1998 Market Reflections

"Three words that encapsulate where this market is going -- applications, applications, applications." -- Larry Warnock, VP of sales and marketing, Documentum

"Knowledge management and sharing will become a senior management imperative." -- Michael Howard, VP Document Services Group, Xerox

"The knowledge management sector has grown throughout the year, and companies are becoming more aware of how knowledge management and its components, like document management, electronic forms and workflow, can benefit an organization's business operation." -- Chris Robert, president and CEO, Keyfile

"Knowledge management is being embraced increasingly in organizations where centralized access to mission-critical business information and the standardization of best practices are corporate imperatives." -- William Zastrow, VP of marketing, Tower Technology

"KM is real. I have been in Fortune 500 organizations thinking I am talking about something new, and I find they have well-established KM initiatives. It is one of the fastest moving management phenomena in that it went from a concept to the mainstream to a Dilbert cartoon within a year." -- Tony McKinley, director of Professional Services, Innodata

"In our organization, KM is about sitting down and plotting which people have certain knowledge and skill sets, and then grouping them appropriately with those that need that knowledge -- given their current projects -- to accomplish a transfer of knowledge with the help of supporting technologies." -- Bill Devine, VP of IT, Prudential Insurance

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Mainstream adoption Acquisitions New entrants Existing players Trends seen by vendors Other trends In 1998, the KM market blossomed. A year ago, the industry was still struggling with definitions. Now, more and more case studies show the solid payback of KM programs. Sometimes that simply called for a reclassification of existing project initiatives, and sometimes new KM initiatives were born.

Household names like General Motors, Prudential, Pillsbury, Chevron, Johnson & Johnson, Philip Morris and Hewlett-Packard all had active, formal KM programs led by a KM executive.

Publishing companies on both sides of the Atlantic launched new KM publications in 1998, following KMWorld's lead. Organizations such as AIIM, ARMA, American Management Association and National Managed Health Care Congress (NMHCC) launched KM education programs and seminars. There was even a KM pavilion at Comdex.

A number of vendors including Tower Technology, Lotus/IBM, Lexis-Nexis, Documentum, Xerox, Dataware, Open Text, Input Software, Treev, Excalibur Technologies, PC DOCS, ByteQuest and even Bell & Howell's Scanner Division re-positioned themselves as KM technology providers.

Acquisitions

AOL bought Netscape. IBM renamed its products under the MQSeries line, released MQSeries Workflow, and also purchased KnowledgeX.

FormWare and Wheb Systems merged to become the forms processing powerhouse Captiva, and Scan-Optics acquired Southern Computer Systems following the trend of consolidation in the forms processing segment.

Interleaf acquired PDR Automated Systems and Publications, Photomatrix acquired I-PAC Manufacturing and Eastman Kodak sold its line of DM applications to a subsidiary of Tyler Corp. named Kofile.

ImageMax acquired COMSTOR, Micrographics Plus, Southwest Image Technology, Advanced Image Management and RIS Document Solutions, while Lason, Ikon Office Systems and FYI continued their buying binge (e.g. Amitech, Emerge and Creative Mailings respectively). Merrill bought World Wide Scan Services and affiliate Executech.

In the healthcare segment, imaging and workflow provider IMNET Systems, with a market value of $250 million, was acquired by healthcare software leader HBOC.

New entrants

Newer, smaller companies made their mark in the KM space in 1998. The British invasion was led by Hyperknowledge and Autonomy. Chrystal Software, 2Bridge Software and Enigma focused on the content management segment, while Centillion Digital Systems concentrated on digital asset management over the Web. Intraspect, BackWeb Technologies, DataChannel and Wincite made their mark as emerging KM providers.

Existing players

There were mixed results by established players. Microsoft continued to strengthen its hand with successful strategic alliances. FileNet had a strong first half, while stumbling in the second half and suffering a precipitous stock price drop of more than 80%, with some recovery at the end of the year. FileNet also moved to a vertical market strategy and announced it would no longer appear at the AIIM Show.

Kofax was late in getting its new VirtualReScan product out the door. Upstarts Radian and Powerscan made strides in the capture arena at Kofax's expense.

Under the direction of CEO Kimra Hawley, Input Software found its legs in the second half of the year, after splitting off from Cornerstone.

Plexus seemed to have fully recovered from its two ownership changes a few years ago, and introduced strong Web functionality in its image and workflow product suite. Eastman Software released desktop DM (DMX) and workflow (WFX) products aimed at the Microsoft BackOffice space, while Keyfile came back with a 22,000-seat workflow order in that same space and reported 50% revenue growth.

Mosaix hired a new general manager, Hal Wendel, and continued to focus on call center applications in banks and financial services firms. Optika repositioned itself to focus on E-commerce with the announcement of its EMedia product suite.

Documentum continued its strong showing in terms of corporate growth and stock performance, a result of its focused target market strategy. NetRight released IManage Network 4.1 and continued to leverage its technology advantages to make marketshare gains, particularly in the legal vertical market.

DM providers InterTech, Lava Systems (to be acquired by Open Text) and EZ Power (bought by DocuCorp) were quiet during the year, after a great deal of visibility in 1997. PC DOCS failed to gain back its momentum, with two company presidents resigning within six months.

