I haven’t blogged in a while for various reasons that I won’t get into in this post but recent news demands that I share some thoughts. It seems that barring a better offer, Dell is going to buy EMC for a LOT of money.
Now the numbers don’t really matter to me as I don’t hold stock in any of the players except perhaps in some retirement mutual fund to which I never really pay attention. What I care about is the fate of the Enterprise Content Division (ECD), the home of Documentum.
This Matters Why?
I’ve been advising a lot of companies about how to implement various Enterprise Content Management (ECM) platforms of late. None of them have been Documentum. This is likely as much a bit of chance mixed in with the software many of my consulting partners tend to sell. I have been coming in post-sale to help companies make sure that they don’t go through this same process in 3-4 years.
If Documentum vanished it wouldn’t hurt my income but it would hurt me. I poured a lot of years into the ecosystem as a Documentum partner and rabble-rouser. When I saw the deal leaking into the news last week I paid attention. Now that something is definitely happening I can stay silent no longer.
When EMC bought Documentum it was the biggest ECM buy by an IT shop ever. IT bought all this ECM software and then couldn’t figure out why it wasn’t just taking off. EMC eventually understood that it was the nature of the technology and not Documentum specific so they didn’t keep buying more content management vendors.
In this environment Documentum languished. It was at times ignored, yelled at, and written off. There were times that they tried to bring Documentum into the bigger EMC picture but it never really worked.
This time EMC is being bought by Dell who wants to strengthen its storage and security offerings. EMC is perfect for Dell with a strong storage portfolio and RSA to secure it all. Virginia Backaitis offers an interesting take on the combined analytics assets that show a potential future for Pivotal. Documentum is nowhere to be seen on any analyst’s radar as a positive component of the deal.
As a result, this is either the best or worst thing that could ever happen to Documentum.
Scenario 1: Salvation
Dell doesn’t care about the ECD. Documentum is likely something that was mentioned in a laundry list of Wait, that’s not all!’ items that Dell doesn’t care about. As each item was listed they were probably asking themselves how they could turn those assets into cash as a chunk of this deal was financed with new debt. That debt will likely want to be dealt with quickly to provide more flexibility for Dell in the future.
An easy way to raise some money is to sell of parts of EMC that aren’t desired anymore. One of those parts is likely the ECD. Documentum could be sold to private investors who actually want to invest what is necessary to right the ship. The crew at Documentum have been trying to move to the cloud for years, ever since the Next Generations Information Server (NGIS) was announced years ago. While that effort has not seemed to bear fruit there are continuing efforts to move to the cloud.
New ownership with a priority to get this done would enable Documentum to at least complete the transition. Whether or not it is too late to successfully compete is up to the market. It isn’t dominated by a set of players yet but there are a lot of biases built into the market at this point that would work against Documentum. A strong engineering push coupled with a solid marketing effort could be enough but the margin of error is small and shrinking every day.
But if it worked…
Scenario 2: Death Spiral
The other scenario is where either Dell or someone to whom they sell the ECD decides it is time to milk the customer base for revenue. This would trim overhead and focus on keeping customers on the platform to maximize cash-flow. If Dell keeps the ECD, this is the most likely reason.
If you see Open Text or CA buy the ECD, start lighting the funeral pyres because Documentum would be officially brain dead and waiting for the machines to be turned off.
What Will It Be?
If Dell decides they need cash quickly, expect them to line-up a deal that they will execute as soon as the deal is finalized. It may even happen before the deal is finalized if there is high-confidence that the last hurdles to the deal have been cleared .
If sold then it will depend on the intent on the buyer. Private equity is the best bet and I’d keep an eye out for activity along those fronts.
Given that the deal may not be finalized for over 6 months I wouldn’t dismiss the cash cow option, especially if interest in buying doesn’t happen quickly. Converting into a more steady revenue stream is something that could be done quickly and would generate cash in the short-term and increase the value for any company that wanted to buy Documentum for the revenue.
This is a wait-and-see game but if I was a betting man I’d start looking for wood to use to build that pyre.