2009
a n n u a l r e p o r t
E X P E R I E N C E T H E E F F E C T
document handling
worldwide
ReadSoft is a leading supplier of software for document automation. Our solutions mean that our 6,000 customers worldwide save time and money and can instead focus on their own core business.
Since its formation in 1991, ReadSoft has offered highly advanced solutions for all kinds of document management. Regardless of the format or media, information can be interpreted and managed to sub- sequently be integrated with various types of business systems.
Today, ReadSoft is a global group with operations in 16 countries on five continents: Europe, North and South America, Asia and Austra- lia. ReadSoft is headquartered in Helsingborg, Sweden and employs approximately 460 people. ReadSoft is listed on the NASDAQ OMX Nordic Exchange Small Cap list.
ReadSoft is a public company, Corporate Registration Number 556398-1066. Its head office is located in Helsingborg, Sweden. All values are expressed in Swedish kronor. Kronor is abbreviated to SEK, thousands of kronor to SEK 000s and millions of kronor to SEK million. Figures in brackets refer to 2008, unless otherwise stated.
Data regarding markets and competition are ReadSoft’s own assessments, unless a specific source is given. These assessments are based on the best and most recently available facts, including from published sources in the public sector and the IT sector.
This report contains future-oriented information based on the ReadSoft management’s current expecta- tions. Although the management considers expectations expressed in such future-oriented information as reasonable, no guarantee can be given that these expectations will prove correct. Consequently, actual future results can vary considerably compared with what is expressed in the future-oriented information due to such factors as changed conditions in the economy, market and competition, changes in legal requirements and other political measures and fluctuations in exchange rates.
Five convincing reasons to choose readsoft
• Leading position in a growing market
• Complete proprietary solutions for managing business documents in SAP and ORACLE business systems
• Global service organization recognized for its excellent ability to understand customer operations and processes
• Efficient market coverage through partners that offer supplementary products and function as resellers in markets where ReadSoft does not have its own sales force
How does readsoft make money?
»› Our sources of revenue are software license sales, maintenance contracts, training and customized development, as well as some hardware.
Once our software is fully developed and license sales can begin, the production cost per license is very small, almost negligible.
Thus, sales of our product licenses provide high profit margins. Our service offering is packaged around our products, and our ongo- ing service contracts comprise a significant part of our sales.
What does readsoft offer?
»› Our products enable companies to auto- mate their document management, which generates a number of advantages:
• Lower document management costs
• Increased security since documents cannot be manipulated without this being detected
• Improved control and management of document flows
• Enhanced efficiency since information is available to all
What is readsoft’s competitive situation?
»› We are the clear market leader in the segment for process and transaction manage- ment. This market segment is the largest in the overall market for document automation software as well as the segment expected to grow the most in the coming years.*
The overall market is fragmented, with some 25 competitors. The fi ve largest compa- nies represent about 40 percent of the mar- ket for process and transaction management.
* Source: Harvey Spencer Associates Who are readsoft’s customers?
»› Our customers are located around the world and conduct operations in a variety of industries. Our customers include engineering, telecommunications and insurance companies, banks, authorities, retailers and market re- search firms. Our offering is particularly att- ractive to multinational corporations and other customers with large document flows.
4 Business model, targets and strategies 8 Operations
10 Research and development 14 Market
16 Competitors
18 People, the environment and ethics 23 Corporate governance report 26 Risks and risk management 28 The share 2009
30-54 Administration Report 2009 32 Consolidated income statement 33 Consolidated balance sheet 35 Consolidated cash-flow statement 36 Changes in equity, Group 37 Income statement, Parent Company 38 Balance sheet, Parent Company 40 Cash flow statement, Parent Company 41 Changes in equity, Parent Company 42 Notes
55 Audit report 56 Board of Directors 57 Corporate management 58 Six-year summary 58 Glossary and definitions 60 Addresses
Interim reports, annual reports and ReadSoft’s press releases can be ordered from ReadSoft AB, Södra Kyrkogatan 4, SE-252 23 Helsingborg, Sweden, by phone +46 (0)42-490 21 00, fax +46 (0)42-490 21 20 e-mail: info@readsoft.com or at www.readsoft.com.
Financial calendar
Annual General Meeting April 20, 2010 Interim Report January–March April 20, 2010 Interim Report January–June July 20, 2010 Interim Report January–September October 25, 2010 Year-end Report January–December February 2011 Notice to attend the Annual General Meeting
The Annual General Meeting will be held at 3:00 p.m. on Tuesday, April 20, 2010, at Marina Plaza in Helsingborg, Sweden. Registration and light refreshments 2:00-3:00 p.m.
Entitlement to participate in the Annual General Meeting
Shareholders wishing to participate in the Annual General Meeting must be listed in the share register kept by Euroclear Sweden AB (the Swedish Securities Register Center) not later than April 14, 2010 and must notify the company of their intention to attend not later than 4:00 p.m. on April 14, 2010.
Registration
Register at www.readsoft.com, by mail to ReadSoft AB, Södra Kyrkogatan 4, SE-252 23 Helsingborg, Sweden, by telephone on +46 (0)42-490 21 00 or by fax on +46 (0)42-490 21 20. When registering, please state your name, address, telephone number, personal identity or corporate registration number, the number and type of shares you hold, and indicate any assistants.
Nominee shareholders
To be entitled to participate in the Annual General Meeting, shareholders who have allowed their shares to be registered with a nominee must temporarily re-register the shares with Euroclear Sweden AB in their own name. The change of registration must be made not later than April 14, 2010 and should be requested well in advance of that date.
Notice
Notice of the Annual General Meeting will be given not later than four weeks prior to the meeting in Post- och Inrikes Tidningar, (The Offi cial Swedish Gazette), Dagens Industri and on ReadSoft’s website: www.readsoft.com.
