Altien Blog

Is ECM the new ERP?

2007-02-28T16:56:00.000+00:00

Alan Pelz-Sharpe has made a thought-provoking post suggesting that the impact of ECM technologies on businesses will rival if not exceed the impact that ERP has had over the last twenty years, and consequently the market for ECM solutions has the potential to exceed that of ERP.

Alan points out that the really transformational impact of ERP came from the way it offered businesses best-practice mechanisms to reshape their back-office business processes, and it is this potential to change business processes for the better that will drive ECM adoption forward.
But what ERP recognized was that data centric processes were repeatable, that they were often inefficient and that many manual processes could be streamlined and automated. ERP and BPR went hand in hand.

ECM and the emergence of CEVA's (content enabled vertical applications) are really no different. In its early days, ECM was really just repository management, then structured content management, then it was repository management with a bit of compliance thrown in, and now increasingly it is process centric. It was the process centricity of ERP that lifted it, and it will be the process centricity (if such a word exists) of ECM that does the same for it.

I agree that “process centricity” is a rather uncomfortable phrase, but the point is well made: material productivity improvements necessarily come from changing the way people work, and that means changing their business processes.

Now as everyone knows, changing the way people work is never easy. And if you are a project manager and your starting pointing is an IT toolkit and the question “how would you like to change the way you work?” you are facing an uphill struggle. This is why best-practice, embodied in off-the-shelf applications, is so valuable, because it overcomes scepticism and inertia. Alan references the term coined by Gartner of CEVA's (content enabled vertical applications, and in case this buzzword is new to you, here is what Gartner said about it last year:

CEVAs will manage content within the context of business processes better than straight content management applications or custom applications. To bring unstructured content under process control and to support compliance efforts, companies today spend a tremendous amount on writing custom code, ongoing development, maintenance andsupport — often in independent projects that lead to redundancy. (The cost of customapplications to handle unstructured content easily exceeds the total revenue of the ECM market at present.)

Gartner says it sees increasing demand for off-the-shelf ECM applications that bring best-practice to solve specific business problems, and that are built on common ECM platforms. These off-the-shelf applications can deliver faster implementations and lower ongoing maintenance costs and hence a better return-on-investment than custom development projects. And because they run on common shared ECM platforms, they enable organizations to consolidate their back-end systems and reduce datacenter costs as well.

Back to Alan’s comparison with ERP, he continues:

Where the difference will come is in scale, ECM will on the one hand ultimately dwarf ERP - simply in terms of data volumes (unstructured data volumes are rising at an order of magnitude higher than structured data volumes), but it will be less visible to the user - as in many respects ECM will simply take ERP and Business Apps in general to the next generation of sophistication, rather than displace them.

I agree completely about the scale of the opportunity, and the often quoted statistic that 90% of enterprise unstructured data still remains outside of any management system, reinforces the point that ECM efforts to date have only scratched the surface. And I also agree that it is the emergence of off-the-shelf ECM applications that will start to drive adoption further. However, regarding the scope and nature of these new ECM applications I partly agree and disagree.

Yes, I think that any current business applications that store content in a proprietary fashion will be re-architected to store their content in the market-leading ECM platforms. This will yield benefits to enterprises by improving information sharing, reducing redundancy and meeting their records management goals. Those established business applications won’t be displaced, although the transition to embracing ECM platforms will be disruptive and there will be opportunities for market share gains.

However, this is only part of the opportunity for ECM applications. ERP, and the other major established business application categories, CRM, SCM, HCM, are predominantly focused on automating transactions and streamlining back-office processes. They do not address the more complex, heterogenous work tasks and processes undertaken by the higher-value knowledge workers in the organization– the type of work that McKinsey terms “tacit interactions”.
Here is a quote from the 2006 McKinsey Quarterly article “Competitive advantage from better interactions” on this topic:

Companies boost their productivity by improving the efficiency of transformational activities (such as the extraction of raw materials) or of transactions (for instance, the work of the clerks in the accounts-payable function). But the productivity of marketing managers and lawyers can't be raised by standardizing their work or replacing them with machines…The old strategies for efficiency improvements don't apply to employees whose jobs mostly involve tacit interactions; instead, a company must boost these workers' productivity by making them more effective at what they do.

