The incessant waves of corporate governance legislation, industry codes and various other rules and regulations that have been passed in recent years might have been bad news for many, but they have been a blessing for companies operating in the field of enterprise content management, or ECM.
ECM is the umbrella term for a series of technologies from records management to document imaging via collaboration, email archiving, portal and web content management. But its real attraction for many companies in the post-Enron business age has been the ability it offers firms to stay on the right side of the latest rules, and be able to answer probes in a timely and efficient manner. Some put it even more bluntly: this is soft-ware to find the smoking gun of evidence or to “keep the CEO out of jail”.
One company that typifies the rise of content management from arcane back-office task to essential weapon is Open Text, the Canadian veteran of the sector that is managed by Yorkshire-born CEO John Shackleton, who makes no bones about what remains the big driver of the sector.
“Most people come to us for compliance,” he says. “They’ve been sued, or they’ve seen somebody else sued. That’s about 70 per cent of our new business and the surprise they get is that they don’t realise how expensive it is to clear this stuff up.”
Shackleton says that the average regulatory probe costs US firms half a million dollars and that large companies typically receive four such requests per year.
How ECM grew
From roots in records management and document imaging, enterprise content management has grown to become a far-reaching software category with fingers in many pies, including web content -management, portals, collaborative -software, meta-tagging, email archiving and search.
The sales boom that ECM has -experienced over the past 10 years has also driven considerable consolidation through mergers and acquisitions. This has included large deals, such as EMC--Documentum and IBM-FileNet, as well as sizeable -combinations, such as Oracle-Stellent, Open Text-Hummingbird and Vignette-Tower.
Giants such as EMC, IBM, Microsoft and Oracle believe that ECM suits being part of a software stack alongside database, -enterprise applications, middleware and storage management. However, companies such as Open Text, Vignette and Interwoven have stood apart from the action, while SAP, despite rumours of a move, still has no direct participation in ECM.
Alan Pelz-Sharpe, senior analyst at CMS Watch, says: “Open Text has more chance than Interwoven or Vignette of riding this out and remaining both profitable and -independent. It is much larger than either of these. In fact, either could -potentially be bought by Open Text itself; hence, Open Text could be a consolidator rather than simply part of the consolidation.”
ECM’s mushrooming growth is unlikely to stop where it is. Areas such as multimedia search and even business -intelligence are likely to be bolted on to ECM to make the sector morph further
into other domains.
The value of ECM here is that by tagging, time-stamping and keeping an audit trail of documents and messages, organisations can provide useful evidence to investigators and thus avoid penalties for late delivery, missing or incomplete information.
Seek and find
What is perhaps surprising is that even after Enron and other cases, many of even the most sophisticated organisations cannot fulfil basic requests for infor-mation. For example, Intel was embarrassed by its inability to discover key emails as part of the antitrust suit brought by rival microprocessor maker AMD.
However, as well as salve for governance pain, Shackleton and others believe that ECM – even if this is not the primary purpose for installing a system – is a boon more generally in discovering trends. “There is both the biscuit and the aspirin,” he says. “Compliance is the aspirin, but the biscuit is that you see pat-terns of information you couldn’t see otherwise.”
Shackleton sees no end to the govern-ance mandates, nor to another driver of the need for ECM systems: the sheer amount of data held by organisations. Where once this content was largely structured data, reports, email and web pages have made unstructured data the dominant force in stored information.
Shackleton describes a vision of content chaos becoming, well, more chaotic and diverse. “Ninety per cent of all data in an organisation today is unstructured, and with blogs and streaming video it is only going to get worse,” he notes.
Video webcasts, podcasts, voice-over-IP, clip libraries, TV and music online... all these are already adding exponentially to the content load of organisations, placing burdens on bandwidth, storage needs and, of course, the ability to manage content in a meaningful way.
“It’s not getting any easier,” Shackleton says. “Organisations are trying to get their minds around email archiving and new stuff such as blogs. It’s ‘Jesus, how do you manage this stuff?’ Then again, even with structured data, it’s ‘how do you get the parts together [and integrate them with the back-end systems] because I need to know who did what when.’”
The opportunity to address those pain points has led, inevitably, to intense competition in the sector and plenty of consolidation. EMC acquired Documentum, IBM acquired FileNet and Oracle acquired Stellent. That leaves Open Text as pretty well the only sizeable ECM specialist.
