OpenText has announced it is acquiring the EMC Enterprise Content Division (ECD) from Dell for a purchase price of $1.62 billion. This includes Documentum, InfoArchive, and LEAP product families.
It's probably a good deal for OpenText but not so much for customers.
A Plus for OpenText
ECD is a profitable business. According to data published by OpenText, they had a strong recurring revenue; of which 50% was from maintenance. Not only does OpenText get a strong recurring revenue stream but they also get:
- Several IP rights and patents
- New customers, they can milk for recurring revenues as well as cross-sell their existing offerings to them
- Experienced employees and new partners
- Access to new geographies/markets
- Larger footprint in specific verticals (e.g., Pharma and Financial Services)
While the existing OpenText ECM offerings and acquired Documentum toolsets have considerable overlap (more about that below), they differ in the scenarios they target.
OpenText’s new "ECM Platform 16" is focusing increasingly on providing ECM for SAP (and probably Salesforce) processes. So you could be using Salesforce for managing opportunities and/or SAP for managing sales orders and delivery but using OpenText ECM platform for orchestrating the process and providing a unified interface to your users.
Documentum on the other hand has strengths in more traditional ECM and Archival type use cases for specific verticals such as Pharma and Financial Services.
And they'll continue to be independent and different. Synergies? I don't think so.
What’s in it for employees and customers?
OpenText gets all of the above, while their cost of doing business doesn’t increase proportionately. To quote from their 2017 Corporate Strategy,
"Key to our success is the Open Text Business System. ..... The OpenText Business System is differentiated from other business systems by its focus on integration: an integrated sales force, integrated engineering and integrated operations."
Basically, this means that OpenText cuts costs within its acquired companies by merging them into their existing front- and back-office operations. Let's also note that OpenText typically ramps down R&D spend as well. This is not — as some analysts have argued — a new-license growth play.
As for customers, I found this interesting statement in OpenText’s presentation:
"Provides an opportunity to uplift Documentum customers to OpenText Cloud, Managed Services, and SaaS Offerings."
To me this is just another revenue opportunity for OpenText and not so much a benefit to customers. Though in reality few Documentum customers will switch to OpenText services if it requires a major technical overhaul.
More generally, I don’t see lot of synergies between OpenText's existing offerings and acquired offerings, so there’s very less potential of any integration or of realizing any benefits for customers. In any case, gaining synergies across overlapping products is probably not their objective, because if it were, they would have acquired modern and nimble products instead of buying complex and aging products, many of which they’ve bought in recent times including TeamSite and now Documentum.
So now it's official: #OpenText is an old-age home.— Tony Byrne (@TonyByrne) September 12, 2016
If you are an existing customer of either OpenText or ECD, don’t expect anything to change in near future. Over the long run — and history tells us too — OpenText will not be able to focus equally on two big and complex product families. So eventually, one will decline.
But fear not. You have several good options in the ECM marketplace, and OpenText can’t buy all of them. These include more modern, relatively less complex and agile products as well as cloud-based services. We are presently updating our ECM evaluations with a pending major update covering both these offerings as well as detailed evaluations of several others that you can consider.