IBM $1.6B Buy Shrinks ECM Battlefield

UPDATED: IBM  today agreed to purchase rival FileNet
 for $1.6 billion in cash, a deal that will further
shrink the number of players in the enterprise content management (ECM)
space.


FileNet is one of the top remaining standalone ECM vendors in a market that
includes giants IBM and EMC, as well as fellow standalones Interwoven and
Open Text, which is in the process of acquiring
Hummingbird.

FileNet provides business process and content management software for large
corporations concerned about managing their data growth and satisfying
records management regulations from governments.


Blending process management software and ECM allows companies to capitalize
on a distributed computing platform, or a service-oriented architecture
(SOA) , in which data is automatically shared between different
computer systems.


The deal also builds on IBM’s information on-demand play, a strategy Big
Blue launched
in February to help customers better manage their business processes at a
time when data volumes are exploding and compliance rules threaten to choke
corporations.


“This is a very strategic and significant acquisition for IBM that supports
our information on-demand initiative,” said Ambuj Goyal, general manager of
IBM information management, during a press conference announcing the deal.

According to research firm IDC, only 60 percent of enterprises have content
management solutions in place, and very few of those have them available
enterprise-wide.

With so much e-mail, faxes and call center records floating around the
enterprise, IBM sees a huge opportunity to do in the area of
unstructured data what it has already done with structured data.

“Information is freed up from different sources and delivered in context to
improve either compliance-oriented business processes or workflow-oriented
business processes, where businesses get significant value as they move
forward,” Goyal said.


Lee Roberts, CEO of FileNet, was sanguine about the power of the combined
enterprises.

“The combination of IBM’s capabilities and reach coupled with FileNet’s
strength in enterprise content and business process management allows us to
deliver more innovative and industry focused solutions,” he said.

IBM led the ECM market for years, building up a warehouse full of software
to manage files, images and various other records.


EMC took over the top mantle in the market in the last few years, thanks to
its acquisitions of Documentum and Captiva.


According to IDC, EMC  sold $361.7 million worth of ECM
software in 2005, compared to IBM’s $291 million.


Should IBM close the deal, it would be back in the leadership position,
provided it is able to successfully rationalize FileNet’s product lines and
satisfy its customers.

Big Blue, which will pay $35 per share for FileNet and expects to close the deal in the fourth quarter this year, would tuck FileNet’s operations into its
content management segment of its information management unit, led by Goyal.


Big Blue will also spruce up the FileNet platform by bundling IBM’s business
process management and service-oriented architecture (SOA)
 software with the FileNet platform.


IBM officials pledged to protect FileNet customers’ investments upon the
merger.

IBM’s latest bid comes a week to the day after the systems vendor announced its intent to acquire asset management software maker MRO Software for
$740 million in cash.

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