Acquisition of Recommind by Open Text Opens Things Up

First the basics. Open Text has purchase Recommind, a strong player in the eDiscovery space. This is Open Text’s second significant acquisition in the past few months, the other being when Open Text purchased some customer experience software components from HP including Interwoven and MediaBin. We knew more acquisitions were coming after they then announced that they were raising $600 million and are planning to spend upwards of $3 billion on acquisitions over the next five years.

Yep, the old Open Text is back. They are buying Recommind for only $163 million, meaning they have more money. Before we discuss the elephant in the room, let’s look at what this acquisition means for Open Text.

Analytics for the Future

There are three possible reasons for Open Text to make the acquisition. The first is license revenue. This fits their history quite well.

The second is to own the technology. kCura recently acquired Content Analyst, allowing them to own their search engine and direct the development of the tech. Open Text may be looking to own their own modern search technology before they have all been purchased.

The third possibility is that the acquisition may be strategic, enabling them to push further into content analytics. I’ve written a lot about content analytics over the past year. At the AIIM Conference in New Orleans this past April, I participated in a roundtable on the subject attended by Stephen Ludlow from Open Text. He was there, by his own admission, to learn more about the reality of content analytics from real practitioners. It was a very good session and I am sure Stephen learned a lot.

When you consider that Open Text is already making headway in the auto-classification of content with email, the third reason makes sense. If that is their rationale, will it work? Hard to say. As my wise friend Cheryl McKinnon has observed,

“Born-cloud” content services with the inherent elasticity, scalability, and data-driven road maps have a firm foothold in the enterprise market. Dragging 1990s-architected suites into a vendor-run data center for managed services will not be a viable road map for long.

Open Text and Recommind haven’t transitioned to the cloud yet and the odds of Open Text pulling it off are pretty high. Box isn’t exactly sitting still and waiting for them.

The Next Acquisition?

Everyone’s favorite acquisition target, Documentum, is still on the market. It is fun to conjecture about the possibilities of Open Text acquiring Documentum from EMC. The problem is that Documentum is a huge acquisition.

Documentum will cost a lot and that $600 million Open Text is raising would likely not cover the cost. The price does fit into Open Text’s 5 year plan financially but the acquisition would front-load that $3 billion in 2016.

It would be a large effort to integrate organizationally. The challenges would be large but I suspect that Open Text wouldn’t shy away from those particular challenges. If the financials work out, I believe that Open Text will execute the transaction.

That is still a big if in my opinion.

It would all seal Open Text’s fate. It would be a purchase where the whole is less than the sum of the two parts. They would likely be stuck in the on-premises world until that world evaporated.

This is all conjecture. We know Open Text is buying and we know EMC is selling. What will happen remains to be seen.