INDUSTRY SHAKE OUT

Recent mergers and acquisitions in the storage and ECM markets have seen consolidation and refocusing of market strategies. IDM spoke to the industry to get a feeling of how end users would benefit.

As the financial year end passed into history, along with results either boasting of amazing revenue growth, or the ‘on message’ re-framing of less than appealing figures into acceptable market-speak, came news of companies swallowing others.

There was EMC’s purchase of RSA Security, Hewlett-Packard (HP) acquisition of Mercury Interactive, an application and operations software vendor, adding to their already mammoth acquisition of Peregrine, yet another IT Service Management specialist; IBM paid out for MRO, an IT asset management company, and major ECM vendor, Filenet. BMC Software purchased Identify, an integrated transaction management provider that accelerates problem resolution processes across the application lifecycle; Brocade and McData became as one; and Hummingbird was snapped up by OpenText.

Ideally, all this activity should produce those synergies that business-speak loves to ‘identify’. Even more ideally, those synergies should benefit you. However, there is also the possibility that any benefits could evaporate burnt off by lack of choice, lack of expertise and loss of focus.

So, either treated to economies of scale; or they could find themself in a long queue outside the mythical ‘One Stop Shop’, waiting for the assistance to work out who knows how to work the doors.

IDM decided to go to the horses’ mouth, and ask the industry itself. We began Tom Bishop, the Chief Technology Officer of Business Service Management provider, BMC Software. Tom joined BMC in 2005 from VIEO Inc, where he served as Chief Technology Officer and was named one of the top 25 CTOs by InfoWorld magazine in 2004. While at VIEO, Bishop pioneered the architecture and design of an applications-focused, quality of service-oriented enterprise systems management solution.

For more than 20 years, he has served in senior technology and strategy roles at leading organisations including UNIX International, Tandem Computers and CompuCare Management Systems. Bishop was an early employee of Tivoli Systems and rose quickly through the organisation, serving first in key development roles before being named Chief Technology Officer and General Manager for IBM Tivoli’s Embedded Solutions business unit.

Looking at the recent frenzy of acquisitions and mergers, it's clear that each company has come to realise the importance of making I.T. a true cog in the business machine.

As with many series of acquisitions, one can begin to identify interesting trends and motivations behind the sudden spike in activity. In looking at the aforementioned acquisitions, we can see strategic decisions, and in some cases, reactions to competitive threats at play.

What's Behind the Consolidation? The changing competitive landscape is generally driven by four key factors. It includes the need to:
• Increase revenue quickly to meet investor demands;
• Meet customers' wishes to work with a smaller number of IT vendors;
• Complement or expand on existing solutions; and
• More closely align IT with business objectives, a strategy known as Business Service Management.

HP's intended acquisition of Mercury demonstrates a desire to increase its presence in the application development area. HP also needed a more aggressive sales channel, and Mercury fit the bill. Another factor that motivated HP's move, as well as those of other companies, is that customers want to work with fewer IT vendors to reduce the complexity of purchasing software.

In regards to IBM/Tivoli, their intent to acquire MRO appears to be reactive. Most of MRO's strengths are in managing physical assets, and not IT asset management solutions. Filenet is a good content management company, with an emphasis in the Service Oriented Architecture (SOA) areas, so that proposed acquisition by IBM will likely focus on application development - an attempt to compete with EMC.

The proposed Brocade and McData combination offers two companies that together will demonstrate increased revenue. It's a natural evolution played in the service management space.

Investor demands play an important role in acquisitions. Investors want to see revenue growth quickly, and one way to achieve that objective is to buy strong, good companies. BMC has helped drive revenue through its strategic acquisitions, such as its recent purchase of Identify, which helps BMC stay true to its course on BSM, helping IT organisations to meet business objectives.

