Post IBM's proposed buyout of Filenet, the buzz in the ECM market is getting more and more shrill. For players like IBM, its 16 billion software business now contributes even more profit to the bottom line than services, and it's just now emerging as the $91 billion company's most dependable growth engine.
Actually, this is insightful — Annex Research estimates that for 2006, software will account for 20% of IBM's revenues but 37% of its profits. Meanwhile, services, which represent 53% of revenues, account for 35% of profits, and systems and technology (mostly hardware products), which represent 24% of revenues, account for just 12%. IBM's software unit enjoys gross margins of 84.2%, compared with 35.9% for hardware and 27.7% for services.
For players like HP, it’s a catch-up game. BI Vendors could be buying out ECM players says this article, predicting more twists in the content management space. Bizarre, to say the least. If such a thing would happen, this would throw the BI players/ECM players into an awkward situation — they will lose their identity. Look at this — BI operates on structured data and too often ECM players operate on unstructured/hybrid data. BI mostly operates on data built on transactions; it cant be said of ECM to the same degree.
Look at it from a buyer's perspective – what would he get out of such a combined play? NOTHING, TO SAY THE LEAST. Also it may be technically possible (though not so easy), to combine these together – this would be a heavy duty investment for any enterprise and would definitely not be more flexible or friendly to operate/extend and integrate with other applications. More consolidation of ECM space appears plausible – that would be bringing together platform/infrastructure players, portal players, ECM players together . while some acquisitions look sensible, clearly all may not make the cut.
The early results of acquisition of proximate space play have not delivered well. The future of enterprise software is in partnering meaningfully, consolidating where there is a clear rationale, but not to come together for the sake of coming together!
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