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The Market for Document Imaging Services

June 10, 2017

The document imaging services market continues to mature - but it has also maintained its place as a specialty or niche play, which means there are still decent margins to be had for service providers with the right skill set. In fact, in 2014, the trade organization AIIM surveyed more than 300 providers of document imaging services—85% of which reported that their 2013 results were as strong as their previous annual results. Thirty-nine percent of the document imaging service providers reported that their 2013 results were, in fact, stronger than they had originally anticipated.

Document imaging services can be divided into three parts:

  • the installation of a document imaging system on site for a customer

  • supporting that system through software maintenance and hardware warranty protection plans

  • scanning and capturing important documents

Many document imaging service providers offer all three types of services. Often a customer will have a document imaging project that includes converting a large backlog of files as well as a limited number of day-forward documents. The day-forward requirements might be addressed by an on-site system, complemented by maintenance and warranties, while the backfile conversion could be handled by a higher volume operation run by the service provider. A medical records implementation, for example, will often have these characteristics - as modern EMR systems are designed to eliminate paper going forward, but most practices and hospitals have file rooms full of paper records in folders.

Price it right

The trend in recent years has been for document imaging service providers to move upstream and deeper into business process management. That’s because the margins for simple document conversions (scanning and basic indexing of documents), have been eroded due to the falling cost of high-quality, high-speed document scanning and basic document capture software. Some document outsourcers offer conversions for less than a nickel per page. However, prices can rise quickly for more complex processes, where more fields are being captured and accuracy is a must.

One emerging model for selling document imaging services is setting the price based on the ROI. For example, if it is determined an end user is spending 2x on invoice processing per year, but with a new document imaging implementation, it will be spending x, pricing the system at x should produce a 12-month ROI, which is typically acceptable in the market. Outsourcing prices can be set up in a similar way.

Cloud changes the game

Cloud services and subscription pricing add another element to the mix. They are often attractive to end users because of the lower upfront costs. Because of this, they can often be accounted for as an operations vs. capital expenditures and worked right into the user’s annual budget. Of course, for service providers used to booking large one-time deals, selling subscriptions typically requires some changes to the business model.

Software maintenance and hardware service contracts represent another form of recurring revenue potential.

Mergers and AC

One recent trend in the document imaging services market is a rise in the number of mergers and acquisitions. There are a couple factors contributing to this:

  • A number of entrepreneurs who got into the document imaging market when document scanning was a new technology (the mid-1990s) have reached the age where they are looking to cash out and retire. So there is some current opportunity to acquire customer bases.

  • A number of larger companies, many in the print management space, have expanded into document imaging as a way to diversify their businesses. This has increased competitive pressure, especially without a focus on improving business processes.

Some must-haves to succeed today:

  1. automated data capture

  2. workflow for automating process management

  3. vertical or horizontal business process expertise

If you can combine these three elements into solutions, either in-house for your customers or outsourced utilizing your facilities,  you should be able to succeed in today’s document imaging services market.