ECM Vendors go to War

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Keywords: Oracle, ECRM, ECM, Documentum, SharePoint, OpenText, Filenet

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Perhaps it was inevitable, but Oracle has finally declared war on EMC’s Documentum and is introducing a new program to replace Documentum installations for free.  On Oct 26 they are hosting a webinar to discuss some of the specifics.  (http://www.oracle.com/us/products/middleware/webcenter/moveoff/documentum/index.html?origref=http://blogs.oracle.com/webcenter/entry/moving_off_documetum_to_oracle?sf2383954=1)

 

Most software vendors actually make more money on maintenance than do on the sale of new licenses and a company with deep pockets like Oracle can certainly do well.  The real irony is that Oracle is using the same strategy that EMC itself used against Filenet before they were purchased by IBM.  Interestingly, Oracle is not targeting IBM with their new program.

 

Oracle needs to be a big player in the ECM business and they have made quiet strides over the last 2-3 years.  Most sales people from the big vendors (IBM, EMC, and OpenText) will tell you that Oracle has been their biggest fear market and far ahead of HP, the other sleeping giant.

 

The ECM market has been important to Oracle for many years but they really struggled to gain market share.  Larry Ellison himself noted that the unstructured content market is at least four times larger than the market for data in structured databases.  Oracle developed at least three internal products that achieved only modest success in the market.  Part of that was due to the fact that the Oracle sales force focused on more lucrative software products; ECM just wasn’t big enough or profitable enough to get the attention of the sales force.  Just as Oracle was launching their new web-based product designed to compete against SharePoint, in 2006 they purchased Stellent for $440M.  Stellent’s core technology came from Optika, an early document management company that did well in the mid-tier of the market.  Sort of Hyland before Hyland existed.  Optika was purchased for $59M largely because they had a large installed base that paid that maintenance revenue.  At one point, Optika has a market cap of just $9M as new license fees were flat and virtually all of the revenue came from maintance.

 

ECM systems touch a lot of other technologies and larger companies like Oracle, IBM, EMC, HP, and even Dell have the opportunity to sell more of their technologies when they get in.  EMC was locked in a brutal battle with IBM and Hitachi for storage sales when they purchased Documentum.  One key that the smart people at EMC saw was that up to 50% of the unstructured content was stored on Filenet’s large optical disk jukeboxes.  They rightly salivated over the opportunity to convert those customers to EMC storage and some estimate that EMC paid for the entire Documentum purchase in two years just because of the increased storage sales.  That came despite giving away a lot of the software licenses for free to replace Filenet.

 

Oracle is trying the same thing but has even more upside.  Sometimes it seems that Oracle wants to compete with everyone for everything.  Whether it be Microsoft, IBM, HP, Dell, Google, SAP, or even virtually every large system integrator, Oracle brings a wide range of software, hardware, and services to an account.  One key they have done with Oracle Content Manager is to embed it in the database.  So if you own the database, you already have the software installed and merely need to turn on the license.  (Records management is a separate module.)  Oracle will have significant advantages in being able to bring up new systems much faster than Documentum was able to do with Filenet.  Moreover, they have spent the last two years making connectors to other systems so that they can access data in those older ECM systems and accelerate deployments.  Once they have the ECM running, look for them to aggressively try to sell more to those same accounts.

 

Except for EMC, Oracle’s move is unlikely to disrupt the market too much.  SharePoint, IBM, and the host of mid-tier vendors will continue to operate as they do in the short term.  But in the long run, this almost certainly cements Oracle as one of the new Big 5:  Microsoft, IBM, OpenText, EMC, and now Oracle.  Content Manager is relatively inexpensive, however and the mid-tier vendors will be wary as SharePoint squeezes them from the bottom and Oracle becomes the best positioned of the Big 5 to squeeze them from above.

 

For EMC’s Documentum division the timing is less than ideal.  The recent financials showed that Documentum license sales have slowed and the division continues to reinvent itself.  Documentum is still a widely deployed platform and EMC has a world-class sales force, but being singled out by a company just as ruthless as itself is going to be a new experience.

 

For companies looking at new platforms the benefits are going to be huge.  Even if a company isn’t really interested in either Documentum or Oracle, smart companies are going to invite both to bid just to increase the competitive dynamics.  IBM and OpenText know that EMC and Oracle and going to bash each other and dramatically lower the price points, so everyone has discount.  The next fiscal year might be the best opportunity ever for organizations to buy high quality ECM solutions because the competitive dynamics have never been better.

 

One company that can’t be thrilled is OpenText.  As the largest independent software company, OpenText has become a giant in the industry but lacks the opportunity to leverage additional software and services like the big boys.  OpenText must get purchased, but there are only a handful of companies now large enough to buy them.  IBM, Oracle, HP, and Microsoft all looked at OpenText and made other purchases.  SAP is a close OpenText partner, but has their own competitive products and a culture that is very different.  A merger with Computer Associates could be possible, but CA still has financial and cultural issues.  Google is a possibility, but Google doesn’t sell much in the way of licensed software and OpenText would be an expensive purchase for Google to convert to a cloud model.  OpenText has a smart management team and will be fine, but it is a narrow margin of error.

