Two weeks ago on 1/23/17 Documentum officially became part of OpenText. Most of the analysts, including all of us at TSG, have been recommending clients “wait and see” in regards to how OpenText accommodates their new acquisition. This post will share our analysis and predictions based on our review of OpenText’s initial statements since the deal was announced and now that it has finalized.
OpenText Announcements – What is OpenText Marketing Saying?
In a blog post and the press release announcing the completion of the deal, OpenText CEO Mark Barrenecea stated that:
Existing (OpenText) customers will benefit from a more functionally complete EIM platform while the ECD customer base will benefit from integration into OpenText technology, as we are gaining access to the number-one EIM Cloud and OpenText SaaS applications via flexible, on-premises, cloud, or hybrid deployments.
Barrenecea specifically mentions
- Leap and InfoArchive
- Acquisition of the ECD customer base of 5600 companies
- Acquisition of 2000 talented ECD employees
In a recent interview with CMSWire , OpenText Chief Marketing Officer Adam Howatson said OpenText is “100 percent committed to active investment”. Some relevant points from the interview:
- Should be an active roadmap in 60 days (check back here) in regards to how OpenText plans to evolve Documentum, InfoArchive and Leap.
- Stated no plans to move Documentum clients to OpenText products.
- Howatson disputed speculation that OpenText made the acquisition solely because it was interested in the ECD products’ maintenance revenue.
- Howatson stated that “OpenText and Documentum are the information management backbones of many of the world’s largest companies. There are decades of innovation and investment in them.”
Probably the best information was in a subsequent roundtable hosted by AIIM (you can watch the recorded webcast here), Stephen Ludlow, Senior Director ECM Marketing stated
Your investment is safe – OpenText will protect Documentum Customers’ investments with innovation and continued full support for both Documentum and OpenText Content Suite. Current roadmaps and commitments remain stable and will be delivered
Documentum Investment Focus included:
- Industry Solution – specifically Life Sciences, Energy and Engineering
- Continued Enhancement – Documentum and applications like D2 and InfoArchive to improve usability, analytics and total cost of ownership
- OpenText Cloud – Managed Services offerings in the OpenText Cloud.
The presentation also included the one big architecture layer cake marketing slide that starts to hint at at least an initial roadmap. Based on the presentation, applications like Leap (Documentum) and Core (OpenText) will run alongside extensions (SAP, SalesForce, Office365), API’s, Solution Components, Integrations, Content Services, Case Services and Capture Services on top of a integration strategy leveraging both existing platforms and convergence in next generation platforms with continued investment to both OpenText and Documentum content server.
We would say most of the above discussion is consistent with the roadmap from Momentum – EMC World back in May 2016. At the time we said that we thought the Leap design seems very clean and thought out.
Some of the better information was in a roundtable discussion that included:
- Lots of discussion about embedding content into applications. SAP connectivity has always been a strength of OpenText. Salesforce was mentioned as well.
- Combined companies will not be migrating from Documentum to Content Server (or vice versa). Both products will continue to exist. Hoping to leverage Leap as an integration method with cloud capabilities. They did mention that Leap would be leveraged to initially augment and grow client’s current application while allowing for organic growth without a rip and replace of the current platform. That said, they would like to use Leap as a way to gradually move to a new platform. (would think that would be OpenText Cloud).
- Lots of discussion about cloud – specifically cloud solutions and OpenText Cloud
- Good discussion about clients looking for solutions, not just products. We agree as we have been pushing a solutions approach with our products for years.
- Mentioned support for solutions, again focused on Life Sciences and Energy/Engineering. These products have D2 as well as Webtop.
- xCP was even mentioned as something focused on high volume transaction use along with Captiva, Document Sciences and even ApplicationXtender and eRoom. (these products did not appear in the layer cake though)
Overall, OpenText Marketing is saying that everything will be supported. Basically OpenText was saying what needs to be said to address customers concerns as well as competitors that might look to take advantage of an unknown future for Documentum.
