Perhaps it was inevitable, but Oracle has finally declared war on EMC’s Documentum and is introducing a new program to replace Documentum installations for free. On Oct 26 they are hosting a webinar to discuss some of the specifics. (http://www.oracle.com/us/products/middleware/webcenter/moveoff/documentum/index.html?origref=http://blogs.oracle.com/webcenter/entry/moving_off_documetum_to_oracle?sf2383954=1)
Most software vendors actually make more money on maintenance than do on the sale of new licenses and a company with deep pockets like Oracle can certainly do well. The real irony is that Oracle is using the same strategy that EMC itself used against Filenet before they were purchased by IBM. Interestingly, Oracle is not targeting IBM with their new program.
Oracle needs to be a big player in the ECM business and they have made quiet strides over the last 2-3 years. Most sales people from the big vendors (IBM, EMC, and OpenText) will tell you that Oracle has been their biggest fear market and far ahead of HP, the other sleeping giant.
The ECM market has been important to Oracle for many years but they really struggled to gain market share. Larry Ellison himself noted that the unstructured content market is at least four times larger than the market for data in structured databases. Oracle developed at least three internal products that achieved only modest success in the market. Part of that was due to the fact that the Oracle sales force focused on more lucrative software products; ECM just wasn’t big enough or profitable enough to get the attention of the sales force. Just as Oracle was launching their new web-based product designed to compete against SharePoint, in 2006 they purchased Stellent for $440M. Stellent’s core technology came from Optika, an early document management company that did well in the mid-tier of the market. Sort of Hyland before Hyland existed. Optika was purchased for $59M largely because they had a large installed base that paid that maintenance revenue. At one point, Optika has a market cap of just $9M as new license fees were flat and virtually all of the revenue came from maintance.
ECM systems touch a lot of other technologies and larger companies like Oracle, IBM, EMC, HP, and even Dell have the opportunity to sell more of their technologies when they get in. EMC was locked in a brutal battle with IBM and Hitachi for storage sales when they purchased Documentum. One key that the smart people at EMC saw was that up to 50% of the unstructured content was stored on Filenet’s large optical disk jukeboxes. They rightly salivated over the opportunity to convert those customers to EMC storage and some estimate that EMC paid for the entire Documentum purchase in two years just because of the increased storage sales. That came despite giving away a lot of the software licenses for free to replace Filenet.
Oracle is trying the same thing but has even more upside. Sometimes it seems that Oracle wants to compete with everyone for everything. Whether it be Microsoft, IBM, HP, Dell, Google, SAP, or even virtually every large system integrator, Oracle brings a wide range of software, hardware, and services to an account. One key they have done with Oracle Content Manager is to embed it in the database. So if you own the database, you already have the software installed and merely need to turn on the license. (Records management is a separate module.) Oracle will have significant advantages in being able to bring up new systems much faster than Documentum was able to do with Filenet. Moreover, they have spent the last two years making connectors to other systems so that they can access data in those older ECM systems and accelerate deployments. Once they have the ECM running, look for them to aggressively try to sell more to those same accounts.
Except for EMC, Oracle’s move is unlikely to disrupt the market too much. SharePoint, IBM, and the host of mid-tier vendors will continue to operate as they do in the short term. But in the long run, this almost certainly cements Oracle as one of the new Big 5: Microsoft, IBM, OpenText, EMC, and now Oracle. Content Manager is relatively inexpensive, however and the mid-tier vendors will be wary as SharePoint squeezes them from the bottom and Oracle becomes the best positioned of the Big 5 to squeeze them from above.
For EMC’s Documentum division the timing is less than ideal. The recent financials showed that Documentum license sales have slowed and the division continues to reinvent itself. Documentum is still a widely deployed platform and EMC has a world-class sales force, but being singled out by a company just as ruthless as itself is going to be a new experience.
For companies looking at new platforms the benefits are going to be huge. Even if a company isn’t really interested in either Documentum or Oracle, smart companies are going to invite both to bid just to increase the competitive dynamics. IBM and OpenText know that EMC and Oracle and going to bash each other and dramatically lower the price points, so everyone has discount. The next fiscal year might be the best opportunity ever for organizations to buy high quality ECM solutions because the competitive dynamics have never been better.
One company that can’t be thrilled is OpenText. As the largest independent software company, OpenText has become a giant in the industry but lacks the opportunity to leverage additional software and services like the big boys. OpenText must get purchased, but there are only a handful of companies now large enough to buy them. IBM, Oracle, HP, and Microsoft all looked at OpenText and made other purchases. SAP is a close OpenText partner, but has their own competitive products and a culture that is very different. A merger with Computer Associates could be possible, but CA still has financial and cultural issues. Google is a possibility, but Google doesn’t sell much in the way of licensed software and OpenText would be an expensive purchase for Google to convert to a cloud model. OpenText has a smart management team and will be fine, but it is a narrow margin of error.
Regardless, Oracle has declared war and the competitive dynamics are about to change significantly.
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