IBM, FileNet Form Formidable ECM Team

Analysis: IBM’s acquisition of rival enterprise content management (ECM) vendor FileNet  will complement its already impressive array of tools, say analysts.

If the deal goes through, it will also send Big Blue back to the top of the ECM heap. And quite a heap that is.

According to research firm IDC, content management is already a $3.2 billion business.

It is growing by almost 13 percent this year and will continue growing by more than 13 percent for the next several years.

The sector is growing so quickly, said IDC analyst Melissa Webster, because relatively few companies have adopted an enterprise-wide solution.

Only 60 percent of enterprises have any content management solution at all, she said, and most of those are in separate silos that don’t speak to each other.

Another reason that companies are buying ECM solutions is that they need to comply with requirements mandated by laws and regulations such as Sarbanes-Oxley and HIPPA.

“CEOs are painfully aware of how unstructured information is scattered all over the enterprise,” said Webster.

According to Connie Moore, research director at Forrester Research, major IT companies also realize the potential of this space.

“IT vendors who had not given two thoughts to content in the past are seeing this as an attractive market to get into,” she told internetnews.com.

IBM had been the clear market leader in ECM for years dating back to the 1980s.

Then EMC  made its move in 2003, buying and digesting content management heavyweightDocumentum.

It followed that up in 2005 by acquiring niche content management player Captiva.

Those moves catapulted EMC to the top of the market, where it generated $362 million in revenues, according to Webster.

FileNet  followed with $293 million and then IBM  with $291 million.

IBM and FileNet combined, however, would tower over the field with $584 million in revenues.

That leaves EMC fighting for ground in a shattered but quickly consolidating landscape.

The combination of Open Text and Hummingbird, if their deal closes, will equal erstwhile market leader EMC with $362 million in revenues.

Their next closest rival, Microsoft , would be a speck in their rear view mirror, at $109 million.

As unlikely as IBM’s rivals are to cede to the market, they’re just as unlikely to go it alone, said Moore.

She predicted that the remaining pure-play content management vendors, such as Interwoven, Vignette, and Stellent , will get gobbled up by the likes of Microsoft , Oracle , CA  and HP .

“You name the vendor; I think they’re going to get bought,” she said.

But this deal is as much about capabilities as it is about market share — although one might argue that the latter follows the former.

“At first, I thought this was a defensive move to make sure no one else got FileNet,” said Moore. “But when you really look at it, there are a lot of synergies that the two companies can get from each other.”

The synergies between FileNet and IBM would allow IBM to offer the most robust business process management (BPM) offering on the market, she said.

“FileNet’s business process solution is the jewel in the crown. It takes IBM a way long way into business process management.”

IBM’s strong suit in ECM has heretofore been with integrating disparate systems, not managing content.

Forms, for instance, contain unstructured data that has to be retrieved and then processed by other systems, often in very structured contexts.

Assuming its deal closes, IBM will be able to plug FileNet solutions like forms management platform P8 into its current ECM offering to help its customers get a better handle on critical data contained in e-mails, call-center logs and other unstructured documents.

FileNet would thus round out Big Blue’s offering with those business-process-oriented capabilities and complement its IOD strategy, articulated in February by Ambuj Goyal, general manager of IBM information management.

Goyal, in the context of the FileNet acquisition, noted that the goal of IOD is “to provide clients with a seamless flow of all forms of information regardless of format platform or location, and deliver it exactly when and how we need.”

“Content management is a key element of IOD,” he added.

Clearly, IBM also has expertise in BPM through its global services division, but that capability has been largely absent from its software division.

“They didn’t have a strong offering on the document-centric, human-oriented workflows,” noted IDC’s Webster.

“Those are such an important component of managing content well,” she added.

In the near term, however, the companies have promised to support both product lines separately, meaning there is going to be some product overlap and the danger that salespeople won’t know which products to sell.

“It doesn’t make sense to have independent products forever,” said Webster. “An upgrade path in a combined platform would make sense.”