Is Ricoh’s Acquisition of DocuWare a Play for DaaS Revenue?

Ricoh announced July 2 that it reached a definitive agreement to acquire DocuWare, a German document management and workflow automation software company. While Ricoh has been using DocuWare software in its operations and with existing customers for quite some time, the deepening of that relationship through the acquisition shows, according to Ricoh, its commitment to “transform itself for tomorrow” through the “Ricoh Ignite” stage of its current Mid-Term Plan.

Like most acquisition announcements, the view of the importance and effect is likely to vary based on the channel perspective of the reader. Office print dealers, for example, may say “here we go again” and ask how this is different than Lexmark and Perceptive Software or Kofax, or for that matter Ricoh’s deal with mindSHIFT, which, for many, failed to live up to expectations.

Those in the document management and workflow automation solutions and services channel, especially current DocuWare partners, may look at this acquisition as a competitive threat, or they may see an opportunity to expand their managed services into the emerging Device as a Service (DaaS) market using Ricoh printing devices.

Customers may be nervous about how much transitional confusion there may be, and what this acquisition ultimately means to them.

Ricoh’s channel competitors, many of which are DocuWare resellers, may wonder what happens to them when a rival now supports their business process automation solutions and services.

All these perspectives are valid. However, let’s look at the two companies and why this acquisition may be different than previous ones.

DocuWare – what it brings to the table

DocuWare launched in 1988 and has headquarters in Germany and the U.S.A. The company develops and sells on-premise and cloud document management and workflow automation software. In 2013, the company acquired Westbrook Technologies Inc. and in 2017 reported revenues of $49.6M. It has a global network of over 600 reseller partners (130 in the U.S.) with more than 12,000 customers across 90 countries.

Ricoh Corporate SVP David Mills said in the announcement that DocuWare will operate as a standalone subsidiary of Ricoh. Current co-presidents Michael Berger and Max Ertl will remain as presidents of the new Ricoh subsidiary.

DocuWare brings proven document management and workflow automation solutions with an important cloud-based solution to Ricoh. Although much of DocuWare’s customer base is shared with Ricoh, it will nonetheless be welcomed, while DocuWare’s global partner network gives new distribution opportunities for traditional Ricoh products as well as opportunities developing new growth businesses.

Ricoh transformation and growth strategies

Ricoh has been very clear about its transformation needs. The “Ricoh Ignite” stage of its Mid-Term plan contains three growth strategies outlining business segment roles and business changes expected:

Growth Strategy Business Segments FY2016 % of total Ricoh business FY2022 % of total Ricoh business
#0 expand customer value; streamline operations; drive more profit. Office Printing 53% 39%
#1 “broaden the value that printing can provide” by combining core business technologies Commercial Printing, Industrial Printing, and Thermal 12% 20%
#2 Draw on the 1.4M corporate customer base to establish areas of new earnings. Digital Business, Office Services, Industrial Products, and Smart Vision 24% 31%

The Office Printing business segment, while profitable, is a business in a declining market. Ricoh expects printing growth from the Commercial, Industrial and Thermal printing segments through industrial, label and textile printing. Growth in Digital Business, Office Services, Industrial Products and Smart Vision business segments will be from new platforms and earnings models including cloud services, professional services, AI and others.

DocuWare is Ricoh’s fourth acquisition in the past 10 months. These acquisitions have been based on the targeted strategies in order to meet “ … the growing need of companies around the world to digitize their businesses and workplaces, wherever they may be,” said Mills in the DocuWare announcement.

Other Acquisitions

Oct 2018 MakeLeaps Cloud-based billing management software that allows businesses to manage their estimates, purchase orders, and delivery slips. (Japan)
Oct 2018 LAC Corporation Industrial inkjet printing systems for cars, liquefied petroleum gas cylinders, and aircraft. (Japan)
Nov 2018 ColorGATE Digital Output Solutions GmbH Commercial-printing software products for color management, RIP and workflow applications. (Germany)

Additionally, Ricoh acquired a 34.5% interest in Elixirgen Scientific (U.S.A.) in June 2019 as an investment in 3D and bioprinting.