Documentum Future – Will OpenText really invest and where?
While OpenText marketing is saying all the right things to get every client to feel good about paying their current maintenance bill, a more relevant understanding of OpenText goals with the merger can be found in the original announcement (still available here) when OpenText briefed their own shareholders about why they were acquiring ECD/Documentum from EMC. OpenText stated that:
- OpenText promoted the recurring revenue for ECD of 75% (of the FY ’15 $599 million). Based on our review of FY 15 ECD earnings, we would roughly break down $300 million per year in maintenance, $156 million in new product sales and $144 million in consulting/other.
- OpenText was very positive about InfoArchive. See our recap from EMC World 2016 but, in talking with Documentum sales as well as different customers, ECD (and EMC themselves) has been very successful selling InfoArchive as opposed to new instances of Documentum. Since OpenText doesn’t offer a competitive product, InfoArchive does representing a growing revenue stream and new offering for OpenText to sell to OpenText clients.
- OpenText was slightly neutral on LEAP back then. When pushed during the Q&A section, in regards to cloud and LEAP, OpenText focused on how ECD products could benefit from the OpenText cloud and mentioned “bringing the ECD install base forward to the OpenText cloud managed services. We need to look at LEAP but see it as part of our managed service offerings.”
- OpenText sees opportunities for cross selling possibilities. It was specifically mentioned that selling analytics and cloud based services to the ECD install base was one of the top opportunities. OpenText thought they could sell ECD products, specifically some of the ECD vertical solutions and InfoArchive, into their install base.
- OpenText did not specifically mention Captiva, Document Sciences or ApplicationXtender although they are included in the overall EIM Portfolio slide.
- OpenText specifically mentioned “expanding profitability of the ECD products over time”. We would think that expanding the profitability means getting more profit (higher price/less expense) out of the ECD products.
It is an interesting exercise to compare the shareholders call with the marketing activities aimed at existing Documentum customers. When all the recent marketing efforts are compared to the above, it is easy to notice the focus on keeping Documentum customers (and their maintenance payments).
Looking at the ECD/Documentum purchase, we had predicted that OpenText would invest in the products but Documentum clients should understand that it won’t necessarily be in the areas that would benefit them. As it relates to all of the above, from the announcement, we had predicted investments in:
- Integration to OpenText products specifically Analytics and OpenText Cloud – multiple announcements expressed that, now that Documentum was part of OpenText, OpenText could provide integration to other products including analytics and cloud offerings.
- InfoArchive – InfoArchive has been mentioned multiple times. As the hottest product in the ECD portfolio, it will get marketing and sales investment.
- Leap/Project Horizon – As a cloud offering, we would not be surprised to see additional investment here. Back when Leap was announced, we had (and still) have some concerns about the underlying technologies, particularly the Cloud Foundry/Pivotal and xDB components and, at the time, potential impact of a Documentum sale by EMC on those components and hosting options (Documentum was leveraging the EMC/VMware Cloud). With OpenText Cloud now in play, how does that fit with Cloud Foundry? We would predict that Leap will play on both Documentum and OpenText installations.
- Solutions – we would bet this is more of a consulting play that a true investment. Of the solutions mentioned, Life Sciences is the most mature as demonstrated at EMC World back in 2014. Since 2014, solutions have not had as much of a focus.
Two things to note about the above investments:
- Many of the investment areas above really don’t address long-term Documentum customer’s existing needs but try to “add on” additional products.
- Do Documentum customers really want OpenText products, specifically the cloud, when other vendors are available?
- All of the above will typically require an additional purchase by the customer. No discussion of any pricing changes to make new products cheaper for existing clients (or credit for upgrading).
