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Big Blue's Software Spending Spree
abb_road writes "IBM has gone on an aggressive acquisitions spree for document management packages in the past three weeks, spending more than $2 billion to pick up two companies. The companies, Webify and FileNet, are expected to become part of IBM's Information on Demand strategy. The acquisitions point to a larger industry trend: a focus on software for unified corporate data management. From the article: 'It's a crucial time to jockey for most-valuable-software-provider status, because companies want to buy more from fewer players, and they're tired of buying stand-alone pieces of software like customer-relationship management that don't fix real-world business problems. The new message to software vendors: Fix my call centers, don't just sell me a product. As a result, the lines are starting to blur between software companies that offer, say, Internet security, databases, and tools to manage nearly every part of the business. So, too, are the lines between service companies and software companies.'"
When IBM goes on a software spending spree, it makes the news. But when normal people go down the aisles at Best Buy and throw everything into their cart, THEIR spending spree doesn't make the news at all! Oh, the injustice!
is also under construction!
Don't even think of telling me that IBM are buying customers or market share! It's painfully obvious that the market is overvalued.
IBM is just crazy.
-- www.globaltics.net
Political discussion for a new world
If we are, then Mao is rolling over in his spartan, commie grave. If not, then I'd say this is just a software version of vertical integration, first seen thousands of years ago, in the 1920's.
the mods may say you posted flamebait, but to me it's a flame that warms my heart. rock on, brother! --chebucto
IBM definitely has the resources to create many of these software services themselves for alot less money. I think it's as much about buying these companies up before the competition can than getting the software.
Developers: We can use your help.
Dealing with the IBM rep is bad enough but now we will have to deal with them pushing their new products when I just want answers about the product I just bought from them. The only thing worse than this is when they "synergize" their sales force. I recently had a Symantec sales rep come in to discuss their Symantec Security Information Manager product and they sent a sales rep from Veritas. The only thing he could tell me was Veritas would make a great backup system. I had to tell him we already use Tivoli just tell me about the SIM product. Well you know sales people they don't take no for an answer until you kick them out the door. Well I am doing ranting.
"Anything tastes good if you deep fry it."
The big question is, how is this all going to integrate? IBM already has it's own document management system that competes against FileNet in a lot of areas. So, is one going to go away? Or perhaps they'll continue to sell both and basically bring their credibility down for both. Not only that, but with FileNet phasing out one of their products and forcing their user base to upgrade, will FileNet lose a lot of their base because they don't trust that it will be around much longer? There are a lot of questions without much of an answer. Sure one hell of an impulse buy.
Because Companies want to buy more from fewer players, they are tired of buying standalone pieces of software like customer-relationship management that doesn't fix real-world business problems.
I think that the new message to software vendors should be: Fix my call centers, don't JUST sell me a product.
As a result, the lines are starting to blur between software companies that offer, for example, Internet security, databases, and tools to manage the business. Same with the lines blurring between service companies and software companies.
If you were to add it up, I would say that it is a good time to be a software investment banker.
New big spenders like IBM and HP are joining the ranks of Oracle, Symantec, and EMC.
Huh?
Swedish plasma phys. PhD student; MSc EE; knows maths, programming, electronics; finance interest; seeks opportunities
It seems to me that computers are progressively becoming less and less about computing, and more and more about simply storing and communicating data. A long time ago, IBM bought out Lotus software. Lotus became famous based on 1-2-3. It was the "killer app" that sold tons of DOS machines -- and oriented heavily toward doing computation. I'm not sure if IBM even still sells 1-2-3 or anything derived from it -- the big Lotus-derived products are Notes and Domino (I.e. storing and communicating data, not doing actual computing). In fact, you hardly hear about spreadsheets any more. Excel works, and a lot of people use it, but it doesn't seem to be a "killer app" for much of anybody anymore -- I'm pretty sure I haven't heard of anybody buying a machine to run it (or any other spreadsheet) in years.