IntraNet Solutions took advantage of its positioning to capitalize on the Web frenzy, with its hot line of document management products for the Web selling well. Workflow provider Staffware continued its marketshare increases, through alliances and aggressive pricing, taking advantage of sluggishness at competitors FileNet and Action Technologies.

Australia-based Tower Technology continued to exploit technological innovations such as color imaging and storage of E-mail as knowledge objects and was successful in winning a number of large production imaging deals. Minolta also announced support for color imaging.

Trends in the KM space

The KM and intellectual property space was in the midst of rapid change throughout the year, mostly because of the turmoil the maturation of the Web has introduced.

Michael Howard, VP of the Document Services Group at Xerox, identified three significant trends affecting the document and digital asset markets in 1999.

"First, transformation of the publishing and media industries (books, journals, newspapers, magazines, online media, etc.) will accelerate. Industry value chains will be linked in new ways, and technology exploitation, especially the Internet, will be fundamental to it all. Amazon.com is only one wave of change in a sea affecting those (mostly) tradition-bound industries.

"Second, in the corporate arena, knowledge management and sharing will become a senior management imperative. Adapting technology to support higher-level business processes will be seen as a great competitive advantage. Virtually all important suppliers of services and technology are amassing a war chest to add value there. The need to manage the intersection of document and data-centric systems will be even more pronounced in this new era.

"Third, electronic commerce systems will begin to parallel and in some cases substitute for functional business systems that rely on paper and labor. Electronic commerce systems will enable corporations to enhance customers and supplier relationships, often in concert with the knowledge management agenda. Even paper-based systems like billing and direct marketing will take advantage of new personalization (aka 1:1) technologies to achieve greater revenue, and enhance customer loyalty."

Larry Warnock, VP of sales and marketing at Documentum, revealed the not-so-secret key to Documentum's success and characterized the marketplace.

"Customers are looking for applications of this technology. Customers will indeed buy applications. The question is who will provide them? If not the vendor, then an integrator, and if not an integrator, then the internal IT department of the customer.

"My prediction is that a growing number of packaged applications will emerge that use document management, imaging and workflow technology. We (Documentum) will bring those applications to market as knowledge chain applications -- applications that focus on the flow of knowledge across business processes. Other vendors will rapidly follow."

Warnock continued, "1999 will be a great year, again, for Documentum, but even better for our customers -- they will get faster and higher return on their investment because we will codify the experiences of our years of enterprise document management deployments into packaged KM applications."

In the midst of the dramatic change the Web has brought, its maturation into a real-world business tool and hard, calculable benefits from E-commerce applications, the KM market space has been more clearly defined over the past year, and complementary technologies have been integrated to provide total solutions. Several key trends can be cited:

More packaged applications, less customization. Companies offering COTS (commercial off-the-shelf) applications for workflow and DM, tightly integrated into the Microsoft environment. That leverages the existing Microsoft messaging and communications infrastructure and takes the development task away from IT. It has resulted in faster deployments, lower costs, greater returns and greater user acceptance. Increase in of forms processing and electronic forms. There is consolidation among some of the leaders in the marketplace, and there likely will be more acquisitions and mergers as companies, particularly in the capture and workflow marketplaces, seek to incorporate forms processing functionality in their products. Movement towards XML -- using this language to tag content makes it much easier and faster to develop and deploy Web-based KM and other applications. It is a quantum leap over its predecessor HTML, now widely used on the Web, although its shortcomings have become painfully clear. Movement towards shared services and 'rentable' applications. Companies such as ImageX, Ceylex, ACS and LanVision offered shared document services and repositories. While IBM and MCI are offering shared application services -- essentially a service bureau approach, new start-ups appeared in the mainstream with that approach. USIntegration raised $28 million last January to get into that space, and Andersen Consulting's ServiceNet experienced extraordinary growth by offering application services such as Oracle RDBMS, Oracle Financials, Lotus Notes and Lawson accounting with service level guarantees on a 'rentable,' pay-as-you-go basis. Storage innovations. As the information glut continues and the need to sift through it with a KM-type of filter is needed, organizations are storing more and more information. Storage continues to be less and less expensive at the same time. DVD was in transition, but looks to be ready to take off in 1999. A new term, storage area network (SAN), appeared. SAN enables the sharing of storage resources over a network to allow more fluidity in storage capability and functions such as centralized or distributed storage, redundancy, backup and business resumption. Melding of technologies. The lines between the traditional DM, workflow, text retrieval and report management technology markets have experienced a confluence, and different combinations of those technologies are forming solutions. In one part of the market, the technologies are being blended into integrated document management suites (IDM) such as the case of FileNet. In other parts of the market, those technologies have survived and been successful as standalone yet interlocking components, such as workflow provider Staffware. Further, technologies like data warehousing and mining are providing a valuable piece of KM solutions. Strategic alliances. Companies are increasingly achieving their business objectives through a complex network of strategic alliances. At times, alliances with competitors even make sense and are no longer viewed as forbidden. The KM market has indeed come a long way in the past year. And 1999 looks to be an even more exciting year. Stay tuned.

Robert Smallwood (504-525-4500) is a partner with IMERGE Consulting and treasurer/vice chair-elect of the AIIM International Board of Directors.