FileNet Partners Hope IBM Takeover Won't Disrupt Business
$1.6 billion deal to acquire the software vendor
FileNet specializes in enterprise content management (ECM) and has a particular strength in imaging technology, a field it pioneered two decades ago. IBM said it's buying the company to fill a gap in its portfolio so it could better compete with EMC. Though IBM has an assortment of content management products in its DB2, WebSphere and Workplace lines, it lacked the deep records and workflow management technology that FileNet will bring, solution providers said.
"IBM doesn't have anyone over there that knows this space," said David Gerber, president of content-capture services specialist Tallega Software, Mission Viejo, Calif. "I'm afraid IBM will find a way to screw it up. If they leave FileNet to run the way it has, then fine. If they bury it inside the current content team at IBM, I'm afraid they'll smother it."
FileNet's partner network heavily overlaps with IBM's, but VARs without strong ties to IBM worry that they'll be overlooked in Big Blue's larger pond. Tallega Software signed on as an IBM partner two months ago but has yet to talk with any channel executives from IBM, Gerber said. With FileNet, the solution provider has a strong relationship with executives who understand Tallega's complementary areas of expertise.
"We're viewing this as IBM wanting to eliminate the competition," said another FileNet partner, who requested anonymity. "We anticipate it being a bit of a rough road for partners. For deals that are on the table, we believe customers will play a wait-and-see game."
That wait could be prolonged if another bidder makes a play for FileNet, a possibility posed by several Wall Street analysts. FileNet has long been considered acquisition bait, and IBM's $1.6 billion offer carries a miniscule premium: IBM agreed to pay $35 per share, 1 percent more than FileNet's Wednesday closing price of $34.65. Investors were sufficiently optimistic about the likelihood of a better deal surfacing that FileNet's shares ended Thursday trading at $36.17.
Potential suitors include Oracle and EMC, which cannonballed into the content management market several years ago by acquiring Documentum. And the ECM space is consolidating rapidly. Last week, Open Text struck a deal to buy Hummingbird for $489 million, snatching it away from a rival bidder.
Those vendors, particularly Documentum, have crimped demand for FileNet's technology, according to several FileNet partners. Channel sources report heavy Documentum discounting, making it difficult to compete on price.
"FileNet is more of a legacy vendor. You can get newer technology for much less cost," said Hikyu Lee, CEO of Softlinx, a North Billerica, Mass.-based ECM consultancy.
Softlinx partners with various ECM vendors, and its sales have been stronger around FileNet competitors like Stellent, Lee said. Still, Lee thinks the IBM deal is a good one and hopes it will revitalize FileNet.
"IBM has been adding different functionality through acquisition and has a lot of technology," Lee said. "This will fill a gap in its offerings and is a good value for FileNet shareholders. For FileNet, I think it's a great deal."