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.

Putting a Price Tag on Information

Guest Column

Intro: It seems that recently we are running into more and more technology industry visionaries who are saying we now have entered the “Age of Information.” At the recent Harvey Spencer Associates Capture Conference, for instance, author Chris Surdak showed a slide "Information is the New Wealth" that listed the top six companies in the world by market capitalization. Apple, Google, and Microsoft, which he said basically specialize in "information management" topped the slide, followed by more traditional companies like Exxon Mobile, Berkshire Hathaway and PetroChina. The problem is, as AIIM Chief Evangelist John Mancini points out in his excellent piece, there is no standard in place for measuring information as a tangible asset. 

Check it out: 

By John Mancini, chief evangelist, AIIM

No company in the digital age could run without it and it is arguably the most important asset any organization has—but how do you put a price on information?

Intellectual property is listed as an intangible asset in financial reports. But there is no line on the balance sheet for information. No standard method or process for giving it a value, despite the fact that we are churning out more and more information every day. To put this into perspective it is estimated that Facebook users share around 2.5 million bits of content a minute. IBM estimates we create 2.5 quintillion bytes of data every day.

Information is coming at us from everywhere—from social media, purchase transactions, blogs, GPS data, sensors etc. This list is endless. The consumerization of IT, cloud, mobile, and the Internet of Things, have all contributed to a surge in big data that is literally changing our world and the way we operate in it.

Information is now one of a company’s most precious assets. When used correctly it can provide companies with a wealth of insight about their customers and competitors that can give them a business edge. Companies are investing heavily in protecting, securing, analyzing and documenting this data. 

Business leaders increasingly talk about how information is their most valuable asset. Yet information still does not appear on the balance sheet. As Doug Laney, vice president at Gartner so concisely puts it: “We are in the midst of the information age, yet information is still considered a non-entity by antiquated standards”. 

In this age of digital transformation, it comes as a surprise that there is no standard model for valuing information.

Accounting for information

As far as I can see, there is a growing gap between the traditional ways we value organizations, in terms of the tangible and intangible assets reported in financial statements, and the value the market puts on organisations. The huge sums paid for some companies shows our inability to measure and value the information assets of an organization.

According to Laney, in 1975 on average the tangible assets of a corporation represented 83% of its value. Today that number is 20%. Therefore, more than 50% of merger and acquisition exchange simply can’t be accounted for.

Take for example Microsoft’s acquisition of LinkedIn. Look at the accounting value of LinkedIn—$3.2 billion in revenues—and compare it to the price paid by Microsoft—$26 billion—and it doesn’t appear to make sense. We immediately start asking the obvious questions: Are we on the verge of another doc.com bubble?  Why is the accounting value of the company so different from its market value? Has Microsoft lost the plot?

The answer, I believe, is quite straightforward. The disharmony comes from our inability to measure and value information assets in an organization. This is reflected in the growing division between what we actually report about companies and what we actually inherently know about them. But it is also linked to the way we continually undervalue the investments companies have made in creating, analyzing, protecting and storing their data to create real customer value.

Finding a measure

The nearest thing we have to measuring information right now is ‘Infonomics’. This is essentially a framework for organizations to measure, manage, and monetize information as a real asset. But it has still to be taken on board fully by organizations.

Early this year, in a bid to come up an answer to assigning a value to information, AIIM brought together industry leaders in information management from the likes of Shell and Gartner, to discuss this pressing issue.

One particular point soon became crystal clear—we need a standardized way to measure the value of information, and we need it fast.  Although most organizations now understand how valuable their information is, they have no way of valuing it as an asset. This is an important job for information professionals and accountants to get to grips with over the coming months and years, and one that AIIM will be devoting considerable energy to. 

As business becomes more and more information driven, it is imperative that there is a standard in place that can measure the usefulness and monetary value of information. How this is to be done has still to be decided. But it is a problem that isn’t going to go away.

For more information: www.aiim.org

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.

Lexmark ES Rebounds in Q2

Lexmark's Q2 results for its Enterprise Software (ES) division do not appear to be terrible. On Friday, the Lexington, KY-based MFP vendor announced its Q2 2016 results, and while overall earnings were disappointing, ES seemed to have rebounded from a very disappointing Q1. For Q2, Lexmark reported ES revenue of $167M, which represented an 11% YOY increase. But, before you get too excited, Q2 2015 only contained about a month and a half worth of Kofax revenue, as Lexmark's acquisition of the capture market software leader closed in mid-May last year. In the first complete quarter of Kofax revenue (Q3 2015), Lexmark reported ES revenue of $165M.

