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Document Imaging Report September 19, 2022 Page 1 Table Of Contents 2023: Coming At Us Fast! 2 Prospects for the Doc Man Scanning Industry - H2 2022 by Mark Nicholson 3 The Americas Region by Barbara Richards 5 Prospects for the Doc Man Scanning Industry in APAC - H2 2022 by Shinichiro Oda 7 Capture Conference 2022 9 E-Invoicing Coming to the US 13 Document Imaging Report September 19, 2022 Page 2 2023: Coming At Us Fast! With fall in the air and football back (American football for all of you international readers), we’re nearly three-quarters of the way through 2022. It’s been a hectic year – again – as everyone sorts through the ongoing implications of the pandemic, the war in Ukraine, in□ationary pressures, workforce shortages, and . . . well, I guess Billy Joel could update “We Didn’t Start the Fire” with just 2020 through to today. As each year ends begins to close, thoughts begin to turn to next year. We’ve just concluded another successful Capture Conference, despite many of the strong headwinds every in-person conference is struggling against now. The Conference exists to serve the industry. We’d love to hear your thoughts on what you’d like to see in a Capture Industry Conference. Likewise, every publication exists to serve the reader. We have plans on updating the newsletter design as well as a few other ideas under consideration. As I conclude every column: Thoughts, criticisms, and witticisms welcomed. That’s not a toss-off line. I listen to any and all feedback about this, or any other publication I’ve ever been a part of. Love to hear from you. Thanks for reading. Bryant Duhon Editor-in-Chief, Document Imaging Report Comments, criticisms, and witticisms welcomed. bdu@info-source.com Document Imaging Report September 19, 2022 Page 3 Prospects for the Doc Man Scanning Industry - H2 2022 by Mark Nicholson In July the European Central Bank (ECB) announced that it was going to raise interest rates for the □rst time in 11 years. The ECB’s reasoning – “ ." The result is an increasing risk of widespread INFLATION and ultimately RECESSION. This decision by the ECB followed that of the US Federal Reserve and other major European central banks. economic activity is slowing. Russia’s unjusti□ed aggression towards Ukraine is an ongoing drag on growth The risks are real and recession concerns have already helped to push the euro to a 20- year low against the dollar. What has made the ECB's battle against in□ation even harder are worsening energy prices. Making credit harder to obtain and more expensive has the potential to slow economic growth. For the scanning industry, there is a real and growing risk for lower sales at a time when the industry was showing positive signs of a post-COVID recovery. It is against this background that Infosource is revising its long-range industry forecasts. When creating our long-range forecast, I think it is important to understand (□x) where the market is psychologically. It was the Canadian-American economist, John Kenneth Galbraith that said, “there are two kinds of forecasters: those who don’t know, and those who don’t know they don’t know.” Document Imaging Report September 19, 2022 Page 4 The European Region Bearing in mind Mr. Galbraith’s pessimism for forecasting, what I think we can all agree on is that the next four years, for the broader European economies and the of□ce equipment industry, is that the business environment is going to be extremely “challenging.” During and as the pandemic began to taper off earlier this year, there was undoubtedly an air of optimism that things were going to return to how they were prior to the onset of the pandemic. Today however there is an air of anxiety/ denial in the wider European market which will undoubtedly affect new investment and ultimately growth. This week Infosource’s Document Management Scanning Program published the new shipment data for H1 2022. When this data is compared to the previous year there is growth in the European Distributed scanner sector. A modest 1.5 % growth in the sector indicates that the “workforce shift” from the corporate to the SOHO environments continues to be a pertinent phenomenon which continues to have an impact on scanner sales across Europe. A point worthy of note is that it was not shipments of Personal and Workgroup scanners that drove sales in the second quarter but shipments in the Departmental sector. Sales of Fujitsu’s new Departmental offering, the □-8150, is perhaps an early indication that after a long-term decline of shipments in the European Distributed sector things may be about to turn around. In contrast to the Distributed Sector the H1 2022 sales of Production Scanners decreased by over 14%. The decline in shipments in the Low- Volume and Mid-Volume Production sectors is in part due to the aforementioned workforce shift to the SOHO. However, the threat of recession and □scal tightening is a pertinent factor. A burgeoning SOHO user base is not only being facilitated by the hardware but, just as importantly, by a growing and increasingly innovative number of capture software solutions available to the SOHO user. Document Imaging Report September 19, 2022 Page 5 The Americas Region by Barbara Richards In North America the total Distributed scanner market grew 7.2% from H1 2021 shipments. All three segments showed positive YOY growth. The personal segment had modest growth of 1.2% as this category bene□ted previously from the pandemic and lockdowns. Within both the Workgroup and Departmental scanner segments, sales were up 8.7% and 11.8% respectively from a year ago. The NA region saw a similar trend as with Western Europe in that departmental scanners showed strong YOY growth in the □rst half indicative of a shift to return to work for most employees. Overall, the total Distributed segments in Q2 where down compared to the □rst quarter for a variety of reasons, such as market saturation and there is no longer the urgency created by the pandemic. In addition, high in□ation concerns are impacting consumer demand in this segment. Compared with the Distributed segment, Production scanner shipments in this region were down 18% from a year ago. Both Low-Volume and Mid-Volume scanner sales declined. However, High-Volume scanner shipments grew 2.1% in the □rst half of 2022 compared to the □rst half of 2021. Additionally, both Mid-Volume and High-Volume Production scanner sales were up in Q2 of this year compared to Q1 2022. Canon, Fujitsu, and Kodak Alaris all posted market growth in this quarter. A signal that many companies that held off on projects due to the pandemic were able to move forward. Infosource’s Capture Software services research indicates a strong demand for process automation in North America in the next few years and this will drive accelerated demand for digitization. Additionally, we forecast the demand for Capture & IDP solutions to grow at a CAGR of 8.2% for 2021- 2026 bringing the region to almost 4 Billion US$ market potential by 2026. Research conducted by Infosource’s Capture Software Research Program has forecast that that the traditional capture software market will grow in EMEA from 2349.9 $ Million this year to over 2300 $ Million in 2026. Document Imaging Report September 19, 2022 Page 6 In Latin America, the total Distributed scanner market grew 23% YOY in the □rst half of 2022. All three segments had double-digit growth with the Departmental scanner sales up 26.6% year over year. Additionally, compared to Q1 sales, Q2 shipments rose 11% from the previous quarter, indicating the pandemic restrictions and supply chain distributions have subsided in this region. In terms of market share, Kodak Alaris is the market leader in the Distributed space with (27.7%) share, followed by Canon (16.8%), and Avision with (13.8%) share. From a country level, Brazil is the market leader with (53.5%) share, followed by Mexico with (9.9%), and Columbia with (6.9%) market share. Brazil, Chile, and Peru had a strong 1 half in 2022. st While the results are positive for the □rst half of 2022 in the Distributed Segments, the Production Scanner market did not rebound during the same period and shipments fell considerably from a year ago. This region typically has very large tender deals which can affect market share from one quarter to another. In the past few years, Document Capture has shifted to the front-of□ce where business inputs are captured at the earliest point of entry. This segment now represents the largest segment in the region and is expected to account for the largest growth demand going forward Document Imaging Report September 19, 2022 Page 7 In addition, Latin America sales are impacted by economic and political unrest. While most of the region had a strong post- pandemic rebound, there are concerns that the winds are shifting as global □nancial conditions are tightening, commodity prices are reversing their upward trends, and in□ationary pressures may persist. The Capture & IDP market in South and Central America is in early stages of maturity and accounted for only 2.4% of the global market in 2021. Brazil and Mexico present the largest markets in the region, making up around half of the regional demand. Prospects for the Doc Man Scanning Industry in APAC - H2 2022 by Shinichiro Oda APAC consists of a diverse group of countries, and as shown in the □gure 1 below, China, Japan, India, and Indonesia alone will account for more than 80% of all scanner shipments in 2021. Therefore, demand trends for scanners in these four countries will have a signi□cant impact on the overall number of shipments. The urban lockdown and economic stagnation caused by COVID-19 that began in 2020 and the shortage of semiconductors that began in 2021 will cause scanner supply shortages, logistics disruptions, and soaring transportation