I already assumed
That we’re in the felony room
But I ain’t a judge, you don’t have to be nice to me
But please tell that
To your friend in the cowboy hat
You know he keeps on sayin’ ev’rythin’ twice to me
- SHE’S YOUR LOVER NOW

We’ve got some more BlueWashing going on. IBM announced today that they’re acquired analytics and marketing vendor Unica for $480 million. It seems like a lot of cash to me, but then again IBM have got plenty and what do I know. I do know it follows quite shortly after they bought pure analytics vendor CoreMetrics.

The “Farewell to Coremetrics and Web Analytics as you knew it” post from the Unica blog (two months ago) is quite interesting in retrospect:

Now, IBM’s acquisition of Coremetrics follows suit as IBM folds Coremetrics into Websphere with the likely intention of making it part of the Websphere eCommerce technology stack.

With no major standalone contenders remaining in the market (WebTrends had signaled their interest in getting acquired) prospective web analytics buyers must evaluate the core competencies of the parent company in order to determine the best match for their current and future needs.

IBM does NOT appear to be making a play for a broader analytics offering

The wise seem to be saying that IBM isn’t actually going to bother marketing either Unica or CoreMetrics, but rather just add them into the already vast IBM Suite. Which effectively mean they’re being withdrawn from the Analytics battlefield. If that is the case, then the three players that will be slugging it out will be Adobe Omniture, Google Analytics and WebTrends. And although WebTrends are alledgely not trying to put themselves up for sale, I suspect they might be gobbled up quite soon. Maybe AAPL will feel left out of an Adobe vs Google slugfest, and buy WebTrends just to join the fracas. Maybe we should count Nedstat too, but I don’t see much of them. Or have they already been bought?

I’m the kind of guy that likes to believe the IBM <-> HAL thing (although Arthur denies it), and I’ve got this vision of poor IBM acquired vendors trying to wriggle free of the corporation. For no good reason, let’s end on this:

Dave Bowman: Open the pod bay doors, HAL.
HAL: I’m sorry, Dave. I’m afraid I can’t do that.

So I promised an ECM specific follow-up to my book review on Christensen’s book The Innovator’s Dilemma.  There is a lot to talk about, so I’m not going to blather on with a long intro (though this sentence seems to be compounding the issue) and get right to it.

Or not…I have some disclaimers/notes:

• Going to try and use as much of Chistensen’s terminlogy as possible.  This isn’t to say that he has a perfect model, or even 80% model, of what is happening.  It just helps to keep the terminology consistent during this particular post.
• Every Content Management company is different and the observations will not apply universally.  Every company reacts differently.  That said, if I didn’t think that this applied to a large number of vendors, I would have targeted this post at particular vendors.

NOW we can get started.

Why Disruption Now?

There are several trains of thought out there that this dilemma doesn’t really apply to the Internet age because we are in a constant state of disruption.  This an important observation, so let me address this first.

The initial disruption was the Internet.  Since then, everything has mostly been a continuation of that disruption.  Much of the chaos has been sustaining technology for the original disruption.

Everyone agrees that the web impacted the Content Management industry strongly.  Stellant (now Oracle), Interwoven (now part of Open Text), and Vignette (now consumed by Autonomy)all came from the WCM space.  When you look at it though, it was just a new content problem.  Sustaining innovative technologies.  Unique needs, but no more so than Records Management, Imaging, or Digital Asset Management.

So what is qualifying as disruptive to Content Management these days?  Content Management itself has been disrupting the offsite paper record storage and microfiche industry, but what is actually disrupting the disruptor?  The Internet and the browser didn’t do it directly, but it became a sustaining technology for ECM.  The browser interfaces enhanced adoption over time for the existing vendors.  Definitely not disruptive.

