Wednesday, October 21, 2009

Kofax Targets Transactional Capture Market

By Mark Brousseau

Watch out ReadSoft – Kofax is coming for you.

“We are second in the transactional capture market, and we intend to be No. 1,” Alan Kerr, the company’s executive vice president of field operations, said during a presentation this morning at Transform 2009, the Kofax Annual Conference, scheduled for October 21-22 at the Manchester Grand Hyatt in San Diego. “This is where we are going. Everything we do is focused on that.”

Currently, Kofax enjoys a 9 percent market share in the transactional capture market, Kerr said – trailing only ReadSoft. Kofax leads the “All Capture” and “Image Capture” market segments.

Kerr said Kofax continues to spend “a lot of money” on research on development around document-driven business process automation. “We are enterprise ready. This is a consistent, well thought out, deliverable strategy. It’s not a vendor trying to cobble something together,” Kerr told attendees.

It’s little wonder that Kofax would set its sights on the transactional capture market. Kerr noted an IDC study predicting that the document capture market will continue to be one of the stronger growth areas of the content management market over the next five years. He added that despite talk about the “paperless office,” 75 percent of companies use mostly paper-based accounts payable processing. “These solutions are becoming increasingly mission-critical to the enterprises that use them,” he said.

“We’re looking at 9.6 percent growth for the market in which we operate,” Kerr explained. “This is a $2 billion market, driven by the real desire and thirst by end users to automate these processes.”

But even bigger opportunities may lie ahead.

“Just as forms processing and document capture came together to form a more robust market, we think capture will merge with business process automation to form a more robust market,” Kofax CEO Reynolds C. Bish said today. Anticipating this trend, Kofax has changed is corporate mission statement to: “Be the leading provider of document-driven business process automation solutions.”

“This is recognition of the dynamics of the market,” Bish said. “The more we thought about what we did, the more we realized that is was business process automation in a document driven application.”

Kerr describes Kofax as, “the on-ramp to automating business processes.”

Kofax’s biggest -- and most strategic -- move into the transactional capture market was its acquisition this year of 170 Systems, Inc., which expanded Kofax’s vision to include process automation, Bish told attendees this morning. “It was a very important transaction for us in a number of ways.”

“In the invoice processing market, we were at a competitive disadvantage because ReadSoft had the ability provide the complete solution that users were looking for,” Bish said. “We were unable to do that. We had to partner with several vendors.” By acquiring 170 Systems, Kofax can “deliver the complete solution end users expect and desire from a single point of procurement. It addresses a competitive weakness. And it positions us for leadership in the growing invoice processing market.”

Bish noted that most Kofax customers don’t have an invoice processing workflow solution, so Kofax has the opportunity to “take the 170 product and sell it to those customers.” Kerr added that invoice processing represents a “big opportunity” as a large and growing segment of the capture market.

Kofax acquired 170 Systems, Bish said, because it was an acknowledged leader of a manageable size and it supported both SAP and Oracle PeopleSoft. “It also had a flexible platform for automating other financial processes,” he said. “Our plan is to use their platform for other vertical markets.”

In the next nine to 12 months, Kofax will use the 170 Systems platform as a foundation to build a document-driven business process automation solution that breaks down the traditional boundaries between Kofax products – offering a turnkey transactional capture framework for any vertical. For instance, the solution will offer integrated administration and a new pricing model. “The devil is in the details, but this will be a more thoughtful integration,” said Kofax CTO Anthony Macciola.

Macciola said he’s not aware of any other solution on the market that is as packaged or as scalable as the platform that Kofax is building. “The 170 Systems infrastructure is very enterprise-oriented.”

“This is a very natural evolution for us,” Bish said. “If we’re capturing the document, why shouldn’t we look at, see what data we can glean from it, and then put it in front of a C-level executive?”

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