and material costs. This situation has become more pronounced since H2 2021, and has not yet been resolved even in Q2 2022. In addition, demand for scanners remained relatively stable despite unstable factors such as soaring fuel and material costs due to Russia's invasion of Ukraine and the stalling of the Chinese economy, which drives the economies of Southeast Asia. Document Imaging Report September 19, 2022 Page 8 The Asia pacific Region We expect new demand for departmental and production models to continue to increase slightly for the time being due to their use in of□ces for scanning and sharing information with related parties in bulk, as well as to the promotion of digitalization of society and the growing demand for electronic □ling of past documents. This is especially true in China, Japan, Taiwan, South Korea, Singapore, and Hong Kong, where the digitalization of society is progressing, while demand for personal and workgroup scanners and production scanners from □nancial institutions and government agencies will continue in developing countries where the digitalization of society is underway. In order to forecast scanner shipments, Infosource makes forecasts from multiple perspectives, including trends in the tertiary industry, where scanner demand is high, the state of digitization of society, changes in laws and regulations, and the semiconductor supply situation. In 2021, there was a rapid economic recovery in India, Indonesia, and the Philippines; and special demand for scanners due to legal reforms of Book Keeping Law in Japan, but a combination of a sharp economic slowdown in China and a shortage of scanners due to a shortage of semiconductors and logistics disruptions led to a sellout on the EC site from around late Q3 2021. However, due to a combination of the rapid economic slowdown in China, semiconductor shortages, and logistics disruptions, the supply shortage of scanners has not yet been completely resolved even in H1 2022. Therefore, the market showed a large drop from H2 2021 to H1 2022. Although the supply shortage is gradually being resolved, people are beginning to return to the of□ce, and the new style of telecommuting and coming to work is starting to take hold. The scanners (personal to low-cost workgroup models) needed by those who were forced to telecommute under COVID-19 are already owned. Document Imaging Report September 19, 2022 Page 9 Capture software solutions have become indispensable in driving the digitalization of society, with intelligent OCR technology (AI-OCR, reading from amorphous forms and converting them into structured data) and RPA-based data transmission to mission- critical systems and cloud services becoming mainstream. In the APAC region, problem-solving solution vendors and cloud services have begun to emerge, and there has been a noticeable trend for these vendors to sell their own software packages as a set with scanners provided by scanner manufacturers on an OEM basis. Especially in China, scanners branded by domestic solution providers such as Hanvon, UNIS, and FOUNDER are becoming more common in the market. Capture Conference 2022 [In the photo above, Jeff Willinger takes a sel□e.] Usually when I attend a conference, I’ll produce a “wrap” of the event. For access to the complete reports and data, contact the authors: Mark Nicholson: Barbara Richards: Shinochira Oda: mn@info-source.com br@info-source.com so@info-source.com Document Imaging Report September 19, 2022 Page 10 THANK YOU During my time as editor at AIIM, I had asked Harvey Spencer (the founder of the event, for those unaware) to attend. On the outside looking in, it looked like another conference – and who wouldn’t want more visibility cast onto their event, right? Having attended the conference two years in a row now, I think Spencer was right to say “no.” What happens at Capture Conference, stays at Capture Conference. The value of the event is being there and rubbing elbows with others in the industry. Those personal connections, even in a virtual world, are vital for business. Plus, it's fun to meet people and talk to them in meat space. The event is intended to be intimate. Reviewing the event or sharing conversations from the event would, I think, puncture that feeling of intimacy. In lieu of a traditional recap, I’ll share the links to the series of “Sneak Peek” interviews I did, with the addition of Todd Albers conversation in full (below this article), which we only managed to schedule a week before the event. The Cloud Capture Conundrum with Jeff Willinger E-Invoicing Coming to the US with Todd Albers What Is Driving Valuation in the Capture Market? With David Gerber RPA and Capture: Match Made in Heaven … Or Love on the Rocks? With Mark Miller Is Focusing on Human-Centered Design Key to Capture Success with Jim Hayes The Evolving Landscape of Loan Mortgage Processing with Mark Swift Modernizing Capture in the Health Insurance