Selection of press releases from 2009
December 30 ReadSoft strengthens customer relations with Fortune 500 company through extended order valued at SEK 2.6 million December 30 ReadSoft signs contract valued at SEK 10.8 million with North American food company on Fortune 500 list December 10 ReadSoft delivers SAP certified invoice automation technology valued at SEK 2.5 million to US manufacturing company november 19 ReadSoft secures transaction worth more than SEK 5 million with Australian authority
november 13 Energy services company on Fortune 500 chooses ReadSoft for automated invoice handling in SAP october 26 ReadSoft strengthens partnership with SAP through new contract
october 23 Interim report January-September 2009
october 15 World-leading technology company invests SEK 2 million in ReadSoft solutions
october 12 ReadSoft concludes Q3 by signing contract worth SEK 6.5 million with French media company october 9 French energy company expands usage of ReadSoft solutions in order for SEK 3.7 million october 5 Notice to Extraordinary General Meeting of ReadSoft
september 28 ReadSoft supplies solution valued at SEK 5.5 million to Australian authority september 24 ReadSoft acquires assets of Spear Solutions AB
augusti 25 ReadSoft signs contract worth SEK 6 million with agricultural company in Oceania augusti 12 Interim report January-June 2009
July 02 ReadSoft signs agreement worth SEK 2 million with US government authority
July 24 ReadSoft concludes transaction worth slightly more than SEK 5.5 million with major European telecom company June 17 ReadSoft concludes transaction worth SEK 9.7 million with world leading infrastructure company for transports June 15 If in Norway invests in ReadSoft’s latest solution for document management
June 08 International energy company invests slightly more than SEK 2.1 million in ReadSoft solution may 19 European gas and oil company invests about SEK 3.4 million in ReadSoft solution april 22 Interim report January-March 2009
april 14 Schneider Electric selects ReadSoft’s invoice processing solution for SAP
april 07 The Swedish Federation of Unemployment Insurance Funds invests SEK 3.9 million in ReadSoft solution april 3 ReadSoft secures major global order worth slightly more than SEK 6.8 million with leading agricultural company
march 24 Notice of Annual General Meeting of ReadSoft
march 3 ReadSoft signs agreement worth about SEK 4.2 million with UK service company
march 2 ReadSoft signs agreement worth slightly more than SEK 3.3 million with US manufacturing company February 18 ReadSoft and Hogia form partnership to offer invoice processing to small and midsized companies in Sweden February 11 ReadSoft signs agreement worth about SEK 3.2 million with UK government authority
February 11 Year-end report 2008 Q 4
Q 3
Q 2
Q 1
2009 in brief
• Net sales increased by 6 percent to SEK 617.7 million (584.2)
• EBITDA for 2009 was SEK 29.1 million (45.6)
• Earnings per share after tax amounted to SEK 0.22 (0.21)
• Cash flow from operating activities was SEK 102.5 million (86.6)
• The Board will propose to the Annual General Meeting that a dividend of SEK 0.15 per share be paid for 2009
Despite the prevailing market climate, ReadSoft maintained its earnings for the full-year 2009. ReadSoft normally has a very strong finish to the year, but in the fourth quarter, some transactions were delayed into 2010. For the year in total, growth and earnings after tax increased somewhat, while there was record-high cash flow from operating activities. The year 2009 was something of an “off year” for ReadSoft, in which we and many others struggled in a difficult market. Our current assessment is that the market is improving and the company’s plan is to apply intense focus to increase sales in all markets. In 2009, ReadSoft launched several new solutions that are increasing our business with new customers and our existing customer database. Sales through partners increased tangibly, which demonstrates that ReadSoft’s partnership strategy and focus are successful.
“ReadSoft is equipped for significantly improved
earnings and faster growth in the future”
Jan Andersson, President and CEO
r e a D s o F t I n B r I e F
Net sales, rolling 12 months per geographic market, SEK million
Net sales, rolling 12 months, and EBITDA margin, %
Revenue distribution, SEK million
License revenues by product, SEK million
Rest of Europe Nordic region US and the rest of the world
50 100 150 200 250 300
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2007 2008 2009
0 100 200 300 400 500 600
700 Net sales
EBITDA
0 2 4 6 8 10 12 14
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2007 2008 2009
0 50 100 150 200 250
Hardware, other Development
and training Service contracts Licenses
2007 2008 2009
2006
2005 2007 2008 2009
Document Capture
Automation Trade Process
Automation 0
50 100 150 200
<<
Turbulent market with opportunities
In 2009, the market was turbulent. Acting rapidly, ReadSoft successfully moderated adverse effects on earnings, maintained its business volume and generated record- setting cash flow from operating activities. There was a breakthrough in sales through partners and a number of new solutions were launched.
Jan Andersson
President and CEO
In 2009, the market was characterized by uncertainty and restraint. Many of our prospective customers deferred and postponed further investments to review how their own operations were performing prior to deciding on new projects. Many companies implemented extensive savings programs, which disrupted and delayed decisions regarding new investments. For ReadSoft, this meant that business has taken longer than usual, with more transactions being postponed and we have found it more difficult to establish interest and to cultivate the base of potential customers toward whom we are working. The decline was particularly tangible in the banking and finance sectors, which have traditionally been our largest market segments, but to which we essentially made no sales in the past year. The
manufacturing sector, which is our largest market sector,
was also adversely affected, with a disabled automotive industry as the most distinct example. To some extent, we were able to offset this by working toward other segments, but 2009 still became an “off year” for ReadSoft, during which we were unable to meet our earnings and growth targets.
unchanged business volume and strong cash flow
Having said that, we can still claim that we performed well compared with many other software companies and businesses in our industry. New sales declined slightly, but overall, we maintained our business volume. As a result of our preparations for a decline in the market with a savings program in the autumn of 2008, we were able to moderate the adverse effects brought on by the market decline. Our operating profit declined, but earnings increased before and after taxes. Financially, we strengthened our position with record-setting operational cash flow of SEK 102.5 million.
In an international comparison with other software companies, ReadSoft is in the quartile of companies that declined the least in sales and earnings. We have probably benefitted from selling systems and solutions that provide strong rationalization and reduce costs for our customers.
Accordingly, we have been in an advantageous position when companies prioritize among their investments, even in a market such as this.
major market potential
Internationally, the market for solutions regarding, for example, electronic invoice processing solutions, remains in its infancy and we are pioneers in every sense of the term.