Of course, immediately upon announcing its Q3 numbers last year, Lexmark announced it was looking at selling either the whole or parts of its company, which sent the ES business into a bit of a tailspin. Things bottomed out in Q1 of this year when Lexmark reported ES revenue of just $143M, a 14% decline from the combined revenue of Lexmark's Perceptive Software and Kofax (which were combined to create Lexmark ES) in Q1 2015.

So, it's good to see that now Lexmark's ES business appears back on track in spite of April's announcement that the entirety of Lexmark was being acquired by a group of China-based investors led by Apex Technology Co., Ltd. and PAG Asia Capital. A week previous to the Q2 earnings announcement, it was announced that Lexmark shareholders had approved the "merger agreement." There was a lot of speculation that being owned by a Chinese entity could adversely affect enterprise software sales due to concerns about security related to a lack of regulation in China. In my research and conversations, I could find nothing to substantiate these concerns and apparently they didn't negatively affect sales in Q2.

I'm not exactly sure what led to the turnaround from Q1, except that perhaps once the deal for the acquisition was in place, the ES team was better able to focus on its business. ES President Reynolds Bish had told me in a conversation at Lexmark ES's Inspire event in early April, that the distractions related to a potential acquisition had taken a toll on his organization.

Of course, rumors continue to swirl that Lexmark ES will still be spun off and a decent quarter like Q2 should help increase its potential value. Although it's still hard to see Lexmark recouping the approximately $2B in spent rolling up ES in the six-year period from 2010 through 2015.

Management Changes Continue at Kodak Alaris

A week after announcing a restructuring of the sales management team at Kodak Alaris Information Management (IM), Kodak Alaris announced it is looking for a new CEO. In an announcement we received today, Kodak Alaris states, "To better position ourselves to achieve our long term growth plans, the Kodak Alaris Holdings Ltd. Board of Directors decided the time is right to initiate a search for a new CEO."

Effective May 1, Ralf Gerbershagen, who was named CEO of Kodak Alaris in 2014, has stepped down. According to statement DIR received from Kodak Alaris: "Today’s announcement is about looking forward. This was not a performance based decision but more an assessment of the future leadership needs of Kodak Alaris. The Board felt this represented the ideal time to begin the new search for a CEO. [Gerbershagen] leaves the company better positioned than when he arrived and with our best wishes for his future."

 Kodak Alaris was launched in September 2013, with the sale of Kodak Document Imaging (now IM) and Kodak Personal Imaging to the Kodak UK Pension Fund for a combination of $2.8 billion in debt relief and $650 million in cash and non-cash considerations. The sale was part of the bankruptcy proceedings for Eastman Kodak.

Gerbershagen, who is based in the UK was brought in from Motorola Mobility in April, 2014. During his tenure, Kodak Alaris reportedly saw a strong rebound in its scanner sales, which were negatively affected by the uncertainty related to the bankruptcy proceedings. Kodak Alaris was less successful with a intelligent document recognition (IDR) venture. After signing a partnership with German ISV ITyX in 2012 and struggling to generate any sales momentum, in 2015 Kodak Alaris launched a subsidiary, AI Foundry, which is totally focused on IDR sales. However, shortly after the launch of AI Foundry, Kodak Alaris broke off its relationship with ITyX, which then filed suit.

According to Alan Swahn, VP, marketing for AI Foundry, in an e-mail to DIR last month, “We are working with other suppliers that more closely align with new opportunities in the marketplace. We are working on exciting new solutions and you can expect announcements later this year.”

Jeff Goodman has been appointed as Kodak Alaris' CEO on an interim basis. Goodman had been serving as COO. Kodak Alaris has not set a timetable for hiring a new CEO. Following is a statement form Kodak Alaris: "We are looking for an outstanding and inspirational leader with a proven global track record of identifying and driving long term profitable growth for large international companies.

"As we need to conduct a comprehensive search for our next CEO, we don’t have a specific timetable. Jeff’s presence, combined with the company being in a solid place, allows our board to conduct a thorough search for our next CEO. Jeff is committed to filling this role until we find our new CEO and will support his/her transition to the role."

