Marketplace Consolidation
ECM Acquisitions: What's Going On?
by Tony Byrne
10-Aug-2006
For the past 6 years, major analysts have been predicting imminent consolidation in the content management marketplace. It never really happened. Sure, some niche vendors were acquired, particularly as vendors built up ECM "suites," but for the most part, few if any products actually disappeared.
Now comes 2 major acquisitions: Open Text of Hummingbird, and today, IBM of FileNet. (Both have to clear shareholder and regulatory approval.) This may be the beginning of a rationalization of the ECM marketplace, but for customers, the near-term impact may seem quite less than rational.
A little history
There were several reasons for the lack of true consolidation to date:
- All the major independent vendors continued to do reasonably well in the marketplace, eking out profits and accumulating customers; that makes them tougher to acquire
- Major infrastructure vendors have been willing to bide their time (Oracle) or develop their own capabilities (Microsoft) as the market matures
- The larger independent vendors developed or accumulated multi-dimensional suites that made them more difficult to digest or merge
The dam breaks
So what's changed? We think there is a sense among non-infrastructure players (i.e. not Microsoft, Oracle, IBM, EMC) that, while they are growing adequately, they are running short of strategic options. And the large acquirers have been looking at content management as increasingly strategic. Also, Alan Pelz-Sharpe reminded me today that, in taking out FileNet, IBM essentially absorbs its biggest competitor in the lucrative imaging market. That deals with the first hurdle above.
Both IBM and Open Text have been on an acquisition binge, despite a poor history in both cases of integrating acquired companies. (Our colleague Steve Arnold has chronicled IBM's contortions in the search and discovery space.) Perhaps they think it will go better this time. We doubt it, but that addresses the 2nd hurdle above.
Plus ça change...
But what about the difficulty in digestion? That problem has not gone away. Acquiring vendors try to put a nice face on it, talking about "product synergies" (unlikely to pan out) and "operational efficiencies" (possible after merger costs are swallowed). But the reality is that Hummingbird's main product line overlaps substantially with Open Text's. FileNet has some interesting business process management capabilities, but so does IBM, and both companies have invested heavily in imaging, document management, records management, and to a lesser degree, web content management. The 2 companies compete head to head more often than not.
The bottom line is that neither Open Text nor IBM is going to just kill any significant products that they acquired, and instead will try to promote competing products for some time. As Janus pointed out today, even BEA has decided they can make more money selling two portals instead of one. And as a practical matter, both Hummingbird and FileNet have significant maintenance revenue streams that Open Text and IBM will need to sustain.
Buyer Beware
What does this mean for you, the technology buyer? Well, if you are already a FileNet or Hummingbird customer, there is obviously some risk, but again, it seems unlikely that major products will be jettisoned in the near-term.
If you are a prospective buyer, don't expect this sort of consolidation to make your choices easier. You'll still have the same number of products to consider, but you'll need to dig a bit deeper to understand the differences among them. Today, Hummingbird and Open Text salespeople will happily describe the differences between the two company's suites. Same for FileNet and IBM. Going forward, those companies will use more subtle messaging to distinguish their different offerings. Behind the scenes, they will have plans for merging code-bases or separating products for different vertical and horizontal markets, but those plans are often fluid and typically opaque to the prospective buyer in any case.
Perhaps these mergers are a sign of a maturing ECM marketplace. If so, it will still be some years before it becomes a truly understandable marketplace.