Some interesting back and forth on CMSWire over the last two weeks around Documentum and OpenText. On October 11th, Joe Shepley from Doculabs posted on planning an exit strategy from Documentum. On October 26th, Stephen Ludlow, Senior Director, Enterprise Product Marketing, OpenText, was interviewed with his thoughts on Joe’s article. This rather long post will present our thoughts on both articles.
Joe Shepley – Planning a Documentum Exit Strategy
For some background, TSG has known Doculabs within the ECM community of Chicago for over 20 years. While we haven’t worked with Joe that long, TSG has had a good relationship with James Watson and his team over the years. TSG has participated in many Documentum user events, invited Doculabs to give the keynote at two of our client briefings, as well as presenting together this spring at the Document Strategy Forum. While we haven’t always agreed on everything, we have always found James, Joe, Rich, Lane and everyone else at Doculabs to be extremely vendor neutral.
In his article, Planning a Documentum Exit Strategy, Joe shares that his clients on Documentum are not looking at Documentum as a platform worth investing in and presents a plan for switching platforms. The planning article built on Joe’s previous article that OpenText’s Documentum Acquisition Doesn’t Change Much, Joe’s most relevant points from the first article included:
- Milking the Cash Cow – Joe feels that OpenText will milk the acquisition for maintenance revenue rather than try to evolve Documentum into a vibrant, thriving product.
- Lose the Sales Team – Joe believes that one of the benefits of the merger was the ability to reduce the sales team given existing OpenText coverage.
- Challenged by a New Breed of ECM – Stating that all the Big Three have been losing ground (see our thoughts on IBM) to alternatives, mostly cloud based.
Stephen Ludlow – OpenText Counters Doucmentum Criticisms
The interview with Stephen seems to be directed to counter Joe’s article and the rumors regarding Documentum within the OpenText fold. Some relevant points:
- In January, one week after the deal was sealed, OpenText Chief Marketing Officer Adam Howatson affirmed the company’s commitment to the product and dismissed speculation that OpenText bought ECD for the maintenance business.
- Stephen hinted that Joe, “a systems integration or ECM specialist might be writing about all kinds of systems in order to create churn for customers” and that “there is a lot of money for some of the ECM specialists in encouraging their customers to move every once in a while in order to generate additional services revenue” stating that Joe or others like him should be seen as biased.
- OpenText has been communicating since day 1 to the Documentum install base that their investment is safe.
- OpenText is investing in Documentum product managers and investing and refreshing the Documentum roadmap.
Stephen brought up several examples of the investment in Documentum including:
- Continued push in life sciences and introduction of Leap, as SAAS offering for on-premise Documentum instances.
- Documentum’s existing solutions are still go to market for Life Sciences, Energy and Engineering.
- There will be more analytics.
- Support for storage objects like Amazon S3
- Office 365 integration
Stephen concludes that Joe might be right that everyone should be looking at their technology and thinking about their exit strategy. With so many customers running a significant amount of their business around Documentum and they “aren’t going to chuck it out just because Joe says it’s time to develop an exit strategy”.
Investing in Documentum – Why did OpenText Purchase Documentum?
To understand the core difference between the opposing views, some history on why OpenText purchased Documentum should be added to the discussion. While Stephen, Adam and other members of the marketing team at OpenText might have their own message, one message that should be added to the discussion should include the call to the OpenText investors when the purchase of the ECD Division from EMC (included Documentum) was announced. Highlights from the investor call included:
- 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. EMC had been very successful selling InfoArchive as opposed to new instances of Documentum. Since OpenText doesn’t offer a competitive product, InfoArchive represented 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 saw 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 specifically mentioned “expanding profitability of the ECD products over time”. We would think that expanding the profitability means getting more profit (higher price/maintain maintenance/less expense) out of the ECD products.
Our take – Joe versus the Marketing Volcano – Is OpenText investing in Documentum?