A survey by The Hackett Group, which is world leading at benchmarking the business processes of Fortune 1,000 companies, reveals that 87 percent of these companies still either do not use automatic invoice processing systems at all or to a negligible extent. The Hackett Group also states that the companies that are world leading in terms of process management on average have 92 percent lower transaction costs from purchase to payment. A single purchasing transaction can cost hundreds of thousands of
c e o ’ s s t a t e m e n t
Swedish kronor and major corporations conduct millions of transactions per year, which makes the savings potential enormous for companies with efficient transaction processes.
Breakthrough for our partner sales
To say the least, the market potential is major, as is the challenge in training the market and generating interest for the advantages that can be achieved by using our solutions.
Accordingly, we work in a highly concentrated manner to create more partners and increase our contact base toward the market to consequently create the means for faster growth. Despite the fact that our overall sales did not increase in 2009, our partner sales increased by 17 percent and now account for 38 percent of our total sales. The target is to achieve at least 50 percent of sales through partners and we are now gradually headed in that direction.
new products generates more business opportunities
In 2009 and in late 2008, we also launched a number of new and exciting products and solutions. These products are in a maturing phase and to date we have not sold them in any major volumes, but the future appears promising.
ReadSoft is the leader in SAP solutions. We have expanded our product portfolio in the area and during the year we launched PROCESS DIRECTOR, an invoice receipt process solution. In the Oracle area, we will launch a solution during the spring called PROCESSIT, which is based on Oracle’s new Fusion technology, thus enabling the solution to be integrated into other finance systems that are based on this platform. In terms of Capture, we launched a new version of CLASSIFY and INDEX during the year, which is capable of interpreting handwritten signatures. Our acquisition of Spear Solutions’ software marked the first step toward offering our Capture solutions as an Internet- based service known as software as a service.
We are expanding our offering, creating more value for our customers and can make significantly larger transactions than in the past. We have an opportunity for additional sales toward our customer base that we have never had in the past. In this respect, it is also worth mentioning that we have a phenomenal customer base that includes many of the world’s largest and leading companies. We now have the means to advance our business and become a considerably more important supplier to these customers than in the past.
extensive market coverage
ReadSoft is established in many markets despite being a relatively small organization. Maintaining cohesion in an organization that is vastly spread out is challenging, but at
the same time it is an enormous strength and a major advantage. We can provide our customers and partners with their own organization in the markets that are key to them. Today, we have several hundred major international customers who have selected us as a supplier and who use ReadSoft products in many countries and companies in their groups.
our employees are a strategic resource
Our competent and committed employees are a key factor in our success. In the frequent surveys that we conduct, we receive highly favorable assessments regarding workplace environment and satisfaction. We have also received several commendations, such as in Spain and the US, as acknowled- gement that we are perceived as a favorable employer. This is naturally gratifying, at the same time as it is the result of a concerted effort to develop and stimulate our employees.
In this respect, I would like to take the opportunity to mention that our Swedish office in Stockholm relocated to premises in Kista during the year. By involving our employ- ees at an early stage of the planning, the office was adapted in the best possible way.
equipped for profitability and growth
We are now looking ahead and I am basically very optimistic about the future. It is difficult to forecast market trends and to say how long it will be before we return to an entirely normal situation. ReadSoft is equipped for a strong earnings trend and growth in a normal market. We have immense potential in our world-leading products and solutions that are established in the market, we have several new and highly promising products due for launch, and an organiza- tion with knowledgeable and hard-working people who are contented. At the company, we have experienced successes and setbacks, which helped ReadSoft navigate an intense 2009 without excessive difficulties.
We will now focus all of our energy on achieving our long-term growth and profitability targets in the market upturn that will probably occur in the coming years. Our long-term objective is to achieve a profit margin of at least 15 percent (EBITDA), and annual growth of at least 20 percent. ReadSoft currently has a leading market position, a more extensive offering than in the past, competent and committed employees and a growing international base of direct customers and partners. Together, we will continue to deliver solutions that create value for customers and shareholders.
Helsingborg, February 2010 Jan Andersson, President and CEO
Did you know that…
ReadSoft’s President, Jan Andersson, was named
“Businessman of the year”
in 2008 by the City of Helsingborg.
Value-adding solutions
and parallel revenue flows
Our vision is for all companies to be freed from manually managing documents by using ReadSoft’s technology. In our efforts to realize this vision, our goal is to grow by 20 to 25 percent annually, meaning more than the expected underlying market growth. We want to achieve this profitably with an EBITDA margin of at least 15 percent.
The foundation of ReadSoft’s offering is our unique inhouse-developed software, which forms the platform for several products that enable the automation of essentially all aspects of document management, regardless of format and media. Using these products as a base, we can offer our customers complete solutions that are flexible and competitive. Thanks to our technology, documents can be managed in an unbroken, integrated workflow, thus generating major advantages for our customers in terms of finances, rationalization and quality.
solutions for all business systems and document types
We have grouped our solutions in two market areas: Trade Process Automation and Document Capture Automation.
Trade Process Automation comprises solutions designed to automate handling of trade documents, including invoice management and order management systems.
Document Capture Automation focuses on solutions that are used for general data capture, indexation and sorting. In this area, we primarily target organizations,
authorities and companies that handle large quantities of documents.
parallel revenue streams
ReadSoft’s business model is based on five parallel revenue flows: licenses, rental contracts, service contracts, consulting services and hardware.
When customers purchase software from us, they receive licensing rights to use it. The cost of this license is based on the number of documents the product is expected to handle and is a non-recurring cost. When the number of customer documents increases, an additional fee is paid for the expanded volume. Licenses currently account for approximately a third of ReadSoft’s total revenues.
We have also supplemented license sales with a model in which the customer can instead lease our solutions directly from us or through our partners. This enables customers to pay a monthly fee that includes a service contract.
Customers also sign a service contract with ReadSoft that covers upgrades of new versions of software and telephone support. The cost depends on the service level chosen by the customer, but in most cases corresponds to
Sales growth, %
2006
2005 2007 2008 2009
0 2 4 6 8 10 12
about 20 percent of the license price.
Service contracts are mandatory for the first year and are then extended automatically if they are not terminated by the customer. Normally, more than 95 percent of all service contracts are renewed. Service contracts account for approximately a third of ReadSoft’s revenues.
