The enterprise content management (ECM) market space is shrinking rapidly as the consolidation that has characterized this market space for the last few years nears its completion. There are now very few independent pure-play ECM vendors left to acquire.

It has taken Oracle a long time to buy into the ECM market. The company has developed its own (it seems fairly limited) ECM capabilities, but it is never easy to establish a market share with in-house developed software that has to compete in a mature market. Although there is a large potential market for the company’s product from existing Oracle users, many of these have already implemented an established ECM platform, and there is little scope for the company to sell its ECM product into organizations not already using Oracle solutions.

On the other hand, Stellent is an established ECM vendor with a portfolio of extensive capabilities, including document and records management, web content management, collaboration capabilities, and digital rights management following its acquisition of SealedMedia earlier in 2006. Over the past few years, Stellent has made a number of strategic acquisitions that have strengthened its product line, and it has established itself as a major vendor in this space.

However, as independent ECM vendors are increasingly acquired by large multiple product vendors with huge revenues and large R&D budgets, it becomes harder for the remaining vendors to compete, and they increasingly lose out when it comes to acquiring small niche vendors to expand the range of their products.

This acquisition by Oracle should prove to be a positive move for both companies. Having an ECM capability in its portfolio will enable Oracle to compete more effectively with IBM, which has, for the last couple of years, been developing a single platform to manage and search across both structured and unstructured information. Microsoft is also finally moving into the ECM space with Office 12.

Stellent, meanwhile, will benefit from the financial backing of Oracle, which will provide the ability to make further acquisitions that extend its capabilities, and will also enhance the credibility of the company when competing against large vendors such as IBM.

In addition, it will provide Oracle with a competitive advantage over its major competitor in the enterprise resource planning (ERP) space – SAP. For years, SAP has benefited from Oracle’s lack of ECM functionality as it has its own capabilities, although it is not regarded as a major force in this area. In addition, it enjoys tight integration with Open Text Livelink – ECM, which allows SAP data to be managed by Open Text processes, and there are many pre-built Livelink – ECM applications for SAP users.

In view of the fact that it is unlikely that any of the independent pure-play ECM vendors will survive intact much further into the future, vendors that wish to move into this area must do so quickly. Therefore, if SAP wishes to regain the initiative over Oracle, it needs to become a major ECM player, which can only be achieved through acquisition.

It is better late than never for Oracle, but SAP should now step in and acquire Open Text.

Source: OpinionWire by Butler Group (www.butlergroup.com)