KM grows into second phase

KM grows into second phase

A new report from Ovum reveals that the knowledge management market will grow to US$4.4 billion this year.

By Hannah Birtles

After an initial period of hype and confusion, knowledge management is now entering a second phase, according to UK-based analyst firm Ovum.

"Knowledge Management: Building the Collaborative Enterprise", a new report from Ovum, includes predictions that the overall knowledge management market will grow from US$3.1 billion in 1999 to US$12.3 billion by the end of 2004.

The report projects that this year the market is expected to be worth some US$4.4 billion. In addition, the market for knowledge management (KM) software will grow from US$515 million in 1999 to US$3.5 billion in 2004, while the knowledge management services market will grow from US$2.6 billion to just over US$8.8 billion during the same period.

"Organisations in a broad range of industries are trying to improve the way knowledge is shared and created within and beyond the corporate firewall," said Ovum in the report. "They realise that only by developing new ways of using and valuing their know-how can they succeed in an economy turned upside down by e-commerce."

Perhaps the most important finding in the report is that KM is "not a passing fad", and the KM market will continue to evolve and expand over the next five years as the theory becomes a core element of corporate IT strategies.

Growth in KM Spending 1999-2004

The overall knowledge management market (comprising software and services) will grow from US$3.1 billion in 1999 to US$12.3 billion by the end of 2004, with consulting services still dominating expenditure.

Ovum states that there is growing recognition of the fact that in a "knowledge-based economy", intellectual capital is a company's prime asset and has to be managed as such.


According to the report, the imminent second phase of knowledge management will be characterised by early adopters beginning to deploy applications on a wider scale, and the "early majority" extending their intranet deployments into significant KM initiatives.

Key events and trends in the second phase of KM will include:

¥ the critical battle between Lotus and Microsoft. Lotus plans to build on the platform of R5 in a number of directions, whereas Microsoft has laid out an ambitious roadmap for Exchange;

¥ increased activity from other key players - Open Text, Documentum and Verity who are seeking to build on their established strengths;

¥ technical innovation. Developments in areas such as expert profiling and Web-based collaboration will continue to create opportunities for the smaller niche vendors; and

¥ the emergence of a new set of knowledge-based applications for competitive intelligence, best practice, speed-to-market, rapid response and innovation acceleration.

The third phase in the market's evolution, expected to occur around 2002 according to Ovum, will see knowledge management evolve to become an embedded technology in a wide range of corporate applications.

Ovum expects the vendor community, which has been multiplying recently, to shrink. This will occur as vendors inside and outside the KM field try to achieve the necessary mass, in terms of customers and revenues, to convince large enterprises that they are viable suppliers of a strategic component of the corporate architecture.

"Further consolidation will result from moves by RDBMS, data warehousing and OLAP and ERP vendors to acquire knowledge management technologies to improve differentiation in their own markets - Hummingbird's acquisition of PC DOCS is the most important example of this trend so far," said Ovum. "Microsoft and IBM Lotus can also be expected to continue to 'mop up' niche technology vendors that can help them enhance their offering."

Smaller vendors wanting to retain their independence will need to be supported by a strong set of partner relationships, and be open about interoperability of their software, according to the research firm.

In addition, Ovum reports that there will still be considerable room for innovative start-ups to emerge and that the Extensible Mark-up Language (XML) will give further scope for new solutions.

Now that all major management consultants have established KM practices, the report identified the main thrust for the service firms is to strengthen the ties between KM expertise and other service offerings such as ERP implementations and e-commerce.


As most large organisations establish KM strategies over the next few years, the impetus for long-term development is shifting to the integration of KM with the concept of the 'extended enterprise' which is tightly connected to its suppliers and customers through knowledge and information exchange. According to the report, this trend is already evident in many early adopters.

The continued growth of the KM market will depend on suppliers' abilities to help user organisations make these links in terms of business processes and underlying technology.

A further driver for KM will be the need to provide 'intellectual capital' assessments as part of the information available to investors.