As part of our efforts to provide complete, comprehensive technical solutions, we also offer customers opportunities to purchase hardware, primarily scanners. Sales of hardware account for approximately 5 percent of ReadSoft’s revenues.
effective market coverage
To achieve increased efficiency, we work directly with companies and through partners. Direct sales are conducted for Trade Process Automation and Document Capture Automation, and are geared toward major international Groups that deploy finance systems from SAP and Oracle or manage large quantities of documents. Our partner sales are directed toward small and midsized companies.
In line with our strategy for growth, we continuously work to achieve broader and deeper sales through partners.
This means that we establish new partnerships and that we form deeper partnerships with our existing partners.
As a part of our long-term goals, we want to increase partner sales from 38 percent in 2009 to about 50 percent of our total sales. This will enable us to increase the volume of license sales and service contracts without needing to tie up a large amount of human resources.
In 2009, partner sales increased by 17 percent and we also introduced a new partner program prior to 2010.
Growth creating trend
ReadSoft continuously works to simplify the business process for its customers. As part of this effort, we established the Integration Center, which works to develop more unified interfaces toward other systems.
Through the creation of a standardized platform, we
Operating margin, EBITDA, %
2006
2005 2007 2008 2009
0 3 6 9 12 15 18 Did you know that…
…about 10 percent of ReadSoft’s US customers are members of the Fortune 500 list of the largest companies?
B u s I n e s s m o D e l , t a r G e t s a n D s t r a t e G I e s
make it easier for others to build customized solutions based on our products. This allows our partners to more easily capitalize on ReadSoft technology. The first standardized products will be launched in the spring of 2010.
Demand for web-based applications known as Software as a Service or Cloud Computing is expected to increase in the future. Our acquisition of software and patents from Spear Solutions enables us to initiate a concerted effort to adapt out products to this form of distribution. This provides us with the opportunity to expand our offering to new target groups.
leasing solutions that promote business In the Swedish market, in partnership with a large financing company, we have been able to offer customers the ability to lease our Document Capture Automation solutions directly from ReadSoft or through our partners. Through this arrangement, customers pay a monthly fee that also includes a service contract, which means that the cost becomes part of the company’s operating expenses.
Following the expiration of the contract, the company has the option to retain or extend the contract. This is good business for our customers since it only takes
an average of about 12 months before our solutions finance themselves through reduced costs.
In 2009, ReadSoft expanded this opportunity and now offers leasing contracts on a global basis.
Leasing solutions enable ReadSoft to supplement its parallel revenue flows with another stable and continuous revenue base.
service – a key competitive factor
The foundation of our leading market position is that we offer the best technological solutions for our customers. At the same time, having a high-quality service organization has also become increasingly important, particularly for major global companies. Accordingly, we are continuing to develop the service offering of our organization. We hope that this will enable us to safeguard our established excellent ability to understand customers’ operations and to further hone our project-management skills.
We will also strive to improve our lead in terms of our capacity to handle cultural differences in our customers’
organizations.
Increased customer satisfaction
Our goal is to have the most satisfied customers in the industry. Naturally, part of our efforts to achieve this goal involves providing customers with even better offerings, service and support. We also strive to give them a faster return on their investments, which generates more business in the long term.
Accordingly, in 2009, we concentrated heavily on our customer care program. The new sales organization with key account managers has been established, which means that we are now better equipped to work with follow up and planning. This makes it easier for our customers, at the same time as we have created increased opportunities to raise additional sales toward our sizable base of satisfied customers.
a strong global presence
With our own representation on five continents, ReadSoft is able to help multinational companies that require global solutions as well as local companies specialized in a particular market or industry. Our partners often offer supplemental products and function as resellers in markets where we do not have our own sales force or they collaborate with our sales companies.
We will continue to focus on global expansion in strategically important markets through new establish- ments, and existing and new partners.
a refined brand platform
The brand survey that was conducted in 2008 showed that ReadSoft has a strong brand in many of its markets. These results are positive as it is important for us to be highly reliable, since we offer solutions that are a business-critical component of our customers’ operations.
At the same time, the survey provided us with key information regarding how to strengthen our brand. In 2009, based on this survey, we developed a new, refined brand platform, which will be implemented in 2010.
We have the power to grow Financial strength
We have a solid financial position with a strong balance sheet and our cash flow is also favorable. Our balance sheet has a well-balanced management of our development costs.
The costs of developing new products are capitalized in accordance with IFRS principles and amortized over their commercial lifetime, which is three to five years.
Strong human resources
The education level at ReadSoft is consistently high and our experience of the industry is extensive. This means that there is a high level of analytical expertise and experience from research-related and commercially focused opera- tions. Combined with our experiences from earlier acquisitions, this provides us with the expertise to acquire and integrate companies and operations.
Did you know that…
…one of ReadSoft’s customers was left with so much additional space after removing their paper archives that they were able to build a spa?
B u s I n e s s m o D e l , t a r G e t s a n D s t r a t e G I e s
solution
The CLASSIFY software searches the document for information or layout that is typical for a certain type of document. For example, it can recognize a form for changing funds, a car damage claim, or a customer letter. In this manner, the documents are sorted and classified by category and presented to an administrator almost immediately after receipt. The software currently sorts documents in more than 75 different categories defined by Länsförsäkringar.
The index component of the software extracts such key data as insurance numbers, corporate registration numbers, dates and civic registration numbers. The documents can thus be searched using these criteria within
Länsförsäkringar’s document-management system.
Since computers take care of the classification of incoming documents, Länsförsäkringar achieves much better continuity in its sorting. The quality is enhanced because assessment is more consistent when done by computers.
By automating receipt registration, Länsförsäkringar can reduce its processing time, for example, for a damage claim, by a full five days.
next step
Länsförsäkringar has begun processing about two million documents a year using CLASSIFY and INDEX. The aim is to be able to increase production by 20-30 percent using the same personnel.
lÄnsFÖrsÄkrInGar
“Automatic receipt registration has reduced processing time by a full five days.”
Ingela Grim, ReadSoft Sweden
Background
Länsförsäkringar, in cooperation with Itella Information, receives as many as 2.8 million documents each year. These include applications, forms and letters. For a long time, they have been using ReadSoft’s software to extract data from forms and invoices, but to date, the actual sorting of documents has largely comprised manual work.
Using CLASSIFY and INDEX, sorting and classification will also be fully automated.