Well, Content Management is being disrupted from a couple of directions:

• SharePoint: It isn’t SharePoint, but what it represents, basic Content Management for the masses.  It may not be the most functional, or scale to handle any situation, but it is easy to buy, install, and integrate into the most used productivity application suite, Office.
• The Cloud: Many SaaS Content Management offering cannot currently compete on functionality with the established ECM bigwigs, but that is just a matter of time.  They are established, have found a starting market, and are adding functionality.  As SharePoint demonstrated, they don’t need to match the established solutions to eat into the market share, they just need to hit the minimum requirement level, document sharing.

Open Source isn’t on the list because that is a model for solving problems, but not truly disruptive.   It is a just a different business model and not a sustaining technology.  For many, it boils down to appealing to people’s inner nature and a different pricing structure.  This is a gross over-generalization, but so is this entire post.

The Cloud could be called just a different pricing structure, but it is also a different delivery model. It is disruptive because no matter what the established vendors say, their software has not been architected for that environment, so it is not plug-and-play.

Those are the disruptions.  They are fundamental shifts in how Content Management is delivered.  They are shifts towards Content Management becoming more of a commodity (though we aren’t there yet).

Microsoft’s Attack

Okay, you can argue that they are disruptive at all or that they will just become a “sustaining technology” down the road.  If the latter is the case, most of the established vendors will survive. (Acquisitions and consolidation aside, we are talking about the actual software offerings).

When SharePoint arrived in the 2003 timeframe, it was nice, quaint, and not nearly functional enough to really have a significant impact on the Content Management market.  It wasn’t until the advent of the 2007 edition that it became an issue.

The initial response was pretty consistent, “Yeah, it does that, but it will fall apart under any real work.”  Well, the market didn’t care.  A large number of people didn’t, and still don’t, need the complicated solutions offered by the established vendors.

Over time, as SharePoint started to erode sales, the vendor strategy shifted to enhancing SharePoint.  This was fine and it started to drive sales, but SharePoint hasn’t stopped evolving.  In 2010 is has the ability to store content outside of the database, manages data better, scales better, and has better Records Management.  The need for SharePoint additional Content Management style capabilities is shifting towards archiving and governance.

When you look at this even more closely, it isn’t that SharePoint is a disruptive technology as much as it is a disruptive new vendor in the existing landscape.  So while SharePoint is very disruptive in its nature, it isn’t a “disruptive technology” as discussed by Christensen.

Still, ignore at your own risk.

The All-Encompassing Fog of the Cloud

Meanwhile, in the bushes, the cloud-based SaaS offering are lurking, ready to pounce.  They have realized a few important things:

• Not only do many people not need all of the functionality provided by the Content Management vendors, they don’t want to manage the data center either.
• Users are getting used to a rapid pace of innovation from their increased exposure to the ever-evolving Internet.  The three year “big release” has become a detriment  from an user expectation perspective, not to mention the nightmare for the IT and Change Management personnel.  Lots of incremental changes are easier to deal with than huge massive changes.
• The ability to share content outside of an organization is becoming more important, and not easier.  If I still have to email that 10 MB presentation to business partners (copying my colleagues), that really cuts into some of the important selling points of ECM.

The SaaS vendors don’t have all the answers, yet.  They are still working on security and many of the CYA features that your average CIO wants.  The thing is, those requirements are well defined, so it is just a matter of addressing them.  Research is only needed to prioritize, not define.

When those gaps are addressed by the SaaS solutions, who will win the market?  Those that are ready from day one, or those that try and create/market their solution after the questions are answered?  There is more to being a solid cloud offering than fancy marketing and a feature list.  The processes and the business value that they support is different than from a traditional software vendor.  Running a successful, secure, reliable, scalable online service is not the same as writing a COTS software package.

The Reaction

Some of the established vendors may tell you that their clients aren’t asking for the Cloud at this time.  They are asking for better business solutions, like Case Management.  Existing clients are asking for Case Management.  I’ve heard it.  The thing is that people that I talk to who are looking for new Content Management solutions are seriously considering cloud-based solutions.

