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Open Text expanding rapidly oon the back of booming demand for compliance technologies

“Most organisations are on their third round of IT budget cuts,” says John Shackleton, CEO of content management provider Open Text. So how is his company still making money, expanding aggressively and even funding a new academy for multimedia excellence in its native Canada?

The reason, in one word, is compliance. “Around 60% of our business has to do with compliance,” says Shackleton.  

One particular pain point for businesses that is driving sales for Open Text is email. “Large organisations are typically receiving 3 million emails a day, and about  1 million of them are spam,” explains Shackleton. “That adds up to a terabyte of data every 90 days.”

Businesses are beginning to realise that they simply cannot afford to keep hold of every email that they send or receive, even if that is what “misinformed lawyers” might be telling them to do, Shackleton says.

So to remain compliant while storing the minimum of data, they are turning to content management solutions that allow them to apply policies to email retention, such as the email management component of Open Text’s content management suite.
That compliance driver has had a particular boost in the financial services industry, adds Shackleton. “They are expecting more regulation down the line, and they are trying to get their act together now,” he says.

That helps to explain why Open Text saw revenues grow 7% to $178.8 million in its financial quarter ending 31 March 2009, compared to an IT industry average revenue growth of -2.8%. Despite a near universal freeze on new spending, the company managed to nudge its licence revenue up by 0.8% to $51.9 million.

That kind of performance has helped to fund a minor spree of acquisitions in the past six months, culminating in the company’s $310 million purchase of web content management veteran Vignette in May 2009. Vignette brings with it the kind of heavy-duty, enterprise-wide web site technology that had not previously been Open Text’s strongest card, says Shackleton.

He rejects the argument that consolidation in the ECM space signifies that the market is mature, an argument that if extrapolated would surely see Open Text itself acquired in the not too distant future. “In ECM, we have the unusual situation that there is consolidation without market saturation,” he insists.

Vignette fell to acquisition because its performance was weak, Shackleton adds. “Its licence revenue was falling by 25% every year,” he says, but he is of course confident that he can turn Vignette’s business around.

“The key to acquisitions, after bringing costs under control, is to focus on synergies,” he says. “After we bought [document management and workflow vendor] Captaris in October 2008, we had their product integrated and on sale as part of our suite within two months.”
“They had even developed their own email archiving product, but they hadn’t sold a single copy,” he recalls. “But now it is one of our top selling products.”

Another recent acquisition speaks to Open Text’s vision of the future. Vizible, which Open Text bought in April 2009 for an undisclosed sum, has developed an innovative interface for managing and analysing rich media content. Streaming video, says Shackleton, is about to infiltrate business administration, and will bring with it a storage burden that makes the email explosion look positively lightweight by comparison.