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We knew Open Text had more acquisitions planned, the company said as much on its most recent earnings call.  Buying Captaris will give Open Text improved fax and document capture capabilities, which are most interesting for Open Text when tied to enterprise apps from SAP and Oracle for outbound faxing of invoices and purchase orders coming from those apps.

Open Text has bid $4.80 per share of Captaris, valuing the vendor at $131m.  Brenon Daly looks more at the financials of this deal over on the 451 Group’s tech M&A blog, Inorganic Growth. For 451 Group clients, our full deal analysis is here.

After two small deals earlier this summer (for Spicer and eMotion), this is a bigger acquisition for Open Text and one that may slow it down a bit on the acquisition front, as Captaris had a few recent acquisitions of its own to digest.   Open Text is no stranger to assimilating acquired portfolios but it’s still no small task.  As usual, Alan Pelz-Sharpe at CMS Watch does a great job outlining the potential pitfalls for customers.

Another interesting angle though is that Open Text has made a larger acquisition and it wasn’t of Vignette.  There’s been speculation like this about such a deal and we don’t doubt Vignette is in play.  This acquisition does make it seem less likely that Open Text will go for Vignette anytime soon.

Still, if approved, this deal should leave Open Text with at least $100m in cash and an apparent mood to buy, so there will likely be more (smaller) deals to come.

A number of things passed me by this summer (yes, there was a reduced work schedule, a nice vacation — back at it now. Look for this blog to return to activity after a quiet summer).

One of the things I didn’t follow closely enough at the time was Microsoft’s earnings announcement at the end of its fiscal 2008.  Joe Wilcox at eWeek noted a 30% year-over-year growth in revenue associated with the SharePoint Server.  This isn’t in the filing, so must have been mentioned during the earnings call.  John Mancini picked this up but I didn’t find much else on it.  Then Stephan Elop, President of Microsoft’s Business Division, in a speech during a financial analyst meeting on July 24th cited fiscal year growth of 35% for SharePoint.

Microsoft claimed $800m in SharePoint revenue (in a press release) last year for fiscal 2007, so 30% growth puts 2008 revenue at $1.04 billion, 35% growth puts it at $1.08 billion.  The company also made a rather vague announcement in March the SharePoint Conference and via a press release that it had surpassed the $1 billion revenue mark.  At that point, we dug into it to find the $1 billion number was for the rolling twelve-month period.

The vagueness of the numbers is because of the difficulty of tracking individual product revenue, particulary when a product is tied to others in bundles.  Microsoft calculates SharePoint revenue by including revenue associated with Microsoft Office SharePoint Server 2007, the previous SharePoint Portal Server 2003 version, SharePoint Designer, Forms Server and SharePoint Search. SharePoint Server is sold individually and also as part of Microsoft’s Core client access license (CAL) and Enterprise CAL. So in the latter case, a share of the revenue from those bundles is associated with SharePoint.

All of this means the numbers are inexact to be sure and all licensed SharePoint seats (we haven’t seen an update on this number, from the 100 million claimed earlier this year) are not actively used.  But of course, the numbers are still indicative of SharePoint’s growing adoption, which few question. And many customers use the free SharePoint Services, which doesn’t directly show up in revenue numbers at all.

I suppose Microsoft didn’t make a big deal about it because the growth is in line with what it had already reported earlier in the year.  For others, the fact that SharePoint is a growing business for Microsoft isn’t exactly, uh, news.  Still, official news on SharePoint can be hard to come by so forgive the post if this is too old news, but I thought if I missed it, maybe others had too.

We’ve knuckled down on our upcoming e-discovery report – thanks for the many responses to the blog post. Even though e-discovery has been around for years, the current market activity proves the party’s just beginning – and it’s going to be a barn-burner.

As we saw a few weeks ago with Interwoven’s acquisition of Discovery Mining (log-in required), SaaS is emerging as a viable option, and may be a playing-field leveler for smaller vendors. Also last week, PwC and Iron Mountain / Stratify announced a strategic e-discovery partnership. Then yesterday IBM released its new E-discovery Manager for its content management and email archiving platforms – 451 clients can expect upcoming coverage.

There are a number of established tier-one players. But where there are large players, there is room for smaller alternatives. And because some large vendors, consultants and services firms are playing catch-up in the boom, there is still plenty of potential for acquisition, particularly because the e-discovery process covers several disparate areas of technology: email archiving, storage, records management, search and text analysis. In this race, the market is just hitting its stride, there are probably too many vendors vying for the business and the players shift frequently.

The latest Socha-Gelbmann survey results bear this out. They’ve swelled the ranks of “Top electronic discovery software providers” from 11 to 15 overall. Autonomy and Clearwell have reached the top tier, along with incumbents FTI Consulting, Guidance Software, Inc. and LexisNexis. Of the second tier, 2006 winners Cataphora, DocuLex, ISYS and Oracle are out entirely, Attenex (recently acquired by FTI) and CT Summation are down from tier one, and Epiq systems, iConect and Symantec are first timers to the list. Third tier is all new for the category: AccessData Corporation, Equivio, Kazeon Systems, Inc., Kroll Ontrack and MetaLINCS (owned by Seagate) – note that many of these were previously present on other best-of’s for service or specific software type.

