What Is OCR (Optical Character Recognition)? Meaning, Working, and Software

Optical character recognition (OCR) is defined as a set of technologies and techniques used to automatically identify and extract text from unstructured documents like images, screenshots, and physical paper documents, with a high degree of accuracy powered by artificial intelligence and computer vision. This article explains the meaning of OCR and how it works. It also lists the top 10 OCR software you can use. 

What Is OCR?

Optical character recognition (OCR) is a set of technologies and techniques used to automatically identify and extract text from unstructured documents like images, screenshots, and physical paper documents, with a high degree of accuracy powered by artificial intelligence and computer vision. 

At its core, OCR is a digital reproduction framework that employs automation to convert scanned documents into editable and shareable PDF files.

Although the world is mainly digital today, the transition is not yet complete. Regardless of the industry or job, paper records are still ubiquitous. Scanning physical documents for digital processes may be time-consuming, but OCR technology can hasten the conversion process and produce more relevant files.

The primary advantage of optical character recognition is that it facilitates data input by enabling text search, editing, and storing. It allows organizations and individuals to save files on their PCs, tablets, and other devices or in cloud storage, guaranteeing that all material is universally accessible. This allows you to:

• Minimize document management costs
• Accelerate processes for all stakeholders
• Automate the processing and validation of material in domains like marketing, human resources, and so on.
• Consolidate and protect data in a centralized location.
• Safeguard against physical harm to papers (fires, theft, etc.)
• Increase efficiency by providing employees with access to the most recent information

OCR provides a wide range of applications. These help users not only to improve workflows but also to improve their quality of life. For persons with visual disabilities, OCR software can decode content from scanned documents and then read it aloud, following one’s preferences.

OCR may also aid individuals with learning disabilities like dyslexia. This makes it widely used in educational settings globally. Teachers with students who have developmental disabilities, for instance, may utilize OCR to guarantee precise and effective communication in virtual classrooms.

With the availability of an OCR solution, linguistic obstacles are also eliminated. Customized settings allow users to translate words inside image files into a different language.

The evolution of OCR

OCR may be traced all the way back to telegraphy. During the First World War, scientist Emanuel Goldberg developed a system that could translate characters into telegraph code. And, before this, in the 1920s, he developed an electronic document retrieval system — the first of its kind. IBM eventually obtained the patent for his “Statistical Machine” in the United States.

Ray Kurzweil founded Kurzweil Computer Products, Inc. in 1974. His omni-font optical character recognition (OCR) system could detect text written in nearly any typeface. He determined that the ideal use of this technique would be as a tool for the visually impaired. Therefore, he constructed a text-to-speech-capable reading machine.

In 1980, Xerox acquired Kurzwell’s company, intending to commercialize paper-to-computer text translation. 

OCR technology gained popularity in the early 1990s when historical newspapers were digitized. Since then, several technological advancements have occurred. Modern methods are capable of offering near-perfect OCR accuracy. This is primarily due to the rise of artificial intelligence (AI), which can simultaneously process higher volumes of complex and multivariate data. Today, OCR is based on machine learning (ML) and computer vision, both subsets of AI.

How Does OCR Work?

An OCR system consists of both hardware and software. The purpose of the system is to read the contents of a physical paper and convert its characters into machine-readable code for use in data processing workflows.

How OCR Works

In the 1990s, several company owners converted physical papers and records into digital files using OCR, also known as text recognition. Ever since, the accuracy and reliability of OCR technology have improved — with the need for broader usability growing simultaneously. Recent advancements in AI have enhanced the performance of optical character recognition by reinforcing its accuracy and speed.

Let us examine the four stages of modern OCR technology operations:

Step 1: Converting a physical document into a raw digital file

In step one, the device machinery (often an optical scanner) converts the physical shape of the document, such as an envelope, into an image. This stage aims to ensure that the machine’s rendition is accurate while removing undesired distortions.

The generated picture is transformed to black-and-white and then evaluated for bright (background) vs. dark (foreground) parts (characters). If necessary, the OCR system may additionally classify the picture into distinct components, like tables, text, and inset images.