Market with Greg Froning A Conversation With @Tim Anderson of Epson Interview With Ralph Gammon, What to Expect at Capture 2022 TWAIN Working Group Update with Kevin Neal We’d like to give a huge thanks to our 2022 conference Speakers and Sponsors. Their support and time investment were key to the success of this conference! Below are links to their pro□les on LinkedIn. These folks know their stuff and are worth connecting with and following. Document Imaging Report September 19, 2022 Page 11 On a personal note, I’d like to thank all of them for their time and willingness to be interviewed for our sneak peek series of videos. It was a pleasure to speak with all of them. Speakers: , Group (M & A) , Surdak and Co. (AI / STP) , (Cloud) , (RPA) , (Capture in Healthcare) David Gerber Corum Group Ltd. Christopher S. Jeff Willinger Withum Mark Miller - Guide to Digital Transformation Naviant Greg Froning Aetna, a CVS Health Company Document Imaging Report September 19, 2022 Page 12 , (Capture in Mortgage Processing) , (e-Invoicing coming to the US) , (e-Invoicing coming to the US) Sponsors: , , and , and , and , and Ryan Peters, Mark Swift Mortgage Cadence Guy R. Berg Federal Reserve Bank of Minneapolis Todd M. Albers Federal Reserve Bank of Minneapolis Jim Hayes Christopher Wynder, Ph.D Dennis DeMott Jeff McGlynn OpenText Haol Yao Tim Anderson Epson America Inc. Kevin Neal ☁ Joseph Odore TWAIN Working Group Andy Wang Lark Document Imaging Report September 19, 2022 Page 13 While this is obviously no longer a “sneak peek,” Albers is looking for industry input for the initiative we discussed below (and in his presentation). So I’m including this here for our readership in the hopes some among you are interested in reaching out to him to see how your expertise can advance the ball (so grateful football is back, I’ll try not to use too many analogies over the next few months!) To keep Albers in the good graces of the government: Opinions expressed are those of the presenters and not those of the Business Payments Coalition, Federal Reserve System, or any Federal Reserve Bank. We’re going to talk a little bit about e-invoices and about the Business Payments Coalition. I'm kind of interested in this because I hate checks. So the □rst question is just very simply, can you brie□y explain the electronic invoice initiative and the Business Payments Coalition? DIR: I'll start with the Business Payments Coalition. So the business Payments Coalition has been around since 2011. Before 2016, it was called the Remittance Coalition. The focus of the Business Payments Coalition is to bring stakeholders together that are interested in improving payment ef□ciency around electronic payments. Albers: Our □nal Sneak Peek before the Capture Conference 2022 was with Todd Albers, Senior Payment Consultant at the Federal Reserve Financial Services in Minneapolis. You can click the image above or the link here to watch the interview. E-Invoicing Coming to the US Document Imaging Report September 19, 2022 Page 14 The focus is to look at the barriers for broad adoption and part of those barriers include paper and manual invoicing as well as on the other side of the payment; manual processing of remittance information. So the Business Payments Coalition, what it's been doing is working through these industry stakeholders, which are all volunteers mind you, that come together. It cuts across all segments of the payment industry which includes the B2B networks, the AP/AR, software providers, corporations, standards bodies where we come together. We work through and collaborate on what are some approaches that can be adopted by the market that can help businesses overcome the challenges with any sort of automation? And I think what the invoice initiative is doing is looking at what are those broad challenges for interoperability between different business systems and how can you solve probably the most vexing problems most businesses face. That is how do I discover another business to send an electronic document to and how do I deliver that electronic document in a secure manner so that I can bring that into a system and process that for payment, for example. From a high level, that’s what the invoice initiative is focused on, solving this discovery, delivery, and data requirements that all of these businesses have when they're trying to automate their back of□ce. You may have alluded to this a little bit in your in your □rst answer, but why hasn't the US embraced electronic payments. If I’m not mistaken, you get charged to cash a check in Europe as opposed to the US where you get charged for electronic payment. Personally, I’m sick of checks. DIR: It's a great question and I get asked this question all the time. I work with a lot of folks from Europe, and they always scratch their head and it's like, “why hasn't the US embraced electronic payments like we have.” “What is a check?” is probably a more