As for the role that IT can play, the article says:

Companies will increasingly need to deploy technology that makes shared data, information, and expertise available in real time; to offer decision support tools that help workers involved in tacit interactions create insights from data and analyses and that enhance the context and information that interactions require; to improve the ability of employees, customers, and suppliers to interact; and to offer effective collaboration tools for multiparty work flows.

Workflow does have a role to play in improving knowledge worker effectiveness but the jobs these people do are not essentially “process centric” and it is a very different challenge than automating insurance claim handling, or loan applications, or accounts-payable departments – the areas where so much ECM+BPM technology has been deployed in recent years. Applying workflow technology to tacit interactions will require more art than science, and a light touch. It is will need to be flexible, be capable of incremental introduction, put control in the hands of the knowledge workers, and above all, be immediately beneficial to their productivity as individuals – or they just won’t use it. This is workflow, but not as we know it.

This reminded me of what Peter Rip wrote last year on the then emerging concept of Enterprise 2.0:

This is why I think Enterprise Web 2.0 is different from Consumer Web 2.0. Enterprise’s have goals and structure. People around the Enterprise collaborate, but the collaboration is (supposed to be) undemocratic, i.e., ordered and non-chaotic. Ironically, this is not a new category. We used to call it Workflow and it was on the Known Quicksand Sector list at every VC firm, along with Middleware, Knowledge Management, and Enterprise Search. It was a Known Quicksand because no two implementations looked the same. Users couldn’t change the workflow to suit their needs. Users couldn’t automate the dozens of little tasks of collaboration that they do every week.
Despite being Known Quicksand, nearly every VC firm has placed a bet on workflow at one time or another. Why? Because the big Enterprise Apps automate you and me and we’re done. Automating the white space between us is the last untapped source of Big Win in the Enterprise.

So to my mind the opportunity for ECM applications has two main facets: content-enabling the existing transactional business applications, and new applications that address the white space of tacit interactions. And it is the latter that is the bigger market opportunity.

How big might that opportunity be? Well one way to look at it is in comparison to the market for database-driven applications. In my last post I made the comparison between the state of the ECM market today and the relational database market in the late ‘80s. It was the consolidation among database platform vendors and the adoption of the SQL standard that enabled the emergence of a whole wave of new database-driven enterprise applications – ERP, CRM, SCM, HCM etc.

In the ‘80s, forward thinking enterprises were already using database technology to develop custom solutions to improve their manufacturing processes, and to track customer and supplier data, but it was the move to common database platforms, that allowed independent software vendors to create their off-the-shelf best-practice applications. And of course the relationship between the applications and the platforms was very symbiotic. The platforms enabled the applications to be created, and customer demand for the applications accelerated adoption of the platforms.

Fifteen years later it is interesting to look at the relative size and shape of the database platform and applications markets. The database platform market is worth approximately $13 billion per annum and Oracle, IBM and Microsoft have 85% between them. The enterprise applications market is much more fragmented (IDC counts 3000+ vendors) but the aggregate revenue of enterprise applications vendors at $120 billion is almost ten times that of the database platforms on which they are built.

So what might the market for ECM applications be worth? If the market for ECM platforms is roughly $2.5 billion per annum now, could ECM applications become a $25 billion market in 10 years time? This would make it just larger than the ERP market. So maybe ECM will be the new ERP – but there is a long way to go.

A New Era for ECM

2006-11-04T17:02:00.000+00:00

I think that the second half of 2006 will come to be viewed as a tipping point for the ECM market. Analysts have been predicting vendor consolidation for many years, but it just didn’t happen. That is now changing fast. IBM’s acquisition of FileNet, Open Text’s acquisition of Hummingbird, and last week’s news that Oracle will acquire Stellent signal that the market is shifting into a new phase.