Step 2: Recognizing the patterns in the document

Next, the AI examines the image’s dark regions to recognize characters and numbers. Using pattern recognition, AI targets a single letter, phrase, or text block. Teams train the AI system with diverse language, content formats, and handwriting. To detect matches, the program contrasts the characters on the digitized envelope snapshot with the words and symbols it has already learned.

Step 3: Recognizing character features within the patterns

To identify new characters, the system uses character-specific criteria. This may include the quantity of angled, crossed, or horizontal curves and lines. For example, an “L” has one vertical and one horizontal line below it. The OCR program will use these feature IDs to recognize every “L” on the paper. After the system identifies the characters, they are transformed into an ASCII code that one may utilize for further processing.

Step 4: Checking for hygiene

In the fourth phase, AI rectifies any errors in the output file. One approach is to instruct the AI using a specific glossary of terms that will appear in the text, such as the English language. This confines the program’s output to the specified words or formats, ensuring that no interpretation exceeds this lexicon.

Step 5: Using OCR in your industry

Any OCR software will adhere to these four steps to transform paper records into digital files that can be indexed, saved, and updated. Utilizing the technology for business or commercial purposes is the final phase.

Word processing is one of the oldest and most used OCR applications. Users may scan printed papers to transform them into editable and searchable versions. This has several uses in industries with voluminous paperwork. For instance, OCR may incorporate signed legal documents like loan documentation into an online database for easy accessibility.

Additionally, retailers may utilize serial numbers to identify their items. In retail stores and warehouses, robots may scan product barcodes, perform optical character recognition (OCR) to extract serial numbers, and use this information to monitor inventory. In addition, OCR converts historical papers into searchable PDFs. This is particularly useful for preserving old newspapers, periodicals, and other recorded documents – in sectors like medicine, insurance, etc.

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Top 10 OCR Software in 2023

According to McKinsey’s Global Executives Survey 2022, 70% of organizations globally are exploring business-process automation, where optical character recognition (OCR) is among the most common technologies used. 

Indeed, the global OCR market size will surpass $ 33 billion by 2030, according to Grand View Research. This means that there are plenty of options to choose from if you are looking for the best OCR software for your use case. The ten leading software options are the following, listed in alphabetical order:

Disclaimer: This list is based on publicly available information and may include vendor websites that sell to mid-to-large enterprises. Readers are advised to conduct their final research to ensure the best fit for their unique organizational needs. 

1. ABBYY FineReader PDF

Overview: ABBYY FineReader is an excellent optical character recognition (OCR) app that automatically digitizes document scans and extracts texts. 

Key features: The key features of ABBYY FineReader PDF include:

• User interface: It has an easy-to-navigate interface.
• OCR accuracy: ABBYY FineReader has the highest quality OCR.
• Document management: The app’s document management features are collaboration tools, document sharing, and file type conversion.
• Compatibility with file types: It supports TIFF, JPEG, .doc(x), and epub formats.
• Value-adding capabilities: In addition to the above core capabilities, this OCR software offers ID scanning, batch processing, and image processing.

USP: It includes a powerful OCR proofreading feature that helps clear up OCR errors. 

Pricing: The annual license fee for ABBYY FineReader PDF 16 costs $105 for the Standard Windows version, $73 for the Mac version, and $175 for the Corporate version.

Editorial comments: ABBYY FineReader has a powerful screen capture tool that allows scraping text from images. However, it lacks full-text indexing for fast searches. 

2. Adobe Acrobat DC

Overview: Adobe Acrobat DC is an OCR software that allows users to extract text and convert scanned documents into editable PDF files.

Key features: The key features of Adobe Acrobat DC include:

• User interface: It has an easy-to-use interface.
• OCR accuracy: Adobe Acrobat DC has a relatively high OCR accuracy.
• Document management: The document management features of Adobe Acrobat DC include conversion to PDF, merging files, and watermarking.
• Compatibility with file types: It supports .docx, .xls, .ppt, and .prn formats.
• Value-adding capabilities: In addition to the above core capabilities, this OCR software offers indexing, step-by-step wizard, and image pre-processing.

USP: The solution offers a secure and feature-rich platform that’s easy to learn for business users. Further, most users are already familiar with Adobe’s experience design.

