The past year has been another stirring one for vendors in the enterprise content management (ECM) software market. OpenText acquired Hummingbird , which had previously absorbed European web content supplier RedDot; IBM signed an agreement with FileNet ; while Stellent, Vignette, EMC Documentum and others continued to make their presence felt.

But what have been the big trends in the market? What have been the driving forces at play among key customers that have provided the motor for change? Compliance – it is widely agreed – and the threat of legal and financial penalties if corporate information and content is not well managed are issues that dominate many board meetings.

Scalability is another key driver in this market – especially with smaller content management (CM) suppliers realising that alliances with larger infrastructure providers can help make their case with big enterprises. That the big infrastructure players are interested in this territory is evident in our soundings of key players for this month’s Sector Update: Participants’ box. Information management is the key concern of IT departments.

The move toward centralised records management (RM) has been a consistent theme, according to OpenText executive vice president Bill Forquer. “Enterprises are all looking for a way to deploy centralised RM solutions that span the entire organisation, increasing efficiency and improving compliance.

“This trend will accelerate with both Microsoft and Oracle making significant introductions in the space.” Needless to say, OpenText is working with those two named players on development projects.

Not surprisingly, this is a view shared by Oracle. Steven Elsham, director of database solutions at Oracle, believes the ECM market leaders are recognising their core value is in business process expertise and are consequently “looking to infrastructure platform vendors (Oracle, Microsoft, IBM) for CM services on which to build their next-generation solutions (for example, OpenText on Oracle CDB). They’re also looking for the platform vendors to provide them with the foundation technologies – CM repositories, business process management tools, integration technologies – that can extend the reach and capabilities of their applications.”

As Oracle sees it, there is a significant shift underway in how ECM applications are perceived. Organisations have realised that content no longer needs to be merely stored: it needs to be proactively managed and shared to enable companies to drive efficiency.

“Many organisations are trying to drive increased process efficiencies by integrating their knowledge workers with their process workers, whom predominantly use customer relationship management (CRM), enterprise resource planning (ERP) and human resource management systems (HRMS) administrative applications,” says Elsham.

Pete Atkinson, MD for European operations at Percussion, agrees there is growing realisation that CM is more than merely consolidation of infrastructure. “For the first time since the web bubble burst, business units are again in charge of budgets and purchases of CM solutions,” he says. “They desire applications that let them utilise content more effectively to achieve their line-of-business objectives.”

So, while traditional ECM vendors have been grappling with developing an accommodation with the big infrastructure suppliers, mainly for scalability reasons, there has also been a seismic shift in consciousness about how their applications are marketed within enterprise business units. Behind all this are the regulatory demands coming down through organisations.

“There is a shift in the market under way, as the compliance tsunami has taken the emphasis off front-end collaborative tools and put it squarely on the nuts and bolts of high-volume archiving, search and retrieval, enterprise records and email management, repository integration, storage integration and data quality,” says Karry Kleeman, EMEA senior vice president at Mobius.

But while broad pan-enterprise integration remains the Holy Grail for many vendors, others are concentrating on smaller goals, and staying ahead of rivals through innovation. Vignette, for example, makes no bones about the fact that web CM must return significant business benefits and ROI for it to carry on being relevant.

“The rapid adoption of content personalisation based on customer profiles is significant,” says Simon Robinson, EMEA marketing director at Vignette. “Organisations are realising that the best way to enhance their customer interaction is to make relevant content available to customers, regardless which device they are using to consume that information.”

The ever-lurking threat (or opportunity) provided by Microsoft is always at the back of the minds of several web CM specialists. Jens Lundgaard, chief executive of Globus Media, notes: “Although Microsoft failed in the web CM market the first time around (with its NCompass purchase, which turned into MCMS2001/2002), it is likely to put a lot of marketing and research effort behind the SharePoint 2007 product line, which is, in effect, an ECM product and due to launch shortly.”

Robinson sees a potential upside: “SharePoint will provide basic rudimentary CM services as an extension to its Office suite, which is significant. This will further educate the market on the importance of managing content.” In other words, there will be more people at the table, and room for many suppliers.