We asked a Kodak Alaris representative if the organization's goals have changed since Gerbershagen was brought in two years ago. Here was the reply: "We continue to transform the company and our current focus has shifted from restructuring to growth. Our plans and our ongoing programs, developed by the Kodak Alaris Executive Committee (of which Jeff was and is a part) and approved by our Board, remain unchanged and have our absolute focus and commitment."

Lexmark ES Q1 Numbers Disturbing

For those of you that haven't done the math for yourselves, Lexmark Enterprise Software (ES) saw about a 15% decline in revenue for Q1, YOY. Yes, we realize Lexmark reported 60% growth for ES on revenue of $143 million, but last year's Q1 didn't include Kofax's numbers. In calendar Q1 last year (Kofax's fiscal Q3), the ISV did $75 million in revenue, and it also acquired a $9 million a year business in Aia Software towards the end of the quarter. So, we'll put Kofax's Q1 2015 revenue at around $77 million.

In the meantime, Perceptive Software, operating as a division of Lexmark, reported $90 million for the first quarter of 2015. If you put those two figures together, it gives you a Q1 2015 revenue number of $167 million, $24 million more than the two combined businesses reported this year for Q1 as parts of Lexmark ES. We don't have any insight into the breakdown of the Lexmark ES in numbers - in particular, how much was from generated in software sales, but we had heard rumors that Lexmark was struggling in that area in particular.

The 15% erosion in revenue is disturbing, and we hope it is not indicative of the industry's direction. We realize Lexmark has been struggling with integration issues, as well as uncertainty related to the recent sale of the company, so maybe the first quarter was an anomaly and the organization will bounce back strongly. That said, Lexmark's competitors are certainly trying to keep the FUD (fear, uncertainty, and doubt) levels pumped up, as I heard a lot of talk at the recent AIIM Conference related to the potential challenges of being owned by a group of investors from China.

In addition to Lexmark, Open Text failed to show organic growth in Q1 (its fiscal Q3), EMC's Enterprise Content Division (ECD) revenue continued to shrink, down to $134 million in Q1 2016 from $138 million in Q1 2015 (not to mention the fact that EMC is reportedly trying to sell ECD to help fund the Dell acquisition), and Top Image Systems (TIS) struggled in Q4 '15 with its Q1 2016 numbers still to come. It has not been all bleak news, as smaller companies like DocuWare and M-Files reported strong growth for 2015, and Hyland Software had another strong year as well.

What is somewhat interesting is that DocuWare, M-Files, and to some extent Hyland, are focused on the SMB space (Hyland stressing the "M"), while EMC, Kofax, and to some extent ReadSoft (also part of Lexmark ES) and Open Text are more focused on the enterprise space. So, maybe the growth in the ECM market is in the traditionally underserved SMB space (as we've been predicting would happen for years). This would certainly bode well for TIS, which recently put a stronger focus on shopping financial process automation to the mid-market.  Then again, the Perceptive Software's content management business is a major part of Lexmark ES and it focuses on the mid-market (we're really not sure how the individual components within the division made out).

When you add these recent ECM software struggles to the steady erosion we've seen in margins in the document scanner hardware market (as well as some of the reogranization at the leaders ), it makes us doubt the future of our industry. That said, the attitude at this week's AIIM Conference in New Orleans was not wholly pessimistic. There were plenty of optimistic vendors, a bevy of end users looking for solutions, and the usual group of energetic and imaginative people that combine to make our industry so exciting at times. New solutions stressing, the cloud, mobile, and emerging technology like natural language processing - as well as a new vision embracing enterprise content as data and thus creating a bridge for mainstream IT crossover, certainly created plenty of positive buzz at the AIIM event (or was that just the alcohol on Bourbon Street?). We'll have more details on what we learned at AIIM in the next issue of DIR.

In the meantime, let's hope for a stronger Q2 for everyone (well, except for your competitors in some cases, I guess.)

Management Changes at Kodak Alaris IM

Word came out yesterday that Kodak Alaris Information Management has changed its management structure. Cássio Vaquero, who had been serving as regional director of emerging markets (Asia-Pacific and Latin America) has apparently been appointed to a new head of global sales position. In conjunction with that, Martin Birch, Kodak Alaris' IM's regional manager for the US&C, and Erwin Schwarzl, regional manager for EAMER, have been let go. 

