ECM platform. This includes utilizing Perceptive Intelligent Capture (powered by Brainware) for the classification and processing of medical claims.

This is cool for two reasons:
1. We haven't seen a lot of adoption of hosted data capture systems. Brainware announced a version of its software hosted on Azure more than a year ago, but we haven't heard of many (if any) wins to date.
2. The Brainware software (which was recently re-branded as Perceptive Capture) has primarily been used for invoice capture historically. Part of the charter following Brainware's acquisition by Lexmark earlier this year, and it's integration into the Perceptive Software business, was to expand the uses of its automated data capture technology. Getting into medical claims forms is an example of this expansion.

For those not familiar with the U.S. healthcare model, a PPO is basically an insurance plan that has agreements with a network of physicians. PHP is based near Perceptive's headquarters, so it's somewhat of a local deal, but still, it's a good place for Perceptive to start with its hosted capture and ECM solution.

Crowley Contracts Imaging 411 for Service

Crowley Company has signed on Imaging 411 to provide service to its image capture hardware customers. Crowley, which is based in Frederick, MD, sells a variety of microfilm- and document-capture scanners. Vendors that Crowley represents include Mekel Technology, Wicks and Wilson, InoTec, Zeutschel, Qidenus, Extek Microsystems and HF Processors. 

Historically, Crowley has serviced its own products, but has expanded to the point where it was beneficial to bring in a third-party provider. "With the addition of the Wicks and Wilson UScan and the Zeutschel zeta to our scanner line this year, our equipment sales have considerably increased, affecting our ability to service maintenance and technical support customers to the degree they deserve," said Chris Crowley, co-owner and president of Crowley.  "From the customer standpoint. The Crowley Company remains the point of contact and the contracting agent. The only difference noticed will be faster turnaround.”


Based in Long Island, NY, Imaging 411 offers third-party service on a wide variety of scanning equipment from almost all leading vendors. Imaging 411 has some federal large government customers and also has a contract for scanner service with national service bureau Databank IMX. Imaging 411 also makes its service available to resellers who are looking for an alternative to vendor-provided service.

"Imaging 411 techs will receive intensive training on all Crowley brands and will be well-qualified to support the units in the field," said Chris Crowley.

Imaging 411 will also act as a distributor of Crowley’s Wicks and Wilson, InoTec and Zeutschel products. Imaging 411 also offer Sunrise microfilm scanners as well as pre-owned scanners and equipment.

Kofax Debuts Mobile App for Mortages

At the Mortgage Bankers Association's annual convention being held in Chicago, Kofax announced a new mobile document capture app. The Kofax Mobile Capture for Mortgage app is based on the technology Kofax announced in January, which involves capturing and processing document images on a phone and then passing them onto a cloud server, which connects with Kofax Capture. Kofax Capture can be used to perform data extraction, document classification, and other process, as well as to connect line of business and BPM systems.

The Mortgage app is designed "to enable lenders, brokers and borrowers to use cameras in smartphones and tablet computers to capture, perfect and extract relevant information from supporting documents and deliver it directly into the appropriate loan processes."

“We’ve seen ready adoption of electronic document management and mobile banking, making the integration of mobile capture into mortgage loan processing the natural next step," said Mark Swift, VP of Opus product management at ISV Mortgage Cadence, in a press release. Mortgage Cadence develops software for the mortgage banking industry and Opus is its document management offering. It is already a Kofax Capture customer.

 Kofax CEO Reynolds Bish expects the flood of refinancing to drive adoption of mobile capture apps.

Harvey Spencer Associates has projected the market for mobile document capture technology to reach $1.5 billion by 2015 and this is clearly the type of repeatable and useful app that can help drive strong growth in a space that is just now emerging. A couple months ago, Kofax announced four Mobile Capture wins in four different markets. So, it appears as if mobile capture is at developing a wide footprint. It will be interesting to see if a killer app emerges out of these early wins and product announcements.

Toshiba's Forward Thinking

In my last newsletter, there's a story on Toshiba America Business Solutions (TABS) launching a new business unit - Toshiba Managed Business Services (TMBS). No surprise here that an MFP vendor is trying to expand further into services. After all, we've written about Ricoh, Canon, Xerox, and HP all trying to do the same thing. With paper volumes declining, hardware just isn't enough to pay the bills anymore.

What's interesting about TMBS, however, is the range of its focus. It is targeting four main areas within the enterprise market:

• Managed Print Services
• Document security, workflow/capture
• Barcode systems
• Digital signage and kiosks 

Now we all know what MPS is, but here's what Chris Applegate, Director, Enterprise Services, TMBS, had to say about his organization's focus on MPS. “The MPS space has become overcrowded. You’ve got MFP vendors, big box office equipment providers, VARs, and even large technology distributors playing there. And their value propositions all sound alike.

