The latest EDI money saver? Paper invoices
Use humans, save money
So I was at a Kofax customer and partner meeting last week, where the standard view of the electronic digital world taking over the analogue paper document world was stood on its head.
The way for businesses to save buckets of cash is to abandon EDI (electronic document interchange) invoices and revert to human readable documents.
It has been thought that totally electronic invoices could be dealt with quicker and enable suppliers' accounts payable (AP) people to get discounts for fast payment. Paper invoices were necessarily dealt with more slowly and so the suppliers paid more for the goods or services. Analyst Harvey Spencer suggests that, with very clever document capture software, human readable invoices - paper or PDF with extractable data or similar formats - can be processed as fast as purely electronic invoices and so gain the same discount advantages.
He cites one document capture product customer who spent $250,000 on a capture system, saved $150,000 a year on reduced AP labour costs and more than six times that - $1,000,000 a year - through more invoice discounts. In other words: if we pay quickly, can we have a discount on the invoice?
The problem with EDI, Spencer says, is that the standards just keep on changing leaving IT departments perpetually recoding to recover lost ground. He just cannot see a single, all-embracing EDI standard emerging. Last year some 80bn paper invoices were issued, in a lamentable indictment of the colossal failure of EDI to become a standard for document interchange.
If EDI is a failure then deal with paper and part-digital invoices and other documents better. That's the Kofax proposition in a nutshell.
Kofax is the single brand company resulting from the Kofax Dicom acquisition in the somewhat staid world of paper business document scanning and storing. The software has got better such that intelligent document capture can cope better with paper, fax, PDF format documents and more.
Kofax recently brought OptiInvoice, a two-man Swedish company founded by ex-ReadSoft employees, for €1.57m, and has launched its e-Transactions product, based on that technology. It is used to process semi-electronic invoices, in print or other formats, and add their processing to that of captured paper invoices, meaning one automated invoice processing system for AP departments.
Kofax is also entering the ad hoc or front office document capture market with Kofax Express so that, for example, loan applications can be captured there and then, and authorised very much more quickly than via a paper transmission to a central office, which takes days.
Customers using these Kofax products look to be able to save direct labour costs, get more discounts off their invoices, and provide better customer service. That seems to be a pretty recession-proof business. Kofax' new CEO, Reynolds Bish, co-founded and ran Captiva, another document capture company, which was bought in October, 2005, by EMC where Bish ran it until resigning in June 2006. He was then hired to run Kofax in November 2007.
Bish also served on the board of external storage supplier Iomega from 2006 through to the closing of its sale to EMC in June 2008. He got a Director of the Year award from the Corporate Directors' Forum, upon receiving which he said: "I have a passion for helping companies to improve their performance while keeping a clear focus on shareholder value. I was fortunate to be able contribute in this manner on Iomega’s board.”
Should Kofax be concerned about that being the end-game for maximising shareholder value? This guy might have a thing about selling companies to EMC.
The business document capture market is forecast to grow 15 per cent this year and at roughly that rate through to 2011. This is a higher growth rate than the overall enterprise content market of which it is part, and higher again than the general IT market.
Gartner just revised its 2008 IT market growth figure down from eight per cent to three per cent because of the economic turmoil. Compared to that the document capture market is hot, and Bish, who has said his favourite movie is The Terminator, is back, hungry to do it again.
He scents that EMC Captiva, Kofax's main competitor in its core batch capture market, is getting weakened through closer integration into EMC and through staff leaving at all levels - none of his previous eight direct reports are still in place.
Kofax is being energised and reorganised for growth. Staid old document capture is turning out to be a good place to be, because there's lots of business processing left to automate and that saves cash - these days that's exactly what businesses want. ®