Here's a quote from Kodak Alaris on the shake up: "With the global integration of key business functions, including sales, within IM, we are transitioning to a new worldwide operational model. We thank Martin and Erwin for their contributions and wish them well in the future as we continue to help our customers grow their business using Kodak Alaris scanners, software and services."

The move is a bit surprising as Birch and Schwarzl have only been in their current positions for about a year. Last April, Birch, who was serving as regional director for EAMER, moved to the U.S. to take over for Russell Hunt, who retired. Schwarzl had been serving in another capacity at Kodak Alaris. Both Birch and Schwarzl worked at Kodak (and then Kodak Alaris) for several years.

These moves are part of a tumultuous few months at Kodak Alaris IM, which has also included some changes within its AI Foundry intelligent document recognition (IDR) software business.  

Lasefiche EMPOWER Event Continues to Grow

LONG BEACH, CA – It was good to return to the Laserfiche EMPOWER Conference this year after a three-year hiatus. Last time I had the opportunity to attend was 2012. I had planned to go in 2013, but a snowstorm changed that. 

Since that 2012 event, I haven't really had a chance to connect with the Laserfiche executive team. And there have been big changes to that team over that time. In 2013, Tom Wayman, VP of marketing and product strategy, died. The next year, his mother and company founder and CEO Nien-Ling Wacker passed away. (Both had awards named after them that were presented at this year's conference.) Nien-Ling's husband Chris Wacker has taken over as CEO, with CTO Karl Chan having added president to his title. In 2014, Laserfiche named Thomas Phelps IV as its VP of corporate strategy and marketing.

During the last few years, Laserfiche has continued to grow. For the 2012 conference, which was held at the Anaheim Marriott, I reported 1,600 people attended. For this year's event, which was moved to the Long Beach Convention Center (a much bigger venue), Laserfiche announced 2,700 attendees. Chris Wacker also told me the company enjoyed 10-12%  revenue growth in 2015 over 2014, which was also a growth year.

Overall, 880 organizations were represented at EMPOWER. This included a mix of end users, resellers, and vendor partners. The big announcement was the release of Laserfiche 10, which features improvements in collaborative and mobile capabilities, as well as the introduction of a library of more than 100 pre-built workflows across several vertical markets and horizontal applications. New analytics tools for BPM were also introduced.

A few things that have not changed in the four years since I last attended EMPOWER:

1. Laserfiche remains very strong in state and local government market.
2. There is still a big push toward getting many of these government customers to expand their implementations enterprise wide. It seems to be working. For example, I attended a presentation by the City of Boca Raton, which has expanded its implementation from the clerk's office to the A/P department and now has 50 more projects either currently being implemented or that have been requested. Many of the attendees I spoke with were considering similar (if not quite as big) expansions.
3. Epson is still the event's premier sponsor, although Epson's scanner business has grown considerably since 2012. According to Mark Pickard, senior product manager, Document Scanners, Epson America (citing numbers from the NPD group) through the first 11 months of 2015, the company's revenue from commercial scanners grew 24% over 2014, which was twice as fast as Epson's nearest competitor. He credited Epson's relationship with Laserfiche and its channel as contributing to that growth.

We'll have more detailed coverage of the event in our next newsletter, but that's a quick summary for you.

Lexmark Apparently for Sale

Today, Lexmark announced that its Board of Directors has "authorized the exploration of strategic alternatives to enhance shareholder value." After the announcement was made, Lexmark's stock rose more than 6% (as of this posting), lifting the company's market cap to $2.1B. This is not that great of a valuation for a company that bills itself as a "$3.7B global technology company that includes a $1.5B Higher Value Solutions business comprised of Enterprise Software (ES) and Managed Print Services (MPS)."

That Enterprise Software business, of course, includes Perceptive, Kofax, ReadSoft, Brainware, and some other ECM-focused companies that have been rolled up since 2010. Most recently, Lexmark acquired Kofax for $1B in a somewhat surprising deal. It followed up by appointing Kofax CEO Reynolds Bish as president of Lexmark ES, which has about a $700M annual run rate.

Unfortunately, investors were less than thrilled with the guidance Lexmark presented for its overall business in conjunction with its Q2 earnings report, which dropped the company's valuation by 20% on a single day in July. Although the stock has bounced back slightly over the past few weeks (including today), it is still trading at more than 25% below its July peak.