As we mentioned in our Detailed Analysis of the OpenText Purchase, OpenText does not have a history of substantial investments and ECD hasn’t been investing in the Documentum core product for quite some time. We noticed the non-investment back in 2014 when Documentum 8 had strangely vanished from the product roadmap. Review the post for more thoughts on improving Documentum as well as the cash cow dilemma back in 2014. As mentioned back in CMSWire in May of 2016 around EMC World, ECD was stating it was not investing in Documentum as Rohit Ghai, President of ECD (who has since departed) – said “No one is asking for more features or functions,” as he was promoting LEAP.
Where should OpenText invest for Documentum Customers?
In a quick meeting with some our long-term Documentum technical architects, we had a variety of innovative things that Documentum could add to the core product based on our work with clients with Documentum. Some quick thoughts might include:
- Amazon Web Services (or Microsoft Azure or Google) – Getting away from EMC means getting away from the VMware Cloud. See our comparison of Amazon versus VMware Cloud for Documentum. Amazon, Microsoft and Google are the clear market leaders in a race for cloud dominance that Dell or OpenText will not win. Documentum having an easy to deploy Amazon offering (S3 connector, Dynamo Support…) would be an accelerator for those looking to move to a private cloud. Not sure if this makes sense based on OpenText commitment to their own cloud offering.
- Better Backend – Removal of DB for something else more modern. It used to be on the product roadmap as XML after Xhive purchase. Clients would love something cluster/fault tolerant out of the box and Hadoop for ECM is something we have been recommending.
- XPlore – get rid of xDB/Lucene for more modern Solr. While xDB might work for InfoArchive, Solr is clearly better and evolving for search.
- Java Method Server – removal of the reliance on the Java Method Server for D2 as we have seen D2 scaling issues.
- Transformation Server – great to add a cloud/highly scalable option for clients to reduce reliance on standalone servers that don’t scale and are often unreliable for clients.
- Enhanced Extensible Front End – D2 and xCP are showing their age. Lots of opportunities for better, more extensible front end to the repository based on newer technologies (see our thoughts on Alfresco adding Angular support). Somewhat related to the investment in LEAP and other cloud based Documentum tools. Leap wasn’t build to addresses the Webtop/D2/xCP replacement issue.
All of the above items would improve the existing Documentum instances. On the downside for OpenText, they don’t necessarily generate new revenue. Will they make the investment?
Predictions on OpenText Investments
After the marketing calls, we are basing our predictions off the announcements as well as the two goals heard during the initial financial announcement.
- OpenText maintaining the Documentum/ECD recurring revenue
- OpenText enhancing the profitability of ECD products over time
Easy items to enhance the profitability over time will be reducing sales/marketing staff for the ECM products. Rumor mills pretty much confirms that is that is already happening, particularly since Rohit left although we understand most of the Leap team is staying intact.
We would predict that OpenText would invest in:
- InfoArchive – very high probability – based on new product, would predict both engineering and sales/marketing investment.
- Connectivity to OpenText Products – high probability – OpenText will look to cross-sell/up sell customers to enhance the per client recurring revenue. Specifically Analytics as that seems to be a focus for OpenText.
- Documentum running in the OpenText cloud (or some type of strategy to move Documentum to the OpenText cloud) – high probability – this might be tricky as, depending on the strategy, moving clients to a new offering might be difficult and expensive and open up the option for clients to consider other cloud offerings (Amazon, Microsoft) or ECM vendors.
- Leap – medium probability – announcements say they will invest but, like any new product, would depend on how the product does from a sales perspective and how much it costs. From talking to our Documentum clients, most are pretty skeptical about a new Documentum product specifically now that it is part of OpenText.
- Webtop, D2, xCP, Captiva, Document Sciences, Application Extender – very low probability – We would predict that OpenText will follow ECD’s lead with these products on life support. Not investing but not retiring due to fears of losing the maintenance revenue stream.
OpenText Cloud versus Amazon or Microsoft – Why is it a big deal?