How consistently are they asking? Well, in 2009 I was helping a large, 50K+ user, organization look at vendors, and they invited a SaaS provider to present their solution.  I knew going in that the vendors didn’t meet all the critical requirements, and I even told the client as much.  Didn’t matter.  They want to move in that direction as part of an overall strategy, so they were going to talk to the vendor about what the vendor offered and tell that vendor what was lacking for them to make a purchase.

Did the lack of a cloud-based solution get mentioned to the other Content Management vendors?  No.  The closest was when someone asked about external hosting and they mentioned that they had partners that can offer that service.  A savvy market research person would be able to see that question that as a potential need for cloud-based solutions, but a sales person, even if they are smart, don’t have the same channels.

But I digress and this post is already pretty long.

So the Content Management vendors, looking for double-digit growth, are pushing Case Management so they can land the multi-million dollar deals required for that growth.  Smaller cloud-based vendors don’t need to close deals of that magnitude to have double-digit growth in a quarter, much less a year.  The ECM vendors are chasing the large deals while the smaller deals get left to SaaS and SharePoint.

Christensen talks about this as companies moving up-market while the new vendors, based upon the disruptive technologies, tackle the lower market.  As the the firms innovate faster than the needs of the average customer, they can move up-market and take revenue from the established vendors.

So right now, SaaS vendors are doing this in the Content Management space.  They aren’t able to compete on functionality yet, but they are adding it faster than the market is demanding new features.  It is only a matter of time before they hit the minimum level needed for them to be a player.

There is Not Plenty of Time

As I discussed in the review, there are a ton of examples focused on the hard drive industry.  I think a more relevant example is the excavator industry.

In the first half of the 20th century, cable-actuated excavators ruled the construction world.  Each new model could scoop more thanks to larger buckets and deposit it further away.  The market drivers were bucket size and reach.

Then came the hydraulic excavators.  Made by new companies, these had smaller buckets and a smaller reach.  They couldn’t compete against the established cable-actuated vendors, but they worked well for people needing to dig precise trenches and other smaller tasks.

Over time, years and years, the bucket size and reach grew to the point that the larger construction project started to buy them.  While they could not in any way out-perform the cable-actuated excavators, they were more reliable, cost less per unit (though not less per cubic ft. bucket size), and were generally cheaper to operate.

By the end of the transition, which took decades, of the over 40 cable-actuated excavator vendors, only FOUR successfully transitioned to survive in the new market.  That is less than 10%.  Let me repeat a key fact here…

DECADES!!!

The technology was there and it was obvious.  Many established vendors entered the market once it was a viable solution for their clients, but by then it was too late.

Why didn’t they enter sooner?  Like many victims of disruptive technology, the margins were less on the new technology, which led to different processes within the makers of the disruptive tech.

Let me put it this way.  Let’s assume that I have historically made a 20% margin on my products.  I get two proposals.  One is for an innovative enhancement on an existing product that will increase sales 10-20% at the current margin.  The other is for a newly engineered solution that will increase sales around 5% at a 10% margin.  With finite resources hich do I approve?

It doesn’t matter if in 5-10 years that the second option will over-take the market, stockholders want results this year, and CEOs want their job next year.  The new markets for the disruptive tech are always fuzzy and ill defined.

This is why startups are the “source” of truly disruptive technology.  They can start with new business structures, values, and processes, that can take advantage of the different margins.  They also get more excited about that $50K deal.

Do you think EMC, Oracle, IBM, or Open Text get exited about $50K deals?

Where Does that Leave Implementers?

In reality, waiting for another post.  Let’s just say life can be good and move on to the wrap-up…

Is Pie Nuts?

While an in-depth study would be required to answer that question, not to mention my forced participation, I’m really talking about selling out to the concept.

Did I read the book, proclaim it as genius, and then seek to fit the world into the model proposed by Christensen?  Not at all.

