2002 was not a good year for most software companies – especially European ones and especially those listed on the now defunct German Neuer Markt stock market.

But for Peter Hoog and his fellow executives at Ixos, the Munich-based supplier of enterprise content management software, it was a break out year.

For over a decade, the company had pursued the unglamorous but financially astute strategy of providing document archiving solutions to users of SAP’s ERP suite. This is a function that the core SAP package does not support and which SAP has been happy to leave to Ixos’ eConServer server product.

But at a strategy session early in 2002, the company, perhaps fearing that it might be marginalised if it did not broaden out, seemed to wake up to its potential – and its size.

With revenues of EU122 million, it was just outside the European top 20 software companies, and growing comfortably. But that position was not secure: big US rivals such as Filenet and Documentum were already trying to lure Ixos customers over to more comprehensive solutions. And a further worry: Ixos itself had already penetrated half of SAP’s global customer base. It needed to diversify.

The solution, it decided, was to take on its US rivals and turn itself into a full-blown enterprise content management (ECM) supplier. That meant it needed to develop, buy or source software that could carry out a host of key functions – among them workflow management, content management, unstructured searching and collaborative working.

The culmination of this came in January with two opportunistic acquisitions: it snapped up Swiss content management supplier Obtree for just EU5 million in cash – less than half the company’s $12 million revenues; and it bought the German workflow software supplier PowerWork, with revenues of EU2.2 million, for just EU1.2 million in cash.

The valuations reflect the fact that both companies had been struggling in their difficult and overcrowded markets. But as part of an integrated enterprise content management suite, from a stable and profitable supplier, Ixos believes their technologies will quickly win market acceptance. Other parts of the suite – such as improved transaction management, unstructured search capabilities and collaborative working – are being sourced through internal development or through partners, such as Autonomy in the UK.

The net result is that, by the end of 2003, Ixos expects to have one integrated ECM suite capable of rivalling the global market leaders – Documentum and Filenet. The next stage will be to enhance support for industry specific business processes – especially in the banking, insurance, public and utilities sectors. It is notably wary of pharmaceuticals, a sector that Documentum dominates.

In addition, Ixos is extending its partnerships with SAP’s competitors in the software market – most notably Siebel. At present, 80% of all sales are made to SAP customers.

With the company’s shares now listed on the main Frankfurt DAX exchange, and sales expected to be just short of EU140 million in its year to June, Ixos is one of the very few European VC-backed software companies to have established itself in the global market. But there is still much to be done: its sales and its profile, especially in the strategic ECM market, still lag Documentum and FileNet.