OpenText under the strategic leadership of Tom Jenkins has evolved from a document and archive management firm to a serious player in the collaboration space. With their new strategy we at Collaborative Strategies believe that they are a good vertical counterpoint to Microsoft’s horizontal play in this space.
I recently attended an “analyst day” at the OpenText LiveLinkup conference in Orlando in mid-November. Most of the management team from the Chairman (Tom Jenkins) to the head of sales spoke to a good sized group of analysts. Based on what I heard and saw, I believe that OpenText is moving in the right direction given the current trends in the collaboration market.
Ease of Use
One of the big messages from John Shakelton the OpenText CEO was that he wanted to make it easy to buy, deploy, and use OpenText. This fits with feedback we have had from a number of user organizations that we have interviewed over the last year. Most organizations prefer “easy” over “feature rich” (and not so easy). We have seen other vendors like SiteScape (who I talked about last month) also moving rapidly in this direction.
Dancing with Elephants
There are a number of “elephants” in the collaboration space, and Microsoft is one of them. Rather then being on the dance floor with these behemoths, OpenText has wisley decided to work with Microsoft and add on to what they are currently offering. Microsoft is seen as a “horizontal” collaboration play. As it turns out, OpenText found that about 60% of their 20 million users also use Microsoft desktop applications and SAP. So OpenText did deals with both of these “elephants.” To the features found in Microsoft desktop applications and SharePoint, OpenText offers a search engine, archiving engine, portlets and case management. Partnering with Microsoft gives OpenText access to the 800 million users of Microsoft desktop applications.
OpenText’s real strength, and where we believe that they will not only survive, but thrive, is going after vertical markets and specific processes. At OpenText they call that the focus on business applications, and industry solutions. They have created a 10 x10 matrix of the top verticals and top applications, and will select a number of these to partner on or implement.
OpenText has done an excellent job of “going vertical” over the last few years and have partnered for such applications as: Community of practice for Government, or partnering with FrontRange Systems for Oil and Gas Exploration applications.
In our recently released RTC 2006 report (www.reports.collaborate.com) we believe that by 2008 there will only be a few major colloboration players (elephants) left and all the other vendors in this space will either: be acquired, go out of business, or move into specific vertical and process niches that they can defend.
For OpenText what this means is that they are building applications on top of both Microsoft and SAP (Levels 2 and 3) for specific verticals and processes.
This change has been so pervasive at OpenText that they have re-organized the compay to reflect this new strategy. They have put sales support and professional services (all revenue generating areas) under one person (yet to be named). The other two groups are: Product development, and product marketing.
One of the areas they have focused the most attention on with partners like Deloite is SOX compliance. Working with Deloite they found that 80% of customers use the same compliance process, with 20 % customization for that particular organization. OpenText which is about $400 M in revenues this year will be looking for some small acquistions this year to add specific SOX expertise to the team.
John Kirkham (based in the UK) is currently running the sales team. For the last year about 55% of sales are in Europe. OpenText is also trying to consolidate its executive team into its Chicago and Waterloo (Canada) offices. This seems very contrary for a company that sells collaborative tools, currently they have executives spread over almost 50 different offices.
SOX it too me!
Nothing, not even sex, seems to sell as well as fear! Although it has taken much longer for the market for SOX solutions to appear, it seems to be on track and growing rapidly according to both Deloite and OpenText. These partners have generated more revenue this quarter for this application then they did all of last year, and expect revenues to be 3X what they were over last year.
The partners also found the sales cycle to be longer then expected, about 6 months, and it is a strategic solutions sale rather then a software sale, which means that typically there is a 2-1 services to software cost in the sale.
Eric Slaghuis from SASOL petrochemicals did implement a SOX application with OpenText that supported collaborate in controlled environment, focused on standard operating processes and looked at faciliting effective risk assessment and document controls. They were able to put the application on one page, which spaned 18 levels of hierchy in the SASOL organization. The application took 36,000 man hours to build, most of it using internal SASOL people, and this project had a 10-1 services to software ratio.
SASOL is not unusal for the SOX market, as they are in a highly regulated vertical and they found out that their initial use of paper-based or Excel spreadsheet was too difficult to replicate for the next year. 90% of customers did it manually, and did not automate. This year, the second time around, about 40% are doing the automation.
The Customer is Right
One thing I heard a lot at the OpenText conference was about the people at OpenText and how responsive they were to their customers. Having attended other “elephant” events for Oracle and Microsoft, that is not typically the comment you hear at those conferences. We at CS believe that this is a significant differentiator that OpenText is taking advantage of. If looking at their Communities of Practice offering, it is bundled with instructions on how to be successful with an online community, as well as several templates and examples to get you started. Rebecca Phillips of General Dynamics, who runs a secure Community of practice, talked a lot about the level of support and response they go from OpenText. Where we see OpenText differentiating it’s self from some of the elephant vendors is that they are invested in their customer’s success rather then just selling software. This might seem like a subtle philisophical difference, but it really is a much bigger change, and one we see as a smart strategy.
Another trend we have seen, and that has been written about in the RTC 2006 report, is the shift in those who are buying collaborative solutions. More and more these are business people with a specific problem, who are adverse to risk, and are not sure how to apply the technology except in a very specific way.
OpenText’s philosophy of of both verticalization and investing in their customer’s success is sure to make them one of the survivors in this dance with elephants, but if you read between the lines at OpenText, you can see they are moving away from collaboration and focusing more on the vertical applications like SOX and compliance, and letting Microsoft deal with the collaboration aspects at a lower layer. The question then becomes is OpenText a collaboration player? CS expects to see more vertical solutions from OpenText this year, and less collaborative ones. We saw demo's of their community of practice products, and of TouchPoint (their RTC technology) but there were no real plans to make TouchPoint commercial that we heard from OpenText management at the conference. Does this mean collaboration is in limbo at OpenText?
David Coleman is the Founder and Managing Director of Collaborative Strategies (CS). He is the author of two books on groupware. He can be reached at firstname.lastname@example.org or 415-282-9197.
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