 

Regardless, Oracle has declared war and the competitive dynamics are about to change significantly.

 

 

For more info, be sure to follow me on Twitter:  @ElamGuru

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Nick Inglis

Great Analysis

Nice overview of the current state of the ECM vendor market right there.
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craig conlee

Great overview, but...

Thank you this nice read, however, I believe you missed it. But, this definately confirms that ECM market is nothing more than a commodity now. Just like we see the database market today. 10% to 15% data in corporations is just structured data. Unstructured content is increasing at a alarming rate. Understanding the unstructured content nobody had addressed it, except one. All the traditional ECM vendors are busy to create technologies that structure the unstructured content. As unstructure content has become more complex, ECM vendors are nothing more than a repository to store again. Just like the ole imaging days. Google can't compete because their technologies to search is nothing more than a search engine that is not applicable for the enterprise. You had guess right about HP. Autonomy's ability to conceptually understand data, separate traditional linguistic methodologies, we are going to see some amazing things change in the market. IBM can't address it. They are too busy fighting internally about integration, sales model and marketing issues. Oracle can't because 90% of the organization doesn't believe in the Stellant or the New marketing message around ECM. EMC can't compete due to its nature as a typical hardware company first. With that being said, couple with old technologies, rip and replace for free is just a joke. Nothing is for free and the time and commitment to migrate meaningless data (because enterprises don't know what they don't know within their systems) will cost them. What about maintenance? Going to offer free maintenance as well? ....uhh, no. Autonomy, HP.. watch out. Here we come and its great time to trip up the old and come in with the new.
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craig conlee

Great overview, but...

Thank you this nice read, however, I believe you missed it. But, this definitely confirms that ECM market is nothing more than a commodity now. Just like we see the database market today. 10% to 15% data in corporations is just structured data. Unstructured content is increasing at a alarming rate. Understanding the unstructured content nobody had addressed it, except one. All the traditional ECM vendors are busy to create technologies that structure the unstructured content. As unstructure content has become more complex, ECM vendors are nothing more than a repository to store again. Just like the ole imaging days. Google can't compete because their technologies to search is nothing more than a search engine that is not applicable for the enterprise. You had guess right about HP. Autonomy's ability to conceptually understand data, separate traditional linguistic methodologies, we are going to see some amazing things change in the market. IBM can't address it. They are too busy fighting internally about integration, sales model and marketing issues. Oracle can't because 90% of the organization doesn't believe in the Stellant or the New marketing message around ECM. EMC can't compete due to its nature as a typical hardware company first. With that being said, couple with old technologies, rip and replace for free is just a joke. Nothing is for free and the time and commitment to migrate meaningless data (because enterprises don't know what they don't know within their systems) will cost them. What about maintenance? Going to offer free maintenance as well? ....uhh, no. Autonomy, HP.. watch out. Here we come and its great time to trip up the old and come in with the new.
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Dan Elam

Might be right...

Craig, you might be right that the ECM market is a commodity, but I would argue that is only true in certain lower ends of the market. SharePoint has been a huge disruption in the market and forced a lot of low-end vendors to lower price points. The SaaS plays like SpringCM, Box.net, etc have also changed the dynamics and driven price points down.

But at the mid-tier and higher end of the market there is still a great deal of variability in terms of the specifics. Especially for enterprise-class solutions, the vendors have unique features, especially in the areas of integration to legacy systems, security, infrastructure interoperability, etc. I'd argue that side of the market is still a long way from being a commodity unless you consider line of business applications like SAP to be a "commodity".
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Ronda Ringo

Nice summary/feedback

Feedback you gave was spot on, and I find it refreshing that the ECM market has shown some re-birth as far as competition goes. Back in the 2000-2005, under the leadership of Dave DeWalt, there were many competitive knock-out incentives provided...one being FileNet replacements as the author mentions. However, the FileNet competitive-replacement approach wasn't exactly as you mention early on in your article. As far as I recall, no free software was given to any customer under the DeWalt years prior to the EMC aquisition. The products were selling themselves and didn't need to be given away.
With that said, it will be interesting what will shake out of this announcement, and we'll see if any of the big players counter-attack Oracle.
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Dan Elam

Documentum, pre-EMC

Ronda, I don't remember anything like the competitive upgrade program that EMC allowed Documentum to do after the acquisition, but there were deals that swapped out certain licenses in a one-off basis. The market was a little different in that IBM was the only large company that could offer bundling, so ECM systems were sold on their own merits. But when EMC had the opportunity to leverage the software to sell even more profitable products, they certainly took advantage of that leverage. Same thing happens in other industries: ECM was just a bit unique because we had 200 software OEMs and only a handful of companies even doing $100M in revenue. Usually a mature software market would shake out to two or three vendors or Microsoft would put them all out of business. ECM was really the first big 'fractured' software market where each vendor found a way to survive. Now we see similar markets in Business Intelligence, CRM, and a couple of others, but even those are beginning to consolidate just as the ECM market has somewhat.
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Garth Honhart

