EMC Is Resolute

In the face of abundant criticism, EMC confidently defends its acquisition of Documentum

There was no shortage of people willing to comment on the implications of EMC's announcement that it would purchase content management vendor Documentum in a deal valued at $1.7 billion. Within hours after word of the agreement got out, at least a half-dozen analysts and competitors began contacting the press to offer their input — which was tinged with a heavy dose of skepticism, to say the least.

Take for instance the statement released by FileNet: "Executives at FileNet believe the EMC acquisition will be a distraction for Documentum and take the company's eye off the prize of enterprise content management domination and innovation."

Alan Pelz-Sharp, vice president of software and services at Ovum, noted similar concerns. "EMC is a storage vendor that has no history of content or document management," he said in a statement. "It is to be hoped that Documentum will be allowed to continue largely as a subsidiary rather than simply merged into the whole of EMC."

Even Computer Associates's David Liff, vice president in charge of the company's BrightStor Solutions division, got in on the action by warning that "EMC is faced with the complex challenge of integrating its technology to both Legato's and now Documentum's, without the ability to address security or enterprise management of stored data."

Still others questioned the 29-percent premium on Documentum's stock price that EMC agreed to pay. And investors responded to the arrangement by selling shares of EMC stock, leaving the value of the deal at $1.56 billion a few days later.

For its part, EMC has ignored the critics — and with good reason. Company executives have made no secret of the fact that they want to derive at least 30 percent of EMC's revenues from software by 2005. The acquisition of Documentum and, previously, Legato Systems, will not only propel the company down the path toward that goal but will also position it as a leading vendor of information life-cycle management (ILM) products, a growing field that links storage and document management.

"Overall, the upside of this deal is that we're acquiring a leader in the fastest growing software market and we believe that this will allow us to better serve customers who need to combine content management with data storage," says EMC spokesman AJ Ragosta.

Addressing critics who are worried about Documentum's future, Ragosta points out that EMC will retain Documentum's entire executive, sales, and engineering teams. The company also has no plans to force Documentum customers over to EMC hardware or vice versa. "We will make a pitch for what we believe is the best solution for our customers," said Ragosta. "But obviously, we'll show how Documentum can fit their needs."

Doculabs principal analyst Richard Medina took a more balanced stance on the situation, noting that he sees a number of pros and cons to the deal, and that only time will tell which side wins out. "EMC now has the ability to cover all stages of content management," says Medina, "but this does nothing for its ability to enable business process management for its customers." If FileNet or another competitor were to acquire an EAI vendor, the resulting product could give EMC a run for its money, he adds.

Still, Medina believes that the Documentum/EMC announcement is good for the industry as a whole because it signals an increasing interest in extending enterprise content management into new areas. Indeed, even FileNet and Computer Associates agree to this. "EMC's acquisition of Documentum at a substantial premium over current stock price demonstrates the strong prospects and importance of the enterprise content management category," wrote a FileNet spokesperson.

Whether this focus will turn out to be a big win for EMC remains to be seen. But one thing is certain: You can expect to hear a lot more about ILM in the coming months.

— Amit Asaravala

Amit Asaravala is a freelance technology journalist based in San Francisco.

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