common one. But on the B2B side what we found is that there's a couple of barriers. Albers: One is exchanging that electronic payment information. There's a lot of hesitancy to share that information even though it's on the bottom of your check. You've got your routing number and your account number and that’s typically what you need to initiate payment. The other one is just how payments are made with either a credit push or a debit pull. In the US, credit push is the primary one. I need to know my bank and my partner's bank account to send that payment. So there's just this hesitancy to share that information. There's hesitancy to store that information as well because people are fearful of being hacked and that payment information is going to be stolen. Those are two of the primary reasons why we see still high check usage. And the other thing too is that for small businesses, checks still work. They have the information that they need on a check to process that payment, so the electroni□cation of that check, or that payment I should, say isn't on a high priority list for them at this point in time about checks or their usages. Document Imaging Report September 19, 2022 Page 15 I think COVID and the pandemic in general really made businesses start thinking about their back of□ce because as everybody started working remotely, it became increasingly harder for businesses to start printing checks. And I kept hearing stories of businesses having to do these check runs where somebody – the AP clerk – was going into the of□ce. Or they were bringing the check printer home and running check runs from home and dropping those off at the Post Of□ce. All of those are work around solutions, but I think they highlighted the fact that businesses need to start embracing electronic payments. I know the banking industry and the payments industry is very focused on trying to convert off of check payments into more electronic payments. And you've got you know the new instant payment systems that are being set up with the clearinghouse and the real time payments network that's been established in the Fed with their Fed Now platform that's being implemented and will be rolled out in 2023 timeframe. Those are all targeted to try to help remove or reduce the usage of checks in the B2B space. On the consumer side, there's quite a bit of a drop in check usage because consumers are becoming more accustomed to or comfortable with the technologies that have been developed around person-to-person payments or online bill payment solutions and whatnot. It's funny you mentioned that people are concerned about storing this information electronically and then you're talking about people doing check runs and having the check printer and checks in their vehicle, which is a huge potential risk exposure: DIR: Absolutely. What we see with checks is that there's more payment fraud. That and other reasons are why the Federal Reserve is interested in helping move the market to electronic payments and embracing electronic payments. Albers: DIR: Here’s hoping so. I'm not 100% sure if this is the right question to ask you. It seems to me there's a drag on the economy because there's just a whole lot of time spent on trying to process an invoice for payment. It just seems that that energy could be spent a little bit more productivity somewhere else. Is that kind of an outlandish statement or does it make any sort of sense? No, it makes complete sense. The Business Payments Coalition published a paper in 2016. So it's a, it's a few years old now, but it was focused on the challenges and options and opportunities of electronic invoicing in the United States and how would it look if widespread adoption occurred. The report estimated that US businesses would save anywhere from $180 to $210 billion in processing cost annually if you were able to convert all invoices from paper to electronic. Albers: Right now, roughly 75% of invoices that are exchanged between businesses require some sort of manual processing. You know, it might not always be just paper. It may be sent as a PDF attachment via email. I have to open that up and I have to do something with that PDF. You know that is one part of it. The sending side is automated, but the receiving side isn’t necessarily automated to bring the invoice into a system. Another one is where I require somebody to log into a portal and upload an invoice so that I can download that into my system. Document Imaging Report September 19, 2022 Page 16 All of those variations involve manual steps. But if you did a true electronic system-to- system data exchange you can cut anywhere from you know $4 to $8 per invoice out of the cost for processing. So there's a huge upside from just general business payment ef□ciency and to, you know, back to your question about drag on the economy cut out a signi□cant cost in the back of□ce for most businesses. I always get asked as well if