This is a guest post from Dave Giordano, President and founder of Alfresco partner, Technology Services Group. Dave is a technical architect and visionary with deep experience in enterprise content management. He is widely acknowledged for his expertise and 21 years working with Documentum and shares his thoughts on the recent purchase of Documentum by OpenText.
On September 12th, OpenText announced the completion of a deal with Dell (now that EMC is part of Dell) to purchase the Enterprise Content Division (ECD) that includes Documentum. For those of us in the ECM world and particularly the Documentum community, we had been anticipating some type of sale since it was announced in the spring that EMC was looking to sell Documentum. For this guest post to the Alfresco community, I thought I would share some of my insights into the mega ECM merger, most likely outcome of the purchase as well as what our thoughts in regards to innovation within the ECM space.
As a veteran for the past 20 years of all the US based Momentums (Documentum user conference) and an early Documentum partner, I can vividly remember the first Momentum in Miami where I actually presented on how to tie Documentum to a Browser based interface (was C – Perl – CGI at the time). It was a small, tight community that was passionate about ECM and how we together could change the world. On a side note, I also remember first meeting John Newton and see his passion for ECM, even when having to scramble on how to make Auto Render (PDF Transformations) better during an ask the experts session to close the conference.
TSG was a partner with Documentum from 1996 to 2010 and began developing products and solutions for Documentum in 1999. We continue to offer our software tools to our community of Documentum customers as part of a services arrangement at no software purchase or maintenance cost. Since 2006, we have offered these same products and solutions to our Alfresco community of customers.
In regards to this latest news on Documentum, we have posted a detailed analysis for our Documentum customers , some relevant points include:
- 1.62 billion purchase price of which OpenText is borrowing 1 billion
- During the investors call, OpenText was very excited about the amount of revenue from the ECD division that was based on maintenance (50% of the 599K 2015 earnings) and discussed ways to “expand the profitability of the ECD products over time”.
Some of our thoughts in regards to the purchase include:
- The purchase reduces the stress of those at ECD and customers that have been in limbo since the Dell purchase was announced as they were a small, insignificant cash cow division of Dell.
- OpenText has purchased many other companies in the past (5 in the last 6 months) and has a detailed understanding of how to on-board companies. OpenText focus on growing through acquisitions has resulted in a substantial bump in their stock price over the last year.
- OpenText purchasing the ECD assets helps them remove a significant competitor. OpenText does have their own cloud offering and mentioned the ability to upsell Documentum customers to the OpenText cloud.
- OpenText does not have a history of enhancing or innovating within their purchased companies, instead mostly leaving the companies alone in more of a portfolio and cross selling consortium or suite.
- OpenText does not bring in a new group of customers hungry for Documentum (maybe InfoArchive but that is not Documentum) as they have multiple competing products that already provide ECM capabilities (Hummingbird/OpenText)
- OpenText will look to reduce expenses to expand the profitability of the ECD products. We would think sales and marketing would be an easy area given overlap of OpenText and Documentum resources but would imagine that that could include R&D and customer support.
- OpenText will need to look to entice ECD employees to stay. Keep in mind that, with the EMC/Dell deal closing, all current employees just had their options vested as part of Dell taking EMC private. We would predict that OpenText is expecting at least 50% attrition.
Overall, we would predict that OpenText will manage the ECD division very similar to how it was managed at EMC except with a closer eye to reducing expenses. While OpenText will announce that “big things will happen”, even an optimist would have to agree that proof of those announcements are being undertaken will take a least one to two years to prove out. As an example from the EMC days, back in 2015, Documentum unveiled their “Project Horizon” that was focused on providing a new cloud based tools and repository. At the time, one of our primary concerns was that, while the vision was innovative, we didn’t think it would be funded if it didn’t contribute to additional sales. In 2016, the first components of Horizon emerged as LEAP but needed to be purchased and did not include the new repository. With a closer eye to expenses, would LEAP even make it out of the starting gates at OpenText?
Documentum customers should understand that for what they are paying for Documentum maintenance, they will not be getting innovation but simply access to product support for a very old, legacy product. Not wanting to disrupt the maintenance stream, OpenText is not motivated to spend money to make the product better or introduce the risk of moving clients to a new platform as that might open up the discussion of staying on Documentum and not something newer.
As an Alfresco partner, we see innovation by Alfresco on both the repository, partnerships and other tools. A subscription model, rather than a purchase, focuses Alfresco on innovation and customer satisfaction, not maintaining a maintenance revenue stream. John Newton took many of the lessons learned from Documentum and has innovated with Open Source to create a better and newer ECM. Rather than follow the model of procuring companies, Alfresco has chosen to partner with innovators rather than buy or build their own. One great example is a tight relationship with the biggest (and best) cloud disruptor, Amazon Web Services, rather than build their own cloud infrastructure as OpenText has purchased.
For more information, access our whitepaper from last year comparing Documentum to Alfresco.