By John Webster
Whether or not you think EMC's acquisition of Documentum is a masterstroke or a billion-dollar-plus blunder, you have to admit that the move is unprecedented. For the first time, an independent storage company has reached well outside its own backyard to grab a content management software applications provider.
The question most prevalent on everyone's minds, however, is: Why is EMC spending $1.7 billion (the amount at press time) to help its Centera product, which isn't really contributing to the company's bottom line?
1. It's not about Centera alone. It's about ILM.
EMC is marching to the land of information life-cycle management (ILM). And take note: EMC is going after all information. If you believe, as many do, that something like 80% of all data is unstructured data, then EMC would be missing out on a huge opportunity if it were to leave unstructured data outside the ILM tent. That's where Documentum plays into the equation: EMC + Documentum = ILM for structured + non-structured data.
So, the Documentum acquisition isn't really just about Centera. It's about Documentum plus Symmetrix and CLARiiON, too. It's even about Documentum plus Symmetrix attached to IBM mainframes.
2. It really is about Centera. Documentum gives Centera the boost it needs to reach its full potential.
The fact that Centera has yet to make a significant revenue contribution to EMC's bottom line doesn't necessarily mean that there is something wrong with the product, its price, the messaging, etc. EMC went out of its way to find content management software and services partners when it launched the product, and the list was impressive.
So, why is EMC putting these partnerships at risk by buying a company that many will see as competitors? Because partnerships aren't good enough for Centera. It's simply not enough to simply co-market a hardware/software solution in this space. You have to own the whole enchilada.
3. It's not about the hardware. It's about the software.
EMC has publicly stated that it wants 30% of its total revenue to come from software and software-related support by 1Q05 (though this date could slip further into 2005). Documentum is a hot software company in an even hotter space. Why waste time developing software growth engines when you can buy them?
The bottom line
Documentum fits EMC's ILM strategy and has the potential to help EMC hardware sales across the board. Documentum's content management software is also a clear fit with Centera, and it adds fuel to the software fire with which the company is trying to warm Wall Street.
While it all sounds good, it nevertheless is still a high-risk venture. EMC plus Documentum is a solutions sell all right, but to whom?
The Global 2000 companies to which both EMC and Documentum sell may be the same, but the people making the decisions for these types of products are different. For that reason, the Legato acquisition is easier to comprehend: The combined product sets were largely storage-related and were sold to many of the same buyers.
In the case of Documentum, it's a different mix—storage and content management—with different problems, solutions, and buyers. If partnerships aren't effective selling solutions here, why will Documentum/EMC be any better?
If we believe that the future of networked storage management applications is in the fabric, why not include the content and document management applications, too—or at least parts of them? If we believe in the ILM goal of managing data from cradle to grave, why not also include data structures that content and document managers address?
EMC has made its first really visionary move since it introduced Symmetrix, and the impact could be as resounding.
John Webster is founder and senior analyst at the Data Mobility Group (www.data mobilitygroup.com) in Nashua, NH.
What does it mean?
By Stephen O'Grady
Documentum has made a very successful transition over the past few years—at least measured by its consistent financial performance relative to its peers—from a document management vendor to a content infrastructure provider. This is more of a journey than a destination, however. We expect to see some significant product announcements as the company better leverages and cross-utilizes some of its existing assets.
But, ultimately, as partnerships like the Centera deal illustrate, storage is an increasingly important component of the content management sale—and, even more important, the compliance sale. As everything from Annual 10K reports to Website snapshots become subject to new compliance-oriented legislation and rules, the need to store that information long-term becomes more critical.
Looking at one specific set of rules—SEC 17a—it is immediately clear why storage systems are an integral part of these solutions. SEC 17a requires that records be stored three to six years, depending on type, and specifies that the information be stored in an easily accessible place for the first two years. As the timelines for record-retention schedules lengthen and the volumes of information being stored increase, the difficulty of managing them purely in terms of disk size becomes critical, and specialized storage systems will often be necessary.
In the end, EMC's acquisition of Documentum will in all probability be another confirmation of the resurgent systems narrative. Just as we're seeing the return of combined hardware/software systems in products like Sun's
Java Enterprise System or the recently announced KVS/Network Engines e-mail management appliance, so, too, can we expect such combinations from EMC/Documentum.
Stephen O'Grady is senior analyst at Bath, ME-based RedMonk (www.red monk.com), an analyst firm dedicated to understanding and building the narratives that define technology marketing and purchase.