Supplier Set for Data Capture Explosion

A growing list of suppliers who convert mountains of paper into searchable data expect to make billions over the next few years, and Brainware Inc. of Ashburn, Va., wants its slice.

This company was formerly a division of European enterprise content management solution provider SER, which is based in Germany. A management buyout in 2002, along with an unspecified amount of investment of at least $1 million from Vista Equity Partners in 2003, made it independent, albeit with close reseller ties to its parent.

Since then, it's been a gratifying ramp-up for Brainware, which has about 80 employees and claims just under 400 customers, half in Europe, half in the U.S. Among these are EDS, Southern Company, U.S. FoodService, Shell Oil, Kimberly-Clark, Pitney Bowes, Her Majesty's Prison Service, Capgemini, and Halliburton. Many of these customers process more than 1 million invoices annually, Brainware says.

Despite a widespread move to "paperless" business transactions, companies like these have an astounding number of applications requiring input from paper invoices, vendor proposals, purchase orders, insurance forms, legal documents, and the like. Halliburton, for instance, is said to have an invoice processing system that involves 550,000 distinct vendors, whose invoices must be placed into the company's enterprise resource planning (ERP) database to feed other applications.

That's where Brainware comes in. Using scanners from partners like ABBYY, Brainware converts images from paper to electronic format, which is then subjected to its "Brainware Engine" software. That package uses fuzzy logic to extract data, organize it using a proprietary search engine, and place it in a customer's ERP system -- which in Halliburton's case is based on SAP.This kind of content capture is common to large enterprises and government agencies, whose focus on ERP shows no sign of abating. Indeed, ERP ranked sixth on the list of "high priorities" names by 100 CIO-level IT managers in the latest IT spending survey from Goldman Sachs.

Brainware has plenty of top-flight competition from Anydocs, Kofax, EMC (which bought Captiva for $275 million in 2005 to get into the segment); and IBM (which spent $1.6 billion for FileNet in 2006. Others in the segment include Banctec, Datacap, and Readsoft.

Brainware claims its differentiator is its efficiency in extracting data from paper. Typically, Brainware officials say, software suppliers use templates to retrieve data from a box or field in which it appears on an invoice or other business form. This method, according to Brainware, forces customers to create a new template for every kind of business document with which they need to work.

In Halliburton's case, for example, over 550,000 templates would be required to extract data using that method.

Brainware also claims to work with both structured and unstructured data -- the software can add emails, for example, to the same searchable pool of data that contains invoice and purchase order documents. And searching isn't slowed down or based on keywords or Booleans. "Instead of keywords, we use an associative-memory algorithm to search words, phrases, sentences, paragraphs, text," says CEO Carl Mergele.The system "learns" as more data is put into it, he says, so that efficiency improves with time.

While it's difficult to gauge exactly how these and other features claimed by Brainware actually pan out against the competition, the company's growing roster of customers and partners testifies to robust demand for the kind of software Brainware offers.

How great is demand? Harvey Spencer of New York research firm Harvey Spencer Associates, puts the market for data capture software at $1.5 billion annually, growing at a rate of 16.5 percent.

Spencer notes that Brainware is aiming for a high-end slice of the market, and its products are priced accordingly. Typical installations range from $500,000 upward.

CEO Mergele is unrepentant, insisting that his firm's features and functions are worth a premium. "At Her Majesty's Prison Service, we were up against EMC and outshone them at two times the price. They still selected us... Our numbers are taking off," he says, claiming that his firm's growth topped 1200 percent in the last year and a half. Have a comment on this story? Please click "Discuss" below. If you'd like to contact Byte and Switch's editors directly, send us a message.