In Focus: ECM Market Notches Steady Growth

ECM market growth is stuck in the high-single-digit range, and

Enterprise content management (ECM) vendors posted solid financial results overall for the quarter ended December 31, 2005, with several companies citing a continued drive by Global 2000 companies to move toward a single ECM standard. With ECM market growth stuck in the high-single-digit range, competition has remained intense and vendors are filling gaps in their portfolios in hopes of luring customers away from competitors.

Among the leading performers in the most recent quarter was EMC, which reported a 15 percent increase over prior-year quarterly revenue in its "Multiplatform Software" category, which includes the company's content management, backup and resource management software lines. Focusing on content management alone, EMC Documentum's software license revenue increased 25 percent on the quarter and its software and maintenance revenues combined climbed 21 percent for the year.

With the acquisitions of both Captiva and Acartus during the fourth quarter, Documentum now accounts for $525 million in annual revenue on a pro forma basis, according to EMC CEO Joe Tucci, and the company says the unit is gaining share in a market that is growing 7 percent to 8 percent per year. The acquisition of capture vendor Captiva (which was on track to reach $100 million in sales in 2005) steps up competition with IBM and FileNet for imaging-related ECM deployments.

FileNet stayed on pace with the ECM sector overall in 2005, reporting a 7 percent increase in revenue over the prior-year quarter and a 6 percent increase in revenue for fiscal year 2005, to $421.8 million. In a conference call with analysts, CEO Lee Roberts said business process management (BPM) is FileNet's differentiator, figuring in 50 percent of customer deployments. Roberts also highlighted recent moves to bolster the company's Web content management (WCM) portfolio — an area FileNet had largely ignored. Like the Captiva acquisition, FileNet's move is a sign that ECM vendors are trying to live up to the ECM goal of filling all content management needs and not cede business to competitors.

Other notable ECM vendor results in the most recent quarter included Hummingbird's 15 percent increase in revenue over the prior-year quarter, which reflects, at least in part, last year's purchase of WCM vendor RedDot Solutions. Interwoven's 10 percent increase was more organic, and the company attributed its gains to a focus on supporting professional services firms, financial services firms and global customer-facing Web sites.

The consensus is that ECM is growing 7 percent to 8 percent annually, but FileNet's Roberts said this compares favorably with 2 percent to 4 percent growth in the general IT market. EMC's Tucci said Global 2000 firms are now "flush with cash," and improving economic conditions in Europe bode well for IT in general and content management in particular 2006. The small and midsize enterprise (SME) market is seen as an engine of double-digit IT growth, but adoption of content management in this segment is harder to quantify given that many of the firms catering to SMEs — Digitech Systems, Hyland Software, LaserFiche, Westbrook Technologies — are privately held and don't report financial results.

CHART: Enterprise Content Management Revenue and Trends

Company Oct. 1 to Dec. 31 ($ millions)Revenue Trend vs. Prior-Year Quarter
EMC Multiplatform Revenue*
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*EMC's Multiplatform reporting category includes content management, capture, backup and resource management software. In 2005, content management represented roughly 20 percent of that total.

IBM, the reputed ECM market leader, does not break out content management revenues.

Stellent reports earnings 2/7/2006.