What Happens to Documentum If EMC Sells It?
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By: Virginia Backaitis, CMSWire
We don't have a GPS tracking device attached to Rohit Ghai, president of the Enterprise Content Division (ECD) at EMC, so we can't tell you exactly where he is pitching Documentum at the moment.
But Ghai, by most accounts, has been asked to sell the 25 year old, industry leading, enterprise content management product line. More specifically, EMC wants to sell its ECD, which includes not only Documentum, but products like Project Horizon and InfoArchive, too.
The questions on everyone's mind are obvious: Who will buy it and what will they do with its products, especially Documentum?
There has also been a lot of speculation between Documentum watchers on social media and in private conversations about the relevance of products like Documentum in today's cloudy world.
But with what seems to be rare exceptions, the chatter about Documentum's rapid demise are greatly exaggerated. Odds are Documentum won't be pulled away from its user base anytime soon.
Documentum Has Staying Power
As Darin Stewart, research vice president at Gartner told CMSWire, Documentum has a huge user base, with a huge presence in government, education and healthcare. "It has many integrations with legacy systems. I don't see customers walking away. It's impractical to do," he said.
Digital Clarity Group vice president Alan Pelz-Sharpe agreed. "Documentum isn't dead. It's a solid platform," he said. "Look at its customers, blue-chip companies in healthcare, insurance, pharmaceuticals. They run on this stuff."
Forrester analyst Cheryl McKinnon, in a report she penned last November — shortly after the pending sale of EMC to Dell was announced — explained, "Despite shifting markets and new competitors, Documentum — the core of EMC’s enterprise content business — remains a viable product line." She went on to explain why a separation of ECD from both EMC and Dell would be a good thing, more on that later.
Last year, ECD revenue was $599 million, down from $640 million in 2014. More specifically, for full year 2015,:
ECD product revenue declined to $156 million from $164 million year-over-year (YoY)
ECD services revenue was $443 million, down from $476 million YoY
ECD gross profit on the $599 million was $407 million, down from $417 million YoY
But Ghai was nonetheless optimistic. In the last quarter of 2015, he said, software license bookings grew 5 percent YoY. "So total revenue was down but the most important growth and health metric for a software company is its software license bookings. More people signed on the dotted line to buy our software licenses in the fourth quarter of 2015 compared to the fourth quarter of 2014. That's most important and bodes well for our future. That is the most profitable part of the business as well," he said.
EMC will release earnings for first quarter of 2016 next week, providing a more recent look at ECD performance and how customers are reacting to previews of its new ECM suite, code named Project Horizon.
Just before EMC World last year, Ghai revealed his vision for Project Horizon, a suite of apps that will work with files stored anywhere.
It will be interesting to see how it compares to what Jeetu Patel, who transitioned from general manager of EMC Syncplicity by Axway to Chief Strategy Officer at Box, is building for his former rival.
Unlike companies like M-Files and Box, EMC ECD has an innovator's dilemma to deal with.
On one hand it has to keep its large, lucrative install base happy. On another, it has to innovate, lest it get shluffed aside as an irrelevant legacy product out of step with today's marketplace. Of course, it probably has some breathing room left before the latter occurs: Forrester named it as a leader in its new ECM Wave for ECM Content Services, alongside younger companies like Box and M-files.
That being said, there are certain elements EMC ECD might be able to offer customers who want to glean big data insights from their content that their competitors can't (yet).
When we interviewed Cloud Foundry CEO Sam Ramji, for example, the big data expert couldn’t say enough about the edgy things that ECD was doing on its open source platform. And ECD'S non-Documentum sibling, InfoArchive, might be easily Hadoop-able.
While we won't have the specifics on this until EMC World, we have one slide, geared toward developers, to share now.
What it indicates is that Project Horizon is geared toward the large population of knowledge workers (as is Box) and that Documentum will be used for specialty cases — with most appeal for users in businesses like life sciences, energy, oil and gas who aren't about to put their files in the cloud.
Let's hope it's more transformational than that.
Who Will Buy?
With all of that being said, who is going to buy the wares that the EMC and Dell management teams seem eager to get rid of?
A private equity firm or a spinoff of some sort is at the top of many wish lists. The hope is that the high-bidder would invest in the ECD portfolio rather than milk it for recurring revenues.
Ideally speaking, McKinnon wrote, "The portfolio would get the attention that it lacked at EMC and won't get at Dell," that it would be better off with an owner that "bets the farm on digital transformation" and would accelerate Project Horizon.
Oracle Could Be Interested
Jon Huberman, head of portfolio operations at Skyview Capital, which acquired Syncplicity by Axway from EMC, told CMSWire that it might be a larger vendor like Oracle.
Long term Documentum consultant Johnny Gee told CMSWire that his bet was on Larry Ellison's spawn, too. Analysts like Pelz-Sharpe said the mega-vendor could benefit from the acquisition because it doesn't have anything like it and they can certainly afford it," he said. Oracle declined CMSWire's requests for comment.
HPE is another possibility. Analysts think the fit is right, but that the timing is not given its recent split from Hewlettt-Packard. But HPE CEO Meg Whitman has publicly said that she is shopping.
What About OpenText?
SAP also fits the mold of an industry giant that doesn't own its own ECM platform but has the resources to buy one, though analysts told CMSWire this isn't likely because its customers who need ECM are already invested and integrated with OpenText.
And while OpenText might be able to find the financing, the two ECM platforms are "very different under the hood," said Stewart, "so not a good buy."
Yet Real Story Group's Tony Byrne pointed out via Twitter that he suspects OpenText "would like the lucrative maintenance rev."
Contenders Include Dropbox
There are also outliers to consider: Dropbox, for example, has been working overtime trying to earn a legitimate seat in the enterprise — and it could walk in the front door and be greeted by CEOs if it owned Documentum. "It would be a great buy if they could afford it," said Pelz-Sharpe. But he doubts that it can.
Box, which could also gain some additional clout and a profitable product line, apparently isn't interested — at least according to company representatives who practically laughed when CMSWire asked.
And while there are many private equity firms to consider — Thoma Bravo had reportedly expressed interest in Lexmark, which has ECM software holdings. If rumors are true that Lexmark will be acquired by China's Apex, then Thoma Bravo may have both the cash and the desire.
Documentum is Desirable
Huberman cautioned that no one should equate EMC's desire to sell Documentum with the platform's value. "EMC doesn't want to be in the software business. That's what the company told me when we bought Syncplicity by Axway. There's nothing wrong with the product," he said.
If he's right, then Ghai just needs to keep knocking on doors and putting on a show. If nothing else, it's good practice for when he officially unveils Project Horizon and reveals its name at EMC World, which starts in sixteen days.