Now acquisitions (and new development) seem to be oriented almost entirely toward storing and communicating data, not toward doing any actual computing. The same seems to be happening in software development as well. Languages for doing real computation, like FORTRAN and Matlab are almost universally seen as boring and passe. Even languages like C++ oriented kind of halfway toward computation seem to be viewed as a whole less less than exciting, anyway. What's hot are things like Ruby on Rails. Of course, you can write computational code in Ruby if you want to, but I'm pretty sure nearly nobody uses Ruby to do things like matrix multiplication -- they use it for Rails, to set up web sites that talk to databases (storing and communicating data).
In fairness, I suppose I should add that there are still a few "big things" oriented heavily toward real computation -- Folding@home and Seti@home for a couple of obvious ones -- and BOINC has a number of less obvious/well-known ones as well. Clearly computation isn't entirely dead and gone or anything like that.
I'm a little uncertain what this emphasis on simply storing and communicating data really means though. Was most computing that involved real computation really just a fad, and people were doing it primarily because it was new and different? Is the current emphasis on data storage and communication really just a fad, and people will care a lot less about it in a few years? Is it a matter of the "computing" parts of things mostly being cured problems, so they're less apparent, even though they're really as important as ever?
I suppose for this to be a proper comment, I should have a strong opinion to express about it, but I really don't -- at least for me it's almost entirely an open question.
The universe is a figment of its own imagination.
IBM paid just over 700mm for MRO Software last week. It's the best-of-breed maintenance management sytem in the market. I am very curious to see IBM buying up all these companies but their consulting wing does do a fair amount of work deploying Maximo and Filenet, so I see some synergy (to use a horrific cliche' from the 90s). ANyhoo, I'm hoping IBM increases the marketing exposure for MRO Software and their Maximo product. More sales means more value for my consulting services.
just my 2 cents.
0.086 thousands of years, to be precise?
being smart is exausting
Document management is a technique for turning all the crappy little internal web sites in your company running Apache, PHPNuke, or some random blogging thing into giant bloated internal web sites with exactly the same content, overpriced on-site consultants, and $50K per year support contracts.
Give a man a fish and you have fed him for today. Teach a man to fish, and he'll say "WHERE'S MY FISH, YOU IDIOT?"
This has been the case for years. IBM has always specialized on "Enterprise Solutions" for businesses. Indeed, this is where IBM makes most of their money (not their consumer products).
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"Seriously. These firms make apparently only 1 software product, that is probably relatively complex, but no rocket science. "
OK, since it isn't "rocket science". Were's the F/OSS equivalent, and why isn't IBM using that?
In terms of Content Management repositories, IBM now has ...
...)) which was/is the programming API and integration hub, which is a kludgy scary train wreck. Content Manager for Multiplatforms is the internal IBM solution, and (just like CM 8.3) it feels like it was architected by ivory tower folks and implemented by angry drunk Germans.
... 10 choices now, take your pick!" All of IBM's products are an integration NIGHTMARE, none of their products are turnkey, everything is crufty and old and flaky. The only thing saving IBM in the Content Management is that relevant competitors like EMC have lost their way (the wisdom of Documentum has been forgotten since the acquisition. Sadness.)
DB2 Content Manager for Multiplatforms v8.3, then they got another busted up jalopy third wheel called Document Manager that rounds out the feature-starved Content Manager, then there's Content Manager for Z/OS, goofball plugins like VideoCharger for the last two, Content Manager OnDemand, OnDemand for Z/OS, Records Manager, Lotus Domino, Workplace and all that forms stuff, the Venetica acquisition, and I'm probably missing three or four more CM-like things IBM owns. And now, let's just throw in one more rusty battleship, FileNet.
Each of those products is more or less not-integrated with one another. You've got Information Integrator 8.3 (formerly called Information Integrator for Content 8.3 (formerly called EIP
The sales people at IBM are the best, but at this point the acquisition of FileNet only adds insult to their injury. What's their message gonna be now?? "You want Content Management? Why, we've got um
I hate you IBM, you deserve to lose: DIE MONSTER, DIE! If only sweet little Magnolia could snag more marketshare! (http://magnolia.info)
Value is not cost.
You may install and use a piece of software which cost $5.50 to develop but which saves your organisation $500,000 per year. Someone sells that software to you for $450,000. You save $50,000 on the first year and $500,000 per year every year after that. The vendor makes $449,994.5 profit on the first implementation and $450,000 profit on each subsequent implementation.
