Open Text’s new CEO preps for compliance competition

Just as Open Text’s earnings rose earlier this month, so did John Shackleton.

The Ontario-based firm recently said chief executive Tom Jenkins will step down on July 1 and named long-time president Shackleton would become

CEO. Jenkins, who recently authored a book on enterprise content management, has led Open Text for the past decade.

Shackleton says Open Text is aggressively pursuing the opportunity to help large companies better comply with a barrage of laws and regulations that now govern the way information is managed and stored. Although he admits this can sometimes be a chore, he says the results can go beyond keeping the senior management team out of jail. In some ways, it’s similar to the situation companies faced when they were dealing with the Y2K bug, he says. 

“Some people took the easiest and least expensive route and just got it done,” he says. “Whereas others would say, ‘If I’m going to do this and use it as a benefit for my company to clean up my act. That’s where the next phase will be.”

Shackleton recently spoke with about Open Text’s acquisition strategy and its plans for the rest of 2005. How are you managing the transition with your new role and Tom’s?

John Shakelton:   When I joined Open Text just over six years ago now, really Tom and I worked as partners, where Tom’s background was in the engineering kind of things and mine’s much more in the organizational growth side of things. Even though Tom was the CEO and I was the president, I was pretty much the only person who reported to Tom. I had everybody reporting into me. What this has done has formalized the whole process and allowed Tom to focus on the three key areas that he’s always wanted to. One is to really define the whole market space that we’re in. As you may know, Open Text is not exactly a brand name, so one of his major focuses in defining this space will be to help Open Text become one. The second part of it is, with Sarbanes-Oxley and everything that goes with it, he will be focused on the change in the way that boards (of directors) are being used, which is much more strategically, while also providing them the infrastructure that they probably would never have really seen within a board, and obviously using our products to do that. My goal is that, seeing as we are selling products are around Sarbanes-Oxley, that we would become a model for that. The last thing, which he has been doing, is on the mergers and acquisitions. We have a very formal approach for strategic review of where we’re going and the role that acquisitions play in that. Then Tom goes off and acquires the companies and I integrate them.

ITB: How do you go about that exactly? You’ve done a lot of them.

JS: We actually have a very good methodology around the whole acquisition. We only go after ones that strategically fit where we want to be in the market. It will either fit from a technology standpoint or a customer base. By customer base, I mean giving us strong customers but also maybe domain expertise of the sales people selling into that customer base. It’s not a CA approach where they’re just rolling up and milking maintenance. We’ve only ever bought – even though we’ve bought a lot – for the long-term strategic growth of the company within our space. We have a disciplined approach of what we would go after, or, in these days, it’s almost daily we get people coming and saying they want to be part of Open Text. The discipline is sifting through and saying “No.” 

ITB: How do you know when an integration has been successful?

JS: There are two things even before you get to that. Even before we’ve actually signed the deal, it’s setting the right expectations of what’s going to happen afterwards. Everything from location, organization, what the branding will be, what can be said to their customers – it’s very clear that this is not some, “merger of equals, and trust us, it will be wonderful once it’s done.” In some cases we do it immediately, in other cases we’ll keep them separate for a time, and in other cases we’ll keep them separate indefinitely. For example, Ixos, which is by far the largest, within three quarters it’s pretty much business as usual.

ITB: There are a number of vendors, including Oracle and IBM, who are trying to make headway in the content management or collaboration space. How do you prepare for that kind of competition?

JS: There’s a couple of things that we see that we usually do well on. One is time to deploy, and with that is total cost of ownership. So for example, I remember one major client of ours telling me that they had gone to LiveLink from Lotus Notes, and we were eight times less cost, when you looked at time to deploy, footprint of servers and all the other infrastructure that you needed to run it, as well as the training and the people to support it. The second piece is scaleability. Many of the competitors coming into this might be very departmental, but (one of) the two key drivers we see today is compliance of some form or another, whether it’s Sarbanes-Oxley, Patriot Act, etc. By their very nature they’re enterprise-wide. It can’t be, “Well, my finance department’s complying, but nobody else knows anything about it.”  You’re looking at big companies, with hundreds of thousands of people. We find we scale better than anybody. The second major market driver is productivity, both saving money and making money, what we’ve seen both in the good times when customers are going rapidly – they’re using LiveLink to help them grow – and subsequently when they’re downsizing, they’re using LiveLink to help them reduce (staff).

ITB: One interesting purchase that didn’t involve Open Text was the acquisition of Documentum by EMC. Do you think that means you’ll need to align yourself with a storage partner?

JS: When that happened, we had all the other storage vendors saying, “Come and work with us, come into our accounts.” The person that you sell storage to is not the person who’s buying document management, records management and collaboration. We’re kind of scratching our heads as to why they would do that. As you look at the Microsoft and the IBMs and at large corporations and their ability to do an extended enterprise where they’re working with their suppliers and their customers, the ability to run on any operating system is important. So is working with any of the other peripheral vendors, too.

ITB: Do you not think that at some point the purchasing of storage and content management will converge, though?

JS: Well, it’s interesting. For example, if you look at one of the major issues today, it’s e-mail management. Again because of compliance, the big fear IS has is they have their ERP under control, but they’re getting three million new e-mails a day. How do they control that? E-mail archiving is critical, but then when the SEC calls and wants to see every document that you wrote about this subject within these dates, you need records management. That’s where I see them converging, and quickly.

ITB: What will happen to the content management and collaboration market once compliance has been achieved by the majority of mainstream enterprises?

JS: I think the compliance is going to be quite a while. It’s not a one-time thing. Sarbanes-Oxley was rapidly put together, with the expecation that there would be lots of changes. And there will be. Also, while the U.S. is aggressively doing this, Europe is not far behind. I don’t think it’s really even begun yet.



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