“Basically, they tell the same story. They provide a baseline assessment and an analysis. They then help customers right size their fleets by doing things like replacing inefficient desktop printers with workgroup models. And they provide software to manage that new fleet of printers.

“We believe that creating a lower cost per printed page is only a foundation for managed services. The true value is in reducing print. The paperless office is a myth, but running an office with less paper can be a reality today. We help customers choose when paper is the best solution."

The focus on digital signage and kiosks is designed to offer an alternative solution to printing. In a world where more and more formerly printed materials is now being read on tablets, this makes a lot of sense. I always tell people that a number of years back at a Xerox Tech Expo I saw a lot of "digital paper" solutions previewed that I think foreshadowed today's tablets. I think even better "viewing" technology is on the way.

Healthy Coopetition
The other forward thinking strategy employed by TMBS is its vendor-agnostic approach. Included in TMBS software portfolio is Lexmark's Perceptive software suite, as well as some HP security software. Yes, both HP and Lexmark make MFPs that conceivably compete with Toshiba. This is the second time I have heard TABS commit to this vendor-neutral approach. The first was two years ago, when they launched a professional services group - and they said that it was not about the hardware anymore. I can't say for sure whether this is lip service or reality, but it certainly makes sense. Integrators selling scan-focused document imaging solutions realized it was not about the hardware brand several years ago.

E-Puzzler - Reverse Shredding

Not to sound snooty, but I caught a brief report on NPR this morning on some technology currently being used to piece together documents that were ripped up by the former East German secret police- the Stasi. Developed with help from the Fraunhofer Society, German research organization, the technology is known as the e-Puzzler. According to the NPR report, "The E-puzzler is basically a shredding machine in reverse. You scan torn-up documents into it. It matches up the pieces using color, paper texture, fonts, tear lines and other details."

A conveyer-belt is apparently used in the scanning device, which I can only imagine looks like the open track devices developed by IBML and BancTec. According to an article that appeared in The Guardian a few years back, "The machine works by scanning the document fragments into a computer image file. It treats each scrap as if it is part of a huge jigsaw puzzle. The shape, colour, font, texture and thickness of the paper is then analysed so that eventually it is possible to rebuild an electronic image of the original document."

More from the NPR article: "For the past few years, the E-puzzler has been used under a pilot program funded by the German government. But it has processed only a few hundred sacks. There are more than 15,000 to go. Joachim Haeussler, the archivist in charge of digital reconstruction, now wants to greatly step up the use of E-puzzler technology. "It will help us enormously," he said. "We couldn't even employ the amount of people that would be needed to put together the tiny, tiny pieces of files, because some files are only half a fingernail's worth in size." Ahh, the beauty of document capture.

Canon's I.R.I.S. Strategy

A couple weeks ago, Canon, through its European subsidiary, announced it was planning to acquire document capture ISV and systems integrator I.R.I.S., which is based in Belgium, outside of Brussels. Following is a Q & A put together through a correspondence with the Canon PR department about how the two companies will work together going forward. Basically, it sounds like Canon will enable I.R.I.S. to operate primarily independently, but that the companies will now be able to share more intellectual property. (As far as I know, the only current jointly developed product between the two organizations is the Advanced Scanning module in Canon's UniFlow platform.)

1. How will the acquisition change the way that Canon is currently working with I.R.I.S.?        

Canon anticipates leaving I.R.I.S. Group as a stand-alone company within the Canon group (in line with the acquisition of other software companies in the group). This should allow I.R.I.S. Group to keep its focus on high-quality product development.

Canon has no intention to change any of the strategic relationships in place between I.R.I.S. Group and third parties.

2. What will change at I.R.I.S. as a result of the acquisition?

See answer to question 1.

3. Does Canon have plans to market the I.R.I.S. products through its channels worldwide, or still primarily in Europe?

Canon anticipates leaving I.R.I.S. Group as a stand-alone company within the Canon group (in line with the acquisition of other software companies in the group [Therefore and NT-Ware]). This should allow I.R.I.S. Group to keep its focus on high-quality product development.

4. How will the operation of I.R.I.S. Professional Service group change under Canon?

See answer to question 1.

5. Can you tell me anything about the timing of the acquisition? e.g. why the decision was made to buy the whole company after spending three years as an equity partner?

The relationship between Canon and I.R.I.S. Group has developed very well since 2009 with Canon contributing well to the sales of I.R.I.S. Group’s products and both companies working together to develop new solutions.

However, the relationship is limited in its nature to that of a strategic commercial relationship due to the mutually agreed rules between Canon and I.R.I.S. Group that govern sharing of information.