Socha-Gelbmann does offer the caveat that “anyone who makes buying decisions primarily on these rankings is a fool,” although we haven’t seen the quote included in many vendor press releases.

So how then do software purchasers choose a vendor, and what does it mean for the market? We plan to address these questions in our upcoming e-discovery report, in which we’ll be looking at a number of users, vendors and service providers with a range of experience and across sectors, keeping our collective eye on new developments and a view of where the market is headed from here.

What we can tell you as a preview is that it’s exciting to watch such a dynamic market. Now that more companies are becoming familiar with the demands of storing, managing, searching and producing Electronically Stored Information (ESI), they’re no longer buying nick-of-time service. The new standards of the amended Federal Rules of Civil Procedure (FRCP) are not a one-time inconvenience, but require a legally-defensible methodology and the speed to produce on-demand in a number of days. Users are investing in long-term plans for all types of litigation. IT is developing comprehensive strategies for approaching various ESI repositories. Preventive measures are available for monitoring ESI distribution in potentially litigious areas - stopping trouble before it starts in high-litigation operations. These developments are reflected in corporate structure, where IT and legal have more overlap and greater cross-functionality.

Stakes are high, the time-frames for discovery are short - one services exec told us “fast in this business is FAST” - the competition is crowded, and the need is ubiquitous. We’re looking forward to continuing the conversation with many of you – and if you have yet to get in touch, please do so.

Last week it was EMC’s Documentum group taking on SharePoint and this week it’s Alfresco, interesting not just because both Documentum and Alfresco were founded by the same person.  I had the chance to speak with that person, John Newton, this morning about Alfresco Labs 3.0 (Labs is the new name for Alfresco Community, which is the unsupported, uncertified version of Alfresco’s open source ECM software).

Alfresco has been positioning itself as the open source alternative to SharePoint for awhile and this announcement puts more wood behind that marketing arrow (Alfresco is undeniably good at marketing).

By working with the documented server protocols that Microsoft made available after its tangle with the EU, Alfresco built interoperability with the Microsoft Office desktop apps and with Microsoft Office SharePoint Server to make Alfresco a more viable replacement for SharePoint or to make it easier for the two to co-exist.  The most useful part of this will be the ability for end-users to work with an Alfresco repository via Office apps in the same way they work with SharePoint.

As is generally the case in ECM, SharePoint and Alfresco aren’t apples-to-apples in all senses and Alfresco isn’t necessarily attempting to replicate all the search, business intelligence and portal pieces of SharePoint just yet.  But this definitely provides an alternative for those organizations looking for basic content services a la SharePoint in a non-Microsoft or mixed server OS, database and browser environments.

I’ll be relocating from New York City to London as of August 1, but continuing in more or less in my same role here at The 451 Group.

After more than a dozen years in Manhattan, I’m moving back to the old country (those of you that know me will know I more or less managed to retain my accent) and as such, I’ll obviously be closer to the European scene. I hope to unearth more European vendors and customers than we’re already covering, although we will continue to actively cover all the US vendors we already follow and continue to dig for more there as well.

I expect to hear more about semantic technology than I do in the US (although that’s already quite a lot) and I expect the drivers for using text technologies of various types to be slightly different in Europe.

August will be a bit hectic sorting things out, but I’ll be fully up to speed by the start of September, that’s for sure.

The only contact that will change is my office number, which I’ll be sending around to key contacts.

Katey Wood, my research assocuate remains in the 451 Group’s New York City HQ, helping me cover this fascinating market.

You’ve had Nick’s take, now here’s mine, with a little overlap – great minds think alike, right? We were not expecting the 40 attendees for the pre-conference workshops during prime Sunday TV viewing time. Seth Grimes laid out “Text Analytics for Dummies,” while Nick gave a market overview. But the attendance (and the long Q&A sessions) were good indicators of user enthusiasm and the desire for real, practicable advice about the field.

Some of the other memorable moments:

• Best of the vendor panel: Seth Grimes’s challenge to say something nice about a fellow vendor’s offerings. And the vendors’ response to an audience question about incorporating UIMA, which was uniformly that it wasn’t necessary or in demand.
• The Facebook presentation on trend-tracking through users’ “Wall” posts was brought back for an encore by popular demand. The crowd in my session was a little confrontational about the amount of analysis being done on the available information (never enough!), but as far as quick and dirty zeitgeist goes, it was unbeatable, and a lot of fun.
• The Clarabridge 1-hour deployment was good sport, with at least one customer’s testimony that once the system is learned, it can actually be configured with speed approaching that of CTO Justin Langseth. You have to hand it to Clarabridge: they make it look easy.

