Shaky Financials Hurt Content Managers

In the fall of 2000, Jeff Sears searched for a content-management system to handle the ever-growing volume of data amassing on his company's Web sites. In the end, he bypassed major vendors because of worries about their financial health and instead had a system custom-built. While his action may be considered extreme by some, Sears is far from alone in his concerns.

The manager of Web services for NCS Pearson—a division of educational publishing giant Pearson Education—Sears had initially looked at the top three players in the market, Documentum, Interwoven and Vignette. By and large, he liked what he saw. In fact, NCS already was using a content-management platform from Documentum at one of its subsidiaries, NCS Learn, and was pleased with its performance. However, Sears noted that the three were piling up heavy losses, and with technology companies failing all around, he was reluctant to bet on any of the trio.

"Everything was risky," he recalls. "The systems the vendors were selling were large and expensive. We agreed the market was so volatile, it wasn't the right time to be buying."

Instead of doing nothing, NCS had its own developers custom-build a content-management system in Macromedia's ColdFusion. It took six months to create, and came in at about one-tenth of the $3 million to $5 million price tag quoted by the vendors. "We don't have all the bells and whistles that you would have in a full-blown content-management system, but we don't need all the bells and whistles," he says.

Still, Sears believes NCS will eventually have to implement an off-the-shelf content-management system—the growth of content and the headaches associated with its management are too big to ignore. But he's prepared to wait until he's more comfortable with long-term prospects for the software providers.

Market Leaders Wobbly

What is the financial health of the major players? Vignette is on shakiest ground, reporting combined losses of $1.3 billion over the previous four quarters. Interwoven sits in the middle of the group, reporting second quarter revenue of $33 million, up slightly from the $32.6 million reported in the first quarter. Its second quarter loss was $13.8 million; Interwoven lost $120 million on revenue of $176 million for the 12 months ended March 31, 2002. Documentum is the oldest of the big three players, and that seems to be playing in its favor. Revenue in its second quarter jumped 17% to $54 million, but the company reported a loss of $473,000. In the previous four quarters Documentum had combined losses of $25.2 million.

What's more, the three are keeping a close eye on Microsoft, which has targeted content management as another sector to conquer.

Meta Group analyst Andrew Warzecha believes Microsoft and, to some extent, Oracle and IBM, will commoditize the document-storage end of the content-management market by 2004, leaving other vendors to focus on building industry-specific applications.

While it's hard to find any technology sector swimming in the black, content-management companies have one major plus going for them. In its 2002 CIO survey, research firm Gartner Inc. found that content management was the No. 2 priority among CIOs, topped only by security. The primary reason, says analyst Mark Gilbert: content costs money—to create, maintain and search. Content also can drive revenue—companies can sell it, and use it to attract and retain customers—and content management is core to the operation of any enterprise, bringing the correct information into the hands of workers when they need it.

Practically every type of company uses a content-management system today, from obvious industries such as publishing, to large health-care organizations, drug companies, financial ser- vices organizations and government. In total, Gartner estimates the market to be worth about $2.4 billion in 2002, split evenly between traditional or enterprise content management, and Web content management. What it all boils down to is that enterprises are still pushing ahead with content-management projects, but they're taking longer to come to buying decisions, and may not be deploying on as grand a scale as they might have a year or two ago.

Clarke American, a San Antonio provider of checks and related services to more than 4,000 financial institutions, selected Vignette this summer to be the content engine behind its corporate portal. Larry Patrick, vice president of customer and partner integration, says the company was experiencing a number of frustrations related to the workflow process around writing, editing, approving and publishing content. It felt Vignette's Content Suite provided the best match for its needs, but Patrick was concerned about the vendor's financial health.

"I actually talked twice with Vignette's CEO (Tom Hogan) before agreeing to the purchase, because we wanted to get some assurance as to the company's long-term prospects," he says. "I came away from those talks pretty confident. I was also impressed by the fact that they had some very large customers that weren't going to walk away."

Similar talks are taking place elsewhere. Joe Tooman, manager of Web services and business analysis at Berger Financial Group, decided to purchase the Interwoven content-management platform in February 2001, not long after the tech bubble burst. He says he spent almost as much time analyzing Interwoven's finances and customer base as he did its product features. "It was a big issue for us—we're a mutual fund company. We don't like to gamble," he says. In the end, Tooman says he's comfortable with his decision. "The test is whether they are still there today—and the answer is yes."

The last word goes to Thomas Schiavone, vice president of Documents on Demand, a unit of Bowne & Co. Bowne decided to base a new business venture, which allows companies to print financial documents on demand, such as 401(k) enrollment booklets, on the Documentum platform in June 2000.

Schiavone says Documentum's relatively stable financial picture was a key factor for the oldest publicly traded firm on the New York Stock Exchange. "There were other factors, but you don't get to be a 227-year-old company by making rash decisions," he says.

Expertise Online

AIIM Marketplace www.aiim.org/marketplace.asp Allows users to search for content management vendors based on application or technologies. Also provides white papers and seminars.

CMSWatch www.cmswatch.com Site owned by consulting and training firm includes news, analysis about content management, also links to a content-management listserve.

Copyright © 2004 Ziff Davis Media Inc. All Rights Reserved. Originally appearing in Baseline.