Ingela Grim
Account Manager, ReadSoft Sweden
Did you know…
…that ReadSoft has sales offi ces (subsidiaries) in 16 countries and development centers (labs) in four countries?
We make your company’s
document management smoother, less expensive and more secure
Most companies throughout the world have a great deal to gain by simplifying their document management. Our business concept is to develop, sell and lease out soft- ware that makes it possible to fully automate document management.
Automation of document management creates major benefits for companies, organizations and authorities. Using ReadSoft’s software platform, they receive a digital center that captures, interprets, sorts and distributes incoming documents and correspondence to the right business processes.
With the help of our technology, all types of documents, including invoices, loan applications and damage reports, are delivered to all types of archive, business, authorization and case-management systems.
ReadSoft’s software platform also allows documents to be exchanged between suppliers and customers.
Faster processes and increased security
This results in more efficient operations in terms of costs and lead times since employees no longer need to spend time manually sorting, reading or entering data from various documents. Instead, these resources can be put into the company’s core operations. Another benefit of digitizing documents at an early stage is that the information immedia- tely becomes available to everyone who has a use for it.
This also increases the security of the organization. Since documents become traceable, they cannot be manipulated without this being detected and the risk of erroneous data entry is reduced.
Finally, work processes become clearer since document handling can be monitored throughout the organization.
Automated document management has, for example, enabled global companies to create central hubs, known as Shared Service Centers, which manage administration for the entire Group. Here, ReadSoft’s solutions fill a key function of enabling significantly faster, simpler and more efficient management of complex and worldwide business processes.
a stable platform for all needs
The foundation of our business is our unique software platform. Based on this, we develop programs in two market areas: Trade Process Automation and Document Capture Automation.
In the area of Trade Process Automation, we work with
solutions that handle all documents and processes related to invoice processing. In the area of Document Capture Automation, we handle all other types of incoming docu- ments, regardless of the target system or industry.
trade process automation
One of the most important areas within document automa- tion is the handling of financial information, such as invoices and order confirmations. This area, which is also the fastest-growing market, offers many clear benefits for customers.
We are currently the world leader when it comes to products for invoice processing. This is partly because our products are entirely integrated in the leading business systems, our high rate of automation and our in-depth understanding of companies’ internal processes. Combined, this enables us to develop products that fully meet market needs for functionality and user-friendliness.
The web-based interface gives the user full control over where the invoices are in the process. This means better control over invoices, cash flows and received and invoiced goods and services. Through an advanced analysis program, companies can also gain a tool for monitoring key data and a means to enhance the efficiency of the process.
Our products can be integrated with any business, authorization or archive system, and in addition to being part of our own complete solutions, are also often part of our partners’ solutions for invoice processing.
ReadSoft is currently the world leader in automatic invoice processing solutions for the two leading business systems, SAP and Oracle. Together with our partners, we can also offer solutions to most other business systems available in the market.
Document capture automation
In addition to financial information, companies also receive numerous other business documents, such as claims cases at an insurance company, loan applications at a bank or customer matters at a power company.
We offer solutions for these types of companies that make it possible to capture, interpret, sort, and index the
o p e r a t I o n s
information and then send it on to the right person or depart ment. Our programs can interpret all types of documents, regardless of whether they are structured (such as forms), semi-structured (such as invoices) or unstructured (all other document types, such as letters). This information can subsequently be sent to any target system regardless of industry.
applications adapted to all markets
Our partnerships enable us to capitalize on complementary technologies and solutions while providing our partners with access to our unique functionality and expertise. In addition to broadening our offering, these relationships also increase the potential for more rapid expansion, particularly in new markets.
Through utilizing our partners’ consultants, we can also offer small companies efficient and expert implementation of complete solutions. Using our technical platform as a base, we are thus able to offer all companies a complete solution for automatic document management in cooperation with our selected partners.
Individual support and customized adaptations We offer customers operational support, including helping them get started with efficient production and specialist support to maintain productivity at a high level. We also train our customers when new system solutions are introduced.
Training can range from specific selective services to taking complete control of the entire training process.
Our consulting organization assists customers through all phases of the process, from analysis to implementation. In many cases, our personnel also offer our customers consulting services when choosing supplementary technology.
Global support and comprehensive service contract coverage
Thanks to our global organization, we are able to offer our customers service and support worldwide, which is a major benefit, particularly for multinational corporations.
Our support contracts also include software updates.
Since our solutions often are a business-critical component of our customers’ operations, our support contracts are renewed to a very high degree.
comprehensive solutions guaranteed with certified hardware
To be able to offer our customers a comprehensive solution, we also offer third-party products from partners, primarily scanners. We continuously test and evaluate suitable hardware to certify that it is compatible with our system, thus enabling us to ensure that the customer receives a comprehensive solution.
their problems with extensive data entry, long approval cycles, and difficulty retrieving invoice documents and accounting accuracy.
solution
With INVOICES 5-5 and INVOICEIT 3.2, ReadSoft’s automated invoice capture, workflow and reporting solution for Oracle E-Business Suite, Convergent got an automated AP system that helps them to centralize invoice receipt, leverage existing business rules in Oracle, increase visibility and control, reduce manual data entry and improve cycle times. ReadSoft’s solution is implemented in 5 separate companies and has preserved Convergent’s existing investment in MFP devices. It also adopts a solution that works with their E-Business Suite instance hosted by Oracle On Demand.
The result is an improved invoice process that eliminates inefficiencies of a manual method. Invoices can be searched and retrieved instantly, accounting and approving is accurate and quick, detailed audit trails exist and there is a significant reduction of manual data entry.
next step
ReadSoft will continue to provide product support and are working to expand the business relationship with Convergent.
converGent
“Convergent has increased visibility and control, reduced manual data entry and improved cycle times.”
Cliff Autin, ReadSoft North America
Background
Convergent is a leader in healthcare claims management, consumer collections and commer- cial collections. The company, which was founded in 1998, has its corporate headquarters in Atlanta, Georgia and employs 2,600 people in 11 locations across 10 states.
Convergent wanted a solution that would solve
Did you know that…
…ReadSoft’s software contributes to the elimination of 1.4 billion sheets of paper, which reduces carbon emissions by 2,000 tons?
