W H I T E P AP E R

T h e C a s e f o r a n E n t e r p r i s e C a p t u r e P l a t f o r m Sponsored by: Kofax

Melissa Webster December 2010

I D C O P I N I O N

IDC believes there is a tremendous opportunity for large organizations to improve their document-intensive business processes using capture technologies. Manual business processes are costly and error-prone, increase compliance risk, and perhaps most important of all, don't provide the visibility that organizations need to optimize those processes and make better business decisions. Fortunately, the ROI from capture applications is very compelling: Usually, it's fairly easy to justify an investment in capture based on hard dollar savings, and many customers achieve ROI in less than a year.

At the same time, we believe it's important for organizations to think about capture as an enterprisewide capability rather than go the route of separate, siloed applications that use different technologies and require diverse skill sets. Large organizations need an enterprise capture platform that:

Provides rich functionality to support diverse use cases, from mailroom automation, to invoice and order processing, to customer care and other industry-specific processes (The platform must be able to capture, transform, and deliver information from a very broad array of document formats with a high level of accuracy.)

Can be flexibly deployed to address the organization's centralized, distributed, and ad hoc capture requirements

Integrates with the organization's enterprise applications such as ERP and CRM systems, as well as its content management and archiving systems, and is extensible.

Provides high performance and is scalable and reliable

S I T U AT I O N O V E R V I E W

The vision of a paperless office has been with us a long time — more than 20 years — and yet we still find ourselves awash in paper documents. We're seeing an explosion of information of all kinds, including paper documents. Some are internal documents — the paper incarnation of forms, PDFs, and Microsoft Word documents that support the hundreds of small volume but routine and standardized business processes that are legion in every organization. More are external documents — invoices, sales orders, customer correspondence, requests for information, contracts, and on and on — that we exchange with our customers, partners, suppliers, investors, and citizens.

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Why hasn't paper gone away? For one thing, paper is universal: It's human-readable, and it requires no computer programming. More importantly, organizations don't fully control their externally facing business processes. Insisting that customers, suppliers, and partners spend the money to integrate their internal (behind the firewall) business processes with our business processes is a nonstarter: It would severely restrict the number of entities with which we (and they) could transact.

Even the largest of retailers is unwilling to restrict its list of trading partners to those willing to invest in electronic data interchange (EDI). Governments, too, must make it easy for citizens of all ages (and with different levels of computer savvy) to "transact" — whether it's to renew a driver's license, pay taxes, or obtain benefits. Inside the organization, it's often not cost-effective to buy (or train employees on) new applications that could automate all of the internally facing document-intensive business processes that managing a large, distributed workforce entails. Finally, although we are slowly moving toward digital signatures, many business processes still require physical signatures and thus a paper original.

In fact, eliminating paper would only partially address the challenges around the exchange of document-based information with our customers, partners, suppliers, employees, citizens, and others with whom we need to transact. Organizations also need to process documents that arrive in electronic format — whether email, PDF, Microsoft Word, or some other format. Getting the information off paper and into a digital format is just part of the solution: Making sense of this less structured information is the key. By "making sense," we mean extracting the information in these documents — whether paper or electronic — in a way that it can be leveraged by automated business processes.

Automating our document-based business processes requires sophisticated technologies that can convert paper to digital format (and deal with diverse legibility issues in the paper original and in the digitized copy), recognize and classify the document (whether paper or digital) and extract critical metadata, extract and validate data from the document in a usable format, and deliver that data to the business processes that consume it.

T h e R o l e o f C a p t u r e T e c h n o l o g y i n T o d a y ' s E n t e r p r i s e

Over the past decade or so, we have seen significant adoption of capture technologies in the enterprise. Indeed, capture investments align well with all three of the key drivers for IT spending:

1. Cost mitigation and process efficiency. Improved automation dramatically reduces the requirement for human data entry, reduces errors, and reduces cycle time.

2. Reduced risk, improved compliance. Automated processes ensure auditability and traceability. This is critical for demonstrating compliance with federal and board-mandated regulations and policies and lowers the organization's risk.

