Contented market?



‘Content management’ (CM) is not generally a term that excites many people in the technology industry. Back in 1999, maybe, when European and US stock markets, along with most venture capital portfolios, sparkled with high-flying suppliers. Then, it was almost impossible to get a salesman to return a call.

But not now. Those same portfolios are littered with CM duds. Even the internationally known companies, such as Vignette and Interwoven, sell far less than they used to, and have valuations that reflect the market’s shattered expectations. That is what makes a recent report from market research company IDC so surprising. In the Western Europe alone, CM software vendors’ revenues will have surged 79% since 2001, reaching $1.14 billion by the end of 2002, says IDC. By 2006, it says, this will have more than doubled to $2.85 billion.

But that’s not all. Executives at leading CM vendors such as FileNet and Documentum have recently been saying that their industry could ultimately become at least twice as big as the relational database market; indeed Documentum’s CEO, Dave De Walt, says that the company could one day “be bigger than Oracle”.

In the same spirit, 12-year-old, loss-making Documentum was even touted as the ‘next Microsoft’ by analysts at market research company Ovum. This is some turnaround; in 2000, one Ovum analyst told Infoconomist that “nobody was interested” in content management.

The performance of a number of vendors reflected this: drastic cost cutting (Vignette, Interwoven, Documentum), cancelled flotations (Mediasurface), and closures (InterX, EBT International, Reef) were commonplace. There is no dramatic change in strategy or technology that points to the rebirth of CM, admit suppliers. Rather, they say, organisations have finally grasped the importance of CM software to their ebusiness architecture, and realised that they need it to increase the effectiveness of their existing technology assets.

CM is increasingly seen as an integration technology and a key part of emerging process architectures. Gartner has coined the term for this – enterprise content management. This represents the supplier’s attempt to reposition CM from its departmental silos and make CM tools accessible across an organisation. “Today’s enterprise content management fervour is built on the concept of leveraging content across multiple applications,” says a recent Gartner report.

Customer relationship management (CRM) software is one area where the addition of CM technology can help existing software investments provide a better return.

“Information [in customer relations] isn’t typically shared in nice little packets. Rather, it comes through conversations, emails, note fields of customer surveys, and other free-form communications,” explains Kevin Scott, an analyst with AMR Research. “Relationships are built on communications, not transactions. The better a company is at understanding what its customers are saying, the better it will be at satisfying their needs.”

Chief information officers (CIOs) have caught on to this message. A recent survey by Gartner found that CM software is second only to IT security on their priorities list.




The company’s CM strategy is still being put together. Its Content Manager product has emerged out of other products such as EDMSuite and Digital Library. IBM Lotus’ Domino knowledge management products and collaboration software are also part of IBM’s CM strategy.


The forthcoming release of Content Management Server 2002, and Office 11 with XDocs functionality should put Microsoft in the centre of the CM industry. But it will take time for the products to reach enterprise-level usability and scaleability, say analysts.


Possibly the boldest independent CM software vendor. Documentum’s acquisition of collaborative software vendor eRoom has been lauded by analysts. If the company can successfully incorporate eRoom’s technology as a low-cost CM product, it could lead the mainstream CM market.


A web CM company set-up in the mid-1990s, Interwoven’s revenues have plummeted over 2002. The company has reduced its low-end product price to $300,000 in the hope that it can attract small to medium size companies.


One of the biggest and oldest CM companies, FileNET is one of the few remaining vendors that still provides document imaging technology. Its products have been criticised for lacking complete web authoring functionality. Its acquisition of web CM company eGrail may help.

Gauss Interprise

Germany’s Gauss Interprise has struggled to integrate portal technology acquired through a merger with US vendor Magellan in 2000, but its products are highly regarded. Its balance sheet is weak.


One of the UK’s former dot-com darlings, Mediasurface attracted good investment and customers during the late 1990s. Things started going sour when it cancelled its planned IPO in 2001.The recent acquisition of the assets of the now defunct Reef might open up more opportunities in the future.


Founded in 1995, Vignette, specialising in personalisation technology, peaked in 2001 with $296.8 million in annual revenues. It is now loss-making, however, and sales have plummeted. The October 2002 acquisition of portal software vendor Epicentric forms part of a wider ECM strategy, but its weakness in traditional document management is still hindering progress.


It entered the content and document management markets through the acquisition of document management software vendor PC DOCS. The eighteen-year-old company now has a broad application suite covering collaboration, CM, portal and business intelligence software. Strong in the legal industry.



And, according to a June 2002 survey by Jupiter Media Metrix, 53% of companies said that they will have begun implementing a new document, content or media asset management project by the end of 2002.

Two-speed sector

Analyst optimism doesn’t always translate into sales, however. Documentum might be touted as the next Microsoft, but most vendors in the sector are having a tough time.

Vignette and Interwoven have been hit hard. At their peak, during 2001, both were generating over $200 million in annual revenues. But for each quarter of 2002, these companies’ revenues have fallen by between 30% and 50% over the same quarters in the previous year.

