The ECM Market in the PM (Post-MOSS) Era
The recently-completed quarter marks the first financial reporting cycle since Microsoft released their latest version of SharePoint, Microsoft Office SharePoint Server (MOSS) 2007. This is the first version of the tool that could be considered to be a true competitor to incumbent ECM vendors (although there’s plenty of debate about that, see my last post for more).
Based on what I’ve seen in the Calgary ECM and document management market I have a sinking feeling that established ECM vendors could have a hard time making their numbers. I know of several organizations that have deferred their decision about the purchase of an ECM suite until it becomes clear exactly how SharePoint 2007 performs in some of its early implementations and I’ve also seen several organizations dive headlong into MOSS deployments. Either way, this translates into reduced license revenue for established ECM vendors in the short term. If this is a trend beyond Calgary, which I’m virtually certain it is, vendors like Open Text, Vignette, Interwoven and OnBase could be in for a rough year.
The first three in that list are public companies so we can keep an eye on them to see how exactly they do, and two of them have reported already. Vignette shares took a tumble after reporting their first quarter results last Thursday. Revenues were steady and EPS was up but curiously they’ve cut their sales and marketing budget by about 20% over last year. This helps them report healthy profits but it strikes me as a bit short-sighted in a battle for market share with Microsoft and other software giants taking an interest in the ECM space. Interwoven has seen an increase in revenue but their share price has flattened out over the past three months or so, coinciding nicely with the release of MOSS. There could be many other reasons for this, of course, but it seems likely that the presence of Microsoft in this space is having an impact. Open Text seems to have bucked the trend, their acquisition of Hummingbird reflecting nicely on the bottom line in their second fiscal quarter release back in February. Rumours also persist that they’re a takeover target, SAP or HP being the most likely suitors. However, I’ll be very interested to see what the numbers look like this Wednesday when they release their third fiscal quarter results.
Is this the start of a trend towards very large vendor domination of the ECM space? Probably, if past history is any indication (remember SQL Server’s humble beginnings?) But all is not lost for incumbent ECM vendors. As I noted last week, established vendors are miles ahead when it comes to full-function ECM. Compliance, line-of-business application integration and countless mature vertical markets will continue to serve traditional ECM vendors well. The trick will be convincing purchasing departments that there is a role for both SharePoint and a full-scale ECM tool. And this, I think, is the reason that established ECM vendors are likely to go through a bit of a rough patch over the next quarter or two. Until it becomes clear what use-cases MOSS satisfies, and where it still has a ways to go, sales of full-scale ECM applications are likely to suffer.
This probably means that the sales pitch of the ECM vendors will take on a different form, perhaps targeting vertical deployments rather than the grand vision of a system that spans the enterprise. Most have released SharePoint integrations and have as much as given up on the collaborative space. While this is necessary it may be contributing to the confusion in the market. The question ECM vendors need to answer is; “Why would I integrate your tool with theirs when I could just buy theirs?” There are many good reasons as I’ve listed above, I think it’s just going to take some time for that message to get through.
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DISCLAIMER: I am not a financial analyst and am in no way making a recommendation regarding any of the publicly listed companies referenced in this article. I do not own any shares in any of the companies mentioned above and present this information strictly as my own personal opinion.
Records management is plumbing. We no longer carry water from the local well, or dump our sewage into the street–plumbing is completely integrated into modern life. We don’t notice it because it’s built into every building we live in.
Similarly, records management will be completely integrated into modern business systems, and we won’t notice it because it’s built into every process we live in.
MOSS is headed towards that integrated future–as ECM vendors, sadly, are not. “Thanks for the R&D, boys, but it’s time to expand our monopoly power base.”
Comment by Rick Cowburn — May 4, 2007 @ 3:49 pm
I am leading a small company with big net revenue and very complicated federal contracts through an ECM project. We looked at all of the vendors you mentioned none could offer us exactly what we were looking for without so much special adaptations that we realized we were essentially desinging our own ECM system and what we needed were the tools to build it. I think MOSS 07 and Office 07 (though I loath the very thought of moving our users to Office 07) give us those tools. I have to agree with the above when you look at a future where Sharepoint is managing web content, Exchange is managing incoming content and users can fill out a Document Information Panel and have 90% chance of finding their document again, why it certainly seems that microsoft will own this space in a very short time. All they need to do is produce a slightly more organized out of the box deployment.
Comment by Travis Sanford — June 5, 2007 @ 11:32 pm