HP has a...

very strong relationship with Microsoft which has this little known app called SharePoint that has pretty deep ECM capabilities.
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Dan Elam

HP and SharePoint

This tickles me a bit. Garth works for HP and talks about a "strong relationship" with Microsoft. Every vendor (except maybe Oracle and Google) talk about their "strong" relationship with Microsoft. But HP ended up with a great mid-tier ECM platform called TRIM (from Tower. HP has done some stuff with it, but they haven't put their full efforts behind it. Five years ago HP tapped Tom Hogan, the former CEO of Vignette, to run their software division. Tom knows the ECM market (having bought the *other* Australia-based ECM company named Tower(!)) but has had his hands full with other infrastructure plays that work with the more profitable hardware (and now services thanks to the purchase of EDS). The HP ECM team would probably be disappointed to hear an HP person talking up SharePoint, but the reality is that SharePoint probably drives more HP profits than their own product - and HP TRIM is a capable product!

The reality is that HP hasn't executed as well as Oracle. New leadership might turn things around, but if their reentry into the tablet market last week with a $699 tablet to compete against the iPad is an indication, Meg Whitman and the other leadership have a lot to learn about competing with the likes of IBM, Oracle, OpenText, Apple, and others.
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Rich Blank

great post...

Oracle is always a concern b/c of who they are and the fact that they're fierce competitors. Oracle has many parts/products...but I really don't see them having a vision or ecosystem. Just like EMC, Oracle is a backend/middle player and should really leverage their strengths there. They're a database company, a wanna-be ECM company, and all of sudden they're a cloud company and a social enterprise company? Perhaps Oracle should take the advice of Steve Jobs and find their focus...
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Errin O'Connor

Well, bring it on...In this fiscal year or the next (in the most professional way said..)

Dan,
First, I thought your piece was fantastic and very informative. Being the pessimist and non-stop devil’s advocate, I can’t wonder thou, why most Fortune 1000’s would care?

We are talking the here and the now and not the future-tense “present”… What Larry Ellison is currently cooking up and or rolling out in beta\testing\pre-prod (although rumors of his traffic, Ferrari Ticket threat and moving his company out of that tax district if ticketed, which I am sure is not true but I can’t help to admire and hope it is true) is amazing, its Q4 in 2011 organization and overall (pointing just to your article in my opinion) are rolling out ECM\ERM solutions and Oracle, their brother Darryl and their other 2 brothers Darryl are late to the game.
One of the smartest analysts I have ever met, from Gartner, Mark Gilbert, assisted in commissioning a new study, “Gartner Magic Quadrant: Update Your Enterprise CMS If It's More Than Five Years Old” the URL:
http://www.cmswire.com/cms/information-management/gartner-magic-quadrant-update-your-enterprise-cms-if-its-more-than-five-years-old-013201.php?awt_l=9gL7F&awt_m=JF7il2tYDKn0sm&utm_source=newsletter&utm_medium=newsletter&utm_campaign=newsletter
and several other Gartner associates involved in this study quote, “In fact, Gartner advices enterprises with enterprise CMS technologies that are more than five years old to re-evaluate their content architecture with a view toward consolidating functionality and vendors.”
Should have, could have, might of, and I think we will, are not going to be good enough for the Board of Directors and Gating Committees' approving funding to ensure their organizations are ahead of the competition...
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Tom Motzel

It appears EMC wants out anyway...

EMC has never given Documentum products equal status with their primary storage product line. They recently told their internal reps they are going exclusively to a partner model for Documentum sales. ...When was the last time you saw EMC offer any vision statements about their ECM Roadmap? ...Oracle is smart to make themselves 'available' to pick up the slack.
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Yves Mittelmann

Interesting battle : isn't there more ?

Thank you for this information and your complete analysis : it is interesting indeed !
I find it amazing : do "traditional" ECM vendors really think this is the way to gain market shares ?
As quoted by Craig : who can (still) believe that replacing will ever be for free ? :-)
Not one word concerning the open source ECM vendors : don't you think the real change is coming from there.
Look how some open source vendors have managed to become real competitors within the last five years, proposing new integration capabilities, standards respect and promotion... and gaining market shares in return.
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Stacey Brown

Sharepoint? LoL

Yes Sharepoint is doing ECM too but it's becoming better known as PainPoint for ECM. If you want to gain use of all the "features" you better hire a few more staff to manage all the vendors that you'll have to deal with for the add-on products. Geez. And, for those who want to meet Federal Records Management requirements, it's not 50515 compliant and would still require a documentum, filenet, Trim backend to manage records.
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Rich Blank

Stacey

It's always easy to blame the system. Fact is, SharePoint requires governance like any other ECM system. Fact is SharePoint has economic benefits especially if you consolidate vendors. And there are products built on SP2010 that address areas the core platform doesn't fully address weel...like 5015 compliance. See: http://www.gimmalsoft.com/Products/Compliance/Pages/default.aspx
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