John Mancini, President of AIIM, rightly points out that the ECM industry is following a familiar economic pattern of consolidation, and that we are now entering the final stage when a handful of players achieve lasting dominance. So what will the market look like in the future? Economics tells us that three or four dominant players will likely take at least 80% of market. Many commentators have drawn parallels between the ECM market and the relational database market, and I agree that this is a valid comparison.

According to Gartner, in 2005 80% of the RDBMS market was shared by three vendors – Oracle, IBM and Microsoft. In 2005 80% of the ECM market was shared between eleven vendors. Following the closure of the deals mentioned above, the number is down to nine (Oracle wasn’t in the top eleven). Using last year’s numbers, IBM + FileNet is now the clear market leader with ~26% share, OpenText + Hummingbird is second with ~20%, EMC is third with ~13% and the rest (Interwoven, Vignette, Oracle/Stellent, Mobius, Hyland and Microsoft) are in mid to low single digits.

Of course the relationship between the ECM market and RDBMS market is more complicated than a simple analogy. At one level, today’s ECM server engines are just relational database applications, albeit some of the most sophisticated such applications in the enterprise landscape. Alan Pelz-Sharpe wrote an excellent piece earlier this year on CMSWatch about the future of ECM in which he supported the opinion that “the database vendors will in future own the repository”. The database vendors undoubtedly have a technical and marketing advantage. IBM and Oracle have already shown through their acquisitions that they getting serious about trying to dominate the market. Microsoft is finally getting serious about ECM with the launch of Office 2007 and Microsoft Office SharePoint Server 2007. Also, the decision to pull the long (long) anticipated relational file system WinFS out of the desktop operating system, and to repurpose the core technology into a future release of SQL Server, shows where their long term vision lies.

So it seems probable that we will end up with three or four dominant ECM platforms. Does this mean the end of innovation in ECM? I think the answer is absolutely the opposite.

John Newton of Alfresco wrote very eloquently in September about the Commoditization of ECM. He argues that despite many false starts, standardization will now come to ECM, largely because it is now in the interests of the major platform players to accelerate it.

“The scene is set for real standardization in content management and commoditization to the point of real replacement and swap out of existing systems. The environment is very similar to that found when the database market first standardized through SQL-89 and SQL-92. This was basis upon which the smaller players in DBMS disappeared and the new era of client-server and ultimately the web appeared. The changes in the ECM market can be just as profound.”

As an aside I would say that Alfresco has an excellent chance to emerge as a major ECM platform player. The open source model had not evolved at the time that the RDBMS market entered its end-game phase. Despite this MySQL has emerged as a significant force. Alfresco is well positioned as the ECM market is just entering the end-game and it will be fascinating to see how it disrupts the market.

Standards such as JSR-170, its upcoming successor JSR-283, and the iECM initiative from AIIM, promise to deliver true interoperability across ECM platforms. It is my belief that this process of standardization, together with the ongoing process of platform-vendor consolidation will actually enable a flourishing of new content-centric applications, which will transform the market landscape.

Why? Well to start with, the market opportunity remains enormous. Analysts frequently state that 80% of the world’s data is unstructured and that only 5-10% of that unstructured content resides today in a content management system. Last year the RDBMS market was worth ~$13bn while the ECM market was ~$2.5bn. I know several customers that have a vision for “total ECM” but none that have actually delivered it. That gap will only be closed by new applications that address the myriad use-cases around unstructured content. It is inconceivable that a single vendor could address this entire market effectively: a single platform yes, all the applications no.

The second point is that until now it has been nigh impossible for a developer of content-centric applications to address the market effectively. The lack of standards and the fragmented market meant that supporting one or maybe two ECM platforms was the limit. The addressable market for a new content-centric application was thus pretty limited, and the ISV had the added headache of hoping they had backed the right platform horse. In the new world, an ISV can write their application once against an interface standard, or if they need platform functionality beyond the scope of the standard they will only need to work with a handful of platforms. At Altien we have already solved this problem by integrating ADM with IBM WebSphere® Information Integrator Content Edition (IICE) which provides a fully-functional bi-directional interface to all major ECM platforms.