Heading for growth
Predictably, Open Text is plagued by journalists and analysts wanting to know when it will sell out, but Shackleton has a robust response. “We look three years out and we believe we can grow and stay profitable to provide good ROI to our shareholders in that time,” he says.
Alan Pelz-Sharpe, principal of analyst CMS Watch, and a veteran observer of the ECM scene, says that Open Text might have come near to a sale in the past. “I firmly believe that Open Text came very close to being acquired in the past few years, and that it has entered into negotiations more than once. However, Open Text is a difficult company to buy as it is very expensive and continues to have too many non-integrated moving parts to make it easily digestible in terms of people, units and technology. That said, for big firms such as SAP or Hewlett-Packard, which may want to get into ECM fast and big, maybe it is the only choice left.”
Oddly enough, it is possible that Open Text could be helped out by a company famous for conquering markets and leaving the blood of rivals in its wake – Microsoft. The software giant’s Office SharePoint Server is becoming hugely popular and has helped validate the ECM sector, although it is arguably the biggest threat faced by ECM incumbents.
But Shackleton prefers to see SharePoint as a platform that Open Text can build on. “SharePoint has legitimised our space,” he says. “You could argue it’s commodity, but it has opened up the market.”
The rise and rise of SharePoint
Microsoft released SharePoint in 2001 to a largely unimpressed market, but growth in recent years has been such that the -program brought in $800m in revenue -during the software giant’s 2007 fiscal year.
In part, this is because of classic reasons for Microsoft success stories. SharePoint has a familiar look and feel, and shares tools with other Microsoft -programs. Microsoft’s sheer heft also -cannot have hurt, with the company able to bring in SharePoint as almost a free-trial basis on the back of subscription sales of bigger products such as Windows and Office. But SharePoint’s success also points to a typical criticism of the ECM sector as being guilty of -introducing -products that are too complex and -difficult to deploy and use.
Whatever the reasons for SharePoint’s success, it has forced some radical new strategic thinking among ECM -incumbents. Companies including Open Text, EMC and Interwoven are -positioning themselves as ECM -back-ends for -companies that have adopted SharePoint for basic content -management purposes.
However, with Microsoft -committed to buying enterprise search firm FAST, and on the record as saying it has plans to have a more grown-up version of -SharePoint in its next releases, there is concern that Microsoft could disintermediate partners and rivals in the same way as it has in other software segments.
Change is in the air
As Pelz-Sharpe notes, there is a sea change surrounding ECM. “ECM as a whole is changing and it is accepting that SharePoint owns the collaborative space,” he explains. “As such, it is going back to its very lucrative roots of imaging and archiving. Some firms are pushing the governance aspect too, to some effect. ECM remains fun-damentally very strong. SharePoint has helped boost its visibility. Entries by Oracle, and now HP through its acquisi-tion of Tower Software, also boost the visibility of ECM and market size.”
Mike Davis, senior analyst at analyst firm Ovum, says change in ECM is a constant. “There’s a whole lot of fear, uncertainty and doubt in ECM because it’s morphing almost on a weekly basis. To differentiate, companies are trying to show their Enterprise 2.0 credentials with blogs and other community features.”
As for the presence of rivals with infinitely deep pockets, Shackleton contends that his company can benefit from being “the Switzerland of ECM”, with no biases towards a particular brand of database, application suite, middleware or other chunk of infrastructure.
Also, Shackleton notes that with many customers, these rivals are Open Text partners, and buyers prefer a third-party best-of-breed ECM product over the one-stop shop being delivered by the giants. He is critical of the strategy of Oracle, which acquired Stellent when some observers thought it might have grabbed Open Text. “Oracle thought Stellent would be a cheap way to get into ECM, but it hasn’t been successful,” he says. “We still offer a superior interface to [other Oracle properties such as] PeopleSoft, JD Edwards and Siebel.”
Although the partnership Open Text enjoys with SAP might suggest an eventual formal combination, Shackleton remains defiant, repeating his view that, in the mid-term, Open Text will stand apart from the giants, while continuing its own expansion through acquisitions and organic growth.
He is also confident that there is no end in sight for ECM investment (“people are buying cautiously but they’re still spending”) and is dismissive of open-source challenges, despite the emergence of companies such as Alfresco and Nuxeo.
One change, he concedes, might come about from hosted software. “It’s not sig-nificant as a percentage of our revenues but it is growing significantly. You can’t ignore the knock on the door that asks you to supply information about your company’s activities. That’s still what’s driving ECM.”