Cliff Autin
Manager, Oracle Consulting Services, ReadSoft North America
A more open platform creates new business opportunities
A key step in offering ReadSoft’s software solutions to small companies was taken in 2009 through the acquisition of Spear Solutions’ software. This has provided us with access to a service-management platform on the Internet, known as Cloud
Computing, which can be integrated with ReadSoft’s software. During the year, we also developed an integration platform that will make it easier for our partners to use our products in their solutions.
strategic acquisition of supple- mentary technology
Software is advancing in the direction of no longer being installed on the company’s compu- ters, but rather being centrally available on an independent server, which is known as Cloud Computing or Software as a Service. The advantage of this is that customers no longer need to spend time installing, configuring and maintaining software, but can instead subscribe to these functions. To increase the rate of development in this area, ReadSoft acquired a number of patents and software from Spear Solutions AB and Spear Imaging Inc. in September 2009.
Spear Solutions’ service-management solutions mark an important step on the path toward offering our solutions through a web-based interface. We will primarily develop web-based solutions for our products in the Document Capture Automation market area. The resulting product is expected to be launched as a pilot in the Swedish market in 2010.
Spear’s image-management technology is also a key supplement. When scanning documents, image quality is decisive for how well the content can be interpreted, which we are now able to further improve.
The acquisition of Spear’s technology led to the inception of a new Solution Lab in late 2009. It has been named ReadSoft Lab – Software as a Service Solutions (SaaS) and will now work on adapting and developing all of our products for Cloud Computing and Internet-based software services.
standardized products broaden the market The trend in other areas is also heading toward a more service-oriented approach. Instead of creating large, complex software that is capable of everything, the trend is moving toward assembling small, independent components, which combined, are capable of delivering a greater offering (Service Oriented Architecture, SOA). However, this requires that various software programs can be integrated with each other in a simple and standardized manner. This is
why we established the ReadSoft Integration Center in 2008, which developed an integration platform for our products in 2009. The objective is to make products simpler to integrate with other solutions, including those of our partners. This is a key component of our efforts to expand our partnerships.
Faster product development through increased concentration
In 2008, ReadSoft’s development work was concentrated to encompass three solution labs: SAP, Oracle and Capture.
This reorganization has gone well and we have managed to create a successful concentration of skills. This also resulted in ReadSoft being able work with shorter release cycles, which led to the development of new versions of several products during the year.
In 2009, we also launched a test center in India. This center is operated by an external company but exclusively uses ReadSoft products. Our objective is to achieve even higher quality assurance of our products, in terms of functionality and security.
We will continue to invest heavily in research and development to continuously be able to advance our solutions and rapidly mirror the relevant technological shifts.
ReadSoft shall always offer the best products available in the market at a reasonable price.
readsoft lab – capture solutions
At the ReadSoft Lab – Capture Solutions, we are develo- ping ReadSoft’s unique technology for intelligent document recognition and creating solutions for general invoice processing and document management.
r e s e a r c H a n D D e v e l o p m e n t
• THE ABILITY TO INTERPRET MORE ASIAN LANGUAGES AND CHARACTERS
• CAN NOW ALSO SORT HANDWRITTEN DOCUMENTS
• DEVELOPED NEW STATISTICS PRODUCT, REPORTER
• BROADENED USAGE TOWARD MORE BUSINESS PROCESSES
Significant events during the year, Capture
Product development costs, SEK million
2006
2005 2007 2008 2009
0 10 20 30 40 50 60 70 80 90 100
During the year, the lab worked on creating a simple and standardized way to disseminate data from our software platform. This work was conducted in conjunction with the labs for Oracle and Capture solutions, and our partners within the framework of our Integration Center. The concept is for our data capture products to easily be able to connect to any target system. We shall also be able to offer finished connections toward more general systems, such as at insurance companies or in Microsoft’s SharePoint.
We have also continued to develop the platform’s self-learning capabilities. The objective is to create a system that is as automated as possible from the beginning, while also being able to increase quality and security compared with a manual operation.
During the year, a new version of ReadSoft’s document- management program, CLASSIFY and INDEX, was launched. In the new version, the functionality has been developed so that the program can now also manage signatures on documents.
In partnership with the new lab for SaaS solutions, we have also begun development work on adapting CLASSIFY and INDEX to cloud computing.
Efforts to adapt the software platform to handle the major Asian languages continued during the year, and by the middle of next year, a system to manage invoices in Japanese and Chinese will also be launched. This will enable us to manage invoice flows in the important Asian markets.
During the year, a new version of REPORTER was launched. After previously only being able to analyze invoice processing, the program now manages the full processing of accounts payable ledgers, from scanning the invoice to payments.
readsoft lab – sap solutions
At ReadSoft Lab – SAP Solutions, we develop products that are integrated with SAP’s business systems. During the year, we developed PROCESS DIRECTOR, that enables the handling of significantly more types of documents and business processes. This piece of software is now also capable of handling large document volumes. At the same
time as the new platform allows us to develop prepackaged additional services, which can easily be added to depending on the needs of the business process. This reduces the installation time, while simultaneously allowing PROCESS DIRECTOR to easily be adapted to the specific needs of each individual company.
We have performed several installations of PROCESS DIRECTOR at some of the world’s largest Shared Service Centers. This provides us with a major potential market for the sale of additional services.
During the year, we also worked on enhancing the efficiency of our implementations and our development work. A component catalogue was developed for our INVOICE COCKPIT invoice-processing software. This catalogue serves as a register of solutions developed by us in conjunction with earlier customization of installations.
This will enable us to take greater advantage of these in future projects.
We also improved our efficiency in the lab, which has increased the frequency of developing new releases for INVOICE COCKPIT.
To increase the rate of implementation and create flexible project management, we previously launched a standardized packaged solution, Invoices Business Solution for SAP. During the year, we adapted this solution to a number of markets, including the UK, France and Australia.