Some thoughts on the users’ takes:

• In presentations and in private chats, frequently recurring themes among vendors was eDiscovery and social media – some of the drivers for the market. The user questions I heard were mostly about sentiment analysis, deployment time and ROI. Specifically, information on how to judge all of the offerings – is sentiment analysis accurate enough? What is the expected deployment time, what is the ROI?
• Precision and recall went back and forth again, but the hard truth is that the edge depends on the application. For patents or PubMed searches or eDiscovery, you need recall. For other applications, precision is paramount. Some users I spoke with mistook this as a lack of accuracy – it’s more of a sliding scale of usefulness.
• Accuracy was a recurring issue, both because text analytics is an emerging technology, and, of course, text is messy and imprecise. Partly it’s a matter of maturation. But the “fast / cheap / or good – pick any two” truism about software development is equally true here. Even with built in taxonomies and dictionaries or domain-specific knowledge, any text analytics software needs configuration to increase accuracy for its application and user, which takes time.
• “Win fast and win often” – great words from Tony Bodoh of Gaylord Hotels, on the user panel. Because of the financial investment, the fact that text analysis software can automate (obsolete) some employee work, the time it takes to configure, and general resistance to change, it is important to gain both executive and user buy-in early in the process. Chris Jones of Intuit echoed the sentiment, adding that it’s not advisable to go after your largest (and most time-consuming) problem first – come up with a number of smaller successes to prove the concept to users and higher-ups. Incidentally, both of these are Clarabridge users.
• Jones also noted that one of his “lessons learned” was to avoid over-configuring or too much tinkering with the analytics. He advised after a prudent amount of configuration to treat it more or less like a black box, and not worry about what is going on under the hood, just let it do its job and leave it to the professionals.
• Some more wisdom from the user panel: you can’t go into a text analytics deployment expecting quantifiable ROI. “You don’t know what you don’t know” - which is what the tool is there to solve. In many cases, the real potential isn’t obvious until you can see how it works with your business. At that point it’s possible to come up with applications that not even its creators could have thought up.
• Lastly (and this is not a new sentiment, but it meant more coming from school Superintendent Chris Bowman, who looked like he had my parents on speed-dial): the text analytics field is emerging, and will become integrated with larger applications. This will eventually render a conference like this obsolete, but it also means a great chance to get a leg up as an early adopter.

Looking forward to next year!

I attended a star-studded open source panel this morning, with Bob Bickel of Ringside Networks, Jeff Whatcott of Acquia and John Newton of Alfresco. The panel and audience members discussed adoption of open source specifically for social applications.

There was a bit of discussion on market readiness for open source in this sector. A comment came from the audience that Alfresco, the most established of the three vendors, started with an “easy target” - that is, replacing document management systems that were largely understood and seen as commodities. The same audience member noted that applying commercial open source to emerging social applications may be more difficult, as these are viewed as more strategically important for IT and management.

Ringside is really only just now getting started so it isn’t too far down the road in selling to enterprises, but Bickel came from JBoss and so recounted some of his experiences there with overcoming adoption hurdles at the application platform layer. Acquia is also a new company but it is attached to the popular Drupal project. Acquia hopes to help legitimize Drupal for the enterprise.

Other questions from the audience focused mostly on the complexity of deploying some open source tools (lack of documentation etc.) and licensing issues.

The issue of how little open source was represented at this conference, something I had also noticed, also came up. John Newton said he went from booth to booth on the show floor asking “are you open source?” He got few “yes” answers. Alfresco / Acquia were on the show floor along with a big Sun / MySQL booth but of the 52 vendors on in the demo pavilion, that was about it for vendors with primarily open source business models (a few like Socialtext and Jive Software dabble some in open source but it’s not their primary model).

It’s interesting that at a conference that was all about communities and user-generated content, the vendors represented didn’t have more of a focus on community-generated software. The emphasis in conference sessions and certainly among the vendors on the show floor was much more around software that is easy-to-procure and easy-to-deploy for business users…in other words, lots of SaaS.

Why? I met with John Newton after the panel and he said he thought it was just the vendors present, not a real reflection of the amount of social software currently deployed as open source. I think that’s true as most organizations definitely have WordPress, MediaWiki and Roller deployments but none of these tools were represented at the conference. (Aaron Fulkerson from MindTouch was there (commercial open source wiki vendor) but MindTouch didn’t have a booth.)

Jeff Whatcott also noted off-panel that he thinks the SaaS and open source models will advance in parallel in this market but there will eventually be a “come to Jesus” moment when organizations realize the benefits of community development and the need to have the flexibility to develop, integrate and customize this stuff. I agree that these two models will continue in parallel for awhile or perhaps more than awhile as there are likely to roles for both SaaS and open source in the social software (or collaboration) market for the foreseeable future.

Update: I neglected to mention in this post originally that John Eckman from Optaros did a wonderful job moderating this panel.  My oversight for not mentioning that.