johnp's blog

Markets and Mergers

May 20th, 2009

The software industry is changing more rapidly today than at any time since its inception as a serious standalone part of the IT landscape in the 1970s. I personally have worked in pure play software companies since 1981, including the likes of Oracle and BusinessObjects (now part of SAP).

One of the key forces driving this change is the rise of open source as a viable alternative to many of the established software categories – with lower cost, higher quality and faster innovation.

When we founded Alfresco, we predicted that the customer’s choice would eventually reduce to only four options (four because only one of the four allows for a reasonable cost of exit): IBM, Oracle, Microsoft and Open Source.

In four years this has become true for most of the infrastructure, enterprise application categories. For a time we thought Sun might change the dynamic but with Oracle’s recent takeover it only remains a matter of time before IBM or Microsoft swallows SAP (and so may end up with the two arch rivals of BusinessObjects and Cognos as bedfellows).

In 2007, the Business Intelligence category of proprietary vendors disappeared into the stacks with the acquisitions of Cognos by IBM, BusinessObjects by SAP and Hyperion by Oracle. These vendors accounted for 80 percent of the category.

From 2006, the ECM/WCM category has been similarly consolidating, although some significant independent players remain. What is true is that open source has pretty much killed WCM as a standalone proprietary category.

How can you run a profitable company on a proprietary model on such a small (well several $billion) niche without the economy of open source? The answer from the market is you can’t, which is why OpenText acquired Vignette and Autonomy Interwoven (SDL bought Tridion, Oracle purchased Stellent, etc).

These companies can only be profitable if the cost of sales to each customer can be spread across several product lines. However, this also means that customers will be forced to buy old, barely changing, cobbled-together products. They cannot afford the reengineering to integrate these in a way that provides any efficiency to the customer. All the efficiencies accrue to the vendor and shareholder.

We can expect to see this wave of consolidation continue. The blessing for customers is that open source has emerged to provide the breadth and depth of choice that will allow consumers to innovate and improve the services they need to meet the demands of the post-crunch era.

The Alfresco community and business is growing rapidly and the number of customers now switching off Documentum, Vignette, Interwoven and SharePoint is increasing day-by-day. We had the vision to build a product with a common repository infrastructure for the four key areas of content management, avoiding the overhead of integration that has defeated the proprietary players. We did this by utilizing a modern open source rich framework.

We will continue to drive our leadership role with innovation and standards, delivering the first and most complete CMIS implementation to date. I look forward to working on the most challenging content projects for our community and customers and ensuring we continue to excel in the service we offer.

Entry Filed under: Alfresco,ECM Market