SAP partner sales were strong during the year, and to further strengthen our partnership, we initiated a project to provide advanced training to our partners. The aim is for our partners to acquire a better understanding for how our
• NEW PLATFORM FOR ORACLE FUSION MIDDLEWARE
• DEVELOPED FUNCTIONALITY FOR MORE TYPES OF DOCUMENTS
• NEW VERSION OF ORACLE E-BUSINESS SUITE 12
• INCREASED FOCUS ON PACKAGED SOLUTIONS
Significant events during the year, Oracle
• WE BUILT A NEW PLATFORM FOR THE FUTURE
• WE ARE NOW CAPABLE OF HANDLING MANY VARYING TYPES OF DOCUMENTS
• THE NEW PLATFORM ENABLES SIGNIFICANTLY FASTER DEVELOPMENT OF NEW SOLUTIONS
• WE HAVE CREATED A PACKAGED SOLUTION THAT WE OFFER OUR PARTNERS
Significant events during the year, SAP
solutions function and how they can be configured.We are also creating the opportunity for them to independently develop addtional services and improve- ments for our products.
A new support contract was also signed during the year with SAP. This means that our customers can now contact ReadSoft through SAP’s own support portal. We also gain access to SAP’s internal support system, which means that we can more thoroughly analyze the underlying reasons for any problems. The new contract strengthens our partner- ship with SAP, which benefits our customers and ReadSoft.
We have also begun work on adapting the new version of the REPORTER statistics program for SAP.
readsoft lab – oracle solutions
At ReadSoft Lab – Oracle Solutions, we develop products that are integrated into Oracle E-Business Suite.
During the year, we adapted our invoice-processing solution, INVOICEIT, to Oracle’s new Fusion Middleware platform (which is based on Service Oriented Architecture) and the coming Fusion App business system, which will be launched in 2010. At the same time, we developed a new product, PROCESSIT, which is also capable of handling other document types and processes. The product’s open architecture means that it can easily be developed and supplemented using standard tools and become part of a larger solution. PROCESSIT simultaneously works as an independent product, which makes it more open to partners and simpler for other players to integrate into solutions for other areas of use. PROCESSIT is also entirely based on Fusion Middleware and is ready to be connected to Oracle’s new Fusion App business system.
Did you know that…
…it is not unusual for an investment in automatic document management to finance itself in less than 12 months?
r e s e a r c H a n D D e v e l o p m e n t
Its standardized platform also makes it possible to build connections with the ERP systems that were previously acquired by Oracle and have now been integrated into Fusion, such as JD Edwards and PeopleSoft. In 2010, we will evaluate the market and decide on the ERP systems that may be considered.
We worked hard during the year to adapt the new
version of the REPORTER statistics program to Oracle. The new version will be launched in early 2010.
Efforts to prepare our products to function as Software as a Service have also been initiated. However, it is currently unclear when or if Oracle will develop solutions for this area.
allWeIler aG
“ALLWEILER has succeeded in signifi- cantly increasing the control and transparency of its procurement process.”
Jörg Schneider, ReadSoft Germany
Background
ALLWEILER AG is a German manufacturer of pumps and part of the global Colfax Corporation.
The company is a market and technology leader in the construction of vessels, power generation and specialized industrial applications. To increase its efficiency, ALLWEILER wanted to automate and optimize its paper-based and manually controlled procurement process.
solution
As a result of ReadSoft’s web-based PROCESS DIRECTOR solution, authorized personnel can now create, circulate and approve procurement requests through a secure connection. The requests are subsequently automatically registered as orders in the company’s SAP system. Since ALLWEILER already uses ReadSoft’s software to automate its invoice processing, the procurement and invoice authorization processes are now integrated into the same user interface.
This has enabled ALLWEILER to succeed in significantly increasing the control and transparency of its procurement process, which strengthens its relationships with its suppliers while simultaneously creating a better foundation for the negotiation of prices and terms and conditions.
next step
A pilot project has already been completed and the next step will be to make the PROCESS DIRECTOR available to all ALLWEILER employees in Germany. ALLWEILER ultimately plans to expand the installation to also cover project-related purchases, which requires a much more extensive flow of authorizations.
procurement process.
Jörg Schneider
Account Manager, ReadSoft Germany
Did you know that…
…ReadSoft’s products can recognize characters in 15 languages, including Chinese, Korean and Japanese?
Increased focus on
more efficient processes
ReadSoft is the market leader in Data Capture for Transaction Processing & Process Management. This segment accounts for 41 percent of the total market for automatic document management and is thus the largest sub-segment.
According to the analysis company Harvey Spencer Associates, industry growth in 2009 primarily comprised increased maintenance and service sales, while product sales declined somewhat.
However, according to Harvey Spencer, there are several factors that indicate that growth will regain momentum. One reason is the quick rate at which the investment finances itself. This primarily applies to invoice processing, which once the solution has been integrated into the work flow, often finances itself in less than a year.
The importance of integrated processes is also supported by The Hackett Group, a global strategic advisory firm, whose studies indicate that a key factor in optimizing the administration of a company is that the integration of the electronic invoice process is connected to the entire work flow.
This primarily applies to SAP and Oracle-based work- flows, an area in which ReadSoft has long been leading advancements.
According to Gartner, accounts payable is a major area of focus for process improvement in midsize to large enterprises.
Solutions that can improve the workflow of and standardize accounts payable financial management processes should be candidates for IT investment. Many companies are seeking to augment their ERP accounts payable (AP) processes to cover more of the upfront business processes, including document/
electronic transaction capture, workflow approval routing and analytics. This is typically a part of the financial value chain that has been overlooked from a technology perspective, yet is ripe for achieving value.*
The Hackett Group also conducted a survey that indicate major growth potential in the market for automated invoice processing. Only 17 percent of companies currently use automated invoice processing and content extraction as their primary method for processing paper invoices.
centralization benefits customers and suppliers Another reason that the segment is growing is that the transactions being made are increasing in value since they are increasingly being signed for centrally at global groups. This trend, in turn, is driven by the fact that many international companies are focusing on enhancing the efficiency of their administration by concentrating it to a few global nodes, known as Shared Service Centers. Doing this efficiently requires process-integrated automated document manage- ment for financial information and other types of documents.
According to Harvey Spencer, this creates advantages for
major suppliers that have the resources to handle more extensive systems, which benefits ReadSoft.
According to The Hackett Group, world class performers have a processing cost per procurement order that is about 92 percent lower than the average. These companies are also increasingly utilizing automated processes in conjunction with invoice processing. For a median company, this corresponds to a potential savings margin of about USD 2 to 3 million in terms of the total administration of purchases.
