FileNet finally goes out to IBM

The consolidation in the ECM market continues with IBM snapping up FileNet. This is a good outcome for FileNet, which had not performed very well and was threatened by changes in the ECM space.

The acquisition price of $35 per FileNet share is only a slight premium over the closing price of FileNet’s stock on Wednesday.

This news comes not long after OpenText got Hummingbird, putting in question the fate of smaller ECM vendors that don’t have a highly differentiated offering. Some of these, like MDY, which ended up recently at CA, will end up being technology acquisitions to fill out larger vendors’ product portfolios. Others will specialize either horizontally or vertically and go after niche markets.

One cannot underestimate the effect that Microsoft Sharepoint is having in the ECM market. SP 2.0 has effectively commoditized basic Web-based collaboration in enterprises. SP 3.0 adds significant document management capabilities. The combination of free Sharepoint Services and the reasonably scalable SharePoint Portal Server will have significant impact on the way current ECM vendors do business. They’ll be forced up-market and will have to deliver value through integration of their ECM suites into broader infrastructure and applications, the core driver behind the IBM acquisition of FileNet. Even then, the larger ECM vendors won’t be able to ignore Microsoft’s presence in the market. IBM’s services group is already the biggest MS integrator. EMC smartly bought Internosis, with one shot giving the company a response to Microsoft’s increasing market share and IBM’s services advantage.

My own investment in the ECM space, Meridio, is riding the SharePoint wave by helping very large enterprises and government agencies deploy scalable and secure records management (RM). Meridio recently won the largest RM contract in the world numbering in the hundreds of thousands of seats. IBM’s purchase of FileNet is good news for the company–there are fewer competitors who can satisfy the needs of the very large enterprises and even fewer who can do so while leveraging existing investments in Microsoft Windows, Office and SharePoint.

About Simeon Simeonov

I'm an entrepreneur, hacker, angel investor and reformed VC. I am currently Founder & CTO of Swoop, a search advertising platform. Through FastIgnite I invest in and work with a few great startups to get more done with less. Learn more, follow @simeons on Twitter and connect with me on LinkedIn.
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