These figures tally with the experience of many of Europe’s smaller CM vendors. In Germany, for example, two prominent vendors, Ceyoniq and SER Systems, have exited the business in 2002. At one time, SER Systems was the third biggest German software vendor after SAP and Software AG. Richly funded Brussels-based Reef Software went into receivership in 2002, and its assets were bought by Mediasurface, a UK-based company, in October 2002.

Interwoven’s vice president of Northern Europe, Bob McNinch, offers his explanation: the market for high-end CM systems is saturated. Customers are now supplementing their original CM platforms with smaller software purchases, he says. But not all suppliers are struggling.

Documentum, FileNet and Open Text have all had their problems, but are all now growing, despite the IT spending downturn. Documentum and FileNet have averaged about 20% growth in new licence revenues year-on-year for each quarter of 2002. Documentum’s growth is strongest: revenues for its most recent third quarter to 30 September 2002 grew by 24% year-on-year, reaching $56.3 million. The emergence of this ‘two-speed market’ supports the argument put forward by Gartner.

Established CM vendors, mainly with a document management background, have more sophisticated, broader products that better fulfil what analysts are now calling an ‘Enterprise Content Management’ (ECM) strategy.

“The goal is to think of content as a supply chain from creation to publishing,” explains Nathaniel Martinez, an analyst with IDC. “Companies like Vignette and Interwoven grew up in the mid-nineties by selling web CM tools. But there has been a shift in the market and organisations now realise that they need to have a holistic approach to content.”

A second factor: these companies, through their size and heritage, have gained the trust of wary technology buyers. “In this economy, customers want to deal with as few vendors as possible, and they want to know the company will provide broad functionality for the long-term,” explains Lee Roberts, CEO of FileNet.

These established suppliers can also rely on their large, high-end customer base – an option not always open to those that supplied mostly dot-com companies. Documentum, for example, says 72% its new licence revenues in its third quarter were from sales to existing customers, mostly in pharmaceuticals and financial services.

Enter the giants

CM software is about to become more common, running on smaller and more widely distributed machines; and the big names in software – IBM and Microsoft – want to play a much bigger role.

FileNet’s Roberts agrees that the threat from the likes of IBM and Microsoft worries him most. “If IBM and Microsoft were to train all their guns on our space then we are in trouble,” he admits.

Analysts also believe that Adobe, a company focused on document creation software, with $1.2 billion annual revenues for 2001, is well positioned to dominate the industry.

All of these companies believe that CM software is now ready to escape its high-end, and often vertically focused niche. To date, the big CM vendors have sold increasingly sophisticated and high margin products to very demanding customers.

Analysts’ forecasts of continued and strong growth, however, are in part based on the expectation that well-resourced suppliers, such as Microsoft, will bring CM software right down to desktop or small departmental server. And Documentum, FileNet and others are looking the same way.

Microsoft’s strategy looks particularly threatening to rivals. Although it has offered a Windows server product for the past year (based on its $36 million acquisition of content management vendor NCompass in May 2001), it has not pushed the product heavily. But it is now incorporating a technology called ‘XDocs’ in the beta version of ‘Office 11’, due in 2003. XDocs will enable Office users to create and use XML-based documents, which can be linked to back end systems, and managed through Microsoft’s upcoming Content Management Server 2002 product.

Microsoft’s strategy, significantly, is not based on the mass distribution of low-cost, shrink-wrapped products for desktop computers. This kind of approach, tried by companies such as Verity and Autonomy in the 1990s, requires enormous volumes of buyers and tends towards commoditisation. Microsoft’s server component provides better control and function for customers and better margins for suppliers.

Documentum’s interest in the mass-market opportunity for content management tools is demonstrated through its acquisition of eRoom, a supplier of web-based collaborative project services. Using eRoom, customers join a remote service and make use of tools, without actually installing them. This will enable it to serve low-end users through a services-based approach. Collaboration on content-based projects is seen as an increasingly important growth area for CM suppliers.

It is clear that not all CM vendors have the resources or the vision to survive against such competition; equally, some have the resources and the vision, but need more function. The result will be consolidation. “I think you will see this market moving from between 70 to 40 vendors to about four or five in the next three years,” says Roberts.

The process is well under way. Documentum, for example, has acquired technology to manage rich media from Canadian-based Bulldog technology; it also bought three companies: Boxcar (content distribution technology), eRoom, and most recently TreuArc, an electronic records management company. IBM has also just acquired an electronic records management company called Talarian. In April 2002, FileNet acquired web CM software vendor, eGrail. And in October 2002, Vignette paid $32 million for portal software vendor Epicentric. Much more consolidation is expected, spanning the whole content and knowledge management sector, where dozens of troubled suppliers have already disappeared.

The shape of the new CM market is beginning to emerge. The software, once viewed as specialist and expensive, will be much more widely taken up. But as sales rise, most of the core software licence sales will go to fewer supplies.

Documentum will not be the next Microsoft, but the well-managed company will remain strong; FileNet and OpenText will most likely thrive, too. Microsoft and IBM will take their share. A host of other international and regional vendors – such as Interwoven, Vignette, Broadvision, Mediasurface – have much to do if they are to build profitable, independent long term businesses.

Avatar photo

Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

Related Topics