TechTarget recently published an article on the deal finalizing with quotes that included Tony Bryne, founder of the Real Story group as well as TSG. Tony was also recommending a wait and see approach in that”
[Documentum customers] will likely be happy to get continued support under OpenText, but will be skeptical about long-term improvements to the platform
TSG focused on analysis of how OpenText, and Documentum before that, had pursued the cloud.
“A concern for Documentum customers when it was part of Dell EMC was Dell was pushing VMware (for the cloud), which is nowhere near what Amazon Web Services [AWS] is,” said Dave Giordano, founder of Chicago-based Technology Services Group, which helps develop and integrate content management systems. “And now, with OpenText, which has its own cloud — that prevents [Documentum] from partnering with AWS or Microsoft Azure. It’s OpenText selling its own cloud service against Amazon.”
The issue with the previous cloud offerings from ECD was that, as part of EMC, they had focused on the VMWare cloud offering, something Gartner viewed as niche player with “limited appeal to the business managers and application development leaders” and substantially behind Amazon and Microsoft who were in the leader category. With the OpenText purchase, OpenText has stated that they would look to provide cloud capabilities via the OpenText cloud, something that is not even included in the Gartner reviews.
The OpenText cloud evolved out of the GSX purchase by OpenText back in 2014. At the time, the purchase was focused on B2B transactions with Mark Barrenechea stating that OpenText “was committed to leading Enterprise Information Management with the market’s best products and cloud-based services.” At the time, the GSX purchase seems to have been focused on e-commerce (accounts payable, invoicing and payment) and not ECM.
Amazon and Microsoft are focused on providing cloud infrastructure for clients to replace their old back-end infrastructures and data centers. Clients are taking advantage of this type of solution for the majority of applications that would have run in a data center. Innovative vendors are providing easier to deploy cloud solutions within the Amazon or Microsoft infrastructure. For our ECM clients, the private cloud and leveraging and existing Amazon or Microsoft relationship seems to be gaining more traction than a multi-tenant “Salesforce” type cloud solution. OpenText (and Leap) seems to be more focused on the multi-tenant approach.
For on premise Documentum customers, OpenText focusing on their own cloud versus developing solutions for the Infrastructure as a Services (IaaS) industry leaders is a major concern. We have found that most of our ECM clients prefer on premise or private cloud options versus complet SaaS multi-tenant solutions for a variety of reasons including:
- Very competitive pricing when compared with Data Centers and other cloud vendors. See how we thought Amazon was half the price and twice the capabilities when compared to the VM Cloud.
- Concerns about multi-tenant solutions particularly when dealing with document ownership, legal and privacy issues.
Given the direction of the industry, we would predict that OpenText would have a very difficult time competing against Amazon or Microsoft as it relates to clients moving ECM to the cloud.
With the deal closing, OpenText is saying all the right things about how the investment by Documentum customers will be safe with OpenText. Clients will have to wait and see if these investments are made over the next one to two years.
OpenText knows that, after the large investment customers have made in Documentum, it is difficult to switch to new products, whether those be OpenText or another ECM company. We would predict that OpenText would take advantage of customer lock-in to continue to receive maintenance stream payments and look for ways to up sell clients to additional OpenText products hence the investments in InfoArchive, Leap, connectivity options (specifically Analytics) and the OpenText Cloud.
Unfortunately for OpenText, much of the long term Documentum investment and subsequent lock-in by customers is with the older product set (Webtop, xCP, D2) and on premise solutions, something that ECD was not investing in and we would predict OpenText would continue to not invest in given cost and the lack of a new revenue stream. We would predict that as customers look to move away from older Documentum products and look at cloud options, they will look both within the OpenText family (Leap) as well as outside of OpenText. It may be very difficult for OpenText to compete against the bigger and established cloud vendors (Amazon and Microsoft) as they already have a footprint in most customers as an Infrastructure as a Service (IaaS) for other customer applications. ECM vendors that have aligned themselves with the IaaS service providers will be very competitive with OpenText products for both modern interface and cost-effective cloud alternatives.
Let us know your thoughts below.
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