Thursday, August 10, 2006

FileNet to be acquired - first thoughts

First one then the other - IBM moves to acquire FileNet. Probably the most expected acquisition in software history! Yet one that raises questions.

At the end of the day for major imaging projects there were two clear leaders IBM & FileNet, with EMC making up an admirable but clear cut third place (Hyland coming up fourth in the Mid Market). Now there will be only be one clear choice, and though IBM says they will run both product lines, there is simply no business logic in doing that over the long term. One set of products by definition will have to run its lifecycle and be replaced by the other.

IBM have always been the elephant in the room for ECM, as for many years they have held first or second place to FileNet in terms of leadership postion (by revenue) and only in the last year has EMC moved ahead of them. Combined IBM & FileNet will easily be the dominant player, and without doubt IBM will do well from the deal.

  • They close out their number one competitor
  • They gain some nice pieces of technology to compliment or replace their own
  • They gain a substantial and lucrative client base

Lee Roberts CEO (and ex IBM'er) will also do very well - but I am not sure I would be too happy if I were a FileNet customer, or for that matter a member of FileNet's staff.

Its worth remembering that most people who bought FileNet's products also had IBM on the short list, so for the customer base it must seem like they chose FileNet over IBM - but now they are given the vendor they rejected....Of course nothing is concluded till the shareholders vote, and though that is expected to go through positively - there will certainly be some interesting questions to be asked of the FileNet board, top of the list being.

  • Were there other approaches (certainly the industry was rife with rumours that HP, CA and Oracle had all shown interest)

The other question for me is what does this mean for the industry as a whole? The ECM Suite vendors are document centric vendors (Web Content Management remains a parralel but separate market) and now we have two very large players dominating (IBM & EMC) - behind that we have OpenText, and behind them Interwoven, Stellent etc. We also have a lot of infrastructure vendors looking to take a slice of the growing pie (HP - Oracle - CA - Microsoft etc) and I guess the question is who will be next? And who can challenge these two - the market is big enough and has more than enough growth in it to encourage others to enter - most likely it will be an infrastructure player via the acquisition path, but which one is the question.

On a personal level I am really quite sad - though it was inevitable and the pending acquisition was of open discussion in the industry - FileNet represented the heart of document management. They literally invented Workflow - they were the first Imaging company (and pretty much invented that sector) - and they dominated for years. Though in the last couple of years they had become a little more aggresive and edgy (with the recruitement of new Sales management), it was always to the outsider a great technology company, friendly, and wonderfully located in Costa Mesa with directors who liked to surf before work in the morning. The total opposite to the equally likeable but much more 'A Type' Documentum in Northern Cali. I certainly wish all the wonderful people at FileNet well - and hope that they are well looked after by IBM (as they will certainly be in demand elsewhere if not!)

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