Not content to stand still
Not content to stand still
Sep 13, 2005: The Australian market for content management (CM) software has been to some extent an exception to the global rule, with two homegrown players capable of appropriating a proportion of the national revenue pie greater than most other non-US players in their national markets (Objective and Tower Software). However, this apparent uniqueness does not mean the market is buffered from the effects of the global enterprise content management (ECM) market. On the contrary, these are as clearly visible in Australia as elsewhere. And given that the global ECM market is set to see further radical changes over the coming years, the Australian market likewise will be affected. Industry analyst Sarah Kittmer, of Ovum, summarises the story so far, and makes some predictions about the shape of the market in years to come.
The global content management market is no longer recognisable compared to its status five years ago. Back then, self-contained content management markets such as web content management, records management, scanning and imaging, document management and digital asset management were the norm.
In the wake of the dot com bust, those originating markets were clearly no longer sustainable as individual markets, and were combined within a whole new market category. Enterprise Content Management (ECM) was born. The vision was grandiose and ambitious; provide a single product capable of resolving all users' various content management woes, and make a tremendous amount of money by selling enterprise-wide licences for those products.
Driven by this vision, in the subsequent years, vendors have acquired and merged with one another, and engaged in significant development work. Vendors around the globe have been affected. On the merger and acquisition side, notable examples have been the acquisition of Australian leader Tower Technology by Vignette, Open Text's acquisition of German giant IXOS, and the merger of Interwoven and iManage. On the development side, some have chosen largely a build approach to filling out their ECM propositions, such as FileNet, and Australian player Objective.
In light of these developments, many smaller and mid-sized vendors have pursued a third course of sticking to their roots in their original areas of expertise. Though this may have initially been accidental, it is now looking like a definite strategy. Tower Software and Meridio are examples of this within the electronic document and records management (EDRM) market. Tridion, Day and MediaSurface are further examples in the web content management (WCM) market. These players often provide technology to rival the leading ECM players within their category, and are agile enough to capitalise on deals that ECM players miss.
Market potential unfulfilled
Though the market has dramatically changed shape, its growth has been unspectacular overall. Globally, it is now worth US$1588.43 million, only a 4 percent increase from its value three years ago. Vendors who have merged or acquired others see their overall revenues roughly the size of the originating companies combined. Pure play vendors, though fewer in number, generally retain their former revenue levels. The market has so far failed to deliver on its own ambition.
Two key problems have contributed to this failure, and they are closely related to one another. Firstly, buyer behaviour has not evolved as dramatically as vendors would have hoped, in spite of the growing volumes of content and growing pressures to get it under control. Buyers have largely ignored the new ECM term.
They have continued to buy the separate technology pieces from vendors, such as records management or web content management, as opposed to engaging in true ECM megadeals. Secondly, vendors have undermined the credibility of their own ECM mantra by pushing it too hard at a time where the technology didn't really deliver. Only now are vendors starting to offer technology that is truly suitable for enterprise wide CM, both in terms of cost and scalability.
Further sea changes likely
This status quo is unlikely to continue. There has been one further crucial change in the market landscape which has the potential to completely transform the shape of the market across the globe over the coming years. That factor is the entrance to the market of major players Microsoft and Oracle. Joining rival IBM in the market, they are poised to offer CM technology which is truly enterprise-class, and will dominate the market globally over the coming years. Smaller players can no longer rest on their laurels, and must prepare for the coming changes.
IBM has long been a player in the market, with origins in scanning and traditional document management technology, embodied in its DB2 Content Manager product. It has been the undisputed market leader for many years, playing mostly for high-end deals with high-end requirements. IBM was joined on the top five ECM leader board two years ago by Microsoft, who made an opportunistic bid for two parts of the market. Firstly, it went for the low-end web content management market with its Content Management Server product. Secondly, and most successfully, it offered simple document management capabilities, wrapping them for free in its Windows Server 2003, and enabling them to be accessed from its hugely successful portal product, Sharepoint Portal Services. We would be surprised if Microsoft did not seek to improve its CM capabilities further, given both their success to date, and their shortcomings.
Now, Oracle has announced its new offering in the market, due for launch over the coming months. Oracle's Content Services 10g product is set to offer highly scalable and affordable document and records management, aimed at the majority of users in large enterprises who have relatively straightforward CM needs. Given this development, IBM is likely to pursue market opportunities with renewed vigour.
On the one hand, the entrance of these large players is good news for the market. As Microsoft's entry showed, the presence of big players can raise the profile of the market with positive effect for many. On the other, the threat to small players is clear. Their addressable market is likely to shrink. The high-end market is all but saturated with the likes of Documentum, FileNet and Open Text. At the low end of the market, with Microsoft potentially increasing the sophistication of its products, it closes potential opportunities with the enlightened portion of the market. Oracle will make enterprise-wide document and records management a reality at low cost within large enterprises, with IBM closing further opportunities in this space.
It is likely to be one or two years before the market feels the full 'IT giant' effect. In the meantime, all vendors globally must not only have an alternative plan in their back pocket, but must consciously pursue it. Seeking out value-adding opportunities on top of what the giants offer is likely to be the best bet. Interwoven has already announced an extended partnership with Microsoft with this goal in mind. Others would do well to follow suit.
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