Canon has a long standing strategy to develop end-to-end solutions in the business environment for its customers. This is better achieved when the relationship between Canon and I.R.I.S. Group is stronger and not subject to the current restrictions.

Kodak's Software Focus

Kind of ironic that an old photography giant like Kodak should spend so much time talking about focus at its recent Global Directions conference in Las Vegas. But, that's exactly what the Rochester-based imaging vendor did this week. Subscribers to our newsletter will get full coverage later today, but basically, Kodak spent the conference spotlighting its two new software product, Info Activate for SharePoint capture and Info Insight for IDR, as well as ISV partner solutions in areas like records management and creating taxonomies.

And hardware, well, it was barely mentioned. I think there might have been a session or two on Kodak's new Asset Management Software for remote scanner management, but that was about it. No, Kodak certainly hasn't given up on the document scanner market - according to Dolores Kruchten, who is now the president of DI, Kodak still invests more in hardware development than software development. It's just that like the MFP vendors, Kodak knows there are better margins and growth in software and services going forward than in hardware. After all, Harvey Spencer Associates has projected an 11% CAGR for the capture software market through 2016. We're not sure when the last time was that the document scanner market saw double digit annual revenue growth.

Of course, many of you already know that this is not Kodak's first venture into software. Originally, there was the initiative that eventually spawned Kofile- basically a digital microfilm retrieval software package that eventually became a lower-end document management system (not sure I got that description completely right, but I think it's close). Then, there was the 1997 acquisition of Eastman Software, which DIR once labeled "The $260 Million Mistake," when the charred remains were sold off in 2001 (although Kodak did ended recouping some, if not all, of that money through a patent deal a few years later).

But Kruchten assured us that this time will be different, and Kodak will succeed because of the focus it is now placing on its software business. That focus was certainly evident at Global Directions. I don't ever remember Eastman Software getting its own conference, for instance, and it was a $50 million business when it was acquired. DI is also counting on whoever buys it to help it even further increase its investment in its software product lines going forward.

Kodak Global Directions 2012

Out here in Las Vegas (JW Marriott up in the hills a bit) for Kodak's first Global Directions conference. About 200 people here, which Kodak described as 60% SIs, and 30% end users. Rest our technology partners and analysts. Certainly smaller than Kodak Breakaway events in the past, but also not necessarily trying to be Breakaway.

To get a taste of what's going on out here, check out Twitter #kgd2012.

Tony Barbeau, GM of Kodak Document Imaging has described the event more of as an industry than a vendor event, of which Kodak is a sponsor. And Kodak has mostly delivered on this promise. There is not a lot of Kodak vendor content in many of the presentations. I'm sitting in Kodak DM Director of Technologies Roland Simonis' presentation on IDR right now, and he certainly has not mentioned a Kodak product 45 minutes into his talk.

Kodak did introduce an IDR product at the conference, InfoInsight, powered by German ISV ITyX. But, Simonis is clearly presenting an educational, not an advertorial track. Lot of good, diverse presenters here, including Shad White of CloudPower, Brian Dirking of Box, and Rai Wasner of Kollabria, who helped put the agenda together.

Interesting this is that scanning hardware, Kodak DI's bread-and-butter for many years, are really not playing a prominent role. This was a deliberate move to Kodak to really spotlighting their software. I'll get into reasons for this in my next premium issue, but it certainly seems like a good idea, as expanding into software and solutions are clearly the future for Kodak DI.

Canon to Acquire I.R.I.S.

Canon, working through its subsidiary Canon Europe, has made a bid to acquire Belgium capture ISV and systems integrator I.R.I.S. The two companies have been partners since Feb. 2009, when Canon Europe became a reseller of  I.R.I.S. products. A few months later, Canon followed-up by buying a 17% stake in I.R.I.S.

I.R.I.S. is probably best known in North America for its OCR/ICR software. Several big-name companies like Adobe, HP, and Evernote license I.R.I.S.'s technology in this area.

 I.R.I.S. also has a batch capture product - which has its roots in software it formerly licensed to Kodak through an OEM agreement (Kodak Capture, the predecessor to Kodak's current Capture Pro software). In 2008, I.R.I.S. acquired German IDR ISV Docutec and markets a document classification and extraction product - IRISXtract, based on the Docutec technology. I.R.I.S recently ramped up its North American efforts around Xtract, which includes licensing Xtract to Salumatics, a Canadian outsourcing firm, that is using the technology to capture healthcare patient records.

 I.R.I.S. has several other software products and some hardware, like mobile scanners and a pen scanner, as well. I.R.I.S. also has a ECM systems integration/professional services business that mainly operates in the Benelux region. This integration business has historically accounted for more than half the company's revenue.