Acquisition Challenges

What often looks good on paper may not necessarily be a match made in heaven when it comes to corporate cultures. Cultures can often make or break an acquisition. When acquiring an organisation, there is a sincere desire to acquire the talent of the organisation as well. However, if acquired talent decides that the acquiring culture isn't something that they like, they will leave. This presents a major challenge that HP may have with the intended Mercury acquisition, which has a different, faster-paced culture. To complicate matters even further, HP acquired Peregrine and is still dealing with those cultural and integration issues. Questions such as "who is going to take charge, what products are going to be saved, and which ones are not," become even more confusing to figure out.

The proposed HP/Mercury acquisition will also create uncertainty for Mercury and HP customers. In the service desk, configuration management database (CMDB), and other related core areas - customers are going to want to know which service desk and which CMDB they should they use. HP will have three service desks and three CMDBs. While HP is sorting out priorities, customers could be taking a risk if the technology they acquire turns out to be an albatross. BMC, in contrast, offers one fully integrated CMDB, which delivers complete architectural interaction across IT solutions. A federated, integrated CMDB, such as the one offered by BMC, can reduce the complexity of the IT infrastructure by providing the ability to take information from a variety of sources and offer a single source of accurate information of data in the infrastructure. Other organisations such as IBM and CA, although in the infant stages of their CMDB development, have also focused on only one CMDB, a safer bet for customers than the approach by HP.

In regards to the intended IBM/Tivoli MRO acquisition, there are some other issues that should be considered. MRO is a good company, but most of its strength is in physical assets and it is not clearly an IT asset management solution. IBM needs to sort out how it plans to position MRO's solutions related to asset management. This analysis could take time.

Looking ahead

So what will next year's acquisition season bring upon us? A number of key issues will be important in the near and long-term future that will impact future acquisitions. There has long been a gap with application development versus operations, so you'll start to see a lot of moves to tie those areas together. Companies that have a strong play in application development will try to leverage that expertise into the systems management area. There will also be new opportunities for companies to beef up Web Services solutions for Service Oriented Architectures (SOAs), and opportunities for business process management solutions. Over the next five to ten years, there will be a much stronger playing in tying business process management into enterprise management.

For the immediate future, I expect to see the pace of acquisitions accelerate. When one company sees its competitors make acquisitions, it's more likely to do more of its own. This creates a "follow-me" approach in the industry. Hold on for the ride.

Who Fits Where?

Exploring the changes is the industry is one thing, but we also wanted to get an idea of how changes would affect the end users. We spoke with Jackie Bettington, Director and Principal Consultant, Integrated Business Improvement Services (IBIS) on this subject.

IDM: Are your clients reporting that they are finally being involved in ICT purchasing decisions for records management?

JB: Our clients are primarily State or Local Government organisations seeking enterprise-wide solutions to achieve compliance and accountability outcomes. In these organisations, records management personnel are valued contributors and often lead the acquisition and implementation of electronic document and records management solutions. However, we are finding that records management expertise is often omitted from the design, acquisition and implementation of other business information systems such as client management, human resources and financial management systems that generate and store documents and records. We find the risk profile for these initiatives is much greater because they are designed to manage information and transactions. Once implemented, the se systems compromise the organisation’s capacity to efficiently manage the full lifecycle of records and ensure the integrity and usability of those records is protected to meet legal, accountability and business operational needs. By omitting records management expertise in these initiatives, organisations typically spend significantly more time and money in enhancing the business information system or integrating these systems with an eDRMS. This time, money and pain could have been avoided by simply engaging records management expertise up front.

IDM: How do you assess recent high-profile market changes such as IBM's purchase of FileNet, and OpenText acquiring Hummingbird?

JB: These high-profile acquisitions indicate that eDRMS products have come of age and are now regarded as critical components of a standard enterprise-wide ICT tool kit. eDRMS products are no longer just add-ons. They are necessities. The market recognises this change and these companies are positioning themselves to package eDRMS products within a broader enterprise-wide suite of business solutions to enable their clients to not only meet compliance and accountability requirements, but to also gain real bottom line business value.

