OVUM COMMENTS

Content management market remains dynamic

Christopher Harris-Jones, Principal Analyst

This year started in the same hyperactive vein as the last couple of years. A flurry of acquisitions and the collapse of divine show that the content management market is as dynamic as ever.

Acquisitions continue apace…

In January 2003, German document management vendor, IXOS, announced its double acquisition of Obtree (web content management) and PowerWork (workflow). This reinforces its position as one of the world's largest content management players, with revenues of well over $100 million. See IXOS waves the ECM flag for Europe for more on this.

Following Vignette's acquisition of Epicentric in the fourth quarter of last year, Open Text acquired Corechange in February to add portals to its collaboration and content management software.

Other major acquisitions since the beginning of 2002 include:

Documentum's acquisition of Boxcar Software (content importing and exporting) in January, eRoom in October to provide substantial collaboration facilities (see Documentum: A new Microsoft?), and records management vendor TrueArc in November

IBM's acquisition of records management vendor Tarian in November

Stellent's acquisition of Kinecta Corporation, which provides substantial software for content distribution

FileNET's acquisition of eGrail in April 2002 to provide web content management.

End-of-year results that have been announced over the last few months have shown that the financial trends we described in 2002 continue unabated. They continue to clearly distinguish between the companies with a traditional document management background and those ‘new wave’ companies targeting the management of content for complex websites.

One of the most dramatic events this year was the collapse of divine in February. The company, which was founded by Andrew ‘Flip’ Filipowski in May 1999 is in severe trouble and has filed for Chapter 11. It has been notified that its shares will be delisted from Nasdaq. The share price was down to five cents on the day of delisting (6 February). The company also failed to release its 2002 results in late February as planned.

divine's strategy was to buy up a large number of organisations (approaching 100 acquisitions), an approach identical to that taken by Filipowski in his successful development of Platinum. While many of the acquired technologies were in related areas, and the story seemed good from 50,000 feet, the problem with acquiring technologies is creating an integrated whole - a task that divine did not succeed in doing.

Severe problems emerged in one of divine's subsidiaries late in 2002, when it became apparent that Rowecom was suffering severe financial difficulties. RoweCom collected tens of millions of dollars of subscriptions for magazines and periodicals on behalf of various publishers, but then promptly spent the revenues trying to stay afloat.

During its life, divine has swallowed a significant number of very good technologies in the general area of content management. These include Northern Light's search engine, Open Market and Eprise, which both operated in content management, and dozens of other companies. The big question now is who, if anyone will step in to acquire one or more of these valuable assets. There are significant opportunities for the larger software vendors to acquire some very strong technologies.

Financials

Revenues

Despite there being some signs that the content management market may be picking up, revenues from licences continue to be mixed. The split in the fortunes of the major content management companies continues. Organisations such as Documentum, FileNET and IXOS, which have traditionally focused on document management, have fared well and recorded either little change or an increase in core revenues.

In fact, Documentum is showing exceptional growth having recorded a growth in licence revenues of 46 percent since the beginning of 2001. A significant component in this growth has been its string of acquisitions.

However, vendors that are more web-focused, such as BroadVision, Vignette and Interwoven, continue to do badly. The one ray of light among this group is Vignette, which saw an increase in revenues in the fourth quarter of 2002 for the first time in eight quarters.

Many vendors are now trading with a share price of below $5, including BroadVision, Gauss, Interwoven, Stellent, Vignette and IXOS.

Forecasts

Current Ovum research indicates that the market for content management product licence revenues will continue to grow steadily from its current level of just over $1.4 billion, at an average rate of 8.5 percent, reaching $2 billion by 2007.

One of the biggest surprises is that Microsoft has leapt into second place in terms of licence revenues.