Open Text is emerging as a leading player in the red-hot enterprise content management (ECM) space, which includes competitors such as FileNet, Documentum, Vignette and IBM. Driven by the need for systems that help companies comply with new regulatory requirements, the category represents a major new growth area for the channel. In an interview with CRN Editor in Chief Michael Vizard, Open Text CEO Tom Jenkins talks about the growth factors and opportunities for solution providers in this segment.
CRN: What impact have Sarbanes-Oxley and HIPAA had on the ECM space?
JENKINS: It is absolutely the reason why content management is a hot IT sector. About 13,000 reporting companies today have to satisfy Sarbanes-Oxley's requirements. If you talk to analysts, I think you'll find various estimates show content management will be the highest growth sector within the IT universe. That's simply being driven by regulatory requirements.
The events of 9/11 and Enron and what happened to society the last part of 2001 really touched off more regulations and more legislation in many industries than had been written in the previous century. So you know how in news we report things like a "once in the century" flood? Well we have a "once in a century" event that has occurred in several industries. Whether it is FDA or financial services or government or construction or energy, the reality is we've had all kinds of legislations over the last two or three years that have been profound and all center around the same thing: Who wrote the e-mail? Who destroyed the e-mail? Why didn't I get the e-mail? And I use e-mail as a proxy for, who wrote the content? Why didn't I get that content? Why didn't you forward me that Web site? It is really all about content.
Not surprisingly, content management is taking off like a rocket simply because legislators understand that it is possible to document and create audit trails of all these interactions. This is really a reflection of how much society has changed. A lot of this stuff is simply a reaction to the enabling technologies being now in place.
CRN: How many channel partners do you have today?
JENKINS: We have well over 100 partners worldwide. That ranges from small organizations with 100 people in them to the global integrators. So it is a full spectrum of partners.
CRN: Is there room for additional partners?
JENKINS: The industry capacity in content management to deploy right across the entire world, across all verticals, is probably around 2,000 customers. So Sarbanes-Oxley alone would probably take the current capacity of the industry two years to resolve. There's no question that all of the companies in the content management industry are going to need more partners. There's no question about it.
CRN: Do you sell direct?
JENKINS: We do both. It is simply because that is what customers like to see. We have quite a substantial partner program, and customers like to see that. Customers like to see partners. But at enterprise software, customers like to see the vendor. The enterprise software vendor is in on the deployment so that they're committed. Where it is a domain experience, [customers] like to see the partner be involved in that deployment.
CRN: The ECM space today seems to be undergoing a fair amount of convergence as the data, content and document management disciplines come together. From your perspective, what is going on today?
JENKINS: There is no question there is a convergence going on. As with other industries when they converge, you generally have a pyramid kind of convergence where you sort of have a whole bunch of small vendors become medium-size vendors. Then you have a whole bunch of medium-size vendors become large, and then you end up with a couple of pillars. At sort of two ends of the spectrum you have IBM and Microsoft as being very large, all-pervasive vendors of software. Then you have a whole bunch of smaller vendors that have grown up over the last 10 years building point solutions to solve a particular problem needing content management. In the middle you are starting to get an aggregation around this idea of content management.
I'd say what's interesting about what is going on in the Open Text world is that we're seeing a kind of midtier software vendor getting created from the aggregation of a whole bunch of point solutions. Open Text, FileNet and Documentum are all [that type]. Then Documentum was taken out by EMC, which created a bizarre side category of a hardware/software hybrid. On the whole, I think you have a very dynamic time in the software industry.
CRN: What is the relationship between content management and storage? And what did you make of EMC's deal to buy Documentum?
JENKINS: I think that storage and software can be a natural fit. I actually think what EMC did was a very smart thing because there are a group of customers who like one-stop shopping. But the simplest answer is that there is no simple answer. The reality is that it depends on the customer demographics. But the vast majority of customers prefer the flexibility of making their own decisions so long as that flexibility doesn't come at a tremendous total-cost-of-ownership price.
CRN: Do you think that business intelligence and portals are going to be the next categories rolled up into this convergence?
JENKINS: Business intelligence, by the footprint of having several companies that are half a billion revenue or more, is certainly in its own category. Portals in and of themselves do not have the financial weight with customers or with the stock market to be considered a category. Portals, I believe, will end up under content management. They're simply a window into content.
CRN: As the industry focuses more on business process integration, do you think that large enterprise application providers will begin to focus more on ECM?
JENKINS: The ERP industry for the last 20 years has been a transaction-oriented enterprise software area. I think that area has been very well-served and very well-researched and very well-deployed. What has not been solved and where the applications are really being driven today is where you need the collaboration, which is where the fuzzy interface of human beings interacting with each other comes in a non-numerical way. A human being has this amazing way of collaborating and does it in a very sort of nonlinear way. It's those applications that are the next frontier of enterprise software. Vendors that have been from the transaction side will probably look at this area as their next natural area.
CRN: Will interest in ECM tools expand more in the small and medium enterprise space?
JENKINS: What you'll see in the SME space is that the typical vendors that satisfy that space continue to proliferate there. So, for example, you'll see Microsoft really be in that space. You'll see Open Text stay in the heavy-lifting, industrial-strength space with the Global 200 and large organizations with worldwide operations. That's really our specialty. But I think you'll see price points continue to come down. Interestingly, it is more of a question of value for money. What is actually happening is Open Text has increased its prices almost every year for five years, but the value of what we sell has increased every year greater than what our price increase has been. So I think you'll see more of that. You'll see products that are more sophisticated being offered at basically the price of a less-sophisticated product from the year before.
CRN: In your mind, what differentiates Open Text?
JENKINS: What we have done over the last two or three years especially is both organically and through acquisition built a soup-to-nuts suite. There really isn't anything in the Open Text product suite that is missing that would be considered to be a major component of content management. Why a customer would prefer one vendor over another is that you eventually know that you're going to use all the pieces of a content management suite. In a particular situation you may be in a department that wants digital asset management for marketing, or you may want contract management for your legal department. But over time the IT guys know that all of those pieces eventually will come into one unified data model under content management. That's always what drives them to want to standardize on a single vendor because, at the end of the day, it becomes much cheaper for them to deploy and redeploy.
CRN: What do you think will happen next in the ECM market?
JENKINS: I think that we'll see an orderly consolidation of this market, and Open Text will obviously be playing a leadership role. Over a year from now I don't see very much change in the competitive landscape or in the vendor landscape. There's been quite a lot of activity over the last six months as many point solution vendors have merged with another point solution vendor, and I think you're starting to see a pretty active aggregation market at the low end. I don't think we'll see any aggregations at the high end yet. That will certainly come over time. But over the next year, an objective for Open Text is to just keep delivering on this overall view of a consolidation of the enterprise content management market and delivering solutions to customers that encompass all of those pieces.