What's the value of that software? $5.50? Bollocks it is.
Cost and value aren't directly related and the reason you aren't earning $1 million a year is because you don't understand that, or if you do, you're unwilling or unable to exploit the knowledge.
Deleted
Wait, isnt this just what Xerox was doing in the '90s?
~psybre
Authority questions you. Return the favor. -- d474
What is obvious is that you have no idea what you are talking about.
A document management system comparable to Filenet's offerings would require more than 20 man years to develop. If you disagree, then please go for it; Filenet needs the competition. Otherwise, STFU.
Filenet provides more than just document management software. They provide a whole slew of products, as well as consulting services and support. Their document management, content management and workflow management products are used by 70 companies in the Fortune 100. Filenet is debt-free, flush with cash and is making money (~$422M in 2005).
IMO, IBM got a good deal, and the market agrees with me.
Don't say that too loud, IBM might acquire Magnolia next.
cndrr
It seems to me that the F/OSS phenomenon is largely responsible for this shift. Think back to Cygnus, ISC, and other companies like them. For that matter, the early Red Hat years seem to fit that description, as well. Value-added service on top of a GPL'd stack is far from uncommon, these days, and often makes for a rather reasonable business strategy.
Couple that with IBM's grand (and expensive) ongoing experiment with gnu/linux, and this sort of observation is hardly surprising. It will be interesting to see what tech from these recent acquisitions make their way out into the F/OSS community at large.
When I grow up, I want to have Christopher Walken hair.
IBM used to invest in it's employees as much as it did technology. Now, however, it's been paying for it's recent acquisitions by offshoring thousands. While I have no real problem with offshoring (it looks fine on paper), in practice it results in companies sacrificing real talent for less expensive labor. At some point, the pendulum needs to start swinging back the other way.
This isn't Microsoft Sharepoint we're talking about here. This is a framework for managing unstructured content--that means forms, records management, business process management, content-centric workflow, email archiving and retention, regulatory compliance, web content management, imaging, search and discovery. FileNet spent 14 years building up their portfolio through acquisitions and development. IBM arguably invented document management in the 1960s and has been working on their Enterprise Content Management suite since the late 80's. Read the analyst reports to see how huge this market is. IBM picked up Informix for $1B in 2001--that grab was mainly for database marketshare. FileNet, at $1.6B, is a growth acquisition and a bargain by comparison. This market is so ripe for picking that SAP, Microsoft and Oracle--all companies that have ignored this space until the last couple of years, are making a headlong charge to grab what they can. EMC, IBM, SAP, OpenText, Microsoft, Oracle...and you say this market is overvalued? Do you know how much it costs a company when they can respond to a litigation discovery request in a timely manner? Do you understand the customer loyalty considerations when a company can put its electronic billing statements online? Do you know how much the Air Force saves by having its thousands of forms available electronically? These are just a few of the business pains that ECM solutions address... Just because content management doesn't have a mainstream mindshare yet doesn't mean it's minor league. You use FileNet and/or IBM content management products today, whether you know it or not...and don't think the big acquisitions are done. Microsoft and Oracle aren't just sitting on their hands going, "oh, that's nice"...
IBM SWG's chief business issue is that they are hyper-concentrated at the top end - several hundred of their customers account for 90%+ of their revenue. They tell us that this available market is growing circa 2% a year, so the only way to increase market share in that segment is by acquiring other company's technology and customer bases... or by switching to more service orientated business (Business Process Outsourcing or Redesign is growing 100% a year at the moment). Or both.
Same thing is happening for Oracle.
They're also all looking over the fence at Small and Medium sized business, whose IT growth is 9%+ a year. So there's some effort to engage reseller channels to take them down lower, albeit more into the high-end of "M" rather than the "S" in SMB (in this case, Small and Medium size businesses). IBM are trying hard, other enterprise software vendors less so.
So, all part of a general trend at the high end, where you get to embed yourself in business processes that are fairly core to enterprises hooked on spending lots of money. The more interesting things will happen once that consolidation has taken place, and the enterprise vendors really have to try hard to move down market to get growth.
Ian W.