Our take

Since there is already a deep and long-term relationship between the two companies, each understands the other’s business and business models and how both hardware and software can be used together to provide solutions to customers. Ricoh reports that DocuWare “seamlessly integrates” with the new IM C line of MFPs.

Execution will be the key to the success of this acquisition. Ricoh senior management regularly reinforces that they are fully committed to Ricoh’s transformation after some very rocky recent years. In its FY 2018 financial announcement, senior management noted that “Ricoh failed to fully address the business climate changes” caused by digital technology advances that changed customer perceptions, lifestyles and demand following the 2008 financial crisis. The Mid-Term Plan and its “Ricoh Ignite” stage illustrate their commitment to addressing this very effectively.

Half of new DocuWare customers last year implemented DocuWare Cloud; preconfigured cloud solutions that make entry into SMB customers easier with little to no expensive professional services. Importantly, cloud solutions provide ongoing revenue streams to Ricoh and the channel as well as a platform that can be used to deliver DaaS offerings. This is right on target with Ricoh’s Growth Strategy #2’s goal of developing new earning areas. With the DocuWare integration into the new IM C series, Ricoh and their partners can expand value to office printing customers and use this as a launching point to accomplish Growth Strategy #2.

Acquiring DocuWare, like the other recent acquisitions, shows another important change. Ricoh states they have “eschewed the notion of doing everything in-house,” in order to transform for the future. Moving away from traditional “not invented here” thinking is important. It frees Ricoh’s capital to invest in what they do best – manufacturing devices that “print,” like industrial, textile, 3D and bio-printing – while the DocuWare subsidiary can continue to invest in developing software and cloud solutions.

Finally, this acquisition, like the others, is more digestible than the $1.6B IKON or $167M MindShift acquisition. A smaller deal size doesn’t necessarily mean total success, but the size of this deal, the familiarity of both companies to the other’s way of doing business and the market timing (digital transformation, cloud, and DaaS are powerful trends in the market today) bode well for both companies.

To answer the questions posed at the beginning of this post:

Office equipment dealers shouldn’t necessarily view this as another “here we go again” move. Ricoh appears to be committed to transformation and executing on well-thought-out strategies to meet the changing digitization needs of the market and channel. Ricoh and DocuWare bring a long-term relationship with knowledge of how their products work together. Current Ricoh dealers selling DocuWare probably won’t see radical change. Ricoh dealers not selling DocuWare should consider it. Both should pay attention to how this acquisition may help move their MPS business to DaaS.

Software and services channel resellers could view this as a good opportunity to expand managed services offerings. Evaluating the DaaS model through the integration of Ricoh devices could differentiate and provide increased wallet share in current customers.

Customers might welcome this acquisition to consolidate solutions providers and gain added value in the office equipment investments they are still making. They could also view this as a means to future-proof a relationship with their solutions provider even as their printing declines.

Competitive OEMs, such as Konica Minolta and Toshiba, that are resellers of DocuWare, will likely be affected to varying degrees. Konica Minolta may not be affected much since they have other solutions to fall back on, including their own and their All Covered division. Toshiba may find other solutions to resell but it appears Toshiba Business Solutions uses DocuWare in its operations based on a case study available on DocuWare’s web site.

However, as we all know, change is a constant in this industry, and any players unable to adapt to change have likely not lasted this long. For all of those still standing, adapting to change is part of the game.

Tom O'Neill

Tom O'Neill

Thomas O’Neill, an analyst for BPO Media, is a 35+ year marketing and product strategy professional in the enterprise imaging and print industry. Beginning with positions in sales and training management, for the past 24 years he’s held director and manager positions at Canon, Océ, Lexmark and Minolta. He has extensive experience in hardware and software product marketing, strategic product planning and sourcing, solution sales, marketing content creation and strategies, branding strategy and vertical marketing strategies. Contact him at tom@bpomedia.com.