Lexmark has made a concerted effort to shift its business from hardware-centric to a software and services focus, stressing its growing ES and MPS revenue. Unfortunately, it appears that investors are still valuing the company based on its declining hardware and supplies revenue. Stated Jean-Paul Montupet, lead director of the Lexmark Board of Directors, in relation to this, "We are extremely proud of what the Lexmark management team and employees have accomplished in the transformation of Lexmark. While the Board is encouraged by the company's future prospects, the Board does not believe Lexmark's current share price fully reflects the intrinsic value created by the company, and the Board has concluded it is appropriate to explore strategic alternatives as the next step to unlock this value."

What specifically those strategic alternatives are is not mentioned, but speculation is that the company could be sold either to a private equity company or another high-tech company. HP, which had long been discussed as a possible landing point for Kofax and has a partnership history with Lexmark, is one possible buyer. However, to me, a private equity buyout at this point would seem to make more sense. After all, less than six months ago, Lexmark paid $1B to pick up Kofax, so selling the whole company to someone else for anything close to its current market valuation would seem unlikely. After all, Kofax was a $300M-plus company and Lexmark is a $3B-plus company. The math just doesn't make good sense.

What makes more sense is to take the company private, which would conceivably enable those who agree with Lexmark's management's transformative vision to stay on board as investors. The company would then be able to work on really affecting the changes it wants to without the worry of meeting quarterly numbers - which are going to be very hard to meet as the formerly hardware-driven company de-emphasizes hardware. When the transformation is complete, and Lexmark is operating as primarily a software and services business, it can then go public again, conceivably with a more favorable valuation.

At least that's the way I see it shaking out.

Your thoughts?

German Start-Up Developing Unit for Smartphone Scanning

Here's a preview of an article that scheduled to run in tomorrow's (Oct. 16) edition of DIR:

scanPAD is a German startup that has created a new apparatus designed to enable smartphones to act as document scanners, mini photo studios, and even overhead projectors. According to a press sheet, the scanPAD leverages patent-pending nanotechnology to hold and stabilize smartphones, as well as documents. Shaped like a desklamp (see image), the scanPAD holds a smartphone in place above whatever the user is trying to capture. 

For documents, the base of the scanPAD has a microsuction surface designed to not only hold documents, but also smooth and flatten them. It is designed to work with whatever document capture app a user has installed on their phone. The reverse side of the microsuction pad features a bluescreen that enables users to take pictures with a transparent/replaceable background. The device can also be used to give video presentations utilizing printed pages or whiteboards.  

The scanPAD carries a retail list price of 249 Euros, or about $283US. There is a Kickstarter campaign underway, with a goal of raising $113,000 over the next two months. As of mid-day yesterday, 40 backers had pledged $6,500. Pledges of a certain amount get the pledger a discounted scanPAD in return. Manufacturing is scheduled to begin in Germany in January with units to begin shipping in February. 

I believe this is the third device we have covered in DIR designed to hold a smartphone to create higher quality scans. The last one was the Scandock from Atiz, a company headed by former Apprentice finalist Nick Warnock. Atiz’s Scandock lists for slightly more than the scanPAD but also offers a lighting system and software designed to ensure high-quality color images are produced. 

Added for blog: Would it make sense for someone to create an ADF version of this type of scanner? Along those lines how fast could you capture images, say, leveraging the video camera within a smartphone or tablet? Could you do it ibml fast if you had the right transport? Just some food for thought.

Aggressive Cost Cutting in Store for Lexmark Enterprise Software

Lexmark reported its Q2 2015 earnings today. Overall, Lexmark reported $891M in non-GAAP revenue and $139M in earnings. Apparently, Wall Street traders were not impressed with these numbers along with lowered earnings forecasts, as Lexmark shares were down more than 20% in early trading. I don't pretend the understand the complete dynamics of Lexmark's business, but I do follow its Enterprise Software division fairly closely, and this was the first quarter it reported that includes any revenue and income from Lexmark's Kofax acquisition, which closed on May 21.

For Q2, Lexmark reported $150M in total Enterprise Software revenue, with margins of 20%. On the surface, this looks great, considering that Lexmark's Enterprise Software margins for 2014 were around 5%. But, if you look closely, the Kofax Q2 operating margins are listed at 42.6%, which has something to do with the timing of the acquisition. Apparently, some Kofax operating expenses in areas like IT, finance, HR, facilities, and legal and corporate staffing were charged to "All Other," instead of Enterprise Software.