IDM: 'Compliance' appears to be the word of the moment. Have you been getting feedback that supports this.

JB: I believe that compliance has been the word for many years. What has changed is that people are now actually doing something about it. This change has been triggered by the legal and regulatory response to recent high-profile illegal actions, unethical behaviour and accountability crises underpinned by poor recordkeeping practices. What made these high-profile cases scary for so many was that the underpinning recordkeeping failures were either complacency or a perception that recordkeeping is not important. These attitudes and practices resulted in real penalties and real time for a few high flyers and sent a sharp message to a critical mass that recordkeeping does matter and ignorance or poor recordkeeping cultures were no defence. While this change has pushed recordkeeping up the corporate agenda, it is a negative message fuelled by fear. I believe the preoccupation with compliance will run its course over a few years and is, therefore, insufficient to sustain the momentum required to ensure that compliant and accountable recordkeeping are embedded in business processes and bankable business benefits achieved.

IDM: How would you say that the role of the records manager has changed in the last ten years?

JB: Thankfully, the role of the records manager has changed significantly over the past decade. There is a noticeable escalation in the level of professionalism with many breaking out of the basement and strategically positioning recordkeeping as a means to business outcomes rather than a hindrance to business. While not a standing item on any Board that I know of, increasingly Boards, governance committees and Executive Management Groups are asking critical questions about recordkeeping and increasingly recognising that the corporate records management program is a necessity for achieving or sustaining good corporate governance. There is also a maturing of thinking in that it is widely recognised that records is not just about filing and destroying old stuff, nor is it about ‘plugging in an eDRMS’. There is a growing recognition the recordkeeping is integral to all business activities and is more a people-based process than an object-based or technology-based process.

IDM: What are the major challenges to change management does the implementation of a new ECM system provide - where are the pain-points?

JB: Our clients all agree that people present the most challenging part of any change management process. It is not that people are difficult, it is simply that a fully deployed enterprise-wide system such as an ECM affects all because it changes the way people need to operate on a day-to-day basis. Trying to communicate in a meaningful way that both engages and excites everyone in an organisation is far more challenging and exhausting than implementing the more traditional records management system to specialist administration or records management personnel. Sustaining the momentum and meeting the expectations of all is a related and major challenge too.

IDM: Some people have said to me that the role of the Records Manager is becoming redundant with the massive growth and development of digital record keeping - how would you respond?

JB: The role of the traditional records manager is probably diminishing. However, for as long as organisations have paper-based business processes and for as long as people need to keep paper records to satisfy legal and regulatory requirements and personal preferences, the traditional records management role will remain. What we are seeing is the emergence of more strategic and business oriented recordkeepers. These new roles include recordkeeping analysts to develop, maintain and integrate a wider range of information management tools, recordkeeping policy officers and information strategists. The key challenge here is that there is a significant skills shortage in these new areas. There are national competency units to support the training required to fill these roles, but there is a lack of financial incentive and personal motivation among many recordkeepers to gain the skills required to fill these new roles. Although many registered training providers have offered qualifications at the diploma level and above the vast majority of enrolments in competency-based qualifications remain at the operational records management level

IDM: What are the key challenges facing compliance-aware business wishing to align their IT and end-user interactions the next 12-months?

JB: The key challenge is understanding the business processes and workflow so that records may be efficiently managed across systems and enable compliance and basic records management lifecycle tasks to be managed behind the scenes. Organisations tend to implement an eDRMS to manage documents and records but do not attempt to make the eDRMS and associated information management tools, business rules, etc relevant or beneficial to what people do. This is a significant problem because it means the eDRMS is often seen as an unwelcomed imposition. These implementations satisfy the requirements of the recordkeeping and IT community but they do not help the end-user do their business better. If an eDRMS is not made explicitly relevant to the end-user and implemented in a way that directly supports what they do, then it will be difficult to ensure that records are systematically captured and managed in accordance with compliance, accountability and standards of recordkeeping best practice.

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