you're going to cut out these costs are you cutting out the people. And I don't think it's necessarily cutting out the people. It's really instead of hand-keying invoices into an AP system or uploading them into a portal or whatever or downloading them from a portal, whatever that is, you're just going to turn them into doing more value-added activities within the back of□ce. And that provides more value for the business so they can start understanding things like their working capital, how to take better advantage of discounts, or how to develop new payment strategies. All of those items are bene□ts to the business instead of hand-keying data into a system. I guess the □ip side of that, and relevant for the capture industry is, you know, processing invoices. I almost seems like every year a couple of new invoice processing products come out. It's been bread and butter for capture industry for decades. So will an effort like this sort of help business in general? But could removing invoice processing as a steady source of income harm the capture industry? DIR: Albers: I don't think so. I think it can actually enhance their service offering quite frankly. I think it becomes another product that they can support in the market that will help their businesses. You know, their goals of digitizing back-end processes. And let’s be honest, if we start something tomorrow it's not going to convert over Friday. There’s an adoption curve here that will take some time and I think the capture industry would be able to adjust within the concept of what we call the Exchange Framework within the e-invoice initiative. As I was reading the site, I just kept thinking “this just makes so much sense.” You spoke about this a little bit, but what’s the holdup. You mentioned the Registry work. Will that get us closer to electronic payments? DIR: That's a great question. I think what we're doing through the Business Payments Coalition – you know, with the technologies that are essentially standards that are being leveraged for what I mentioned earlier about discovery, delivery, and data that make up the exchange for work. Those standards have been around for a signi□cant amount of time. The data standards been around since the late 90s. The discovery and delivery standards have been around since the early 2010s. And they're being used currently in Europe through a couple of different platforms, one is called , which maybe the scanning industry might be familiar with. Albers: OpenPeppol That was a government initiative, quite frankly, where the government was driving the adoption of these exchange standards for sending business to government invoices as well as other procurement documents within the government space. Document Imaging Report September 19, 2022 Page 17 So the Business Payments Coalition looked at those standards and said, you know this would be a really good approach for the US market. And so to answer the question, “Why hasn't this come to the US?”, it's just that we're a little bit late adopting these sets of standards. The other thing is that there was no entity in the market driving it. The Business Payments Coalition stepped in and identi□ed this from a payment ef□ciency and realized that this was a really good approach for extending and helping automate electronic invoices, but also to help automate electronic remittance exchange which is another set of problems that is highly fragmented and has very low adoption from an automation standpoint. Interested in participating in these efforts? . Connect with Albers on LinkedIn You can read about the . Business Payments Coalition on their website DOCUMENT IMAGING REPORT Business Trends on Converting Paper Processes to Electronic Format DIR is the leading executive report on managing documents for e-business. Areas we cover include: Document Capture; OCR/ICR, AI, and Machine Learning; RPA; ECM; Records Management; Document Output; and BPM. DIR brings you the inside story behind the deals and decisions that affect your business. Vol. 32, No. 11 Managing Editor: Ralph Gammon; Editor-in-Chief: Bryant Duhon; and +1 (301) 275-7496 rg@info-source.com bdu@info-source.com DIR is published approximately 15 times per year by: Infosource SA Avenues des Grande-Communes 8, 1213 Petit-Lancy, Geneva, Switzerland http://www.info-source.com Copyright @ 2022 by Infosource SA. Federal copyright law prohibits unauthorized reproduction by any means including photocopying or facsimile distribution of this copyrighted newsletter. Such copyright infringement is subject to □nes of up to $25,000. Because subscriptions are our main source of income, newsletter publishers take copyright violations seriously. Some publishers have prosecuted and won enormous settlements for infringement. To encourage you to adhere to the law, we make multiple-copy subscriptions available at a substantially reduced price. 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