No – it’s not the name of a law firm. It’s a business model. The concept behind this is that seatholders represent the lasting value toward enterprise software vendor stability – that gathering and then holding onto as many of those end-users as possible will keep one vendor afloat on a stable sea of maintenance while others in the same market flounder and drown. And, it works given no other changes to the environment. So, in the enterprise content management market (ECM) for example, we’ve seen growth, consolidation, and maturity… but no decline as of yet. At least for many vendors. But there are exceptions. Like Vignette.
With yesterday’s announcement of its intention to acquire Vignette, Open Text has reminded us that standards and practices in typical software M&A don’t always have to apply. You don’t have to intend to leverage the actual technology or brand or channel or partner ecosystem. You just need to leverage seatholders. Fact is that Open Text’s acquisition algorithm is fairly successful. Another fact is that many of the assets under management within OTEX’s portfolio haven’t gone completely away, they’ve been layered under a brand management hierarchy that positions those assets toward new buyers and markets. The only question for which no fact has yet emerged: “After maintenance from product inventory shrinks to a specific level, can it upsell or cross-sell effectively?” In other words, can it farm as well as it hunts?
Generating loyalty in enterprise software markets can be tricky. Generating ‘sticky’ is not quite as hard. Vignette’s products are often tied to long-running processes for mission-critical applications – whether Web channel or imaging-based. Open Text seems to have wisely waited until the falloff of potentially more fickle customers and prospects had been completed. The business core thus revealed, it swooped in with the right offer at the right time. VIGN’s value to Open Text is not the technology, it’s the seats. The very plushy ones of large enterprises with global potential to look at one of its own (now) incumbent suppliers to provision other user needs. And, Open Text has options for those enterprises in spades.
Now it remains to be seen if – having won and wrung value from many other vendors’ customers – it can wean them off last year’s (or even last decade’s) models and move them toward an interesting ECM future. Open Text has been playing its cards right if revenue growth and seat share are the only measures of success. But I think it’s betting on other hands we can’t yet see. With combinations of Portal, Content, Collaboration, Process, Social Software, and Digital Asset Management technology, it isn’t hard to imagine that Open Text has all the table stakes necessary to buy into the big game with other new media titans as much as hold ’em in the $4B ECM world.
Am I seeing the same things you are? Comments are welcomed… As are attendees at the Gartner Portals, Content, and Collaboration Summits in Orlando, 8-10 June and in London, 16-17 September. We’ll discuss the turmoil in ECM during a Magic Quadrant Megasession in both locations.
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