"The software segment benefited from the timing of the Kofax closing which coincided with the most profitable portion of what is traditionally Kofax’s strongest quarter," explained David Reeder, VP and CFO, of Lexmark in an analyst call. "Kofax added $48 million of revenue and $20 million of operating income to second quarter results." (Quotes are from the Seeking Alpha transcript of the analyst call.)

When you take Kofax out, Enterprise Software reported operating margins of 9.8%, which is not great, but is an improvement over what we've seen historically from the Enterprise Software group. And, of course, we all know that Lexmark has set a goal of exiting 2016 with 25% operating margins for Enterprise Software. So, how does it get there?

In conjunction with today's quarterly financials report, Lexmark announced plans to eliminate about 500 positions. "We are announcing a restructuring action today, the vast majority of which reflects the cost synergies targeted for the ReadSoft and Kofax integrations," announced Chairman and CEO Paul Rooke. "In total, we’re eliminating about 500 positions worldwide, primarily across the G&A, marketing, and development organizations with about one-third of the impacted positions being shifted to lower cost countries, and we expect to complete these actions by the end of 2016. Financially, these actions are expected to generate annualized savings of about $65 million in 2017, the vast majority of which will benefit the Enterprise Software segment."

Basically, it sounds like Lexmark is expecting to save more than $33M in operating expenses annually in Enterprise Software - as well as grow the division due to "revenue synergies." When you do all the math, this should work out to 15% operating margins for 2015 and 25% by the time 2016 ends.

Obviously, there are going to be some challenges growing Enterprise Software while simultaneously reducing headcount, but Lexmark at least has a vision to try and executive on. I feel badly that it sounds like many people in our industry are going to lose their jobs as part of this vision, but as document imaging and ECM gets subsumed into more general IT and larger organizations, this type of evolution is inevitable.

Now, I'm not saying Lexmark is guaranteed to succeed at what it has set out to do, specifically in terms of margins and more broadly in terms of transforming from a hardware player to establishing itself as a leader in the ECM space. But, I will say it's definitely worth watching - and I'm sure most of its competitors are. Lexmark is clearly betting big here. We should know the results of those bets in another couple years at the latest.

Bish Appointed President of Lexmark Enterprise Software

You can't accuse Lexmark of being predictable and boring. Almost two months after announcing its surprise $1B bid for document capture market leader Kofax, today, Lexmark not only announced it had closed the deal, but that Kofax CEO Reynolds Bish was taking over as president of Lexmark Enterprise Software.
Most people in the industry had assumed that Bish, who has hired by Kofax in 2007 to drive up its valuation and sell the company, had successfully completed his mission and would move on.

Instead, we have Bish taking over for Scott Coons, who was basically the founder of Perceptive Software -  the rock on which Lexmark Enterprise Software was built. Lexmark acquired Perceptive in 2010 and followed that with several other software acquisitions all rolled up under the Perceptive flag. The result was a software business with run rate of approximately $350M, prior to the acquisition of Kofax, which now doubles the size of that business. The curveball, however, is that Coons, who is some 15 years Bish's junior, is taking his retirement while Bish takes the reins of Lexmark Enterprise software (which is what Perceptive was renamed earlier this year).

The said, Bish's appointment really makes perfect sense. When you add together the revenue of Kofax, ReadSoft (which Lexmark acquired last year) and the former Brainware (now Perceptive Intelligent Capture), capture now makes up at least $450M of Lexmark Enterprise Software's projected annual run rate of $700M. And who better to run a $450M capture software business than Bish?

In addition, for the past couple years at least, Bish's vision has been wider than capture. He executed a series of acquisitions while at Kofax to help transition the company into the emerging smart process application (SPA) space. In many ways, the portfolio that Kofax adds with Lexmark, will further beef up its SPA play. But the bottom line is that, as reflected in its name, Lexmark is striving to be an "enterprise software" company and that has also been Kofax's goal since Bish took over.  Bish put a lot of infrastructure and strategies in place to execute on this goal and will now be able to carry them over into Perceptive.

