Comments on the IBM-FileNet acquisition

Questions and comments about the IBM-FileNet acquisition have been coming at me since last Thursday when it was announced, asking for my perspective — many people know that I was FileNet’s Director of eBusiness Evangelism in 2000-01, and that FileNet is still an occasional client of mine, and I also have a number of friends and colleagues who are current or past employees of FileNet. As a shareholder, I’m also monitoring the stories and stock price online to see if it looks like another suitor might jump in — with the current price running higher than the offer price, the market seems to be indicating that that’s a possibility, or at least a pipe dream.

To clarify my “speechless” state of last week when this news was announced, I wasn’t surprised that FileNet is being acquired, since rumours of acquisition were rampant even when I was at FileNet and before; I’m just surprised that it’s IBM, since I always figured that it would be Oracle. Phil Ayres has a thoughtful post on how all the IBM and FileNet pieces might fit together, but I’m not convinced that FileNet’s content management has much of a future within IBM. I found Connie Moore’s (Forrester) comment interesting (in this article, among others) that BPM is FileNet’s “crown jewel” — I agree with her sentiment, but think that’s it’s a bit of a hidden gem, unfortunately.

I listened to two of the conference calls on Thursday: a very brief one for investors (it was over before I got on it live, but listened to the replay later; for a conference call about the acquisition of a content management vendor, it was pretty content-free), and a longer press call. Ambuj Goyal, the GM of the Information Management unit that will be eating FileNet whole, delivered the usual blah-blah about how the whole is greater than the sum of the parts, how FileNet partners will benefit from an “enhanced ecosystem” and how IBM will preserve and enhance customer investments in both companies’ platforms. Yeah, right. He also referred to FileNet’s BPM as “content-centric”, which means that there’s some pretty fundamental misunderstandings by people how matter about the current state of the product.

Then Lee Roberts, CEO of FileNet, started with “we’re all very excited about this announcement”, and I swear that I could hear the rigging on his platinum parachute twanging in the background. During the Q&A, Roberts said that both he and Ron Ercanbrack (FileNet’s president, to whom I reported when I worked there) would be moving over to IBM — it’s worth noting that they’re both former IBM employees — and that “a vast majority [of FileNet’s workforce] will migrate over to IBM”. He also said that the cultures of the two companies are very similar, words that could only come from a former IBMer, I think. FileNet employees: resistance is futile! Prepare to be assimilated!

Bruce Silver also caught the conference call and had a few comments, and Cote from Redmonk did a mindmap of the calls.

Tons of interesting commentary all over the web:

• IBM Acquisition Aimed at Microsoft?: “The purchase could be seen as an expensive play by IBM to compete head-to-head with Microsoft, which plans to integrate its own content management capabilities into Office SharePoint Server 2007.”
• Why IBM bought FileNet (hint: it wasn’t for the technology): “Indeed the only feasible reason I can see – other than the fact that IBM just wanted to have to compete with one fewer vendor – is that FileNet deployments usually need a fair element of services, so FileNet brings in services partners including Unisys, EDS, Accenture, Capgemini, BearingPoint, Fujitsu and many more. Now that IBM owns FileNet, it will try to mop up most of that services business itself.”
• IBM acquires FileNet – who really stands to gain?: “If IBM believes that the ECM/BPM market is set for a period of significant ongoing growth, it is highly plausible that buying FileNET is the most cost-effective way of making sure it takes a leading share in that market.”
• BPM Market Changes: “This is a very interesting acquisition that addresses a gaping hole in IBM’s BPM strategy while signifying the importance of the BPM market to even the biggest players in the software industry.”
• IBM Snaps up FileNet for $1.6B: “Despite FileNet’s worthy product developments over the past few years, the acquisition is hardly about technology. With the exception of some industry-specific applications built on the FileNet platform, IBM already has all the technology pieces. The motivation for the move is more likely acquiring customers and gaining a better competitive position relative to the ECM market and the enterprise IT market as a whole.”
• IBM’s FileNet bid proof of ECM consolidation: “IBM Corp.’s intention to acquire FileNet Corp. points to a major shift underway in the ECM software market as systems infrastructure companies encroach on pure-play ECM vendors’ turf.”
• Mr. Palmisano, this is American Express. We’ve noticed some unusual activity on your account …: “The acquisition will strengthen IBM’s position in a very lucrative market.”
• FileNet to be acquired – first thoughts: “Lee Roberts CEO (and ex IBM’er) will also do very well – but I am not sure I would be too happy if I were a FileNet customer, or for that matter a member of FileNet’s staff.”
• IBM acquires nice customer list: “This is what analysts call a “customer acquisition”.”
• Morning news: Block, drop, gobble, charge, crunch: “IBM buys software company FileNet for $1.6 billion, and papers everywhere remark on the “recent trend” of big companies gobbling up small companies — which is like remarking on the recent trend of panthers gobbling up gazelle.”
• IBM Embraces BPM 2.0 Model: “IBM moved on a fast track to adopt the BPM 2.0 model with its proposed acquisition of FileNet.”
• And lastly, advice for other ECM vendors from A World without FileNet: “Those who used FileNet as their model and who are working in the thin air of the enterprise market had better find some breathing apparatus because being sandwiched in the top of the market pyramid between Oracle, IBM and EMC will suck the air right out of your lungs.”

I also received a hilarious comment from someone I know at FileNet: “Back in the liberal ‘70s of my youth, working for Big Blue was your worst nightmare! What a long, strange trip it’s been and now I am one of them — wake me up!!”