We (TSG) just got back from the Alfresco Sales Kickoff in Dubrovinik, Croatia. One major rumor-mill discussion we had with several partners and ex-Documentum employees surrounded thoughts on layoffs at Documentum. In a similar vein, while some of our more popular posts have been Documentum to Alfresco migration focused on the clients and technical migrations, what surprised us in Croatia was not only continued announcement of larger sales wins for Alfresco with clients moving from Documentum but also migration of former Documentum employees and partners to Alfresco. This post will try to tie the layoffs and migration of clients, people and partners together for discussion as the two companies are tightly related. Please post a comment if you have anything to add.
We couldn’t find a ton of public information on the EMC layoffs. The overall 1,000 layoffs were reported back at the end of January and were not broken down by division. In this article, it is pretty telling that “The company is trimming legacy businesses and doubling down on high-growth areas such as cloud storage and flash.” We would think IIG/Documentum would be included in that legacy business. We pointed out in our review of IIG earnings that IIG product revenue declined 10% in 2013 with a slight rise (1%) in overall revenue all from services.
In the big picture, the Documentum layoffs don’t really surprise us as we have often posted that Documentum, as a small (2.7%), non-growth component of EMC is focused on profits. Reducing overhead of non-revenue producing resources is consistent with that goal. We saw back in 2011 that much of the support and engineering moved overseas from Pleasanton to Bangalore, India. As Documentum is primarily located in Pleasanton, California, many of the better engineers have left over time to pursue other start-ups, including Alfresco.
On the flip side, we heard a rumor that Documentum has bulked up their consulting resources with significant hiring of 50+ recent college graduates last year to compete with external third-party Documentum consultants. As we have mentioned before we see Documentum more and more focused on their services along with software.
Migration from Documentum to Alfresco – Clients
While we are aware of several of our clients that are migrating from Documentum to Alfresco, we were surprised by the announcements at the Alfresco Sales Kickoff of how many other large clients were moving as well. In our “Documentum to Alfresco – Why Now” post a couple of months ago, we tried to highlight reasons we saw clients struggling with Documentum that included:
- Vendor Relationship – whether the software audit or a push for more purchases, many clients have struggled with their Documentum relationship.
- Pricing Model – named user pricing and it’s interpretation has always been difficult. Add a rather complex price list and clients can feel burned out by paying for “add-ons”.
- R&D – difficulties include delays in product releases, difficult upgrades and a push to develop only what can be sold as a new product (D2 for example) rather than consistently update core capabilities.
- Consulting – adding products that can only be accessed via Documentum consulting (example migration tool) and pushing for more consulting sales.
These reasons continue to remain pretty consistent in our discussions about particular clients. Overall, we would say that the long-term relationship Documentum has had with clients has struggled over the last ten years. Clients that have delayed Documentum upgrades and are looking for a better relationship along with advanced product have sought out Alfresco or other alternatives.
Migration from Documentum to Alfresco – People
As many people know, John Newton, former co-founder of Documentum is a co-founder of Alfresco. From the beginning, John brought over many of the engineer resources who helped create Documentum, sometimes even referring to Alfresco as Documentum 2.0 from an engineering standpoint.
With the introduction of Doug Dennerline as new Alfresco CEO, one of Doug’s first key hires was Paul St. John as VP World Wide Sales at Alfresco. Paul was formerly a Sales Director at Documentum and EMC. As Paul has added sales staff, more and more (and particularly in Croatia) are experienced sales staff that used to work for Documentum. We have also seen a heavy influx of sales people from OpenText and other ECM vendors as well.
The benefit for Alfresco and their clients is that both sales and engineering are very experienced in ECM and being able to differentiate Alfresco from other legacy ECM tools.
Migrating from Documentum to Alfresco – Partners
In addition to the familiar faces of ex-Documentum engineering and sales, we are seeing more and more Documentum partners signing up with Alfresco as well. When the Alfresco partners meet, some of the differences between partnering with Alfresco versus Documentum.
- Documentum Consulting Competition – The easiest thing to point out is the difficulty of partnering with Documentum when having to compete against their internal consulting. We would anticipate that this will continue.
- Sales relationship – sales representatives, motivated for commission, will routinely push for product or services from Documentum over those from external partners. Partners find it very difficult to maintain a relationship with Documentum given the consulting push. Alfresco sales relationships, given structure and pricing model, are considerably easier and very focused on a team (Alfresco/Partner) win.
- Any and all partners rather than ECM focused partners – At Momentum or other Documentum events, we always struggled with just how many partners, particularly the bigger ones, that Documentum aggressively brought in (CSC, Accenture…). When we started our partnership with Documentum back in 1996, TSG and other ECM focused consulting firms were seen as key resources. As Documentum grew, their focus shifted to more and larger partners. Alfresco has maintained a partner approach that involves “go-to” ECM focused partners rather than just any partner.
To summarize, we aren’t really that surprised by Documentum layoffs given a push from EMC to focus away from legacy businesses.
As evidenced in Croatia at the Alfresco Sales Kickoff meeting, we are seeing more and more Documentum to Alfresco migration in terms of clients, people and partners. We would expect that migration to accelerate in 2014.
One of Paul St. John’s more interesting analogies was that Alfresco was “just right” in regards to customers not looking for the too complex/big (Documentum, FileNet) or the too small/not robust (Box, Dropbox) vendors. While I am not sure the “Goldilocks” is the right analogy , the point can be extended to both people and partners is working looking for a company and partner vendor that is “just right”.
Let us know your thoughts below.
Chuck Teubner says
Terrific analysis. One other thought, EMC might consider dusting off the 1990s Charles Wang/CA model for legacy software apps, in their case they acquired. Simply said, they eliminated sales, product management and marketing for the product. They reduced the engineers to the minimum necessary to supply high quality customer support. They did not make any future releases – only fixed bugs. By that time in the life of a software product more than 50% of the revenue comes from maintenance. By reducing the costs dramatically you had a high margin, long tailed revenue stream that would last for another decade. Meanwhile they can focus on the next generation of cloud based content management solutions. It is ultimately the path of any software product. Just be proactive about the process as the technology transitions occur.
TSG Dave says
Thanks for the note. Given our previous post on earnings, I think you are right that much of the revenue comes from maintenance/services. Not sure I see the tie-in that Documentum could focus on next generation of cloud based content management. I am an Innovator’s Dilemma fan and see disruption with other, smaller more nimble vendors, when it comes to ECM in the cloud.
My two cents – thanks again for the note.