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3. Enhanced visibility, business agility, and asset optimization. Automation brings improved visibility into the business process: It makes it much easier to identify bottlenecks and resource constraints and opens the door to business process improvement. Improved visibility also creates opportunities for organizations to maximize their assets. For example, invoice processing automation enables an organization to prioritize payments and reap early pay discounts, contributing significantly to net cash flow.

A recent IDC survey indicates that the value of capture technologies is fairly well understood among enterprise buyers. In our April 2010 Document Processes QuickPoll, we asked survey respondents to compare the ROI they obtained from their capture projects with that from their other IT investments. As Figure 1 shows, 40% of respondents from large organizations think their capture investments deliver higher or significantly higher ROI.

F I G U R E 1

R O I f r o m S c an n i n g / C ap t u r e P r o j e c t s

Q. Compared with other IT investments, would you say your investments in scanning/capture offer:

n = 57 (companies with 1,000+ employees only, excluding "don't know" and "no current scanning investment"; subset of total sample of n = 195)

Source: IDC's Document Processes QuickPoll, April 2010

Yet, as this same survey shows, capture technologies are still underutilized in most organizations. We asked survey participants what percentage of the different types of documents/forms that could usefully be captured to improve their business processes are in fact scanned/captured today. As Figure 2 shows, nearly half of the respondents think their organization currently captures less than 25%.

Much better ROI (10.5%)

Better ROI (29.8%)

Similar ROI (38.6%)

Lower ROI (14.0%)

Much lower ROI (7.0%)

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F I G U R E 2

P e r c e n t a g e o f D o c u m en t s C a p t u r e d T o d a y

Q. What percentage of the documents that could usefully be captured is your organization scanning/capturing today?

n = 65 (companies with 1,000+ employees only; subset of total sample of n = 157)

Source: IDC's Document Processes QuickPoll, April 2010

There is clearly a tremendous opportunity for organizations to further leverage capture technologies for an attractive ROI, and this is fueling the growth of what IDC calls the capture and image management market. We expect this market to grow from $1 billion in software revenue in 2009 to $1.4 billion by 2014 (see Figure 3).

Less than 1/4 (44.8%)

1/4 to 1/2 (17.1%)

1/2 to 3/4 (17.1%)

3/4 or more (9.2%)

Don't know (11.8%)

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F I G U R E 3

C a p t u r e a n d I m a g e M an a g e m en t S o f t w a r e R e v e n u e , 2 0 0 9 – 2 0 1 4

Source: IDC, November 2010

How is the capture market evolving to address the business process automation needs that organizations have today? Let's explore this important trend.

C a p t u r e a n d B u s i n e s s P r o c e s s A u t o m a t i o n

Capture has historically been widely used for archiving to eliminate paper storage. This is typically referred to as back-file conversion, and it puts capture at the very end of the business process: It's the final step before documents are destroyed. Certainly, capture for archiving still offers a solid ROI: It ensures against information loss due to fire, flood, theft, or other disasters, and it frees up valuable floor space, saving on facilities costs. Hurricane Katrina has inspired many state and local government agencies to accelerate their back-file conversion projects.

Capture for information retrieval puts capture in the middle of the business process: It enables information workers (e.g., customer support agents or government case file workers) to search for, access, and share business-critical information in the course of performing their work. Organizations that have deployed capture for information retrieval enjoy a greater return on their capture investment than do those that merely scan documents for archiving.

In the past few years, we've seen increasing use of capture to initiate/drive business processes. This is capture at the very beginning of the business process: The data extracted from documents kicks off and directs the process. This is in fact where IDC believes organizations can benefit most from capture investments, as capture replaces keying and other manual processes that are error-prone, expensive, and time-consuming. Automating these manual tasks brings visibility, consistency, and quality to the business process, reducing risk, improving cycle time, and enhancing business agility. The ROI potential can be dramatic: We've spoken with many large

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organizations whose capture deployments have enabled them to take advantage of early pay discounts to maximize cash flow and improve their profitability, a welcome capability indeed in challenging economic times.

