The headline interpretation of the impressive results reported by Kofax yesterday is likely to be the impact on their margin that the disposal of the hardware business will have. And it’s true, the relatively high margins in the software business were in the shadow of the less profitable hardware side of the operation so an increase in target margin from 15% to 20% makes sense. But there’s something else in the air and Kofax as well as number of others know it. There are other reasons why they can be optimistic about the future.
The automation of document driven processes has come of age and eInvoicing is going to be one of the beneficiaries.
The eInvoicing Dilemma
There’s as many reasons not to start an enterprise eInvoicing program as there are to start one. While the headline cost savings per invoice make a great business case when you multiply it up by the number of invoices you process, the cold reality is that when you look at the number of suppliers you need to adopt in order to make your numbers, the cost and ROI time-line can make your business case look a little less attractive. And if you’ve already taken swathes of cost out of your AP function by offshore outsourcing, the benefits case can be even less compelling.
The fact is, eInvoicing involves building a technical interface between your ERP system and a whole community of suppliers - and on your terms! So unless you have the whip hand with most of your suppliers and/or you have very few suppliers, you have a mountain to climb.
Call me naive but wouldn’t it be better if you could automate your AP process without having to build an interface with your suppliers?
The Maturity of OCR
It’s no longer called OCR because it does much more than OCR. Intelligent data capture utilises best in class OCR with intelligence use of complimentary data sources to extract the information held within a paper document and present it for automation. Applied to electronic invoicing it can help to remove the major challenges to achieving a sensible ROI by eliminating the need to build an interface with a supplier.
This argument isn’t new. What is new though is the strength of the argument. 10 years ago – even 5 years ago – OCR was fairly superficial approach to electronic invoicing. Accuracy levels weren’t good enough, the cost of maintenance high and there was little value placed on the environmental impact of paper. There are now, in 2011, sufficient case studies emerging to demonstrate that intelligent data capture can be a valuable extra string to the eInvoicing bow.
Welcome To The Top Table
So where does this leave Kofax and its competitors? Well, if they’re up for it they can position themselves way up the business value hierarchy. Let’s face it, scanning and OCR? Big deal! Not exactly an offering that gets you to the top table in any organisation. And it’s commodity. Indeed, it doesn’t matter who you use Readsoft, Brainware, whoever – they’re all using the same software. You’d struggle to get a cigarette paper between them in a head to head based on functionality alone.
But as providers of value added services that can automate important business processes, reduce the cost of doing business with suppliers, increase levels of accuracy and control so that they can help their customers better manage DPO and cash flow – now that’s something else – that deserves a place at the top table.