One other thing, as Lexmark Enterprise Software moves to reach its goal of a 25% operating income margin by 2016 (from approximately 10% at the end 2014 for the combined Kofax and Perceptive businesses), there are certainly some personnel cuts that are going to have to be made. Technically coming in from the outside may make this easier for Bish to do than Coons, who to date had been operating Perceptive on fairly low margins in part due to Lexmark's laissez-faire approach to software.

Not that Coons was doing a bad job. In fact, when Lexmark first acquired Perceptive, it promised it would let Coons run the software business without interference and to date, Coons noted in a call with DIR, Lexmark has done a great job of keeping its promises. This hands-off approach really enabled Lexmark to establish itself as a major ECM player - which many doubted it could do.

Coons told us he was flat out ready to retire after 20 years in a very competitive market and that he supported Bish as the man to succeed him. Bish is certainly no stranger to personnel turnover, as he was an agent of change when he took over Kofax in 2007 and helped mold it into a true enterprise software vendor. As a result, Bish is probably the best man for the job now that it is time to do some remolding at Lexmark Enterprise Software as well.

Congratulations Reynolds on your new appointment and Scott, best wishes in  your retirement!

Xerox CFO Comments Seem to Rule Out Kofax Bid

Xerox recently adjusted its outlook for 2015 in the wake of fairly weak Q1 results. But, the big news for our readers may be Xerox CFO Kathryn Mikells' comments on the company's acquisition goals. Mikells told Reuters: "We're expecting to do up to $900 million in acquisitions this year and early next year." This would seem to rule out a bid for Kofax, for which Lexmark has already bid $1B.

Kruchten to Depart Kodak Alaris

Dolores Kructhen, who has served as president of Kodak Alaris Document Imaging - DI (recently renamed Information Management- IM), since it was launched in 2013, is leaving the company at the end of May. Here's the official statement from Kodak Alaris:

"Dolores Kruchten, President of the Information Management division, has decided to leave Kodak Alaris at the end of May. All of us at Kodak Alaris thank Dolores for her contributions over the years and wish her all the very best for the future. We are actively recruiting – in the interim, Ralf Gerbershagen and Jeff Goodman will work closely with the existing Information Management Executive leadership team to ensure a smooth transition."

Kruchten started with Kodak  in 1981. She held numerous positions at Kodak Document Imaging, including running the hardware service business for Kodak Graphic Communications before taking over as GM of DI in 2007. Kruchten oversaw that transition of DI from a division of Eastman Kodak to one of the two principal divisions of Kodak Alaris - which were spun off as part of Eastman Kodak's bankruptcy proceedings.

The DI business struggled with uncertainty in 2012 and most of 2013, before bouncing back with a strong year for scanner sales in 2014. Like many hardware vendors, it is attempting to move towards more of a solutions approach and has added more software to its portfolio. Last week, DIR ran a story on Russell Hunt's retirement as Regional GM of the US&C for DI/IM. He is being replaced by Martin Birch, who had previously served as regional GM for EMEA at DI/IM.




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Xerox Leaves Door Open for Kofax Bid

Here's the statement I received from Xerox after asking for a comment on Lexmark's $1B bid to acquire Kofax: "While we cannot comment on Lexmark’s decision to acquire Kofax, we can say that today we are more confident than ever in our capability to deliver outstanding Next Generation Managed Print Services, Document Outsourcing and workflow to our customers and prospects. If and when the transaction is completed, we will re-evaluate our strategic partnership with Kofax.  In the meantime, we will continue to maintain our partnership with them to support  existing customer engagements where Kofax has been adopted. We are committed to open standards and when customers choose Xerox and another partner or competitor, we will work diligently to ensure that their environment works flawlessly."

Sounds to me like their might be conversations brewing within Xerox to make a higher bid, as I don't know what else could prevent the transaction from being completed. The "if and when" certainly makes it sound like Xerox is not considering this a done deal. If the deal is completed, it also certainly sounds like Xerox will be moving on from Kofax.

A Dialogue with Xamcor's Paul Carman on Lexmark-Kofax Deal

The following is a correspondence between Ralph Gammon, the editor of the Document Imaging Report, and Paul Carman, President and CEO of Xamcor, discussing what this deal means to the companies involved, as well as the industry as a whole.

Ralph Gammon of DIR: So, no surprise that an MFP vendor has announced plans to acquire Kofax. What is surprising is that it was Lexmark, instead of Xerox.