We encourage organizations to move capture up as early as possible in the business process for maximum ROI (see Figure 4).

F I G U R E 4

T h e V a l u e o f C ap t u r e I n c r e a s e s W h en I t O c c u r s E a r l i e r i n t h e B u s i n e s s P r o c e s s

Source: IDC, 2010

Our survey research illustrates this progression from capture for archiving to capture for information retrieval and finally business process automation: Organizations are using capture earlier in the business process. However, it's also clear that most organizations could be getting a lot more leverage from their capture investments: Survey respondents from large organizations indicated that less than 30% of their overall capture today initiates or drives a business process (see Figure 5).

Scan/capture for business process automation

Scan/capture for information

retrieval

Scan/capture to archive

$$$

$$

$

Improve business agility

Improve information worker productivity

Reduce costs

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F I G U R E 5

S c a n n i n g / C a p t u r e U s e C a s e s

Q. What percentage of your organization's overall scanning/capture would you say is:

n = 65 (companies with 1,000+ employees only; subset of total sample of n = 157)

Source: IDC's Document Processes QuickPoll, April 2010

As the use of capture for business process automation accelerates and capture becomes a strategic enabler, we are seeing a shift in buyer focus, from capture as a departmental or application-specific solution to capture as an enterprise platform. Let's explore the key capabilities that an enterprise capture platform needs to provide.

K e y R e q u i r e m e n t s o f a n E n t e r p r i s e C a p t u r e P l a t f o r m

First of all, an enterprise capture platform needs to have rich enough functionality to support diverse use cases, from mailroom automation, to invoice and order processing, to customer care and other industry-specific processes such as account opening or funds processing in banking, claims or underwriting processing in insurance, and benefits processing in government, etc. The platform must be able to capture, transform, and deliver information from a very broad array of different document types and formats to diverse enterprise applications, databases, and content management and archival systems. Information must be captured at the point of entry into the organization in order for it to drive the business process. This information may be contained in paper-based or electronic documents (including faxes, email attachments, and so forth) in formats that are more or less structured, ranging from free-form customer correspondence to highly structured invoices with multiple line items.

The capture platform must be able to turn paper documents into digital information that is highly legible, and this requires sophisticated capabilities to compensate for legibility issues in the paper originals (e.g., background colors, fold lines, watermarks, handwritten annotations or stamps that partially obscure content). It must be able to identify, classify, and intelligently extract metadata and data from both digitized paper

For archiving, to reduce paper

storage (44.4%)

For information retrieval (27.0%)

To initiate/drive a business process

(28.6%)

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and electronic documents with a high degree of accuracy — that is, with validation. It must also be easy to integrate with ERP, CRM, and other applications so that the extracted, transformed information can drive the business processes they automate.

In addition, an enterprise capture platform needs to support flexible capture scenarios, ranging from centralized batch capture to distributed and even ad hoc (desktop) capture, so that documents can be captured at whatever point they enter the organization — whether the mailroom, a branch office or retail outlet, or even a customer's or partner's desktop. Our survey results underscore the increasing importance of front-office and desktop capture (see Figure 6).

F I G U R E 6

C e n t r a l i z e d V e r s u s D i s t r i b u t e d C a p t u r e

Q. What percentage of your organization's overall scanning/capture would you say is:

n = 65 (companies with 1,000+ employees only; subset of total sample of n = 157)

Source: IDC's Document Processes QuickPoll, April 2010

Finally, an enterprise capture platform must be highly scalable and reliable and provide very good performance to deal with the very large volumes of information that a large enterprise must typically process.

