What are the current key drivers, opportunities and threats for resellers and distributors within the Document Management space?
ITR Portal spoke to AIIM the Enterprise Content Management Association and leading analyst Strategy Partners for enlightenment.
There are no significant technology problems left to be solved in Document Management. DM is now a commodity and is so successful its now ubiquitous not just in DM products per se but in every significant business application from ERP through to sectors such as Insurance and Government. This is the view of Rory Staunton (pictured right), managing director of analyst organisation Strategy Partners.
Staunton believes DM is now a stable, recession-proof industry sector in terms of software and hardware. However, he also perceives that most people have yet to exploit it or purchase it on that basis. Many still thing its rocket science, but its not anymore, he said.
One of the most omnipresent terms within DM sphere at the moment is Enterprise Content Management (ECM). The label ECM was coined over six years ago in recognition of the fact that a significant proportion of any organisations knowledge resides in the unstructured data that lives outside of any database. The idea behind ECM, according to Doug Miles (pictured left). managing director of AIIM UK, the was that this data should be better controlled for compliance and security, whilst also facilitating its mobility for optimisation across multiple business processes.
So how has this scenario developed within the DM arena in the recent past? Initially the incumbent document management vendors began to add an increasing number of modules to their offerings for capture, workflow, records management, email management and collaboration, either by organic programming or by acquisition. This resulted in the building of genuinely enterprise-capable application suites, Miles pointed out. He added that this growth in the market has in turn attracted the attention of the big infrastructure suppliers such as EMC, IBM, Oracle and Microsoft. They have seen that there is a need for every seat in the operation to have access to basic content and records management services, if only to manage the deluge of increasingly business critical emails and attachments flying around and between corporate networks, he said. With this increase in volume has come a rapid decrease in per-seat costs, epitomised by the Microsoft SharePoint 2007 release (MOSS), which seems to have captured a considerable following in just one year from its release.
In terms of other notable developments, Miles points out that traditional scanner and MFD manufacturers have increasingly pre-integrated capture and basic content management suites with their products, providing a greater opportunity for resellers to offer configuration services to their end-users. And to support this increased application scope, Miles highlights that many distributors are increasing their level of pre-sales consultancy support, with better technical back-up. Meanwhile, according to Miles, the broader ECM area is seeing an increasing footprint of functionality, providing more scope for existing resellers. Invoice processing in particular is applicable to all sizes and shapes of business, and involves systems integration with a range of ERP and financial systems, he said.
For Staunton, the key value add in terms of DM solutions today is the availability of fantastic products for very little money. The value add is that Microsoft cuts code in Seattle, and resellers and distributors turn this into business solutions and services. So just like Microsoft enables the PC and email, the reseller channel is crucial to bringing the products to market. However, observes Staunton, there is arguably a black cloud to this silver lining: Its actually quite difficult to make as much money now as previously because many of the software components are so cheep, he said. Now, the emphasis is on increased value having to be added.
Staunton reflected that, in general, DM/ECM is turning into a customer-volume business. The fact is that the more customers you have the more you sell; its a supermarket and the more you put on the shelf the more customers buy, he said. So, we now see a conveyor belt of new things coming along on top of the core DM solution: Digital Asset Management, integration with call centres, Government regulation compliance, Automated Print Management, email archiving, and so on. Every three months or so theres a new product coming off the production lines from the big vendors. But distributors have to know enough about their market and their current clients to be able to sell to the right person. As an analogy, you dont sell Four By Fours to the same people you sell sports cars to. Therefore, resellers have to learn to understand and embrace whats coming down the production line. The good resellers should be saying to the vendors, for example, I look after 25 universities or 15 retail companies, and Id like it like this; Id like it integrated with Siebel or Id like it integrated with Northgate for Government.
Ticking the boxes
So, new functionality is being added apace. But are there any pronounced differentiators remaining among the vendor community? According to Miles, as vendors move to fill in a tick for each module in the accepted set, the products become less differentiated and perhaps hold less potential surprises for the end user. However, he adds that levels of integration between modules will vary depending on whether it is a best-of-breed assembly or an organically grown suite. Even within delivery model alternatives, Service Oriented Architecture (SOA) capability is claimed by most, but the real differentiators are the depth of functionality as related to specific vertical markets, and the installed reference base between global, corporate and SME, he said.
Staunton has observed that over the past three to five years the vendors have all been adopting the suite/bundle offer. He therefore maintains that DM functionality is becoming increasingly similar. However, he adds that the companies that are now controlling the market such as IBM, EMC and OpenText are now differentiating on the basis of their other offers. So IBM sells Document Management to port through middleware, EMC sells it to port through storage and other software, and OpenText sells it to add applications on top of Content Management, he said. Therefore they all differentiate themselves, but they all offer basically the same functionality underneath. So the bottom line is DM is what could be described as a corporate lifestyle business.
