Insystems History

Introduction

Thirteen years after Insystems was formed, it was sold to Standard Register for $US89 million. Four years after that acquisition it was sold to Whitehill Technologies for $US8.5 million. What happened?

Insystems: The Beginning. Building Value with Document Assembly and Document Automation

Mike Egan founded Insystems in 1989 to solve a large compliance problem that had been plagueing the insurance industry. It's ironic that the country generally believed to be the most pro-business (the USA) has, in some industries, very stringent state-by-state compliance issues. Such is the case with insurance and insurance documents. This was a very big problem for larger insurance companies selling their products in multiple states. (Some states regulate the placement of text, font-sizes, etc.) This was exactly the problem Insystems set out to solve.

Insystems Lanches Mosaic Document Assembly

Insystems Mosaic was released in 1989 and it employed various document assembly techniques so an insurance company could author the main content (e.g. size of policy, terms, etc.) and then format and layout that document on a per-state or per-regulator basis. There were other products that could accomplish the same goal, but they typically required proprietary programs and interfaces. Insystems Mosaic was different. It allowed the document to be authored using the de facto word processor at the time—Word Perfect. As such, most insurance employees could author the main content with a word processor they were familiar with and then work with a more advanced user (or Insystems) to insert Mosaic commands to vary the formatting and layout according to a set of compliance rules.

Insystems Mosaic meets Microsoft Word for Windows

In the early nineties, Mosaic was mostly dependant on Word Perfect for authoring but managed to port its embedded document assembly language to Microsoft Word for Windows. Good thing they did, because as MS-Windows grew more popular so did Microsoft Word.

Insystems Signs Agreement with OpenText

On October 22, 1997, Insystems announced it had signed an agreement with OpenText to use OpenText's LiveLink Internet platform upon which to build a more sophisticated document assembly and enterprise content management system. In the next year or so, Insystems released Insystems Calligo which allowed the document assembly input and output to be managed within the context of a document management system. Canada Life (acquired by Manulife) became the first customer for Calligo.

Insystems Acquires Data Systems Consulting (DSC)

In January of 1999, Insystems acquired Data Systems Consulting (DSC), which was a 70 person software firm located in Roanoke, Virginia. DSC's flagship product was FastForms, which was a PDF-based form technology that allowed input of data into a PDF at a time when PDF's lacked that capability. DSC's FastForms software evolved out of some consulting work that founder Russ Ellis and his colleagues did for First Colony Life in Lynchburg in the early 1990s. The idea was to eliminate the reams of paper forms that insurance companies, brokerages, and agents had to fill out manually. GE Capital had a $3 million minority stake in DSC FastForms.

Insystems Toys with Going Public

Before the dot.com crash, Insystems prepared itself to go public. It sought guidance from investment bankers and met with a number of industry executives for continued guidance and feedback. (Mike will always maintain that he didn't know if he wanted to manage a public company).

Insystems Announces it will be Acquired by Standard Register
(for $US89 million)

On July 3, 2002, Insystems announced that it would be acquired by Standard Register for $US89 million. With revenue of over $1 billion dollars, Standard Register was very successful in the standard forms printing business, but was anxious to manoeuvre itself into the online world and thought that acquiring Insystems would be a way to do exactly that. They were wrong. Some say it was culture. Some say there was a lack of an executable plan. After four years, Standard Register sold Insystems (June 6, 2006) to Whitehill Technologies Inc. for $8.5 million in cash. Standard Register also announced that the Insystems subsidiary had prior 12 months revenue of $11 million with an operating loss of $6.6 million (of which $1.2 million was due to restructuring).

Conclusion: Was Insystems Overvalued?

Given that the revenue had slipped to a paltry $11 million, someone could make the argument that Insystems was overvalued. That question will never be conclusively answered. There's no argument that Standard Register could have executed better and leveraged Insystems depth of penetration in the insurance industry. But they didn't. It could have been a vast divide in culture between the old school forms industry and the modern day electronic document industry that caused the poor execution. Could Insystems have survived and thrived on its own? Yes—but the investors were anxious to see substantially more profit and/or a "liquidation event" (an IPO or acquisition).

Insystems: The Vision of a Total Solution

This is an image of the "total solution" that the Insystems platform was trying to address in the insurance vertical.

Insystems Advertisement

Here is an image taken from an Insystems advertisement that was run around the 1998/1999 time frame.