Although acquisitions among competitive vendors in the enterprise content management (ECM) market are not unusual (for example, Open Text and Gauss, Interwoven and iManage/MediaBin, Documentum and Bulldog/TrueArc previously), it is noteworthy that EMC’s planned acquisition of Documentum represents an infrastructure-level strategy that could be the beginning of a much larger trend, with potential impact on how enterprises seek to address content, archiving, and storage as a completely synergistic, single-vendor solution.
To be sure, storage hardware companies have been trying to increase revenue and have been commoditising margins through product differentiation via partnerships and integrated offerings on their products. It has also become apparent that storage companies are responding to customer demand for holistic approaches for managing exponentially increasing content through the enterprise and across multiple (often heterogeneous) storage systems, consolidation being the norm.
Furthermore, increasing fervour over technologies behind Sarbanes-Oxley and other regulatory compliance and organisational risks has been driving storage vendors and ECM vendors closer together, if only (thus far) through partnership. Documentum, viewed as one of a very few leaders in the ECM market (e.g., IBM, FileNet, Open Text), exemplifies the central theory behind EMC’s acquisition -- that enterprise content has emerged as an infrastructure concern for most Global 2000 and regulated organisations, on par with other mission-critical business data, such as databases, ERP, or financials.
By definition, enterprise content management is application software that provides a means to create/capture, manage/secure, store/retain/destroy, publish/distribute, search, personalise, and present/view/print any digital content (that is, pictures/images, text, reports, video, audio, transactional data, catalogue, code). These systems primarily focus on the capture, storage, retrieval, and dissemination of digital files for enterprise use and their life-cycle management.
ECM systems are generally tactical and non-discretionary, but are increasingly being viewed as more infrastructure-like than application-like, as organisations are dealing with accelerating business velocities, consolidation of redundant content management systems, regulatory and compliance issues (mandated or perceived), and business continuity. Indeed, it is the cost avoidance issues that have significantly accelerated the emergence of the ECM market. Fast processing and leveraging of information are key, but hefty fines, criminal prosecution, and litigation costs are recognised at a much higher level in most organisations.
Although technology is still a critical selection driver in ECM, the past gaps among vendor products are beginning to close, competition among the larger vendors is increasing, acquisitions to reach relative technology parity are increasing, and support for previously "non-traditional" content types (for example, email, digital asset management, and records management) is becoming viewed as core to ECM. While this evolution is seen as completely logical in the realm of ECM, what is most noteworthy is that EMC has never been in the non-storage application software space (Legato is the recent exception), and it now appears to be attempting to change the nature of both the storage management and ECM marketplaces.
On the surface, this acquisition represents a synergy of in-demand hardware and software components (ECM [Documentum], archiving [Legato], and storage management [EMC]), and offers significant up-sell and cross-sell opportunities within the client bases. It also provides Documentum with a formidable customer-facing force (sales reps and pre-sales engineers) of approximately 5,600 (only IBM can boast similar numbers in the ECM market).
Yet, key to understanding this acquisition is the background of Joe Tucci (EMC’s president and chief executive) -- he ran Wang Software’s core imaging and workflow business prior to its sale to Kodak. He possesses experience at a depth critical for success in the ECM market, and this acquisition’s chance of success would be far less had this not been the case. It will also link core ECM strength with Legato’s DiskXtender archiving product line, something Documentum lacked, and EMC’s Centrea content addressed storage product.
Cultural integration will be another story and is likely to take at least as long as deep product integration (18-24 months). In the interim, other ECM vendors are likely to seek other fixed content storage options (for example, Network Appliance’s SnapLock).
EMC must also pay specific attention to all components of Documentum’s portfolio, as this technology is sold as components or as integrated solutions. For example, we believe that EMC sees benefit in the collaborative aspects of Documentum (eRoom) because the collaborative aspects buttress the Documentum ECM story.
eRoom is a competitive advantage for Documentum, and EMC should keep its focus on this product. The latest eRoom release (Version 7) is a very strong one, and current customers should do the upgrade and take a wait-and-see approach. In addition, customers evaluating eRoom should continue to view eRoom outside of the acquisition. Even if eRoom loses six to 12 months in development, it still stays at least on par with the competition (IBM, Microsoft), which usually takes 18 months to offer new revisions.