C O N S I D E R I N G K O F AX : AN E N T E R P R I S E C AP T U R E P L AT F O R M

Kofax plc (LSE:KFX, www.kofax.com), the leading capture vendor in worldwide software market revenue, helps customers automate their many document-driven business processes through a single platform. For more than 20 years, Kofax has provided award-winning solutions that streamline the flow of information throughout

Centralized (34.6%)

Departmental (37.3%)

Desktop/ad hoc (21.9%)

Outsourced (6.2%)

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an organization by managing the capture, transformation, and exchange of business-critical information arising in paper, fax, and electronic formats in a more accurate, timely, and cost-effective manner.

These solutions provide a rapid return on investment to thousands of customers in financial services, government, business process outsourcing, healthcare, supply chain, and other markets. Kofax customers across many industries have reported very significant benefits, including reduced payroll costs associated with document processing (by as much as 65% or 70%); increased processing efficiency and capacity (by up to 500%); and improved cash management, customer service, and sales efficiency, to name just a few.

Kofax delivers these solutions through its own sales and service organizations and a global network of more than 700 authorized partners in more than 60 countries throughout the Americas, EMEA, and Asia/Pacific.

K o f a x S o l u t i o n C o m p o n e n t s

Kofax's enterprise capture platform is designed to address the full range of capture needs in large organizations, from basic scanning to advanced document classification and data extraction, in both centralized and highly distributed environments. The platform is engineered for the rigorous performance, scalability, and reliability requirements that are inherent in business-critical workflows. It integrates with a wide array of enterprise applications, including ERP, CRM, and SCM systems; content management systems; and archiving systems. In addition, it supports a wide variety of input devices.

Collectively, these capabilities make Kofax's platform a strong foundation upon which organizations can standardize their document-driven business processes. Kofax's modular solution includes the following components:

Kofax Desktop lets individual users scan documents into the software they use every day, including Microsoft Office, Outlook, and SharePoint.

Kofax Express is an all-in-one, scan-to-archive software package for less complex and lower-volume applications that makes it easy for anyone to quickly scan and export document images and index data.

Kofax Capture provides scan-to-archive capabilities by scanning documents and forms to create digital images, extracting index data for retrieval purposes, and delivering the images and associated data to a variety of repositories and applications.

Kofax VRS is Kofax's patented image enhancement and perfection software that enhances the quality of scanned images, improving both manual scanning productivity and the efficiency of document capture processes.

Kofax Transformation Modules add document and form classification, page separation, and advanced data extraction and validation capabilities to Kofax Capture and support robust scan-to-process applications.

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Kofax e-Transactions eliminates the need for the printing, mailing, scanning, and entry of information from documents and forms by enabling the electronic delivery and capture of documents from a sender to a receiver via secure email. Designed for enterprises that want to migrate from paper- to electronic-based processes, it can reduce labor costs, improve information quality, and accelerate business processes without the cost and complexity of an EDI.

Kofax Front Office Server extends existing Kofax Capture applications by allowing customer-facing employees in front-office environments to initiate scanning and index data extraction processes at the earliest point of contact to accelerate business processes, gain competitive advantage, and leverage existing MFP and desktop scanning resources in remote or branch offices. This office automation solution reduces latency and eliminates the time and cost of shipping documents to centralized processing centers.

Kofax Communication Server enables the automated exchange of business-critical information, linking both inbound and outbound services provided by devices such as fax and phone systems; media types that include email, FoIP, SMS, MMS, voicemail, and telex; and applications such as ERP, CRM, and Kofax enterprise applications.

Kofax Monitor provides real-time monitoring and performance capabilities to ensure the operational health of Kofax installations. It monitors the system's software and applications, providing real-time access to operational information and alerts to facilitate immediate corrective action when necessary.

MarkView for Accounts Payable is a comprehensive, capture-enabled financial process automation application for accounts payable and other functions. It automates the receipt and capture of paper and electronic invoices, performs data extraction and cleansing, and manages workflows for routing transactions through exception handling and approval processes, reducing cycle times and costs while optimizing process control and cash flow management.

With its acquisition of 170 Systems in 2009, Kofax signaled its intent to move even further beyond the capture enabling of business processes to business process automation and workflow and, indeed, decision management. Figure 7 maps Kofax's solution components by business value and phase of business process.

