Thoughts on ECM spending

There seem to be two schools of thoughts at the moment on how ECM vendors will fare the tightening of IT budgets.

On the one hand, few doubt there is increased legislation and regulation headed our way on a global basis, particularly in financial services and government, and this could be a boon for ECM vendors that sell document and records management systems for compliance purposes — IBM, Open Text, EMC, HP to name a few.  Litigation related to events of the past four or five months is also likely, making the need for eDiscovery tools that can help organizations more cost effectively deal with discovery requests for electronic information more dire.  The vendors listed above, along with a host of others, certainly see growth opportunities in eDiscovery (this was a big part of Autonomy’s rationale in picking up Interwoven last week).

But on the other hand, IT spending is taking some big cuts and ECM vendors aren’t going to be immune to this.  In October, we noted data from our survey partner ChangeWave that forecast declines in ECM spending in Q4 and we’re watching some of those results come in now.

EMC’s Q4 revenue for its content management and archiving (CMA) division declined 12% year-over-year, with license revenue down 30% in the quarter.  For 2008 as a whole, EMC’s CMA division did grow 2%.  Interwoven’s Q4 revenue held up ok, with 11% revenue growth and 6% license growth; about half of this is typically Web content management revenue though, a different market from the traditional ECM and compliance-related stuff discussed above.  (There’s no way to break out IBM and Oracle’s ECM-related revenue, unfortunately).

Open Text announced its fiscal ’09 Q2 earnings yesterday, with revenue up 14% year over year to $207.7m and license revenue up 18%.  Open Text has been beating the compliance drum for awhile now (it was perhaps pushed here earlier as its initial strength was more in the realm of collaborative document management, SharePoint’s target market), and may be benefiting from that most now.  (With ongoing success in this range and high interest in compliance-related markets, we continue to ask if/when Open Text will be open to a deal itself).

Compliance/records management/eDiscovery hasn’t necessarily been the number one sales driver for most ECM vendors (except for Open Text which has tied 70% of license to “compliance” in recent quarters).  Growth in these areas will have to make up for potential shortfalls in other tried-and-trued areas of ECM — the transactional content apps for things like loan originations, account enrollment, claims processing, drug approvals and myriad other types of business-specific apps for which organizations use ECM.

These vendors are also still figuring out how to deal with SharePoint in the market.  While most have a more realistic view of what SharePoint is and isn’t in the market at this point (it is increasingly a standard layer for basic content services but it’s not full ECM for compliance or transactional apps, at least not yet) and have developed some nuanced strategies for co-opetition with Microsoft, there’s still little doubt Microsoft has taken some ECM business that previously went to bigger, more sophisticated document management products simply because there weren’t other alternatives.  A new version of SharePoint expected as part of Office 14 late this year / early next could also see a lot of customers pushing off decisions in this difficult 2009 to “wait and see” what SharePoint.next has to offer.

If you missed it, there was an article from CNNMoney earlier this week on Open Text and spending in this sector.

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1 comment so far ↓

#1 Thoughts on WCM spending — Too much information on 02.19.09 at 3:33 pm

[…] commented in late January that there seem to be two schools of thought at the moment on spending in ECM […]