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Jason Stamper's Blog
Why IBM bought FileNet (hint: it wasn't for the technology)
August 11, 2006
News that IBM has shelled out $1.6bn to buy content management and business process management vendor FileNet caused a fair few raised eyebrows, as IBM already has a software portfolio packed to the gills with both of those technologies.
From where I'm standing it's a simple case of wanting to take out a competitor. IBM obviously doesn't need FileNet's customer list - IBM has more customers than anyone. It doesn't need FileNet's ECM or BPM technology, or at least not much of it. There are a few bits and pieces that it lacks but it's got most of the functionality that most people need - it's the 80-20 Pareto Principle.
I'm not the only one thinking along these lines. Jon Pyke, CEO of business process management technology and services business The Process Factory, chair of the Workflow Management Coalition (WfMC) and former CTO of BPM vendor Staffware, has this to say: "On the face of it, it doesn't make sense since IBM already has content and process capability."
"However, I think this move confirms that BPM is not just about system-to-system SOA solutions," Pyke told me. "The majority of business processes are driven by content, the need for SOA and web-services integration stems from that notion - this purchase simply re-enforces the need to involve people and content in processes. This is only part of the story though - we'll see what happens next as vendors slowly wake up to the needs of the business user."
With 4,300 customers, FileNet is one of the major players in the ECM arena. The company had sales of $421.8m in 2005, and has nearly 1,700 employees. But guess how many ECM customers IBM has? Ambuj Goyal, general manager of the Information Management division said on the conference call that it already has 13,000.
One analyst said yesterday that IBM bought the firm partly because FileNet has spent years developing industry-specific offerings that have content management and workflow pre-built for specific industries, such as banking, healthcare and insurance. But it seems to me that with IBM's vast annual software R&D spend, and the skills at its disposal within the IBM Global Services division, it could have tailored its 'vanilla' ECM and BPM products for specific industries itself, and saved a lot of that $1.6bn.
Indeed the only feasible reason I can see - other than the fact that IBM just wanted to have to compete with one fewer vendor - is that FileNet deployments usually need a fair element of services, so FileNet brings in services partners including Unisys, EDS, Accenture, Capgemini, BearingPoint, Fujitsu and many more. Now that IBM owns FileNet, it will try to mop up most of that services business itself.
That could explain why the company made it clear it will continue to support both the IBM and the FileNet content management and BPM product lines. Some customers will already have both vendors' products in different divisions or departments or even for different business processes, so they may have two services contracts. If IBM tightly integrated the two product lines, it may be good for customers as they may only need one tranche of services. But that's not so good for IBM.
Comments
As a full disclosure, I am the CEO of Lombardi Software. It is our belief that the acquisition of FileNet by IBM is focused on their Enterprise Content Management (ECM) solutions. While the IBM announcement discussed integrating IBM's BPM and Service Oriented Architecture technologies with the FileNet platform, mention of FileNet's BPM product was noticeably absent. It's my feeling that FileNet got into BPM because the ECM growth was slowing, and they had hoped to improve their valuation by entering BPM. It seems as if FileNet decided to throw in the towel because they have not been able to execute very well on BPM – just look at leading analyst opinions from this year.
The valuation they are getting for this acquisition reflects that fact.
This is a positive development for Lombardi and the other BPM leaders, since we view it as yet another opportunity for us gain further market share in the rapidly growing BPM category.
I can see where Rod is coming from WRT one less vendor to compete with - by that I mean if a short list was IBM. Filenet, Lombardi then next time Filenet wont be there (a statement of the obvious I know) - but I can't bring myself to agree on the "throwing in the towel" bit.
Filenet has always had good enough Process technology - a rubbish execution - but good enough products and they were always a formidable competitor if content was involved. Content was the real strength of the company. You need only look at Documentum to see that you can grow a company based only on content - Documentum have rubbish process capability - perhaps only SAP is worse - but I don't see them throwing in the towel anytime soon.
I do tend to think this is a services and remove a copetitor play.
Don't forget where the CEO of Filenet came from :)
Like Rod I have for some time had my suspicions about FileNet's claimed BPM credentials. After all, going from their document management roots to a broader enterprise content management firm was not without its challenges (ask Staffware, hey Jon ;-) so to also become a leading BPM vendor was no easy move.
I agree this deal could be good news for the remaining ECM specialists, not least because some of the services firms may be less willing to partner with FileNet once they become part of IBM.
Customers vary too - some are happy to bring in IBM services while it goes against the grain for others. For the latter, FileNet is less attractive now as it may mean IBM services is embedded in their site before long...
Humbug. FileNet's BPM is good, but the strength of the offering is the whole platform vision. With P8 FileNet has a very credible integrated platform approach - with Documentum close behind, and most other ECM vendors far in the dust and still buying bits and pieces.
Expect to see the P8 platform slowly replacing the existing IBM ECM offerings...
Yes, so good Jan that they just agreed to be bought by a company with overlaps with all of their products. So good that they commanded a premium only slightly above their market cap. So good that they will not now be around to fight it out to be the leading BPM pure-play.
I have worked on FileNet Products specially BPM,CM and IM, I Having no idea about IBM Products.But after this acquistion, one Question arose in mind,what may be reason of this acqustion? due to FileNet's BPM competency or Imaging Competency or any other reaso?.It is possible to tightly integration of Both Product's(IBM and FileNet) good part? But Lasly i think that IBM is IBM so I hope it's good for both FileNet and IBM .
A very interesting article, Although I can understand where perspective of this article comes, it does sound like rival companies to IBM and FileNet trying to put scare mongering into the market, a tactic that both FileNet and IBM has used in the past, remember the Tibco/Staffware and EMC/Documentum Shenanigans, I have read various reports and statements, and in all honesty, if IBM and FileNet get this right, they could very easily be among only three companies who have a complete BPM Suite.
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