Based on The Hackett Group’s definition of what constitutes a world class performer, ReadSoft is currently working with a number of customers to create solutions that help customers achieve this level and thus ensure world- class cost efficiency.
Growth slowed
Between 2007 and 2008, the total market for automated document management, including products, services and maintenance, increased to nearly USD 2 billion. Taking into account exchange-rate fluctuations, this corresponds to growth of slightly more than 7 percent.
This increase was the result of improvements in the technology for intelligent document recognition and an increased realization that paper will also constitute a key component of all business processes in the future, even though its use has declined somewhat in the major industrialized countries.
However, this growth decreased in 2009. According to Harvey Spencer, growth for the full year will probably have declined by about 2 percent.
According to their previous assessment in mid-2009, annual growth was calculated at about 9.5 percent through 2012, when the global market is expected to have slightly less than USD 3 billion in sales. This may be delayed, at the same time as data capture software continues to drive sales. This primarily applies to the companies that can offer added value in the form of improved business processes.
Increased demand
More than 80 percent of all information that a company receives is unstructured. An estimated USD 25 to 30 billion is spent each year on gathering, interpreting and entering business information. Most of this is still done manually on computers. However, the trend is advancing toward increasingly automated document management, primarily due to a continuously growing share of digitalized informa- tion and increased personnel costs. Because even if a large share of the manual data entry has been relocated to
m a r k e t
low-cost countries, such as China and India, wage costs have also begun to rise in these countries along with the development of the domestic economies.
Accelerating development and intensifying global competition mean that there is an increasing need for companies to improve the interaction of various depart- ments, acquire more and faster information, and continu- ously cut costs. The need to control documents and to integrate document management throughout the company’s organization is also increasing
Requirements for transparency and being able to monitor business events in real time also increase the need to be able to extract and process information from business documents as early as possible. This benefits the suppliers that can offer comprehensive solutions that capture, interpret and classify information and can be easily integrated with the major established business systems.
A development is also taking place in society whereby citizens’ demands for access to information is increasing.
Different countries are implementing rules for e-governance at the national and local level to increase transparency at the same time as individual confidentiality is being safeguarded.
This is where a division arises between those who are computer proficient and those who are not in terms of the use of electronic correspondence. According to Harvey Spencer, this leads to a need to understand, manage and control unstructured information more efficiently. It must be capable of being managed with the same speed and efficiency as information that is generated and delivered electronically, while simultaneously reducing costs.
Increased security requirements
The global economy is driving the development of regulations that are not limited by borders and will prevent financial crime and other improprieties. Consequently, companies with global operations must increasingly install shared systems that follow a certain standard, which benefits the market for automatic document management.
One example is Basel II, which stipulates that every bank that conducts business in different countries must have risk management systems. Other examples include the US Patriot Act, which affects all companies that export to the US and all people living in the US who have a bank account abroad.
The US corporate code, the Sarbanes-Oxley Act (SOX), affects companies in the US and the rest of the world.
In the EU, directives have been issued that will harmonize various kinds of business operations within the entire union.
Regulations similar to SOX are also in effect in Japan. This results in IT systems gradually becoming more similar in all countries, a trend that primarily benefits the suppliers that can offer multinational corporations both standardized document-management solutions and global support.
Source: Harvey Spencer Associates Inc.
Five factors driving the market
• When the economy recovers, many companies will probably invest in proven technology to increase efficiency, rather than rehire personnel.
In their simultaneous pursuit to reduce the use of paper in their internal processes, they will search for technologies that optimize their existing processes instead of changing them.
• To improve business processes and increase competitive advantages, an increasingly large amount of information will be retrieved from paper documents. The need to input information from incoming paper documents into data systems will thus rise. This will also increase the importance of rapidly capturing documents when they arrive. The faster a document is digitalized, the greater value it acquires.
• Increased regulations in the market create a need for better document management throughout the company and joint solutions in all markets.
• Data capture technology is developing and providing advantages in more areas with greater possibilities for integration.
• The integration of data capture with basic business processes, such as invoice and order processing, enables an essentially entirely automated processing of invoices. This increases value, reduces costs and improves cash management.
North America 48%
Europe, Middle East, Africa 41%
Other countries 11%
Source: Harvey Spencer Associates Inc.
Global market for document automation software in 2008
Other companies Top Performer 0
5 10 15 20 25
Procurement + Cost per = Full process order invoice
92%
USD
Process cost per transaction (Labor and outsourcing)
For a median company, this is equivalent to a savings of USD 2 to 3 million in terms of the total administration of purchases.
0 5 10 15 20 25 30 35 40
%
The Hackett Group’s surveys indicate major growth potential in the market for automated invoice processing systems (Scanned invoices for work flow and OCR for data capture).
Handling of paper invoices, % Segment distribution, 2008
Data Capture for Transaction Processing
& Process Management, 41%
Ad-hoc & Desktop Capture, 35%
Batch & Distributed Batch Capture, 21%
Full Text Capture, 3%
Source: Harvey Spencer Associates Inc.
We do not have many paper invoices E-mail/fax solutions with OCR for data capture We outsource data capture from paper invoices Scanned invoices for work flow with OCR for data capture Scanned invoices for work flow with manual data capture Handled in paper format with manual data capture
SOURCE
Harvey Spencer Associates. A US company that has been analyzing the market for automated data capture since 1990.
The Hackett Group. A global strategic advisory firm that has assisted major Groups in optimizing their organizations through the use of Best Practice and Benchmarking since 1991.
Gartner, Inc. This company was formed in 1979 and is one of the world’s leading companies in the area of IT analysis and advisory services.
Sources: The Hackett Group
* Quated in “Accounts Payable Invoice Automation”, 11 December 2008, written by John E. Van Decker. The Gartner Report(s) described herein, (the “Gartner Report(s)”) represent(s) data, research opinion or viewpoints published, as part of a syndicated subscription service, by Gartner, Inc. (“Gartner”), and are not representations of fact. Each Gartner Report speaks as of its original publication date (and not as of the date of this Annual Report) and the opinions expressed in the Gartner Report(s) are subject to change without notice.