Pricing: Adobe Acrobat DC Standard costs $15.07 per month, while Adobe Acrobat DC Pro costs $23.19 per month.

Editorial comments: Adobe Acrobat DC has a redaction feature that allows users to replace images and correct typos. However, it is relatively costly.

3. AWS Textract

Overview: AWS Textract by Amazon Web Services (AWS) is an advanced machine learning service that automatically extracts text and data from scanned documents beyond simple OCR to identify, understand, and extract data from forms and tables. 

Key features: The key features of AWS Textract include:

• User interface: Its interface is easy to use.
• OCR accuracy: The OCR accuracy of AWS Textract varies depending on the text.
• Document management: Document management features of AWS Textract include intelligent document processing, data extraction, and text mining.
• Compatibility with file types: It supports PNG, JPEG, TIFF, and PDF formats.
• Value-adding capabilities: In addition to the above core capabilities, this OCR software offers indexing, text editor, and batch processing.

USP: AWS’ OCR software allows the extraction of texts, tables, and fields from scanned images. Also, it comes with reliable cloud hosting. 

Pricing: AWS Textract uses a pay-as-you-use subscription model, depending on your AWS plan and region.

Editorial comments: AWS Textract has an in-database analytics feature. However, it only supports a limited number of languages.

4. Docparser

Overview: Docparser is a cloud-based service that uses advanced pattern recognition, zonal OCR technology, and anchor keywords to identify and extract data from image-based documents.

Key features: The key features of Docparser include:

• User interface: Docparser has an easy-to-navigate interface.
• OCR accuracy: Docparser has a very high OCR accuracy.
• Document management: The document management features of Docparser include data extraction, aggregation, and publishing.
• Compatibility with file types: Docparser supports JPG, PNG, TIFF, and DOC(x) formats.
• Value-adding capabilities: In addition to the above core capabilities, this OCR software offers workflow management, data connectors, and data import/export.

USP: It includes many third-party integrations and application programming interfaces (APIs) that give users more flexibility when accessing and storing documents. 

Pricing: The monthly costs for Docparser are $39 for the Starter edition, $74 Professional edition, $159 Business edition, and a custom price for the enterprise edition. 

Editorial comments: Docparser allows users to create parsing rules easily. However, it loads pages slowly.

5. IBM Datacap

Overview: IBM Datacap provides a complete solution for document and data capture. It scans, classifies, identifies, validates, verifies, and exports data and document images. 

Key features: The key features of IBM Datacap include:

• User interface: IBM Datacap is easy to use.
• OCR accuracy: The software has a relatively high OCR accuracy.
• Document management: The document management features of IBM Datacap include data extraction, image enhancement, and file conversion.
• Compatibility with file types: It supports file formats such as TIF, JPEG, BMP, and PNG.
• Value-adding capabilities: In addition to the above core capabilities, this OCR software offers document indexing, audit trail, and remote capture.

USP: The software can streamline business documents’ capture, identification, and classification.

Pricing: IBM Datacap pricing is available on request.

Editorial comments: IBM Datacap has a role-based redaction feature that automatically lets users specify which information to block out. However, its setup process can take time and effort. 

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6. Nanonets 

Overview: Nanonets is an advanced OCR software that uses AI to automate data capture for intelligent document processing to extract relevant information from unstructured texts and documents. 

Key features: The key features of Nanonets include:

• User interface: Nanonets has an easy-to-navigate interface.
• OCR accuracy: It has a very high OCR accuracy.
• Document management: Document management features of Nanonets include computer vision, image recognition, and intelligent document processing.
• Compatibility with file types: It supports PDF, PNG, and JPG formats.
• Value-adding capabilities: In addition to the above core capabilities, this OCR software offers a zone selection tool, batch processing, and external integrations.

USP: It has the unique ability to allow users to automate manual data entry using AI.

Pricing: The starter edition of Nanonets is free, the Pro costs $0.1/page, and the Enterprise has a customized price.

Editorial comments: Users can train Nanonets’ machine learning algorithms to suit their preferences. However, it can only handle low volumes. 

7. OCR.Space

Overview: The OCR.space Online OCR uses OCR technology to convert scanned images into editable files. 