I’ve been seeing this for a while.  Then this past Spring, I was talking about my observations about what I was seeing in the industry with some others and I was asked if I had read a couple of books.  One was Christensen’s book.  A month later, we were talking again and the book came up a second time, so I went and bought it to read.

What the book did was make me realize that what was happening was actually normal.  This happens in lots of different industries.  It is just harder to determine what qualifies as a disruptive technology in the IT field.  As computers disrupted microfiche in Content Management, the Internet is giving birth to the cloud, which is beginning to disrupt traditional data-center-based enterprise apps, like Content Management.

The best thing is that I realized that this isn’t happening because there are bad executives or managers at the established Content Management vendors, but because of the opposite.  Back to that hypothetical investment question.  What good manager would pick the investment that will increase sales by double digits?

In many ways, the established vendors are trapped by their own success.  There are ways out, but there is no set formula, I may not have the right answers, and I’ve rambled enough for now.  More later.

Flame on….

Check out my guest post on the case management vs. content management debate on the Fierce Content Management site. Another post on this topic comning soon title: “Just what is a case anyway?”

I started this on Monday discussing the importance of goals in general, using the setting of goals for yourself as a starting point.  The same logic applies to a company, and its industry, as well.

Think about it, why is a company in business?  Yes, to make money, but that goal will only get you so far, just ask the gnomes.  You have to have something to offer and the ability to convince your customers that you can deliver and still be around in the future.

So in order to inspire your employees and your customers, you create a Big Hairy Audacious Goal (BHAG).  For example, maybe you want to create the market leading ECM solution.  Ten years ago, that was a challenge.  No one company had all the capabilities in house and the leadership of the market was in flux.  Now, to hit the same goal, you just take aim at the big boys and go forward.

But what does that really get you?  Are you leading or just following the trail already blazed?

What Do You Give the Person that Have Everything?

Out there in the greater US, there was a newspaper organization that set an impressive BHAG in the 90s.  They wanted to own advertising in their market.  For a large market, that is a heck of a goal, especially with the advent of more national sources moving into the region.

Well, a funny thing happened, they achieved their goal.  It was a most impressive achievement.  The question then became, “What now?”

That is a dilemma that companies face when they become successful, how do you define the next step?  Trying to maintain leadership for the sake of maintaining leadership will only leave you reacting to the competition.  That very process cedes the leadership position to other companies.

If you don’t have a destination, how can you lead anyone anywhere?

What is Next for the ECM Guys?

So the question is, what is next for the large ECM vendors?  They have big honking platforms that can do everything (if you know where to look) and are constantly comparing themselves to each other.

At the same time, they are flirting with Microsoft because they see a product and a company that may not have a vision for the future, but does have a vision for the knowledge worker’s desktop of today.  They are flirting because they are hoping to buy time for SharePoint to become the next Lotus Notes and collapse under its own weight, or become inspired to be the next big thing.

The future is closer than you think.  The industry needs a vision, something to aim for collectively.  This is a call to the vendors to articulate a vision that we can identify with and see progress against.

This is a question for all of the vendors and the industry as a whole.  If you think that any company in the industry is immune from what I am saying here, then share.

People need to know.

After all, if you don’t know what you want to be in 5-10 years that is more than what you are now, are you a company in which I want to invest my company’s future?

Not a rhetorical question.

A Starting Point

We have talked to death about what ECM means.  We are pretty much working on the nitty-gritty details now.  We all know the WHAT.  It is time to look at the HOW.

How should people be interacting with their content in 5-10 years?  We know there will be more content, so let the engineers keep working.  The key is how will workers interact?

I’m telling you that we’ll be using our smart phones and tablets more.  We’ll be wireless and not always on our network.  That is obvious.

Forget the “cloud” and all the hype.  If a vision depends upon a cloud, that is pandering.  The cloud is a tool, a platform.  A vision may leverage the cloud, but it shouldn’t be central.

