by John Symon, SVP, International Markets

The Enterprise Content Management (ECM) market has continued to evolve, change & expand its scope within a broader Information Management market.

The “Enterprise” has changed dramatically with the mobility of the workplace and associated devices.  “Content” has broadened and exploded with the impact of the web, and “Management”
- while still addressing key requirements of governance, control and business process - now encompasses both back office and much broader, customer facing, applications.

So, is ECM really past its sell by date?

John Symon, SVP International of Boss Equity catches up with Alan Pelz-Sharpe, a veteran industry guru in this area, to get his perspectives on the ECM market; the effect of disruptive and convergent technologies, the impact of further consolidation via acquisition and some thoughts on where this market sector is headed.

Alan is in the unique position of having researched and analysed this market both from an end user and vendor perspective following his tenure at both The Real Story Group and 451 Research .  Alan has recently launched his own consultancy – “Deep Analysis” and has recently produced a study on the size, scope and changing dynamics of the ECM market.  

JS:     Welcome to Boss Insights, Alan. Perhaps you can give us a brief background on yourself and what has prompted you to launch your own analyst consultancy?

APS: I started out long ago in Oil & Gas document management. During that time electronic document management systems started to appear and I worked on one of the first Documentum implementations in Europe. It was a disaster. Not the software, but the implementation process.It was a baptism of fire and one I never forgot. In the late 90’s an opportunity arose for me to join Ovum (industry analyst firm) in London (later moving to Boston) to write about the emerging document management and workflow market and my previous experience proved to be invaluable. Since that time, I have pretty much always had a foot in the world of ECM, researching, writing, speaking and consulting. I can only say it has been a wonderful if stressful at times ride! Working at research firms you follow technology trends – you look at what’s coming out of early investments in Silicon Valley, you talk often to the established vendors and you hopefully figure out strategies, futures and tactics for your clients. But in starting Deep Analysis I wanted to set my own agenda, one that recognizes that buyers rather than vendors drive the market. It’s a contrarian approach in many ways but one that seems to be resonating well. Quite simply I am asking the question “What do buyers actually want and need today and in the future?”.

JS:     Which technologies and markets will you focus on?

APS: I have a great network in the world of ECM & BPM so much of my focus is of course here – but I am casting the net a bit wider. In short, I am focusing on disruption and innovation – where that is coming from and how to address it. In some cases, that may be working with a well-established vendor to help them adapt to a changing marketplace, and in turn for them to better understand their customers and competitors.  In other cases, it is working with VC funded start-ups that are looking to disrupt and thrive in new ways.  Every week I seem to unearth new players doing ground breaking work so that keeps it all pretty exciting. Harking back to my start in document management I try to ensure that I spend as much time working with those that implement systems and manage the change as I do the technology vendors – in the hope at least of keeping my client advice rooted in reality and not the ivory tower I once inhabited!

JS:     What do you see have been the major changes & drivers impacting the ECM sector in the past  2-3 years?

APS: I would say there have been two major drivers over the past few years – consolidation at the top end of the market and a flood of low cost new entry products at the bottom end. Together they have brought about significant change. The consolidation (think OpenText/Documentum and Hyland/Lexmark) is now filtering down through the marketplace with many smaller firms looking to merge for growth or for some other kind of exit. It’s turbulent times for long established ECM & Document Management vendors. The entry (and rapid growth) of Box, Egnyte, Dropbox along with a slew of collaboration vendors like Slack has meant many buyers in the small and mid-market are just signing up for relatively low cost, low stress cloud alternatives. To be clear though the market continues to grow and will do so – but nevertheless there is a lot of change underway.

JS:    Do you see vendors continuing to build out their ECM related suites? What do you consider are the technologies, markets & applications that present the best return for further innovation?

APS: I don’t really see vendors building out their ECM suites as such, but what I am seeing is many more industry and process specific ECM applications being launched. For example, there are now literally dozens of healthcare specific systems available, more and more HR and Legal systems are coming to market. Many of these vendors and products don’t label themselves as document management or ECM – but under the surface that is what they are.

JS:   What are the 3-4 key challenges that traditional ECM vendors face in this ever-changing technology landscape?

APS: Sad to say, some of the challenges are the same challenges that have plagued the sector for decades but…..

1. Getting their head out of the sand and recognizing that new faces, new approaches and new technologies are and will continue to change things
2. A reluctance to embrace AI & ML – these are tools to more efficiently automate tedious administrative and analytical tasks. They are not silver bullets and often over sell and under deliver. But like it or not they are our future.
3. Stop selling horizontal generic systems/solutions/applications – start selling software and services that meet a particular customer specific needs. Simply focusing in on one business area can deliver $50-100m in business – scattergun sales efforts that chase every lead that comes in the door will always limit an ECM vendors room for growth.

JS:    Do you anticipate further consolidation via acquisition in this sector? For example, what are your thoughts on the impact of the latest news of the Thomas Bravo /Hyland deal in acquiring Lexmark’s software division?

APS: The Hyland deal was large and significant and has sent a chill wind through the sector. But beyond the $1B plus deals there is much more consolidation going on in the $10-$50m vendor world of things. In the first half of 2017 alone I have tracked over 40 smaller deals and I am sure I must have missed some in that process. I see no signs of that slowing down. I think the theme of the deals moving forward will be industry or geographic specific (rather than technology driven) – with mid-sized firms looking to buy up regional players or small niche vendors that can give them access into a new industry market.

JS:   Do you consider the ECM sector an attractive market for PE & Investor firms, and if so, why?

APS: For P&E firms I think ECM is a great place to invest. ECM systems are incredibly sticky and hard to remove/replace. Firms that have had 10, 20 or even 30 years to build up an installed base may not be seeing a lot of new license deals but the maintenance revenue is high margin and pretty reliable. For a private equity firm that is rich territory in which to reduce costs – possibly merge firms together and provide a long tail of solid (if unremarkable) revenue.

JS:  What are your thoughts and projections for the ECM market over the next 2-3 years?

APS: More disruption alongside more growth. But more importantly I think we will see ECM transition into something new and exciting. Artificial Intelligence, Machine Learning, Robotics & Blockchain technologies are already finding their way into the space and when you consider governance and automation are at the roots of all ECM the opportunity is clearly immense. I’m currently tracking startup’s in the US, EMEA & Asia that are building out and testing wholly new approaches to ECM – rethinking the traditional repository and workflow mind-set. Again, they may not consider themselves to be ECM vendors but they are fixing the same problems only with different technologies and perspectives.

JS:  Many thanks Alan for these insights.  It appears the “ECM” market continues to evolve and change. Far from being dead it is experiencing yet another period of transition and, although this presents challenges for some of the established players it is bringing many new exciting opportunities in a much broader marketplace.  More like new wine in old bottles, perhaps!