Finally, the other major customer concern is security, and suppliers such as Stellent are making much of this. “Security around an organisation’s content has reached new levels of visibility, with numerous instances of lost or stolen data, leaked information and careless disclosure of private and confidential information,” says David Macey, Stellent vice president of international operations.

Big Blue v Small is Beautiful

IBM’s acquisition of FileNet this year has certainly given many vendors pause for thought. For the smaller players it has made them look in on themselves and face up to the fact that IBM is seriously out to get them. And Big Blue makes no bones about it.

Tim Robertson, manager of CM sales at IBM Software Group, believes further consolidation is probable as smaller vendors succumb. “Smaller players will find it harder to compete in delivering an overall CM solution that will address all areas of content throughout the enterprise and be flexible enough to be integrated with the customers’ existing environment, as well as scalable to meet the future demands of the business,” he says.

But smaller, focused players see customers becoming more sophisticated and rejecting the superstructure approach. “We have seen a precipitation of low-level commodity ECM services down into infrastructure,” says Atkinson. “As a result, traditional infrastructure players in data and file management and storage [IBM and EMC] are extending their stack with these acquisitions. Look for similarly strong plays from Oracle and Microsoft, albeit from different perspectives.”

Kleeman says that while the playing field may not be level, “there is still enormous potential for niche players to offer more focused and tightly integrated solutions. We are seeing a lot of dissatisfaction from customers of the giants.”

But Robertson says Big Blue is focusing its efforts across a full range of business needs. “Vendors must concentrate on what customers’ business issues are and how the implementation of ECM solutions meet the needs of the business, not only today, but into the future. The rapid increase in email is only part of the story,” he explains.

“Customers are facing business challenges that can be addressed with a comprehensive suite of integrated ECM solutions that are flexible and hugely scalable rather than focusing on the features offered by individual solution components. The strength of ECM solutions is the whole, rather than the sum, of the parts,” says Robertson.

IBM is also conscious that smaller vendors have more flexibility in terms of pricing and admits this can be very attractive. But he warns: “Niche vendors offering point solutions that are aggressively priced seem tempting to businesses whose focus is solely price. But when integrating these solutions with other critical components of ECM, there are often challenges, sometimes resulting in the discontinuing of such ‘closed’ point solutions in favour of an ECM solution that is more open and therefore more easily integrated into the existing IT environment.”

While IBM takes other vendors head-on, having made a range of acquisitions to enter the market, Microsoft and Oracle appear to be developing an approach based on business partner relationships. They see key ECM vendors as having the existing customer relationships and the understanding of business processes to make them ideal partners in developing applications based on their infrastructure.

“For ECM vendors, the biggest challenges are still implementation and adoption challenges,” says Elsham. “Traditional ECM systems are highly functional, but too hard to use for widespread adoption across an enterprise, as it is not their main function. This is where the BCS vendors can leverage their capabilities.”

A company such as OpenText has seen the writing on the wall in this respect, and has started building bridges. “The market is in the midst of significant change, with Oracle and Microsoft building more functionality into their platforms,” according to OpenText’s Forquer. “This is a significant threat to vendors that fail to take advantage of changing market dynamics. Technology is no longer the key driver. The ECM market has significant growth potential and is likely to be one of the hottest in enterprise software.”

Kleeman concurs and says, “Document management and collaborative solutions are becoming the province of Microsoft and other infrastructure vendors, such as Oracle. We are integrating our software with SharePoint and similar applications that address those requirements.”

With such vast development and marketing resources at their disposal, it’s not hard to see why smaller vendors are adopting an ‘embrace ’em and hug ’em hard’ approach to Microsoft and Oracle. That may be the only way they can come out winners in the long term.

What’s Web 2.0 got to do with it?

As for future trends, opinion is divided over the effect of such things as social computing and Web 2.0 interactivity and personalisation on ECM applications. Some dismiss it out of hand. OpenText doesn’t lose any sleep over it, saying it finds it hard to see a scenario with Web 2.0 that leads to a drop in enterprise email.

“I can assure you I don’t lose sleep over this. Email is ubiquitous and while other technologies are coming into play, the need to treat all business communication as a record remains mandatory,” says Kleeman.

