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August 11, 2006updated 19 Aug 2016 10:09am

Why IBM bought FileNet (hint: it wasn’t for the technology)

News that IBM has shelled out $1.6bn to buy content management and business process management vendor FileNet caused a fair few raised eyebrows, as IBM already has a software portfolio packed to the gills with both of those technologies.From where

By Jason Stamper Blog

News that IBM has shelled out $1.6bn to buy content management and business process management vendor FileNet caused a fair few raised eyebrows, as IBM already has a software portfolio packed to the gills with both of those technologies.

From where I’m standing it’s a simple case of wanting to take out a competitor. IBM obviously doesn’t need FileNet’s customer list – IBM has more customers than anyone. It doesn’t need FileNet’s ECM or BPM technology, or at least not much of it. There are a few bits and pieces that it lacks but it’s got most of the functionality that most people need – it’s the 80-20 Pareto Principle.

I’m not the only one thinking along these lines. Jon Pyke, CEO of business process management technology and services business The Process Factory, chair of the Workflow Management Coalition (WfMC) and former CTO of BPM vendor Staffware, has this to say: “On the face of it, it doesn’t make sense since IBM already has content and process capability.”

“However, I think this move confirms that BPM is not just about system-to-system SOA solutions,” Pyke told me. “The majority of business processes are driven by content, the need for SOA and web-services integration stems from that notion – this purchase simply re-enforces the need to involve people and content in processes. This is only part of the story though – we’ll see what happens next as vendors slowly wake up to the needs of the business user.”

With 4,300 customers, FileNet is one of the major players in the ECM arena. The company had sales of $421.8m in 2005, and has nearly 1,700 employees. But guess how many ECM customers IBM has? Ambuj Goyal, general manager of the Information Management division said on the conference call that it already has 13,000.

One analyst said yesterday that IBM bought the firm partly because FileNet has spent years developing industry-specific offerings that have content management and workflow pre-built for specific industries, such as banking, healthcare and insurance. But it seems to me that with IBM’s vast annual software R&D spend, and the skills at its disposal within the IBM Global Services division, it could have tailored its ‘vanilla’ ECM and BPM products for specific industries itself, and saved a lot of that $1.6bn.

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.

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That could explain why the company made it clear it will continue to support both the IBM and the FileNet content management and BPM product lines. Some customers will already have both vendors’ products in different divisions or departments or even for different business processes, so they may have two services contracts. If IBM tightly integrated the two product lines, it may be good for customers as they may only need one tranche of services. But that’s not so good for IBM.

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