And this issue looks pretty similar from a customer perspective. There must be a lot of anxiety right now among customers about what consolidation will mean - especially where they have built customized applications onto what might now become a defunct repository. Large software vendors are generally good at talking about supporting acquired platforms – but in practice, where there is overlap, one platform will be quietly starved of R&D, despite what the marketing rhetoric might say. Given all the uncertainty now about which platforms will survive, customers must be asking how they can best preserve their development investments. The only real answer is for customers to start building ECM applications that are platform independent. With IICE, IBM has a unique piece of middleware that enables their customers to adopt this strategy today. For Hummingbird and Stellent users, the picture is less clear.

So what will these new content-centric applications look like? I think the scope is enormous but verticalized, business process centric applications looks like a big opportunity. I saw Forrester analyst Connie Moore present at the IBM IOD conference and one of her points was that the current major ECM players that weren’t going to win the platform battle would need to verticalize to survive.

I see another key trend converging with the ECM market in the form of Office 2.0. I recently attended the hugely positive Office 2.0 conference organized by Ismael Ghalimi of Intalio. In his wrap up blog post, Ismael refined his definition of Office 2.0 as follows:

"Office 2.0: Office productivity environment enabled by online services used through a Web browser. By storing data online and relying on applications provided as Web services, it fosters collaboration and extends mobility, while promoting a user-centric model that fuels innovation and increases productivity."

What I saw was a host of new companies that are trying to change the model of personal productivity applications that we have lived with for the past 20 years. Some of these applications are about new means of creating content, some are about new means of organizing, sharing and collaborating on content, and the best are using the technologies of the web to combine all of the above.

So are these applications ready for the enterprise? Ismael asks the question "Who is it for?" and answers as follows:

"Individual users and Very Small Businesses (VSB). On one hand, Office 2.0 is not ready for the enterprise, and it’s a good thing. Trying to make Office 2.0 work for the enterprise today will strip the concept off all the good things that make it interesting. The enterprise needs reliability, scalability and security, and such attributes take some time to implement."

He goes on to the make the valid point that Individual users and Very Small Businesses (VSB) represent a huge market opportunity, but ironically much of the debate at the conference was about how to penetrate the enterprise market.

To the attributes reliability, scalability and security I would add integration as a core requirement for enterprise-readiness. Large enterprises today are wrestling with the problems posed by the exponential growth of unstructured content and its fragmentation until multiple silos. The last thing they want is more silos. The integration of Office 2.0 applications into an ECM infrastructure would enable the delivery of all the enterprise-readiness criteria listed above.

And I think the enterprises are ready for these solutions. For a start, large enterprises have moved overwhelmingly in favour of web applications for almost all general business applications. And if you have a few thousand desktops to manage you know why. And second, knowledge worker productivity seems to be being thwarted by the current model, competition for talent is increasing, and organizations want to get more from their most valuable employees.

In summary, I am very optimistic about the prospects for ECM. Rather than representing a simple loss of choice for customers, ECM platform consolidation will provide new choices as it enables the development of a new generation of content-centric enterprise applications. We can already see glimpses of how these applications could dramatically transform knowledge worker productivity. I expect to see a wave of innovation in this market in the next few years. This is an important trend and one in which Altien will play its part.

Altien announces partnership with IBM & availability of ADM 6.0

2006-10-11T00:28:00.000+00:00

I am delighted to announce some major news about the future direction of Altien. Earlier in the year we signed a partnership agreement with IBM and ever since have been busily developing the next version of Altien Document Manager which is fully integrated with IBM WebSphere® Information Integrator Content Edition (IICE) You can see the official announcement here. We will be launching ADM 6.0 at the IBM Information On Demand 2006 conference next week.

By integrating ADM and IICE we have created a unique value proposition. A next-generation enterprise document management application that is independent of any ECM repository. Our customers can now implement a migration path toward a common ECM infrastructure and away from legacy repositories over time and without disrupting their users.

We have also posted a brief screencast showing ADM working across an IBM DB2 Content Manager repository and a FileNet P8 repository.

Now the annoucement is public I hope to have some more time for blogging. Certainly there have been some events in the last few months which are worthy of comment!