FRAMINGHAM (10/17/2003) - Companies looking for ways to better track and manage an ever-expanding amount of digital information should pay close attention to EMC Corp.'s planned acquisition of Documentum Inc. as the lines between storage and content management continue to blur.
The US$1.7 billion deal announced this week highlights the growing role that content creation and archival technologies are playing in storage systems, a union that's being dubbed information life-cycle management. EMC has been positioning itself as a leader in this arena - which includes Hewlett-Packard Co. and Veritas Software Corp. - and in July shelled out $1.3 billion for Legato Systems Inc., a maker of life-cycle management and back-up and recovery software.
The acquisition of Documentum will boost EMC's information life-cycle management capabilities - provided the company successfully can integrate Documentum's expertise - by adding document, records, digital asset and Web content management and collaboration to EMC's portfolio. In addition, the acquisition gives EMC a pipeline into Documentum's customer base, which includes companies such as Dow Corning, Ford and Morgan Stanley Dean Witter.
The question, analysts and customers say, is whether EMC will give Documentum the autonomy it needs to serve not only EMC's storage customers, but also to continue to evolve its content management products.
"For sure, Documentum will gain additional financial and technical wherewithal from EMC, which will perhaps help it further beat out competition and improve the product," says Jim Nasr, CEO of business and technology at consulting firm Armedia. "However, I wonder whether the Documentum/EMC Centera combination will become the de facto Documentum sales pitch to come and force clients to choose a 'package deal' as opposed to what they really want. (This approach would be) similar to what IBM (Corp.) did with Lotus Notes after that acquisition, when seemingly every IBM custom solution needed to include Lotus Notes."
Customers and partners also wonder whether EMC will successfully bridge the hardware/software company cultural divide that might be the greatest challenge to smoothly integrating Documentum into its fold.
"The only thing is at some point in time the cultures end up trickling together," says Elaine Price, president and CEO of business continuity services provider CYA Technologies. CYA is a partner to EMC and Documentum. The company also uses Documentum internally to manage the life cycle of its product development processes.
"In the old days, companies would take on the behavior of the acquirer," Price says. "In order to be successful, the companies have to be able to run separately."
For its part, EMC says Documentum and its 1,100 employees will become the foundation of a separate subsidiary, which will be headed by Documentum President and CEO Dave DeWalt. This approach is much like EMC's treatment of Legato, which it established as a separate business unit led by David Wright, Legato's CEO. The Legato acquisition, which increased EMC's data recovery and life-cycle management capabilities, is expected to close this week.
And while EMC says hardware/software independence will underpin its acquisition of both Documentum and Legato, analysts are skeptical and point out that EMC's track record is spotty when it comes to integrating the products of acquisitions and living up to hardware independence.
"The only way EMC will make this successful is if they let Documentum continue to do their own thing and have them work with the Centera group," says Brian Babineau, an analyst for Enterprise Storage Group. "EMC must keep Documentum separate from its traditional business to avoid distraction, as historically the company has been less than perfect in integrating outside entities into the EMC culture.
"EMC can optimize Documentum to work with Centera, but Centera also needs to work with FileNet, KVS and Optika," he says. "The last thing EMC needs to add is a hardware agenda."
EMC is making every effort to ensure that its products work with a variety of systems, saying it will only integrate its products with Documentum's at the API or package bundle level.
"We aren't going to be doing any direct combination of products; we aren't going to change any partnerships. Centera is going to remain open to Documentum competitors," says Mark Lewis, executive vice president and CTO for EMC.
Last week the company announced a partnership with Documentum competitor FileNet to manage regulated records.
At the same time, Documentum will face challenges of its own. The integration process likely will set Documentum off course for about a year, analysts suspect, giving competitors such as Interwoven Inc., FileNet Corp. and Open Text Corp. an opportunity to gain share on the market leader.
But analysts also tell customers to expect more consolidation in the content management market as companies such as Oracle and other storage vendors take a close look at bolstering their content management capabilities.
Another area of concern for Documentum customers is what products EMC will choose to no longer develop or support.
"There is a good chance that some of the current partner products/solutions that are offered as a part of the Documentum suite will be squeezed out by EMC, particularly around Documentum storage or business continuity," Armedia's Nasr says.
Alan Pelz-Sharpe, vice president of research at Ovum, adds that features such as Documentum's collaboration technology, which it acquired from eRoom last year, might become less relevant.
"It becomes more of a 'How do I manage this mass of content?'" he says. "This is where the two stories don't add up quite so much. Documentum is very much about being a dynamic, live collaborative environment. . . . That's not really all that connected to storage."
Analysts also say that EMC will have to work hard to integrate document and record management with storage management to give customers a means of provisioning, migrating, managing and archiving data based on its value. EMC says it plans to turn content management into just another part of its ubiquitous storage management strategy.
"The acquisition allows us to manage and bring structure to unstructured data," EMC's Lewis says. "The fundamental thing our customers told us is 'you want to help us manage data, you want to do information life-cycle management, you need to give us a hook that lets us put in business policies and the rules when we create the data.' "
EMC says that 80 percent of data is unstructured, and Documentum's DeWalt says that workers spend 40 percent of their time searching for this data. Integrating the content management capability with storage, analysts say, is a natural fit.
"EMC has validated the idea that content management companies should be looking more seriously at storage," says Joe Martins, a partner at Data Mobility Group. "Storage administrators are using completely separate sets of tools (from content management) and moving files around. . . . . People start talking about information life-cycle management. But if you look at the core of information life-cycle management, it's almost identical to what content management has been saying for the longest time."