“Vendors will be adapting their solutions to capture newer ways of communicating – in the same way that we manage email today,” says Kleeman. “Corporations worried about lawsuits will continue to restrict what employees use as a means of communication to do business.”

If anything, ECM vendors are spying possibilities of taking on the Web 2.0 juggernaut in corporations. If one thing will stop it in its tracks, it is fear over employee loudmouths landing a company in hot water. “We see Web 2.0 as a great opportunity,” says Atkinson. “As more channels of communication develop, there is an even greater opportunity to help

business manage their content across these new channels.”

Oracle also sees opportunity here. Elsham expects there to be an increase in demand for the retaining and cataloguing of emails, especially in regulated industries. “There is also an increasing need to retain and catalogue IM interactions (the interaction logs) and blogs, as these are still most likely to be unmanaged and pose a substantial compliance risk,” he adds.

Atkinson thinks blogs, wikis and consumer search engines are driving an interesting trend that ECM vendors will soon be able to leverage. Internet companies are creating collaboration and search tools that are changing the expectations for what a corporate user wants to use inside the firewalls; for example, a Google-type search, easy-to-use blogs, wikis and collaborative workspaces. But Elsham warns: “While initially attractive, they cause IT departments huge security and compliance problems. Such internet tools were never designed with security and compliance in mind, and thus everyone can see everything.

“Within a corporation, there are different rules in place, for good reasons, and these tools cannot be deployed without careful policy management. We expect to see enterprise-ready tools, with appropriate security controls, emerging from major infrastructure players over the next 24 months,” says Elsham.

According to Robinson, Vignette is thinking along the same lines. “Vignette is fully embracing Web 2.0 in the enterprise,” he says.

Robinson believes IM, blogs, wikis and social networking sites are changing the way people interact with businesses – and that has to be of utmost concern to anyone offering web content solutions. “Basically, they have raised the bar of expectations for when people go to a website. Successful businesses will be those that open up these communication channels to customers and give them an opportunity to provide feedback,” he says. “By monitoring and responding to the community, businesses can alter and improve the way they work. Vignette is working with some of the world’s most cutting-edge companies to implement many of these technologies and enhance their customer interactions.”

But it is Stellent that claims to have the lead over everybody else. “For Stellent, this is where we have always felt the market was going,” says international vice president David Macey. “Our software was designed to address the requirement to enable content to have value by making it available to the right person or persons at the right time, in the right format and on the right device – and to protect that value by ensuring it is never available to the wrong person at any time. Now add to that our introduction of secure and manageable blog and wiki functionality within an ECM system,” he concludes.

Rulers of the roost

Looking ahead, the ECM marketplace certainly appears to be on one of its periodic upheavals, where the balance of power shifts in favour of certain players.

Lundgaard takes a historic perspective: “If we are to learn from the past, then the ECM industry ‘power struggle’ is unlikely to stay constant for more than a couple of years,” he says. “During the dot.com boom, Vignette and Broadvision ruled the roost, but this has now changed. It is likely that very large corporates will predominantly buy from large vendors such as Documentum and IBM as they want the (perceived) security which comes with it, but in the midmarket space the jury is still out.”

Robinson thinks the biggest threat facing ECM vendors is a lack of differentiation of basic content services. “Low-end document management and imaging are quickly becoming commoditised, with Microsoft entering the market and IBM buying FileNet,” he says, adding that ECM companies would be wise to differentiate their offerings from IBM and Microsoft. “Vignette expects to see a bifurcation in the market, with document management and imaging on one side and web CM on the other.” Clearly, one will be low-margin, low-cost business; the other a high- margin, high-cost business.

For those players that have made their names in document management and imaging (such as Interwoven and EMC Documentum), commoditisation may well be a trend that forces them onto the wrong side of the fence in the struggle for corporate marketshare. “We have found that many large clients are shying away from vendors such as Interwoven and Documentum for some of their ECM needs because it simply takes too long to implement, and the supplied features don’t always meet their requirements either,” explains Lundgaard.

The ECM marketplace continues to be among the most dynamic in the sphere of information management, one where the many tectonic plates of corporate infrastructure intersect – IT, finance, regulatory and compliance, human resources, marketing and sales – and where there is so much to play for.