Vendors Wage Buying Spree In Enterprise Content Management

With nearly every tech vendor trying to stake a claim in enterprise content management, many expect the flurry of M&A activity in that sector to continue.

IBM Software waged a one-company buying spree in recent months to bolster its content and data management portfolio, most recently buying up Green Pasture Software, Corvallis, Ore., for an undisclosed sum. That was IBM's third content management-related purchase in 12 months, said Janet Perna, general manager of data management for IBM Software, Somers, N.Y.

There was a litany of other deals as well in 2003. Sunnyvale, Calif.-based Interwoven bought MediaBin and iManage, while OpenText acquired Gauss and Ixos Software. EMC, in its quest to stake its own claim in information life-cycle management, bought Documentum in October.

"There has been a trend for IBM, Documentum and others to broaden out,organizations want a single framework to deal with all their unstructured content, documents, images, digital assets and the like," said Ted Warzecha, analyst with the Meta Group.

There are a number of factors at work, including new and more stringent government regulations about how,and for how long,different types of records must be kept. "There's more risk now in how organizations are dealing with content. Organizations are now more challenged on how they treat mission-critical information. They do a good job dealing with physical information,they purge files themselves or have Iron Mountain come out once a month,but those same policies and procedures are not applied to digital content," Warzecha added.

With content management companies getting snapped up, many assume FileNet, a pioneer in the field, is a likely target. Ken Fitzpatrick, chief marketing officer of the Costa Mesa, Calif., company, takes the talk in stride. "We're a publicly traded company and we read the same stories [about potential buyouts] everyone else does," he said, adding that FileNet itself is doing nothing to promote such talk.

The discussion is a natural outgrowth of what's happening in the market. "Content management is top of mind among customers," Fitzpatrick said. "Smart people are looking at emerging markets and opportunities, and we're seeing tremendous demand from customers. Software guys want to extend their technology, they want green fields."

The accounting scandals of recent years and the regulations they engendered have helped spur the need for new technology. And the fact that companies now deal with "267 different types of content,from engineering drawings to instant messages to e-mail attachments to PowerPoint and video and audio,the IT guys are seeing explosive growth," Fitzpatrick said.

Some say pure-play content management companies are on a collision course with other tech companies that are buying or building their way into the market. Fitzpatrick prefers to see opportunity for partnerships. Computer Associates International's BrightStor, for example, is storage management with network backup and recovery, "whereas FileNet manages the content itself, how it's created, who created it, how it's archived and secured and infused with intelligence in the process," he noted. That would mean what had been a dumb object can be smartened up, kicking off action based on human intervention or some part of that document triggering an action based on a rules engine, he said.

IBM's Perna and others acknowledge they expect M&A activity to continue as niche players get bought up by larger companies. "This is consolidating very, very quickly and when it stops, some people may be left standing," she said.

In addition, there's the Microsoft wild card. While no one says Microsoft, Redmond, Wash., will be a player in the enterprise content management market anytime soon, it is building relevant capabilities into its infrastructure.

It was extremely smart for Microsoft to move document management capabilities out of SharePoint Portal Server and into Windows SharePoint Services, said the Meta Group's Warzecha. "Now they're part of the operating system, callable from any application," he said. "They're providing a rudimentary level of document management as part of the OS, commoditizing the low end. Will they be in a position to compete with IBM or Documentum for the heavy lifting? No. They want to do 80 percent of what is necessary for small and medium-size businesses and then leverage partners for heavy lifting for BackOffice."