I wrote about Omnipresent Content Management (OCM) a while back.  The term is a little pretentious, but it had the virtue of being new, unclaimed, and applicable.  We might not be there in 10 years, but pick a point along the way.

The ECM vendors need to think about how to achieve that vision, or create their own vision that has power and evokes a new way of solving problems.  I listed three things, Storage, Identity Management, and Tagging as things needed for that future.  The middle item will not go away, the others will change as the future and visions evolve.

Pick a vision.

Define the vision clearly.

Map a path towards achieving that vision.

Share the vision.

After all of that, start work.  Don’t worry if we are following you.  If it is a good vision, and we believe you can get us there, we’ll follow.

Just lead for a change.

[Note: I said it in the post, this applies to all the vendors.  I'm not just saying that.  Right now, the grass doesn't look greener on the other side.]

Like many OpenOffice.org adopters, Forrester's enterprise clients are starting to wonder what's going on with the once-promising open source alternative to Microsoft Office. As one chief technology strategist posited last week: "Oracle has made several strong public pronouncements that their support for OpenOffice.org will continue abated. This, however, begs the question of the increasing functional and technical gap between standard programs like word processing, spreadsheets, and presentations and the new, all-encompassing view of the desktop being adopted by Microsoft in Office 2010. That being so, is there really any future for StarOffice/OpenOffice.org within the enterprise, except as an ever-shrinking niche to support basic, ultra low-cost office document capability on home-use platforms?"

Great question. After 10 years, Open Office hasn’t had much traction in the enterprise – supported by under 10% of firms, and today it’s facing more competition from online apps from Google and Zoho. I'm not counting OpenOffice completely out yet, however, since IBM has been making good progress on features with Symphony and Oracle is positioning Open Office for the web, desktop and mobile – a first. But barriers to Open Office and Web-based tools persist, and not just on a feature/function basis. Common barriers include:

I’ve regularly covered annual reports, earnings announcements and other financial news about software vendors. These commentaries tend to stir debate and I am frequently asked why I bother to look behind the numbers. Is it really important?

Many vendors, in particular privately-held US-based ones, don’t publicly release audited numbers. Instead they carefully select a few positive numbers to share via a press release. An example of this is seemingly successful CMS-vendor Ektron, which claims to be open and transparent, but will tell you only that their sales grew 38%. If you are willing to sign a non-disclosure agreement, they’ll share more details on profitability, but can a vendor really claim to be transparent when you need to sign a contract to get some fundamental numbers about the financial health of the vendor?

In my view financial numbers and annual reports are a great way to gain insights about a vendor. These are the numbers you should indeed care about:

• Services revenue. A good example of this is FatWire, where your local key account manager might have told you that they are very committed to their partners, when in fact services bring in about 30% of the company’s total revenue.
• New license sales. If this is down, it will tell you that the vendor is having difficulty signing up new customers. This can be a sign that an acquisition is lurking around the corner, which is what happened to Vignette as they got acquired by Open Text.
• Maintenance and support revenue. If this makes up a large part of revenue, it means that the vendor has many customers who keep using the product. If you can get hold of a renewal percentage or average customer lifetime, it will tell you something about how long the customers stay with the product.
• A break-down of revenue by product will tell you which products are really strategic to the vendor. IBM and Google are examples of big vendors, to who far from all products are equally important. This might reveal which products are likely to become discontinued. This happened with Microsoft CMS
• Cash is king. Look at the cashflow to find out whether the vendor might be facing survival problems or is sitting on a pile of cash.

After looking at a few vendors, you’ll discover that the accounting models tend to differ hugely. Some will list licence sales straight away, while others will break it down and only list it partially over a given period. Some might also divide their revenue between a corporate entity and different geographic regions, e.g. CMS vendor Sitecore. Details like this obviously make it difficult to compare the numbers.