Paul Carman of Xamcor: I agree. Of course, it’s no surprise that Lexmark made another software acquisition , as they have been very active in building their software capabilities. However, Kofax does come as a bit of a surprise. With Brainware, an earlier acquisition, and then ReadSoft closing some months ago, the capture space didn’t seem to be the next logical area of opportunity.

To read the rest, please click through to the Xamcor site. 

Part II of the interview, in which we discuss if there is any merit to a shareholder rights-focused law firm filing a complaint against Kofax for not maximizing shareholder value.

Lexmark Attempting To Corner the Market on Capture

Wow. That really caught me by surprise. About 4:30 today it was announced that Lexmark was acquiring Kofax for $1B net of cash. I was just finishing up my Kofax Transform conference story and about to start writing my piece about how Xerox was going to integrate the Kofax technology into its organization. It really made a compelling story. And the rumor circulating around AIIM last week, was the the Xerox-Kofax deal was going to close any day...Then I heard something about Kofax asking for too much, and the next thing I know Lexmark announced it had made a bid of $11 per share, or about a 47% premium over what the Kofax stock was trading at today. It's also more than 3x Kofax's 2014 reported non-GAAP reported revenue of $297M -so from that perspective it's not a bad deal.

There is a lot to like about this deal from Perceptive's standpoint. It's latest and most aggressive move in an already aggressive ECM software strategy. That said, there is certainly some overlap with the recent ReadSoft acquisition, as well as its previous Brainware acquisition. But, if you are going to transition from a hardware to a software vendor, you might as well go hard.

I wouldn't be surprised to see Xerox make a counter offer, but if $1B was already too rich for their blood. But still, if I was Xerox, I would be looking to find some money somewhere, because they really were planning on investing a lot in this partnership and now Kofax is in danger of being taken off the market by a competitor. Exciting times.

Ephesoft's Vision for the Future of IDR

Coming out of AIIM last year I had come up with a vision on the potential future of the document imaging industry. I've repeated the mantra several times since - and it goes like this: "Capture it all and let the technology sort it out."

In fact, I recently completed a piece for Quality Associates' upcoming Insights newsletter detailing what I see as some of the driving forces behind this vision. They include trends like increased multi-channel capture and increasing intelligence in capture driven by emerging technology like natural language processing.

This year I attended the Ephesoft Innovate conference  prior to heading down to San Diego for AIIM 2015. At Innovate, Ephesoft founder and CTO Ike Kavas presented on his vision for the future - which I thought dovetailed nicely with mine. Kavas and his team at Ephesoft have even gone so far as to developing a brand new product - Ephesoft Universe - designed to enable organizations to mine their documents.

Due for release later this year, Universe leverages Big Data tools like Hadoop. According to Kavas, Universe is able to leverage 16 different characteristics to classify a document and recognize a field. Ephesoft is developing machine learning algorithms to consider these characteristics. The bottom line is that this is a lot of data being put through a process that requires a lot of computing power - hence the need for the Big Data tools, especially if a user is throwing a high-volume of documents at it.

The end game for Universe is trying to reduce the time it takes to implement a classification and extraction application from months to minutes. Also, the idea is to enable individual users (not system admins) to set up personalized auto-classification and extraction applications.

Kavas was brave enough to show a demo of Universe, which he expects to be released, in Version 1.0, later this spring. Basically, a user creates their own document classes, feeds it examples, and chooses and labels which fields it wants to extract based on the highlighted fields that Universe was able to recognize. Once the data is extracted, it is fed into an analytics application that is also built into Universe. An example Kavas showed utilized hot/cold zone graphing to show the average price of houses in different states in the country.

Other potential application ideas tossed about included mining medical records for various reasons including enforcing records retention policies, mining expense reports to enable more informed negotiations with vendors, and examining financial documents for at-risk loans or security risks.

There is a lot here, and I'll have more detail in my next premium issue of DIR. Ephesoft's current goal is to find some customers and partners to help it determine what needs to be done next on the road to productizing Universe. But, there is clearly a lot of potential, mainly because it offers to make accessible what has historically been very high-end technology, whose adoption has been slowed somewhat I feel by paralysis by overanalysis.  If Ephesoft can really make Universe a universal tool, I think we'll start to see a slew of new IDR applications developed on top of it.