We had an interesting discussion this week with an ex-FileNet employee as well as some other FileNet analysts surrounding rumors about FileNet platform and the long-term plans of IBM. While we typically don’t like to do rumor mill postings, this post will present some recent thoughts for consideration around IBM’s long-term goals with FileNet and other IBM legacy ECM tools.
FileNet was the ground breaking image processing vendors shipping their first image management system back in 1985. Initially very proprietary for both servers and workstations, FileNet successfully transitioned from a hardware/software company to a software only company taking advantage of commodity windows PCs and servers from a variety of vendors.
In some ways, FileNet started some of the merger and acquisition around Enterprise Content Management as they purchased Saros in 1995, and quickly followed with the purchase of Watermark (ECM) and Greenbar (COLD). FileNet was purchased by IBM in 2006. From a quick review of the IBM ECM products website – IBM currently has four different ECM platforms in it’s ECM Suite – Content Foundation, FileNet Content Manager, Content Manager OnDemand and Content Manager OnDemand Cloud. One could make an argument for Box for the fifth platform in the IBM ECM suite as well based on positioning within the IBM Website.
FileNet and the problems with a Legacy ECM Suite
In talking with a variety of ex-employees and analysts, IBM has treated FileNet as a “cash cow” within the IBM family of products for years very similar to the way Documentum was treated by EMC before Documentum was eventually sold off to OpenText. As with many legacy ECM tools, while FileNet has a large install base, many FileNet customers last made significant investments prior to the downturn of 2008. In our own experience over the last three years, anytime TSG sees a FileNet customers looking to migrate, typically the FileNet implementation has had only minor maintenance upkeep in the last 10 years if any at all. As with any software with a high maintenance stream, there isn’t a good market reason for IBM to introduce significant innovation for a variety of reasons including:
- customers aren’t always asking for change as it can impact stability
- customers forced into a change might begin to review other platforms and disrupt the maintenance revenue
IBM has benefited from FileNet’s large install base as a way to offer consulting services to the base as well as other product up-sell within the IBM ECM Suite (we hear Watson all the time). As we mentioned here in April, we are not sure the ECM Suite is that sweet anymore. As it relates to IBM, even their ECM MegaSuite is just one of multiple offerings for clients. Multiple sources have confirmed that not all is well within the IBM ECM suite as one insider guessed that revenue for the year was down roughly 25% with significant layoffs, particularly in the sales roles.
The concern of FileNet customers as well as the FileNet employees at IBM can be the focus on IBM on items that are not FileNet. Some concerns include:
- Consulting – Should IBM improve FileNet (or Content Manager) or just sell consulting services to patch any issues or upsell to other products/services.
- Cloud – IBM has been very focused on their cloud offerings. FileNet, and particularly legacy FileNet, isn’t really cloud friendly.
- Box – The relationship with Box is something IBM has been focused on lately. Given Box’s thoughts about pivoting to include ECM, does the partnership take away from the ECM focus of FileNet?
- Watson – you hear it everywhere from IBM as the hot tool and it is the major focus on IBM. How does a legacy ECM system line up with Watson? With FileNet positioned in the Analytics division of IBM, will it get the focus from IBM required to innovate or is it just a platform that can sell Watson.
IBM Analytics – Watson, the Cloud and Box
Coming up October 24th through the 27th is what used to be IBM’s “World of Watson” but is now Think 2017 as IBM has merged in AI, Cloud, Data, IoT and Security into one event. As part of the IBM Analytics division, both FileNet and Content Manager are part of this customer event. In looking through the agenda in regards to the customer event, there isn’t a whole lot about either FileNet or Content Manager.
IBM, like any other large company, seems to be focused on the new rather than on their FileNet or Content Manager install base and clearly that is all about Watson and the Cloud. On an interesting note, IBM has focused on their relationship with Box recently for both collaboration and the cloud. It is important to note that IBM has moved the Box relationship out of their analytics division to their collaboration at the beginning of the year despite this page about Box still being live in their analytics section about Box and ECM. While the Box relationship is obviously important to IBM, is moving it to collaboration the first step of moving all ECM out of the Analytics division?
IBM selling FileNet – not yet
In talking about IBM selling off FileNet, one FileNet alumni mentioned that within the FileNet division, there have been rumors of a sale for the last two years. When approached by outside investors, rumors have it that IBM is not saying “never” but saying “not yet”. In understanding the investment environment around legacy software, it is critical to understand both the buyer and selling side of the equation.
- Buyers/Investors – are looking for software assets with guaranteed maintenance streams that they can acquire with good payback.
- Sellers – are looking for cash infusions as well as the ability to focus on other things.
IBM would prefer to focus on Watson, the cloud and the Box relationship than FileNet or Content Manager. From a consulting services side, sale of FileNet and Content Manager allows IBM to not only continue to do FileNet and Content Manager services but also allows them partner easily with ECM competitors (OpenText, Documentum…..).
With plenty of investment dollars looking for a home (OpenText still has 2 billion available), we would expect that IBM would sell off FileNet and potentially Content Manager within the next two years. For customers, the future of FileNet will all depend on the buyer.