Finally, I would say that the past decade has showed that positive financial numbers by no means guarantee that your favourite vendor will not be acquired or that your favourite product will not be discontinued. 2009 saw quite a few acquisitions, most notably Adobe’s acquisition of  Omniture and Opentext which bought Vignette. I’m sure we will see more in 2010. These might not impact customers in the short-term, but down the road, they always also have significant impact, e.g. with closed regional offices, a new partner strategy or a cut in engineering spending.

  by Ted Schadler

We just had another of our regular cloud research meetings at Forrester. In these meetings, we cut across our research organization to examine cloud computing from every angle.

Compared with even just a year ago, it’s amazing how important and pervasive cloud computing analysis (as opposed to cloud computing guesswork) has become in our research calendar.

You can see the existing cloud/*aaS research here and our planned research here. As the meeting host, I mostly listen, probe, and take notes, but ocassionally I get to jump in with a thought.

To wit: We are often asked about whether cloud-based collaboration (email, team sites, instant messaging, Web conferencing, social computing, etc.) works best on multi-tenant, dedicated solutions, or both. The answer is both, but trending towards multi-tenant. Our clients are interested in both multi-tenant and single-tenant or dedicated cloud solutions — as long as the price is right.

The future of cloud-based collaboration is clearly multi-tenant for two economic reasons:

1. Multi-tenant enables the fundamental economic benefits of a shared resource. We can see this in the price war going on in email right now — a 50% price cut in the last 12 months with multi-tenant cloud email. The floor on email cost keeps dropping, fueled by the better economics of multi-tenant solutions and high capacity utilization.

2. Multi-tenant is a much faster way to deploy improvements. With multi-tenant, Gmail can add features overnight; Exchange only once every three years. Multi-tenant Cisco WebEx gets a quarterly update; IBM Lotus Sametime can’t (though LotusLive.com can). Because there is a single instance of the code in a multi-tenant cloud solution, the innovation is continuous, incremental, and globally available.

Multi-tenant is also the path that every major cloud collaboration vendor is on. Microsoft, for example, is running Exchange Online for $5/mailbox/month in a multi-tenant solution that now scales past 25,000 seats. Salesforce.com and Google have always been multi-tenant. And Cisco WebEx Mail and IBM LotusLive.com are also multi-tenant from their core.

So when does a dedicated (single-tenant; servers dedicated to you) solution make sense?

1. If you aren’t yet comfortable with the security assurances of a multi-tenant solution. This is what keeps most companies away from the cloud at all. It’s the number one concern in our surveys of IT decision-makers around the world.

It’s also what led Google to build a dedicated data center for government workloads. At least there, the government data won’t mix with the data of the hoi pollois. But this is mostly about getting the security assurances nailed down. I view it as a short-term limitation.

2. If your content & collaboration application must be highly customized and integrated tightly with other applications. This doesn’t apply to most collaboration solutions today. But for SharePoint or Notes applications it does. And while it has kept SharePoint off of Microsoft’s solution so far, even SharePoint will go multi-tenant in 2010 with a sandbox to keep your custom application walled off from other apps. We also expect some Lotus Notes and Connections features to show up on the multi-tenant LotusLive.com in 2010.

3. If you workload won’t run in a virtual machine. Okay, so this is a bit down in the technical weeds. But applications do run on silicon. And limitations around memory, buffer space, processing speed, and the like define what kinds of things you can actually run in a virtual machine, hence in a multi-tenant cloud. For more on this, see Frank Gillett’s report on scale-out workloads.

Disagree? Agree? Have other thoughts? Please share.

We just had another of our regular cloud research meetings at Forrester. In these meetings, we cut across our research organization to examine cloud computing from every angle.

Compared with even just a year ago, it’s amazing how important and pervasive cloud computing analysis (as opposed to cloud computing guesswork) has become in our research calendar.

As the year comes to an end it’s time to look at the future.  While many are looking to major predictions for next year, I thought I’d focus on the most obvious ones.  These are the top five ECM assumptions that loom ahead in are day-to-day work lives 2010

#1 SharePoint and Traditional ECM Won’t Get [...]