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ECM consolidation continues

In early November 2006, Oracle announced its intent to acquire Minnesota-based enterprise content management (ECM) vendor Stellent in an all-cash deal worth $440 million. And in the apparent absence of any counteroffers, the deal looks set for completion in early 2007.

All things considered, it looks to be a smart move for Oracle. Following so closely as it does on the heels of IBM's acquisition of FileNet and the imminent release of Microsoft's Office Sharepoint Services (MOSS2007), the ECM sector is clearly set for some exciting years ahead.

Stellent had itself acquired other technologies in the past—most notably INSO (viewing tools), Optika (imaging) and SealedMedia (digital rights management)—but the core product is homegrown, Java-based and reasonably well respected. As with all ECM acquisitions, potentially major integration hurdles face Oracle and Stellent, but they are no more severe than those facing their competitors. To fully understand the reason Oracle chose Stellent rather than the slew of other available ECM vendors, it's worth looking at Stellent's history. When Stellent first came to the notice of the market (under the name of Intranet Solutions) in 1997, it offered a fresh approach to document and Web management—a product that was fit for the enterprise, yet could be up and running very quickly (often installed remotely over the Web) at a low price. It was the first tool in the emerging ECM market to embrace Java, even before the meteoric rise of application servers.

Fast forward 10 years and after much work, Stellent has developed a product set that fills in many of the gaps for Oracle, a name that provides recognition and some kudos—and a technology stack that can be absorbed relatively quickly. Once the product is ingested, Oracle will be able to check all the boxes on those notorious catchall RFPs so beloved of procurement departments. The acquisition does not totally close the gap with other lead ECM players, in particular, imaging is not that well represented in the Stellent stack (despite the Optika toolset), and Oracle must now be eyeing firms like Kofax to fill that gap.

If checkboxes mattered in the real world, then life would be rosy, but of course these situations are never so clear-cut. This acquisition raises many questions.

First and foremost is where do current Stellent customers figure in this equation? Although it's too early to be sure, customers should expect change and not a continuation of the status quo for long. Stellent salespeople are stressing the product's new home in Oracle's Middleware group, where presumably Stellent could continue to support MS SQL Server and IBM DB2—not to mention its proprietary file system-based repository where content is really stored.

Oracle will probably standardize around Oracle Content DB. No doubt it will provide incentives to the 4,700 strong customer base to stay engaged, but it didn't buy Stellent for its customer base (of which its typical, large enterprise target buyer is not particularly well represented). Oracle bought Stellent for its technology, and it will want a rapid absorption into a full Oracle offering. As a result, Oracle will have little financial incentive to continue providing support to older versions of Stellent products.

And absorbing Stellent, the firm, might prove much harder than absorbing the technology. Stellent is the epitome of Midwest candor and conservatism, while Oracle is perennially aggressive in its sales and execution. How the team at Stellent might enjoy working at Oracle is open to debate, as is how sensitively Oracle will handle absorption of the experience, skills and people that make up Stellent. Although the darling of the chattering classes who frequently bestowed awards on its technology at industry conferences, Stellent was less well loved on Wall Street, where its stock has frequently traded at a discount vis-à-vis its major competitors amid whispers of operational inefficiencies. Surely, some change is in store.

Oracle, however, has cited Stellent's sales force as a key factor in the acquisition based on its ECM acumen, something missing to date among Oracle's sales force. Handling that transition will be crucial to success.

Of equal importance to Oracle is the need to stay ahead of SAP (sap.com) and Microsoft. So more than a new ECM product set resulting from this acquisition, we will likely see content-enabled infrastructure and specific business applications emerge. SAP will have to respond at some point, though, whether it will be through an acquisition is unclear.

Many other ECM vendors are available for acquisition—including Open Text, Vignette and Interwoven—but the interesting speculation is less on which will be acquired and more on how the ECM market itself will transform. The involvement of the major infrastructure vendors (IBM, Microsoft and Oracle) means major change. There will still be a market as we know it today, but something new will emerge, "ECM 2.0" if you will.

How that will look is open to speculation, but it is worth remembering that the current generation (ECM 1.0) started out life as document management and workflow: tools utilized heavily by those involved in the restructuring of the corporate world using business process re-engineering (BPR) methodologies. BPR is another word that looks on the verge of re-emergence with so many firms currently coming to terms with globalization, outsourcing, the wireless enterprise, and the change that is bringing. The next generation of ECM will play an important part in the next round of corporate re-engineering.

So on balance the acquisition represents a good move for Oracle, but not one without challenges. Current customers of Stellent need to ask some serious questions of Oracle and demand a clear timeline of changes, along with a solid understanding of how Oracle intends to support any changes ahead. 

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