In Focus: What's Hot and Not-So-Hot in ECM - InformationWeek

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7/26/2005
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In Focus: What's Hot and Not-So-Hot in ECM

The quarterly sport of watching vendor financial results isn't just for industry insiders. These reports are a window into not only what fellow technology users are buying but also the vision and management acumen of current and prospective technology suppliers.

The quarterly sport of watching vendor financial results isn't just for industry insiders. These reports are a window into not only what fellow technology users are buying but also the vision and management acumen of current and prospective technology suppliers.

So who's up and who's down in the enterprise content management (ECM) market? EMC and FileNet results sparkled for the three-month's ended June 30, while Open Text and Interwoven disappointed. What's behind the results? At FileNet, where software revenues rose 24 percent in the last quarter, CMO Martyn Christian recently told me that more than half the company's deals now involve business process management (BPM) technologies (not counting basic workflow and routing). Citing company research, Christian said the ECM market is growing 13 percent per year while BPM is growing 27 to 32 percent annually, so it's easy to guess what's leading FileNet's growth.

It's hard to isolate the content technologies in EMC's financial reports, but the company does break out its software group, which includes pieces acquired from Documentum, Legato and Dantz. In its earnings release last week, EMC noted that backup, recovery and archive software license revenue has increased 28 percent, and it specifically cited EMC Legato NetWorker for backup-to-disk, EMC EmailXtender for e-mail retention and EMC Dantz Retrospect for backup at small to midsize businesses. Although ECM Documentum was not singled out (and license figures weren't available), Lubor Ptacek, director, product marketing, last week told me that the unit's revenue grew 24 percent last year. He added that "it's now down to execution" among ECM vendors, since formerly standalone markets such as document management and digital asset management have been largely subsumed into their suites.

Table: Quarterly ECM Revenue and Trends

Company

April 1 to June 30
Trend vs. Revenues
($ millions)

Prior-Year Quarter

EMC Software Group

$408

+16%

FileNet

$105

+11%

Interwoven

$41

+4%

Open Text

$108 to $112*

+2 to +6%

Vignette

$47

+3%

*preliminary

Overall revenue growth rates were similar at Interwoven, Open Text and Vignette, but the companies fared differently in setting and meeting expectations. Open Text was forced to revise its guidance downward on July 11, lowering revenue estimates to $108 to $112 million from $115 to $125 million for the quarter. In a conference call with analysts, John Shackleton, company president and CEO, asserted that the ECM market was not growing as expected industrywide, and he said that weakness in Europe and interest rate fluctuations had depressed Open Text's earnings. The company also announced plans for a $20 to $30 million restructuring during the current quarter.

At Interwoven, software license revenue declined 11 percent to $14.6 million from $16.5 million in the same quarter last year, but a 14-percent increase in service revenue brought four-percent growth overall. One day before the earnings release, Interwoven announced a deal with Sun Microsystems that will see the infrastructure giant reselling the company's software. Steve Pattison, vice president of alliances, told me the arrangement would primarily boost sales of Java-based WorkSite MP document management and collaboration systems in conjunction with Sun portal deployments.

Vignette's performance exceeded its own guidance, so it gets the quarter's gold star for managing expectations while also capping off three quarters of improving profitability.

Stellent, Mobius and Hummingbird had yet to report latest-quarter earnings as of this writing, but IBM last week issued one of its occasional reminders (always timed to coincide with reports from rivals) that it remains the revenue leader in the ECM market. If the company actually broke out ECM revenues (which is does not), it would amount to a rounding error in the company's $22.3 billion (with a "b") revenue for the quarter. Nonetheless, IBM cited a July report from Gartner ranking it as the overall market leader in worldwide ECM software license revenue for 2004. The report, "Market Share: Enterprise Content Management, Worldwide, 2002-2004," put overall ECM market growth at 8.4 percent in 2004 — a figure typical of a mature, rather than rising-star, market in my book.

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