Key features: The key features of OCR.space includes:

• User interface: Users can easily navigate the interface of OCR.space.
• OCR accuracy: The software has high OCR accuracy.
• Document management: The document management features include support for multiple languages, scanner integration, and barcode recognition.
• Compatibility with file types: OCR.space supports JPG, PNG, PDF, and GIF formats.
• Value-adding capabilities: In addition to the above core capabilities, this OCR software offers batch processing, conversion to PDF, and ID scanning.

USP: It is one of the few OCR software that’s free to use even without registration.

Pricing: OCR.space is free. The monthly fee for the Pro plan is $30, the Pro PDF plan is $60, and the Enterprise plan is $299+.

Editorial comments: OCR.space allows users the flexibility to leverage its four OCR engines to digitize scanned documents. However, it has a 5MB restriction for input files. 

8. OmniPage Ultimate

Overview: Omnipage Ultimate is a powerful OCR app that transforms forms and PDF files into editable documents that can be archived and shared securely. 

Key features: The key features of OmniPage Ultimate include:

• User interface: OmniPage Ultimate has a simple interface. However, the learning curve for users is steep.
• OCR accuracy: OmniPage has high levels of OCR accuracy.
• Document management: The document management features of OmniPage include language recognition, OmniPage launchpad, and PDF search.
• Compatibility with file types: OmniPage supports formats such as PDF, JPEG, PNG, DOC(x), PPT(X), and Epub.
• Value-adding capabilities: In addition to the above core capabilities, this OCR software offers batch processing, image preprocessing, and ID scanning.

USP: Its fine-tuned automation for high-volume OCR tasks can significantly improve productivity.

Pricing: OmniPage Ultimate 19.2 has a one-time cost of $499, while OmniPage Standard 18.0 costs $149.

Editorial comments: OmniPage Ultimate has a superb text-to-speech module. However, it is costly.

9. Readiris

Overview: Readiris is a PDF and OCR software that converts scanned documents into searchable and editable PDFs. 

Key features: The key features of Readiris include:

• User interface: The software is easy to use.
• OCR accuracy: Its OCR accuracy depends on the quality of the document. 
• Document management: The document management features of Readiris include PDF annotations, PDF comments, and electronic signatures.
• Compatibility with file types: Readiris supports JPEG, PNG, TIFF, and PDF formats.
• Value-adding capabilities: In addition to the above core capabilities, this OCR software offers offline access, encryption, and multi-language support.

USP: It has a built-in verbal recognition feature that converts document files into audio files.

Pricing: Readiris PDF 17 is free to use. Readiris Pro 17 costs $99, while Readiris Corporate 17 costs $199.

Editorial comments: Readiris has a compressor feature that converts files into lighter documents without altering text resolution or legibility. However, it has low OCR accuracy for handwritten documents.

10. SimpleOCR

Overview: SimpleOCR is a freeware OCR software that converts scanned files into digitized editable documents.

Key features: The key features of SimpleOCR include:

• User interface: SimpleOCR has a user-friendly interface.
• OCR accuracy: The software has very high OCR accuracy.
• Document management: The document management features of SimpleOCR include searchable PDF, vertical text and table recognition, and batch processing.
• Compatibility with file types: SimpleOCR supports TIFF, JPEG, PNG, GIF, BMP, and PDF formats.
• Value-adding capabilities: In addition to the above core capabilities, this OCR software offers barcode recognition, image preprocessing, and PDF conversion.

USP: Its free OCR software development kit (SDK) feature allows software developers to implement OCR in their apps without any added cost.

Pricing: SimpleOCR is free. The paid editions start from $25 up to $2,500.

Editorial comments: SimpleOCR maintains file format and layout after conversion. However, SimpleOCR has no copy/paste option and thus can only export the full PDF.

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Takeaway

Optical character recognition, or OCR, is one of the critical pillars of digital transformation for businesses. It acts as a bridge between analog and digital processes by helping you convert a variety of paper documents (historical records, personal information records, archival records, etc.) and images (invoice screenshots, photographs of checks, etc.) into a structured format. This enables more comprehensive databases for enterprises as you do not need to leave out legacy-era documents or non-digital communication. 

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