For 2011, I.R.I.S. reported revenue roughly the equivalent of $158 million, but it also went through a reorganization last year. For the first half of 2012, I.R.I.S. revenue was down 33% to around $58 million, but its EDITDA (cash flow from operations) was actually improved over 2011.

Commented, Denis Hermesse, CFO I.R.I.S. Group, “We have seen a shift in our revenue mix with an increase in revenue from license, maintenance and services (including system performance and remote monitoring) and less hardware sales with low margin."

The deal
The offer Canon has made is for EUR 44.50 per share, or the equivalent of $92 million for the remaining 83% of I.R.I.S. This represents a 50% premium over what I.R.I.S. shares were trading for, before trading was suspended as the deal works itself through. It values I.R.I.S. at around $111 million, which is considerably less than the $184 million valuation related to Canon's $31 million investment in 2009.

In 2009, I.R.I.S. was coming off a 2008 in which it reported an EBITDA of Euro 9 million on revenue of Euro 108 million. Based on the first half, 2011 EDITDA projects to Euro 7 million on Euro 85 million.

Commented I.R.I.S. CEO Pierre de Muelenaere in a press release, “We are very pleased to have reached this important milestone for I.R.I.S. Group, and proud that Canon intends to bring our company within the Canon group. The entire board of I.R.I.S. Group fully supports this bid and we are committed to making this transition a success, which we believe will be to the benefit of our customers and all our stakeholders.”

For Canon, the move represents part of the overall trend of MFP manufacturers moving more toward software and solutions. Commented Rokus van Iperen, President & CEO, Canon EMEA, "Canon has identified business solutions and professional services as important focus areas for future growth and we believe this investment will bring long term opportunities to build on our success in the solutions and consultancy businesses to date. We will be working closely with I.R.I.S. Group, as a stand-alone company, to deliver more advanced solutions and services and greater customer value.”

For the record, "More acquisitions of Capture/DM/BPM ISVs by Hardware Vendors," was one of the six predictions for 2012-2013 I made at the Harvey Spencer Associated Capture Conference two weeks ago.

ABBYY Acquires Reseller Partner

ABBYY has acquired ECM systems integrator Digital Documents. D-Docs resells multiple ISV products including Hyland OnBase, EMC ApplicationXtender, and Open Text Alchemy on the ECM side, and ABBYY FlexiCapture and Cardiff's Teleform and LiquidOffice on the the capture side. ABBYY's plan is to enable D-Docs to continue to sell all these products - while adding the tagline "an ABBYY company" to its marketing materials.

D-Docs has some 250-300 customers in the U.S., and is especially strong in the healthcare and higher education spaces. It has less than 20 employees and has won multiple awards from its ISV partners throughout the years.

This is ABBYY USA's first acquisition and the Milpitas, CA-based recognition and document capture ISV hopes to mine D-Docs expertise to help it continue to built out its VAR channel.

Kofax Q4 Details

As expected, Kofax has posted a strong Q4 for its fiscal 2012. This included 17.2% growth in terms of organic constant currency for applications software-the company's core business. Applications software generated $30.2 million for the quarter and software licensing overall was about 50% of Kofax's overall revenue of $75.3 million. To give you an idea of what positive trend this is, for the fiscal year 2012 (including Q4), software licensing made up just 45% of overall revenue.

Commented CEO Reynolds Bish in a press release, "“Our fourth quarter produced strong results, with software license revenues, service revenues and revenues in all geographic regions, our core capture business and acquired businesses being equal to or greater than our expectations. This allowed us to meet the guidance we had provided and realize record total revenues and Adjusted EBITDA for the fiscal year. In light of our transition from focusing on EBITA to Adjusted EBITDA and for purposes of clarity, during fiscal year 2012 we achieved an EBITA of $42.0 million compared to $40.2 million in fiscal year 2011.”

Good stuff.

For fiscal 2013 Bish is projecting "mid to high single digit total revenue growth on a constant currency basis and an adjusted EBITDA margin of at least that reported in fiscal year 2012."

Two geographic notes:
1. EMEA saw the strongest growth in Q4 with a 53.2% growth in software licenses contributing to $30 million in total revenue.
2. Kofax continues to struggle to gain a foothold in Asia-Pac, generating just $5.4 million in revenue for the quarter - a decline of 27% over fiscal Q4 2011.

For the second half of FY2012, Kofax reported 56% of application software license sales came through channel partners, which is pretty close the mix Bish envisioned when he took over the company.

Kofax released its results on Monday (a holiday here in the States) and its stock share price seemed to dip slightly before recovering today.