March 14, 2006
John Shackleton has had a tough first year as CEO of enterprise content management (ECM) vendor Open Text. After more that seven years with the company during its headiest days of expansion, Shackleton took the reigns last July. He was almost immediately faced with a revenue shortfall and announced plans for a $30 million restructuring plan to rationalize far-flung and overlapping operations accumulated through more than a dozen acquisitions. Shackleton says that plan is setting the stage for improved profitability, albeit with slightly reduced revenue.
Meanwhile, the ECM market isn't standing still. So what's ahead for Open Text as competitors drive into new markets and infrastructure players add content management capabilities? Shackleton's plan is to stick with the company's strengths and focus on compliance. Open Text will also remain close to Microsoft, he says, and help companies embrace the giant's content technology as it matures.
Intelligent Enterprise (IE): FileNet is investing in BPM. EMC acquired Captiva to compete on imaging implementations. Hummingbird acquired RedDot to meet Web content management demands. What's ahead for Open Text?
John Shackleton (JS): We'll be going deeper into markets that are strong for us. On the traditional Open Text side, collaboration, document management and records management have been the strengths. On the Ixos side it's archiving, particularly around SAP. With Microsoft coming into the ECM market, Mendicino is a natural for us.
If you look at the top 20 percent of our customers, their standards are Microsoft desktop, SAP ERP systems and, interestingly, Oracle database — not SQL Server. What they've been asking for is the ability for any user working within Outlook to do simple records management or document management but also to interface to their ERP system. The Mendicino product is something they've been looking for, so we'll go deeply into supporting those kinds of needs.
IE: How would you exploit Mendicino or do it one better?
JS: If you look at the Mendicino project today, Microsoft is planning to do something like three modules around HR. We can interface to just about every SAP module, including accounts payable and accounts receivable. Users who may not use and understand SAP but who want to see a record that's in ERP can use our Outlook client to pull up that record.
IE: Many ECM vendors have Outlook clients and SAP integrations. How is Open Text different?
JS: We have 200 engineers in Munich, Germany, who have been focused on working with SAP for the past 12 years. Given the levels of customers that we're in with SAP on a global basis — not just heavily in North American or just heavily in Europe — I'd say we're unique in the depth of our interface and the breadth of our market. For a customer such as Siemens, or BP [British Petroleum] or BT [British Telecom], we need to support them on a global basis.
IE: And on Outlook?
JS: We're Microsoft's only global ECM vendor. There's nobody else doing the kinds of things that we're working with them on and will be announcing shortly.
IE: Other vendors, such as EMC and Hummingbird, have Outlook clients and a global presence, even if their sales are more concentrated in North America.
JS: EMC Documentum is not embracing what Microsoft is doing, and Hummingbird is not a global player of the size and level we're at. Hummingbird is usually in the midmarket, mainly focused on the legal side, and we rarely run into them in large corporations.
IE: Microsoft plans to beef up its document management (in the next release of SharePoint) and workflow (in Windows Vista). How will companies decide who gets ECM and who gets a lightweight content management seat?
JS: It's usually driven by the application. There may be departments that could use lightweight tools. The area we'll focus on is compliance, which is, by its very nature, an enterprisewide challenge.
IE: Microsoft is talking about records management, too.
JS: When you start asking when it will be available or whether it will be DoD-certified, the answers are uncertain. When [Microsoft's records management product] is available and when it is certified, great, we can work with that and extend it. As we work with Microsoft, sharing their roadmap for products, we're saying that we don't want to duplicate anything that they're going to be building in the near future. We want to build on that technology and extend it once those products are there, but they're still a ways away.
IE: Some vendors are talking about application servers and portals that can deliver content management and records management services in the background. Do you see that happening?
JS: Some of these vendors are optimistic to say the least. But for large organizations, these are capabilities they need today, not "maybe a year or two from now." We'll take care of migrating customers to what Microsoft is going to offer as it meets their needs. We're trying to eliminate the decision of "will this work with Microsoft or not?"
IE: Do you see infrastructure vendors eventually swallowing the ECM market?
JS: When I joined the company eight years ago, I asked the engineers, "In a worst-case scenario, when do you think IBM and Microsoft are going to take over the content management platform?" They said 18 months. That clearly hasn't happened, but that's when we forged our application strategy. The good news is that we're a much closer partner with Microsoft now, and we know what they're doing. [The advent of infrastructure-level content services] is getting closer to a reality, but it's still going to take time.
IE: AIIM and leading vendors came up with the enterprise content management concept about four years ago. Dreams of having a single repository or even a single system have since been dispelled. Is it time to come up with a new message about what ECM is and what it provides?
JS: I'm not sure it's time for a new message about what ECM is because I think people still don't really understand what it can do to solve their business problems. If you look at what's driving the business, it's the sheer wave of e-mail, records management, instant messaging, voicemail, streaming video. Companies are looking down the road at whether these are legal records that they have to keep. The issue of one repository that fits all or one search engine that fits all or one workflow tool that fits all — there's no way that's ever going to happen. The focus is now on some sort of metadata management that will allow you to manage multiple technologies.
IE: You've said you're going to concentrate on current strengths, but what about workflow and the growing market for business process management?
JS: I'd put that in the context of an application solution. What's driving the market is compliance. The reason they're coming to ECM is that they're being forced to by some kind of government regulation.
IE: Many analysts see BPM growing more quickly than ECM because it's driven by business needs rather than regulation.
JS: The number-one concern for IT is managing e-mail. People can manage their networks and databases and ERP systems, but do they really know what people are saying to each other in e-mail? Are they prepared to respond when the SEC comes along and asks for every transaction relating to X, whether in an e-mail or a written note or whatever? More importantly, can they prove that that's all they have?
One problem is managing e-mail and turning it into a record, finding it when you need it and destroying it when it needs to be destroyed. The other piece of it is the "can you prove there is nothing else" part. That gets back to the audit trail and business rule changes. The ability to automatically change rules and update all the documentation around compliance is business process engineering. The glue on all of that is business process workflow and business rules engines. Without that, it would be impossible to keep track of everything.
Compliance is really a three-phase evolution. The first phase is documenting your processes and figuring out what your business rules are. The second phase is automating that process. In the third phase, you're really refining the process and getting it to the point where you're really managing it efficiently.
IE: What phase do you see companies in right now?
JS: I'd say most are coming out of phase one, in which they over-documented, over-engineered and over-spent, and they're saying, "I'm never going to do that again." Only a few companies have really gone on to the next step, and those who have are able to view their structured and unstructured information in ways that they never thought possible. That's showing them ways to streamline their business as well as interesting new potential products and services based on information that they're mining from unstructured and structured data. I think that's where ECM will really pay off.
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