Beyond these direct implications, the impact and ramifications for both storage management and ECM are far reaching.
First, Documentum has been viewed as a potential acquisition target for Oracle, SAP, and Microsoft from an integrated content/data standpoint (that is, unstructured and structured content).
Given Documentum’s acquisition, FileNet and Open Text would represent the next most desirable targets. Moreover, the continued speculation is that storage vendors (StorageTek, Network Appliance, HP, Veritas, IBM) could be acquirers if Oracle, SAP, or others do not act first, in an attempt to match EMC. However, without the proper management experience, this would not be advisable. This scenario, if accurate, validates that EMC has indeed changed the game, and that storage management in the future includes the management and archiving of content as well as the storage of content. Indeed, the $1.7bn recognises, for the first time, that unstructured content is of significant commercial value to organisations.
Also of significance is how successful EMC as a hardware vendor will be at absorbing a pure software company. Comparisons to Sun and historical failures in the old imaging days (for example, Kodak [twice], Minolta, and Hitachi) are in the minds of many.
As mentioned previously, EMC is purchasing Documentum for the strength and breadth of its portfolio, its customer base, and its market-leading status. This should be paramount in the long-term vision of EMC, and this is where the balance needs strategic focus: if EMC keeps Documentum completely independent (not creating tight, valuable storage-content integration), where is the benefit to the customer?
On the other hand, exclusive bundling and closed interfaces to the EMC platform will prompt Documentum customers to begin quickly considering their options. An open Documentum with value-added tight ties to EMC’s archiving and hardware offers the best approach to maximise revenue.
Although entering the ECM market seems to be a significant departure from storage for EMC, content management actually has many commonalities with current EMC initiatives. For example, policy drivers are essential to effective content management, and policy-driven storage (for example, storage virtualisation) is currently emerging as a key battleground among storage managers.
It is likely that EMC will be able to use technology and knowledge gained from Documentum for its ControlCenter product suite, and vice versa. Thus, the content, policy actions, and underlying infrastructure become seamlessly integrated. Even with a consolidated and integrated offering, EMC should ensure ongoing openness for all competitive storage platforms, and not seek to weld Documentum to the EMC platform exclusively.
Moreover, storage management companies are searching for application software to complement and differentiate their solutions as noted above. With regard to storage virtualisation, this is a "razor and blades" marketing scheme, whereby the policy (virtualisation) engine is the razor and the accompanying applications are the blades. Although storage resource management, backup and recovery, and provisioning are more traditional applications, ECM is a logical extension of this concept.
As EMC seeks to evolve from a hardware vendor to a software vendor (and generate higher margins), the company will find itself competing increasingly with pure software vendors (for example, Veritas). Nevertheless, EMC is not merely matching the Veritas strategy. Whereas Veritas is focusing on infrastructure management (for example, storage, servers, and databases), EMC is targeting data management (e.g., storage, and content management). Although IT organisations will note some overlap of product lines, there will be as many instances of "coopetition" as there are of competition.
EMC has entered the enterprise content management space through a market-leading acquisition. How it integrates Documentum technology and people, and how rapidly it creates deeply synergistic, infrastructure-capable solutions will determine whether EMC emerges as a dominant presence in a competitive market or loses any chance of dramatically changing existing market dynamics.
For EMC customers, having Documentum under the EMC mantle is straightforward, and it is likely to become the first choice for their ECM needs. However, nothing will change quickly enough to make Documentum the only choice, and EMC should not assume that winning these clients is a preordained fact. Clients (new or existing) seeking Documentum or EMC (or both) should be able to realise clear benefits from going to a joint content infrastructure and storage solution, which may not be available for six to 12 months. EMC should offer prospective customers a clear and documented product road map, value proposition summary, economies of scale, favourable licensing terms, and tangible cost/benefit emanating from the combined solution, including how collaboration fits within this vision.
EMC is poised to change the market dynamics of two separate yet intrinsically related markets. How EMC moves beyond historical IT industry hardware/software vendor-acquisition failures and then handles a combined approach to content infrastructure is solely its decision. However, Joe Tucci has the experience necessary to make this work, and we expect he will during the next 12 to 24 months.