Staunton stressed that industry as a whole has got to move to differentiated value. Resellers have to understand the value of the business solutions for the customer, and differentiate that way, instead of just saying Ive got bigger, faster, cheaper, etc., he said. Resellers should differentiate not by the functionality of the product but by business value; after all, all cars get you to the pub. Most resellers have been lulled into a false sense of security in terms of merely taking commoditised electronic products and charging a margin. Unless they can market to a particular corporate lifestyle and have some domain skills they have no value I can get it done in Vietnam or India.
Staunton added that reskilling is another major issue within the reseller community. They need re-skilling because the basic function they did before, which was systems integration, is now a commodity, he stressed. And furthermore, buyers hate buying system integration, because it can mean theyre trapped in the future. So they have to productise what was previously part of custom integration, and they have to show that theyre safe to buy from. Some resellers may say Ive got a bigger disk, faster scanner and cheaper software, but thats the dynamics of the car-boot sale bear in mind that Porsche garages dont look like car boot sales. So theres a big issue here, and ones seen in the whole of the systems integration business effectively offshore and outsource. If a resellers core competence is system integration they are in trouble, and they know that. The clever ones are going into niche markets such as banking and government.
Process and repository
According to Staunton, there are two key things on the IT agenda that DM is helping enormously; number one being SOA. Workflow, invented in 1985 by FileNet, was the first system to recognise the importance of process, not just repository, and SOA has emerged from the recognition that what you do with the data is as important as how accurate the data is, he said. The data processing world is only just catching up with processes and techniques both inside and outside companies that the DM world has been developing over the past ten years. So there are key interfaces of process interchange between document applications that SOA has architecturally built upon.
In Stauntons view, another key issue that IT wants resolved is data quality. If you look at the surveys, the most significant risk in data quality is the level of accuracy of incoming data, and modern automated capture and DM techniques for categorisation provide the most effective and operationally useful way of ensuring data quality, he said. Compared to having one data base over here hooked to another data base over there, these techniques are highly valuable. The best ROI is actually from improving the data coming in, and thats where the document/data capture, scanning, classification, OCR functionality is so valuable.
Consolidations have been plentiful within the DM industry over the past few years. However, according to Miles, despite the relative maturity of DM technology the spate of company consolidation within this marketplace has been driven by the extension of capabilities for full ECM rather than acquisition of legacy user bases. From the reseller point of view, consolidation is seldom a good thing unless it underwrites poor financial security of the vendor, he added. Channel conflict increases overnight, and increased qualification requirements will take their toll of the smaller resellers. Product expertise and enthusiasm built up over many years may be worthless following the inevitable rationalisation. From the end-user point of view, consolidation may hasten the end-of-life of a perfectly competent, but non-preferred product, and channel rationalisation will disrupt loyal relationships with existing resellers.
Staunton maintains that no more big content management companies are going to be created. However, he observes that there is a growing number of mergers taking place in the second tier, where smaller companies are conglomerating to be safe to buy and to compete with the three majors. Theres a lot of this activity in Europe at the moment, and IBM and Opentext will continue to acquire in order to broader their portfolio, he said. So mergers and acquisitions are going to continue to happen, but not at the crazy prices we had a few years ago.
And what of the impact of broadline distribution? According to Miles, the traditional three-tier hardware channel in scanners and capture interfaces has been squeezed by broad-based distributors and internet suppliers offering production-level equipment as commodity. Nevertheless, he maintains that within the records management area, there is still some protection to be gained for local vendors and resellers by the differing archiving standards across Europe although the recently released MoReq2 specification endorsed by the EU is intended to provide a pan-European standard which plays against the DoD 5015.2 US standard.
Miles makes the point that the financial sector was the traditional leader in document-based business process improvement, and, as a result of both departmental restrictions and merger activity, finds itself with multiple repositories spread across the enterprise. Most are now looking at ways to join these up through single-access portals possibly using SharePoint and to provide enterprise wide searchability, he said. Perhaps reflecting the sheer volume of forms-based processes in need of rationalisation, the public sector has continued to provide good business over a number of years, despite the repeated government initiatives to centralise databases and consolidate services.
In terms of the global picture, Staunton reflects that all the major vendors now have a presence worldwide, and the challenge for smaller European vendors is to compete against the larger American companies. Larger vendors cannot handle local issues such as compliance in Europe, which is completely different to America, he said. For example, theres no such thing as eDiscovery in Europe. Vendors are saturated with eDiscovery demand in the US, but the courts work differently in Europe. Therefore, vendors need local domain experts to take their generic products to market, and this is where the reseller community comes in. And bear in mind that the core competence for resellers is domain expertise, not the technology technology is the ticket to the dance but it doesnt necessarily help you to get the girl.