“Industry Buzz” by Ralph Gammon

Read the latest news, rumors, and information

Your February Buzz:

This is my first column for my new partners at Xamcor. I wanted to start out by saying that I’m excited to be working with three such talented and experienced individuals as Harvey, Paul, and Ike. I’ve known both Harvey and Paul for a few years and met Ike at last year’s Harvey Spencer Associates Capture Conference (http://www.hsassocs.com/capture/). I’ve always respected the work Harvey and Paul have done and found Ike to be very knowledgeable and enthusiastic about the world of M&A. In fact, he has received a lot of credit for really driving forward DocuWare’s acquisition of Westbrook last year, which was Xamcor’s initial success story in our industry.

As I said in the press release announcing our partnership (Xamcor and DIR Form Partnership to Serve Information Management Industry), I think the document imaging and ECM industry (which Xamcor includes under the banner of “information management”) is ripe for consolidation. Imaging and document management is more mainstream than ever, which means there is increased demand, which is a good thing, but will also lead to falling prices as bigger players step up to meet this demand. That said, bigger players first must have the technology before they can commoditize it, which is one avenue that will drive acquisitions. Then, of course, since everybody now has basic scanning and DM technology, there is a desire to differentiate through adding innovations, and this can be done with build or buy strategies—a second avenue for acquisition. There are more reasons driving M&A in a maturing market like ours, such as simply to desire to get bigger to better be able to deal with falling margins and compete with bigger players.

Anyhow, this climate of consolidation is one of the reasons I signed on to partner with Xamcor. I think we will be seeing some interesting M&A opportunities in the near future, and that Xamcor formed a strong organization to address them. I’m happy to be able to help them.

So, what have we seen lately:

EPM Shaking Things Up

Toward the end of last year, Eastman Park Micrographics (EPM) acquired Imaging 411 (http://www.prweb.com/releases/2013/12/prweb11414685.htm). It was second move for EPM in the last six months. This summer, EPM announced it had signed up Crowley to handle the sales and marketing of its hardware equipment (http://documentimagingreport.blogspot.com/2012/10/crowley-contracts-imaging-411-for.html)

Imaging 411, which specializes in document imaging hardware service, will now presumably provide service on any ImageLink micrographics equipment that Crowley sells, at least in North America, as well as offer service to EPM’s existing customer base. Historically, that service has been provided by Kodak DI, now Kodak Alaris DI. It’s no secret that Imaging 411 has been going hard after Kodak’s install base of service customers, and this seems to be another win for the Long Island-based organization.

For EPM, the recent moves represent an awakening of a company that has been relatively quiet since it was founded in 2011 with the acquisition of Kodak’s micrographics business. Of course, EPM is owned by Sonny Oates, who is well known in our industry for his M&A activity, so it’s probably no surprise his new company is making some moves.

Another significant move that happened toward the end of last year is that Fujitsu began shipping its internally developed PaperStream IP with its new line of fi-7000 workgroup scanners. The fi-7000s are the successor to FCPA’s popular fi-6000 line and feature multiple improvements in areas like paper handling and speed. They are also FCPA’s first series of scanners bundled with PaperStream IP instead of Kofax VRS.

It’s important to note that FCPA is not positioning PaperStream IP as a replacement for VRS and the product manager I talked to recommended that VRS still be utilized in forms processing applications. However, FCPA will not be bundling VRS in the fi-7000s series like it did in the past with its popular workgroup and departmental models. Instead, VRS will have to be purchased through resellers at an extra charge.

Not sure how big of a blow this will be to Kofax, but clearly its management saw the writing on the wall when they removed its POS/OEM (primarily VRS and Kofax Express) revenue as a line item from Kofax’s financial reports after its fiscal 2012.

FCPA’s reasoning for dropping the bundling agreement was that, according to their surveys, less than 10% of its scanner customers ever utilized VRS. Because PaperStream IP is coupled tightly with the driver, it will practically force their customers to use it by default, creating better images across the board and reducing support calls. How much revenue Kofax will be able to recoup selling full (non-bundled) priced VRS to those 10% of users that need it, is anyone’s guess, but it is certainly going to be less guaranteed money for Kofax. Kofax, of course, has quite a few other interests, including leveraging its image processing technology in its emerging mobile document capture technology.

In the M&A space late last year, DataBank IMX continued its rollup of Hyland Software resellers acquiring Connecticut-based Imaging Solutions (ISI). Former ISI president and CEO Roger Tausig is now listed as a “senior solutions consultant” for DataBank and ISI’s offices are being used for DataBank’s New York Metro region’s management and administrative staff. ISI has always had a strong presence in the high-volume financial services space. Hyland has to be a little uncomfortable with the volume of its licenses that are now going through DataBank.

Finally, Upland Software, which earlier in 2013 acquired FileBound, acquired Web content management ISV Clickability from Limelight Networks. Like FileBound, and the rest of the businesses in Upland’s portfolio, Clickability specializes in SaaS/cloud software. Limelight, which specializes in managing its customers’ digital presence, had acquired Clickability in 2011 for approximately $10 million in cash and stock. Its revenue at the time was around $5 million. Upland reportedly paid $12.7 million.

Please let me know if you have any other scuttlebutt you’d like included here: [email protected]