ECM growth outpaces overall software market

The drive among organisations towards compliance and process efficiency is fuelling the enterprise-content-management (ECM) market, which currently outstrips other major software sectors in growth terms, according to analysts at IT market research company Forrester Research.

Forrester analysts estimate that sales of ECM licenses rose 10 per cent to $1.78bn in 2004 and are set to grow at a compound annual growth rate of 19 per cent to reach $3.9bn in 2008. In a survey of more than 200 IT decision-makers, they found that 38 per cent of North American and 18 per cent of European respondents plan to purchase ECM software during 2005.

That puts ECM ahead of other software categories as a spending priority, including data warehousing, enterprise-application integration, systems management, identity management, instant messaging, RFID and business-process management.

“For most organisations, the majority of their unstructured content – including office documents, e-mails, paper documents and electronic document transactions – is unmanaged. This increases the likelihood that an organisation is at risk of being out of compliance with its corporate governance policies,” says Forrester analyst Kyle McNabb. “These same organisations also want to eliminate process inefficiencies: improving access to unstructured information, reducing the amount of redundant content, and streamlining content production processes,” he says.

At the same time, a shift in focus away from cost-cutting drives in favour of revenue growth initiatives means that CIOs and IT directors will continue to invest in tools and technologies that can help boost the management and delivery of content, which in many cases means replacing bespoke ECM implementations with packaged applications.

Finally, many companies are looking to standardise on a single ECM suite for the organisation – rather than a slew of departmentally-implemented ‘point’ solutions – and wish to push these applications out to a greater proportion of their workforce.

McNabb expects a “clash of the Titans” as ECM suppliers scramble to capture as much of this growth as possible for themselves. “Large, infrastructure companies such as EMC, IBM, Microsoft and Oracle view ECM as a growth opportunity and a means through which they can expand from their existing footprint of application or storage infrastructure to address the broader needs of IT organisations. As these vendors aggressively compete with one another, price points will drop to well under $100 per seat, making ECM technology more affordable to the broader market,” he says.

Meanwhile, smaller ECM companies including FileNet, Hummingbird, Interwoven, Open Text, Stellent and Vignette all face the difficult challenge of positioning themselves as an alternative to these larger companies. Some are attempting to do that by tapping into customers’ fears of vendor lock-in with a large infrastructure player. Others are focussing on differentiation trough tools that align more closely with an organisation’s line-of-business objectives, such as compliance, contract management and customer self-service.

McNabb’s advice? Customers should choose suites over point solutions, look for suite offerings that align with corporate objectives and evaluate ECM vendors on their long-term strategies. “The market is continuing to change as the market begins to split into infrastructure-oriented and solution-oriented offerings. IT organisations should question suite vendors on their longer-term strategy and ask how the vendor plans on maintaining and enhancing its differentiation and value proposition as the market matures,” he advises.

www.forrester.com.