E-Business is Good for Capture

Today, Aug 2005 by Spencer, Harvey

Less Paper, More Documents

It seems counter-intuitive. How can e-business, which spells a reduction in paper-based processes, be good for paper-based capture? Despite rumors to the contrary, bond-paper usage is clearly declining in U.S. businesses (see chart), but revenues for the software capture vendors are increasing by double digits. The fact is, that a greater proportion of total paper in business is being scanned. Another useful statistic is the number of scanner shipments. While shipments of high-speed production scanners are static, distributed workgroup scanner shipments are booming with year over year growth of 45% and higher. In the meantime, revenues from traditional Enterprise Document Management (EDM) companies are scarcely growing at all. What is happening?

While paper volumes may be static, business velocity and customer expectations are increasing. I frequently receive an analyst briefing presentation package five minutes before a conference call - it used to be that I received this in a Fedex packet. It is not that it was prepared a couple of days before, most times people are writing the presentation up to the last minute. When sending an e-mail, people expect and get a response within a couple of minutes.

Everything runs faster in an electronic environment. In addition, electronic documents are delivered directly to the person to whom they were addressed, where tools are available to identify their importance and relevance and to search their content.

So what happens when you have a paper element introduced into the mix? Paper has to be handled by one person at a time and its processing is inefficient. Multiple people look at it, match it with other papers or documents, extract and key data from it, scribble on it, possibly attach notes to it, and then pass it to someone else. If you need to send it to another office it is time consuming and expensive to move and there is the risk of loss.

Nonetheless, some copies of documentation are still being received from third parties in paper form. Over time this will presumably change, but not yet. Insurance claims and other documents such as shipping documents that are notated on are still paper.

The easy answer is 'get rid of it - convert it to electronics'! But that is not so easy. For example: currently, despite the Clinton-era law accepting digital signatures, most organization's legal departments require a signature on a piece of paper. It seems as if this situation will last for the next several years until some case law has been built.

If complete systems were being converted to electronic forms, capture software and scanner shipments would be declining, but they are not. Traditionally, EDM systems have been predominantly installed in the service business and so one would expect most capture solutions to go into services and indeed 35% of all capture sales still go into banking, insurance and finance. But that segment seems to be declining in total shipments (see chart next page).

Manufacturing accounted for nearly 20% of total e-business shipments in 2002 nevertheless there has been, a move of capture software towards more sales to the manufacturing sector. In fact, our latest statistics show 8% of capture installations going into manufacturing in 2004. (It may be interesting to note that these sales are not only being used for invoice-processing applications).

I believe that there is a direct correlation between e-business and the need to convert paper to images. Given that expectations and competitive pressures require faster, more effective management of business transactions and information, what can we do? The answer is to convert the paper into a usable electronic form as quickly as possible. This means not only scanning it, but also interpreting it into a format that is understandable for electronic tools. The new generation of Intelligent Document Recognition (IDR) tools, which are being used to identify and extract fields in invoices and automatically index and classify and categorize documents for the mailroom, are ideal for this.

Effectively, we need to get to the situation where an office worker can place a pile of paper documents into a hopper or feeder and then push start. The documents need to be reliably fed through the scanner, analyzed, classified, categorized and routed. Most of the tools to do this exist or are in the process of being developed. If sufficiently well implemented, paper becomes nearly as efficient as e-business transactions, and at that stage, distributed scanning will become as much a part of office work as opening an envelope is today.

It won't go away. Presumably, paper will continue to decline over the next several years, but as with all old technologies, it will never completely disappear. My best guess is that it will stabilize at around 15% - 20% of total volumes. For those who do not agree with this, consider airline tickets which are still used in some places. Even TELEX, which I thought disappeared a number of years ago, is still used to send reliable messages and transact trade with remote locations.