Big Blue snaps up FileNet in spending spree

IBM on Thursday continued to accelerate consolidation in the business software market by spending US$1.6 billion to by FileNet, a longtime competitor in the enterprise content management space and Big Blue’s third acquisition in a week.

In a teleconference call, IBM said it would keep most of Costa Mesa, Calif.-based FileNet’s 1,800 employees. The company also said it would maintain support for FileNet’s flagship application suite, P8, which was first released four years ago. FileNet will become part of IBM’s Content Management business unit once the deal is closed, which is expected to happen by the fourth quarter of this year.

FileNet has a long and storied history in the IT industry, starting out with a client/sever-based document image processing system in 1982 before expanding into workflow software and later enterprise content management. Early on, it provided its own customized workstations running FileNet DOS (FDOS), but over the last 20 years it has followed the example of other software firms by building its business through acquisition.

Three years ago, for example, FileNet acquired Edmonton-based Shana Systems Corp., a maker of electronic forms software, whose operations became one of FileNet’s Canadian R&D centres. More recently FileNet bought one of its own channel partners, Yaletown Technologies, whose E-Mail Manager and Universal File Imported products became part of P8.

Ambuj Goyal, general manager of IBM’s Information Management division, said the acquisition would allow the company to provide more a broad enterprise content management platform, and that Big Blue will integrate its service-oriented architecture technologies into FileNet products.

“All types of content are becoming actively leveraged in applications and business processes,” he said, adding that IBM sees content management becoming an enabler of business process management (BPM), an area the company has identified as a large market opportunity.

Sean Fitzpatrick, principal at FileNet consulting firm RKO Solutions in Vancouver, used the insurance industry as an example of the kinds of verticals where content management and BPM meet.

“The actual filling out of the claim form either by fax, filling out with pieces of paper or online, is a piece of content,” he said. “It’s nice to have the content and control over it, but the return on investment comes by taking it out, putting it into a work package, and routing that to the right person.”

FileNet chief executive Lee Roberts said the combined organization will maintain its Canadian development presence, which includes a facility in Edmonton, although these are smaller than similar centres in the United States.

“This is something that will accelerate growth of this market and the adoption/migration of using ECM as a platform, much as they use databases as platform to build applications,” he said

Andi Mann, senior analyst with Boulder, Colo.-based research firm Enterprise Management Associates (EMA), said it is only a matter of time before FileNet becomes absorbed into IBM’s existing portfolio.

“They’ve got the ability to integrate quite quickly and they’ve shown that with a number of acquisitions,” he said. “FileNet is a much bigger product set, but it’s a case of what’s commercially viable for them. IBM does not want to upset that customer base.”

Although he agreed it would make sense to merge the products eventually, Fitzpatrick said he wasn’t about to become an IBM partner just yet.

“The bottom line is FileNet has over 4,000 customers using the newer and the older technologies,” he said. “It’s a lot of large companies where a lot of their processes are depending on that technology. Change is going to be expensive, and no one likes to do change.”

IBM kicked off its latest round of consolidation last week when it bought Webify, whose middleware products will be folded into WebSphere, followed by MRO Software, which will become part of its Tivoli management applications division.

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