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F I G U R E 7

K o f a x S o l u t i o n C o m po n e n

Source: Kofax, 2010

C H A L L E N G E S A N D

As noted previously, we believe capture and current customer popportunities before them to autoVendors such as Kofax will need automating their document-intenspotential ROI from capture invesmore about how they can levemoving capture beyond the realmstrategic role.

The capture market remains fairlyin this space. Leaders such as vendors both large and small. It ccapture vendors, as vendors havestrengths in different markets. IDtheir broader and longer-term cacapture vendors on the basis of th

The competitive nature of this mato maintain — and grow — thcombination of technological stre

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D O P P O R T U N I T I E S

there is a significant gap between the potential of practice. Customers aren't yet exploiting all of the omate their document-intensive business processes. to continue to educate customers about the value of

sive business processes and help them assess their stments. They should encourage customers to think erage capture for business process improvement,

m of tactical business process improvement to a more

y fragmented: We are tracking a few dozen vendors Kofax will continue to compete with a variety of

can be difficult for customers to differentiate among e specialized in specific workflows and have different DC believes enterprise customers should factor in apture needs as they evaluate vendors and assess heir strength as an enterprise platform.

arket means that leaders must continue to innovate heir market share. Leadership will be won by a ength (which ensures efficiency and accuracy) and

11

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breadth of capabilities (providing more of the total solution that customers require). It can be difficult to reconcile the conflicting requirements of vertically specialized and line-of-business capture in a single platform.

As the underlying capture technologies have begun to be more commoditized, vendors such as Kofax have begun to move higher up in the stack, incorporating workflow and decision management capabilities that help organizations take action on the information in their unstructured information. This adds significant value to the capture stack insofar as it is complementary to rather than competitive with the capabilities provided by the enterprise applications, business process management (BPM) systems, and business intelligence systems that manage mission-critical business processes today.

C O N C L U S I O N A N D R E C O M M E N D A T I O N S

IDC believes there is considerable opportunity for improved automation of document-intensive business processes in most large organizations. As noted previously, only a small percentage of the documents entering these organizations that could usefully be captured to drive business processes are in fact captured today. Capture projects can deliver a very compelling ROI, often in less than a year.

Ultimately, implementing capture technologies is part of the journey to business process improvement, and organizations will find they are at different points along that journey — at different maturity levels. The first step is getting control over the organization's documents, including archiving paper. The next step is intelligent recognition to support and initiate business processes. Once the organization has the benefit of visibility into its document-intensive business processes, those processes can be simplified and streamlined. Finally, these optimized processes become the basis for improved decision making.

Organizations that are not yet making significant use of capture should investigate how a capture platform can help to transform some of their document-intensive manual processes. Often, these projects can be justified solely on the basis of hard cost savings, although most capture projects also provide significant benefits in terms of improved compliance, reduced risk, and enhanced business agility.

Large organizations that have already put capture to work in multiple applications are beginning to realize that they have considerably broader capture needs than previously thought. Often, they are relying on a host of disparate, siloed solutions that require separate skill sets (and personnel) to use and maintain.

These users should begin to think about capture as an enterprise platform, rather than as just a departmental application, and evaluate vendor solutions against their broader needs. An enterprise capture platform will enable them to leverage a common set of skills and technology to address their centralized, distributed, and ad hoc capture needs across different application domains and give them the foundation they need to streamline their business processes and make better operational decisions.

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Above all, we think it's important to begin the journey. Enlist the help of your capture vendor to assess your current and future needs, and ask to speak with other customers to learn from their experience as you move along the path to process improvement.

C o p y r i g h t N o t i c e

External Publication of IDC Information and Data — Any IDC information that is to be used in advertising, press releases, or promotional materials requires prior written approval from the appropriate IDC Vice President or Country Manager. A draft of the proposed document should accompany any such request. IDC reserves the right to deny approval of external usage for any reason.

Copyright 2010 IDC. Reproduction without written permission is completely forbidden.