KOFAX MAKES THE MOST SERIOUS INVESTMENT YET IN INTELLIGENT AUTOMATION WITH NDI AND TIS, BUT DOES THE MARKET CARE?
Feb 20, 2019 Saurabh Gupta
Earlier this month, Kofax closed its acquisition of Nuance Document Imaging (NDI), a division of Nuance Communications, at a price tag of $400 million. It also entered a definitive agreement to acquire Top Image Systems (TIS). These two acquisitions are significant, not only for the hefty price tag (where PE money from Thoma Bravo helped!) but also for the development of enhanced RPA solutions. RPA clients are struggling to expand piecemeal implementations to fully scaled-up intelligent automation initiatives.
The acquisitions of NDI and TIS are aimed rightly at a sore point of RPA customer experience. Our interviews with 350+ super users of RPA (clients, advisors, and service providers) across 10 leading RPA products (including Kofax) reveal that the lack of OCR capabilities is a challenge (see Exhibit 1). Through NDI, Kofax has enhanced its document capture capabilities with Intelligent-OCR, print management, and office productivity software. The hefty $400 million price tag for NDI indicates how important Kofax felt it was to go beyond the existing OCR embedded in its cognitive document automation capabilities and bridge the gap between RPA and intelligent document management.
Exhibit 1. RPA functionality CX benchmarks reveal OCR capability is a sore point
Sample set: 350+ super users of RPA (clients, advisors, and service providers)
Source: HFS Research, 2018
Without the ability to capture semi-structured and unstructured input data (faxes, PDF files, etc.), the promise of end-to-end automation remains unfulfilled, and the ability to scale RPA diminishes significantly.
Most of the largest RPA use cases revolve around automation of document management. Several third-party service providers have latched on to this opportunity using bolt-on solutions (e.g., Exacto from HCL). Leading RPA software providers are trying to address this through partnerships (e.g., ABBY’s partnerships with UiPath and Pega), but they have not tackled the problem directly. Blue Prism recently announced a forthcoming AI-enabled document processing capability; thus, the race is on. Kofax’s acquisitions of NDI and TIS give them great depth here!
Another interesting automation use case that the NDI acquisition will allow Kofax to address is print management. Most business operations and processes include significant volumes of print where data and IP loss is commonplace through cyber-attacks and unmonitored print jobs. Print management is critical to automating the security of data in an end-to-end process, which is something that has not been addressed by the RPA market. Connecting Kofax IA and print management will provide its customers with automated print management to secure and govern data.
The overall Kofax aspiration (as with every other RPA product) is to get the lion's share of the broader intelligent automation (IA) market by combining RPA with cognitive capture, process orchestration, mobility and engagement, and analytics. For Nuance, the divestiture allows it to focus on its faster-growing business of conversational AI and provides the cash influx to develop it further.
The Bottom Line. Kofax has its IA strategy right, and the acquisitions of NDI and TIS are in line with market requirements. However, its ultimate market success will depend on no-hype execution.
Our interviews with Kofax’s clients and partners revealed that implementing Kofax has never been easy and it hasn’t improved over the years. Clients have reported bugs that should have been discovered and fixed already. In general, getting RPA “production ready” is not as easy as promised. There is a classic expectation mismatch—the RPA providers oversold and overpromised, raising the client expectations beyond normal, which resulted in less-than-required client investments toward process and change management. Kofax will need to focus on balancing its ambitious IA strategy with realistic execution to make the substantial market headway it desires and deserves. Changing the name of its RPA tool (RIP Kapow) to better leverage the Kofax brand and completing these acquisitions both point to a renewed focus on working across the Kofax family of tool functionality.