By Charles King, Pund-IT, Inc. September 14, 2016
The plan by OpenText, an Ontario-based player in the Enterprise Information Management (EIM) space, to purchase Dell EMC’s Enterprise Content Division, including Documentum, is an interesting deal for both firms though for substantially different reasons.
In the case of OpenText, the deal represents a step forward in strengthening a leadership position in a range of EIM solutions and services. The sale also demonstrates how Dell Technologies is moving forward both strategically and financially after the close of its purchase of EMC. Let’s talk about that.
What is EIM?
Unless you follow technologies that purport to enhance the accessibility and use of enterprise business information, EIM may not be on your radar screen. Basically, EIM players like OpenText develop services and solutions that integrate various Business Intelligence (BI), Enterprise Content Management (ECM) and Business Process Management (BPM) technologies to ensure customers get the most out a wide range of data investments.
Many BI solutions claim to do the same thing, though they typically focus on structured information contained in traditional relational databases. Similarly, ECM offerings tend to focus on semi-structured information assets such as word processing documents, reports, PDFs and invoices. There are also Big Data technologies designed to open all of an organization’s structured, semi-structured and unstructured data for analysis.
You could say that EIM solutions focus more on enabling a customer’s business strategy than they do on promoting or relying on any specific technology. EIM vendors like OpenText also recognize that for enterprises, particularly those in sectors and industries that are subject to stringent regulations, including healthcare, life sciences, public sector and finance, the value of information and analysis is closely coupled with following stringent data governance and compliance guidelines.
Enter Dell EMC – Cue OpenText
That’s where Dell EMC’s Enterprise Content Division, including Documentum, comes into the picture. EMC acquired Documentum for $1.7B in 2003 and its offerings played central roles in the company’s Enterprise Content Management and Information Lifecycle Management (ILM) solutions portfolio. At the time, ECM and ILM, as well as data governance and compliance processes were closely coupled with storage management, making the Documentum deal a natural one for EMC.
In fact, a primary value proposition of ILM centered on cost-effectively migrating information across storage tiers that reflected its relative value to the organization. That’s still an important issue for larger organizations, especially those leveraging premium flash technologies for primary storage. But EMC has continued to build out its ECM portfolio with offerings like LEAP, the suite of purpose-built, cloud-native content apps that was announced at EMC World in May, 2016.
That said, while ECD has been a profitable business for EMC, the $599M in revenues it delivered in FY 2015 were a small fraction of the company’s $24.78B in total revenues for the year. In addition, the demand for traditional ECD is tightening, but thousands of enterprises still need solutions like those offered by Dell EMC’s ECD. That left Dell the option of investing to develop more sophisticated EIM-style solutions and services or finding a potential buyer for the ECD division that could also act as a strategic partner moving ahead.
Out of the blocks, OpenText gains a profitable business containing some of the industry’s best ECM and ILM solutions, along with a substantial book of satisfied enterprise customers. That’s the kind of business you can build on. The deal should complement the content management and CRM technologies OpenText purchased earlier this year from HPE. Plus, offerings like EMC LEAP should allow OpenText to develop new cloud-based services and commercial opportunities.
For Dell Technologies, the deal makes sense strategically and practically. The profitability of ECD made it an attractive package to put up for sale—far better than trying to offload an underperforming BU. The cash will enable the company to consider other investments or to retire a significant chunk of the debt it accrued buying EMC. OpenText looks like a solid company to partner with moving forward. That’s a critical point since there will continue to be customers for existing and future ECD solutions and services.
Overall, the deal seems like a win/win for both companies and their existing and prospective customers. Coming just days after the Dell/EMC deal closed, it makes the future of Dell Technologies look very interesting, indeed.
© 2016 Pund-IT, Inc. All rights reserved.