Open Text cautioned against killing off Vignette products

Open Text Corp. secured its position as the largest independent enterprise content management solution provider with its $310 million purchase of Texas-based software firm Vignette Corp. but the success of the move depends on how the Waterloo, Ont. company handles its new acquisition.

Killing off Vignette products and moving them over to Open Text offerings could very well precipitate a customer backlash reminiscent of the troubles brought by such a move by the Canadian company shortly after it bought Hummingbird.

Open Text, arguably the last remaining large independent ECM company , now has enough market share to compete with likes of ECM heavyweights Microsoft, Hewlett-Packard, Oracle and IBM, according to George Goodall, senior research analyst for Info-tech research Group, in Waterloo.

According to Goodall, Open Text was drawn to Vignette’s still sizeable client base although the software maker “has not developed anything new in recent years.”

The takeover of Vignette, the analyst said, was only a matter of time. “Vignette has been on the ropes for a long time. They’re what we call the ‘walking dead’. It had decaying revenues, little investment in new functionality and no obvious suitors.”

Before the ECM market was largely consolidated to Microsoft and Java tools Vignette enjoyed traditional popularity with its Web content and portal offerings.

Vignette started out as a Web content management (WCM) vendor while Open Text and it earlier acquisition Hummingbird both come from a document management (DM) background. But before being bought by Open Text, Hummingbird had acquired some WCM capability by buying content management vendor RedDot.

Open Text now has the choice of simply stepping in and acquire Vignette customers or moving them over to Open Text offerings just as it attempted to do with Hummingbird bird customers after buying the firm in 2006, Goodall said.

That is a choice that Open text should weight very carefully, according to Sue Clarke, senior research analyst for Butler Group.

“If the intention is ultimately to kill the Vignette brand and integrate differentiating functionality into the Open text suite, then this is a highly dangerous strategy that may well backfire,” she said.

Open Text, Clarke said, must learn from its earlier mistake when it tried to kill off Hummingbird products and move over customers to Open Text offerings. Open Text was forced to back track due to strong opposition from Hummingbird customers who refused to migrate to the Canadian company’s products.

“After a couple of difficult years, Open Text is now back on track and has a strong suite of products and a coherent roadmap, it has to be careful that the recent acquisition does not derail this,” Clarke said.

She said Open Text does not have a good track record in handling acquisition aftermaths well. For instance, it took a long time to fully integrate the IXOS and Gauss acquisitions in 2003. “This affected Open Text’s financial results for a couple of years afterwards,” Clarke noted.

Goodall of Info-Tech, however, is hopeful that Open Text will leave Vignette products alone at least for the near future.

“This is not a product play. I think Open Text is more interested with the market share.”

If Open Text decides to kill off any Vignette offering, customers will likely be given a five to seven year transition window, Goodall added.

While the Vignette acquisition “represents the final wave of consolidations in the ECM space” which began with Open Text’s purchase of Documentum five years ago there still may be some surprises down the road, Goodall said.

“Now that Open Text is possibly Canada’s largest software company, could they not be in someone else’s shopping list?” the analysts asked.



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