Stephen’s basic premise is not to listen to Joe (or probably us as well) because Joe, TSG or other analysts/integrators have a “biased” view. Vendors are interested in “churning the customer” to create additional revenue. Stephen’s point is to trust OpenText as they are investing in Documentum. We would like to think that customers are slightly smarter than that and would counter that Stephen should also be seen as biased. As a Marketing resource for OpenText, Stephen would like Documentum customers to stick around to pay maintenance and potentially buy more products consistent with the call to shareholders. To really make sense of Joe versus Stephen, the analysis comes down to “is OpenText investing in Documentum” and not just milking the maintenance stream or up-selling customers? In addition to the points in the ShareHolders call, readers should consider:
- EMC wasn’t investing in Documentum. In another article in CMSWire back in 2016, Rohit Ghai stated that “no one is asking for more features”. Leap and InfoArchive were new products with potential new revenue streams but Rohit stated that he thought Documentum itself was feature complete. No one argues that Documentum and ECD were cash cows for EMC and one of the reasons they initially were looking to sell it off with the Dell purchase of EMC.
- In Stephon’s discussion about the investments in Documentum, how many of those investments come as part of a client’s maintenance payments? From what we can tell with Leap, Analytics, Solutions or even the Amazon S3 connector, Documentum clients paying maintenance would have to pay more for the new products, solutions or consulting services and is consistent with the investor call to “expand the profitability of the ECD products over time.”
- At the OpenText Enterprise World Keynote back in July, Documentum was barely mentioned. Keep in mind this was the first official OpenText event that many Documentum users have attended and OpenText offered free tickets for many Documentum customers. The keynote might have reminded Documentum customers of previous EMC World keynotes where Documentum was never really mentioned. For OpenText, it took 27 minutes into the keynote to even say Documentum and that was just for a “Content Suite (OpenText) or Documentum” mention.
Based on the above and our own discussions with customers, we would side with Joe and Doculabs in that actions speak louder than words. If OpenText was serious about investing in Documentum, that investment should be in areas that would benefit the maintenance customers without additional costs. As we have presented here before, some obvious areas could 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, Aurora 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 proprietary DB for something else more modern. 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 or Elastic Search 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, something that Adlib is currently doing with Google.
- 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. Leap wasn’t build to addresses the Webtop/D2/xCP replacement issue.
What will OpenText Invest in?
Eight months ago we predicted what we thought OpenText would invest in. Presented below unedited, will leave it up to the reader to gauge our predictions.
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).
Summary Documentum – Should I stay or should I go
Stephen and OpenText marketing doesn’t give Documentum customers or analysts enough credit to see through obvious marketing messages. Doculabs makes good points based on feedback from their customers that other Documentum customers should consider. As we pointed out in our blog post earlier in the year – Documentum, Should I stay or should I go , the majority of long-time Documentum customers, while far from thrilled with Documentum over the last 10+ years, have stayed on Documentum due to the perceived trouble of leaving. Documentum customers are looking for ways to reduce the total cost of ownership of Documentum/OpenText, not increase it with additional products or services from OpenText. We would argue that cloud and specifically infrastructure as a service vendors like Amazon Web Services and Microsoft Azure have the potential to push long-time Documentum customers to consider moving given the cost savings with moving both ECM and the supporting infrastructure to the cloud.
OpenText Marketing questioning the objectivity of an analyst or system integrator because they want to “churn the customer” is a marketing message in itself and an attempt to “kill the messenger”. While many of us have a long and not so great history with Documentum (disclosure, EMC kicked TSG out of the Documentum partner program back in 2010), at the end of the day we are talking to customers every day and making them successful with whatever ECM tool they choose, including Documentum. When customers tell us they want to consider alternatives, it is our job to objectively walk through the options, identify the costs and risks and advise the customer. In our 20+ years of working with Documentum, we are confident that long-time Documentum customers are more than smart enough to evaluate bias from both analysts/integrators as well as vendor marketing on their own.