The acquisition shouldn’t come as a great shock. Captiva’s software is used to manage data from scanned forms, faxes and XML streams and is considered to be complementary to EMC’s $1.7bn acquisition of content management software firm Documentum Inc, which in late 2003 was its first major venture into this space.

Content is perhaps an appropriate word. EMC’s strategy is simple; to use its core storage hardware competencies to provide a foundation for information lifecycle management (ILM) applications – a wooly acronym that roughly translates to the process of managing content, spanning from content creation to archiving, by defining data storage based on business rather than technology needs.

Under the terms of the deal, EMC is paying $22.25 per share in cash for San Diego, California-based Captiva. The company expects to take a $15m to $20m charge related to R&D costs.

The deal is expected to close later this year or early into 2006 and, excluding the charge, won’t impact EMC’s earnings for at least a year.

Captiva reported revenue of $20.2m in its last reported quarter and was widely tipped as an acquisition target earlier this year. EMC was always a likely suitor for two reasons.

First, Captiva’s core technology hones in on the early stages of EMC’s grand ILM vision. Its software digitally captures paper-based documents, forms, reports (through a scanner, for example), extracts critical data in them and then applies business rules for accurate processing by ERP and other business applications.

Captiva calls this input management, which is basically a fancy term for converting paper-based documents into usable electronic formats for that it can be managed by an computer system.

Second, the two companies’ content management offerings are already integrated to some extent. EMC already has a partnership in place to integrate Captiva’s InputAccell software into its EMC Documentum platform The company is now planning much deeper integration.

Captiva has around 5,000 customers, 50% of which it claims are Global 2000s. The company employs around 400 people. Hopkinton, Massachusetts-based EMC has not made a decision on possible playoffs or relocation of staff.

According to Dave DeWalt, President of EMC Software, Captiva’s technology will add strong enterprise archiving capabilities to the EMC Documentum platform, adding paper-based data alongside other digital content files managed by the system.

Moving forward this acquisition will enable EMC to deliver further integrated solutions for input management and image processing applications, DeWalt said in a statement.

While EMC clearly has integration between the two product lines foremost in mind, the company insists it will also continue to develop Captiva as an open platform just as the company does with the rest of EMC’s software applications.

By open it means selling and developing Captiva as standalone products without necessarily tying it down to EMC’s storage infrastructure. Of course, EMC would be more than glad to sell users with the hardware storage component of ILM as well.

Despite being laughed at by Wall Street for buying Documentum – many couldn’t understand why on earth an enterprise storage vendor would want to splash out over $1.7bn on company that managed documents – EMC continues its methodical expansion into the software space. Documentum’s prior acquisitions have also given EMC products in digital asset management, electronics record management and team collaboration.

Two years on and the jury is still out if EMC has cracked the ILM puzzle, even though Documentum has bought in new, and quite substantial, revenue which has the company’s past dependence on its core storage hardware business. Software application sales and services now account for 20% – around $470.3m – of its annual $2.37bn revenue, making EMC a content management leader to rival the likes of Open Text Corp and FileNet Corp.

All EMC’s major software acquisitions to date have focused on the important niche of document management. Surely EMC’s next target must be on structured data formats. Its only question of time before it picks up one of the bigger software application vendors that manages or analyzes this type of data as well.