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Content software scramble ahead?

EMC's planned acquisition of software maker Documentum puts new pressure on Oracle, among others, while Microsoft may attack from below.

EMC's planned acquisition of Documentum will help make content management a standard part of business processes and put pressure on Microsoft, Oracle and other server-focused companies, according to analysts.

Storage giant EMC announced Tuesday that it plans to spend $1.7 billion to buy up Documentum, a maker of content management products that help a company catalog and control access to documents stored on central servers.

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What's new:
EMC's plans to snap up Documentum for $1.7 billion puts pressure on technology giants to focus on content management.

Bottom line:
Big tech players such as Oracle and Hewlett-Packard that decide to move in on the market will likely do so by acquiring other companies. Meanwhile, Microsoft has already settled on a strategy and is expected to attack from below.

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Content management has been seen as a key growth area for the software industry over the past few years, spurred by events such as the Enron fiasco and the Sarbanes-Oxley Act that drove interest in centralized document retention processes.

To date, the market has been split among specialists, such as Documentum, Interwoven and Open Text, and technology generalists such as IBM that offer content management as a part of broader enterprise systems.

EMC's move pushes the momentum squarely toward technology giants, analysts said.

"It became pretty apparent in the last few years that the data infrastructure vendors like IBM and Oracle were going to play a much greater role in dealing with content issues," said Nick Wilcoff of Forrester Research. "The independent vendors are going to face a much harder road in the long run."

Charlie Brett, an analyst for research firm Meta Group, expects large technology companies to scrutinize how content management fits into their business offerings. Those that decide they need a full content management approach are likely to do so through acquisitions, Brett said, an idea apparently endorsed by Wall Street. Interwoven shares rose 48 cents, or 13 percent, to $4.18 in regular trading Tuesday. Vignette was up 21 cents, or 7.8 percent, to $2.90 a share.

Who's out shopping?
Likely buyers include database giant Oracle, which is now more likely to see content management as a gap in its server software stack. "They were somebody we kind of expected to be interested in Documentum," Brett said.

An Oracle representative declined to comment on specific takeover targets but noted recent comments by Oracle executives that committed to a more aggressive acquisition policy.

Oracle has tried to stand up against IBM by taking a homegrown approach to content management, Wilcoff said, gradually adding such features to its enterprise products. But an EMC-Documentum challenge means the company has to step up its strategy.

"Oracle definitely has not been as aggressive as IBM in going after this market," he said. "I think it would make sense for them to take a more aggressive strategy, and there are plenty of opportunities for them to pick up some technologies that would put them in much more of a leader position."

Pressure also will fall on storage companies, particularly Hewlett-Packard, which handles pieces of content management--such as image cataloging and print systems--but not the whole spectrum.

"They're going to have to do something for sure," Brett said of HP. "For anybody that wants to get in this business now as a major player, the stakes have changed."

Peter Gerr, an analyst for research firm Enterprise Storage Group, agreed. "The real winners here may be FileNet, Open Text and the other content management companies," he said. "The biggest fish in the pond just got bought, and some of those other companies have just as good a customer base."

An Interwoven representative declined to comment. Representatives from HP and Open Text did not immediately respond to requests for comment.

Serving the small fry
The appeal of content management will vary according to the company's customer base, however. Content management systems to date have been implemented only by large companies with strategic document needs. Pushing the concept to smaller businesses will require someone with EMC's clout, Gerr said.


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EMC's planned Documentum buy comes
as the link between storage hardware
and applications is growing stronger.


"Over time, EMC is going to want to introduce solutions that integrate Documentum stuff across their different hardware platforms," he said. "The small and medium-size customers who are less likely to be aware of, or interested in, content management...may get some of that functionality from a subset of the Documentum technology.

One technology giant unlikely to join any acquisition frenzy is Microsoft. The software giant has already settled on a content management strategy that emphasizes small and midsize businesses, rather than the enterprise-level customers Documentum and its ilk target, said Rob Helm, an analyst for research firm Directions on Microsoft.

The Microsoft approach is based on SharePoint, a collection of technologies for controlling access to centrally stored documents. Basic SharePoint services are available as a free add-on to Windows Server 2003, while more complex functions, such as text searching, require additional server-based products.

SharePoint doesn't have the sophisticated tracking and management features of a Documentum system, but it will do for smaller businesses just starting to think about their document processes, Helm said.

"Microsoft is doing what Microsoft always does with documents, which is to come in at the bottom of the market with something tied to one of its dominant products," he said.

In the future, that approach is likely to mean folding basic content management functions into server-based versions of Windows, Helm said.

"Long-term, I think Microsoft sees document management functions as being something that belongs in the file system," he said.