Fax Server Consolidation: Esker Buys VSI

Up for finding a needle in a haystack? Try tracking down an office out there that has flourished over the past several years without the benefit of a fax machine.

Certainly, this is a testament to the power of the fax business.

Upscale facsimiles of the facsimile machines that arrived in the early 1980s are still spitting out reams of paper in offices every day. But the technological advances that brought us the Internet are improving fax efficiency through the use of fax servers. In the last few years, more companies are opting to wade through their faxes electronically first, cutting costs and saving a few trees in the process.

Some say the fax machine will go the way of the dinosaur, and that continued improvements to e-mail systems will make the fax server obsolete. Don’t be so sure.

"If you look way, way out, at some point the fax system has got to be replaced," says Peter Davidson, fax industry analyst at Davidson Consulting and IDC (www.idc.com). "I don’t know if fax machines will disappear entirely, but it’ll be different in 20 or 30 years. For now, [the fax server business] is a $150 million to $200 million business worldwide.

"At this point in time, it’s not easy e-mailing sophisticated documents," Davidson says. "It’s gotten a lot better since NT showed up, but fax servers in general have it over e-mail for so many business documents in that it’s so easy to fax and receive whole pages. And there are no compatibility or virus issues to worry about. It still has a very solid place in the marketplace."

Judging by Esker S.A.’s (www.esker.com) purchase of V-Systems Inc. (VSI, www.vsi.com) in July, the fax market is getting healthier. Esker focuses primarily on larger enterprises with Windows NT-based solutions. VSI is geared toward small and medium clients with products for Unix, Linux, and Lotus Notes. But a key to the acquisition is VSI’s XML-based fax technology, which will put Esker ahead of the curve in fax automation down the road.

The move allows Esker to expand upon its Electronic Document Distribution (EDD) market strategy. The goal is to enable distribution of any document from any source through any electronic messaging infrastructure. The idea is for price quotas, trade confirmations, and financial statements to be deliverable in high volume through a solution that will recognize, format, route, and deliver messages and documents securely across the Web. The XML factor allows it to prepare for the fax environment of the future.

Esker’s most recent addition to the EDD space is Faxgate 7.0, which was released in June and includes General Document Recognition (GDR), a feature that eliminates the need for clients to modify application data streams to accommodate fax automation. This is particularly beneficial for production faxes and other more complex fax structures.

"What VSI has done in a smaller Unix environment, and what we’ve done on a larger NT scale, is to have the capability to send tens of thousands of unique faxes per day and to translate them onto any kind of format," says Dan Speer, chief executive officer of Esker US. "We think this puts us in a unique position to capture the application generation output market."

Generally, the fax server market is divided into desktop faxing -- the most common faxing system usually geared toward smaller, more targeted outputs -- and production faxing -- aimed at larger outputs for direct sales. Speer believes the VSI purchase will foster future success in the production area, as well.

"The XML technology will mean we don’t necessarily have to have fax servers of the same origin to share documents," Speer says. "We really believe XML will take over the EDI [electronic document integration] space we know today."

The purchase of VSI makes Esker the fourth-largest fax server software vendor worldwide, behind TopCall International, AVT (RightFax), and Omtool, all of which had estimated revenue greater than $25 million in 1999, according to figures provided by GartnerGroup (www.gartner.com). Speer expects more acquisitions and partnerships for Esker as the French firm continues to scale up in the EDD space. It’s a trend that is likely to continue in the fax server industry as a whole.

"This deal continues the consolidation of the fax server market," says Mark Gilbert, industry analyst at GartnerGroup. "The vendors that survive and thrive will grow larger through acquisitions and will also consolidate fax servers and related technologies into comprehensive product suites."

Gilbert said there are at least 50 vendors selling fax servers worldwide. He expects 25 percent of them to disappear within the next three years.