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OpenText acquisition of Hightail signifies ECM market disruption

Alfresco's sale to an equity firm is seen as 'cautiously optimistic,' according to an analyst, adding that the influx of funding will continue operations.

Two leaders in the enterprise content management market made news this month, but for different reasons. OpenText acquired file sharing and collaboration company Hightail, while a private equity firm purchased information management company Alfresco.

The two deals are the latest signal of market commotion in the ECM space: The OpenText acquisition signifies how a market leader is working to keep its share of the market; the addition of private equity into Alfresco is an example of a newer ECM vendor needing an influx of money to continue its growth.

The OpenText acquisition of Hightail is similar to its purchase of Dell's EMC ECD products in 2016; the company gains a profitable maintenance stream while also potentially adding a product it can bundle with existing OpenText products.

"Acquisition is one of [OpenText's] key growth strategies," said Cheryl McKinnon, principal analyst at Forrester Research. "They do better revenue year over year by acquiring companies than they do with their own products."

'It's not just a cloud world'

OpenText executives see the Hightail purchase as the company filling a necessary void in its product offerings when it comes to file sharing and collaboration, especially when dealing with images, videos or larger files, as well as working behind a company's on-premises firewall to create a hybrid content sharing model. Hightail's technology allows for collaboration of a company's on-premises content and extends into images and videos, not just documents.

[Hybrid ECM is where] we believe this content management world is going -- it's not just a cloud world.
Savinay Berryvice president of engineering and product, OpenText

"That's where we believe this content management world is going -- it's not just a cloud world, it's a hybrid world," said Savinay Berry, vice president of engineering and product at OpenText. "The problem we're trying to solve is how we bring that content that is sitting behind a firewall to life for the right workloads going into the cloud."

Berry said that OpenText developed some file sync-and-sharing capabilities but was drawn to Hightail for its technological capabilities and integration possibilities with existing OpenText products, such as OpenText Core.

"What Hightail did a really nice job doing is creating that seamless creative collaboration workflow within the context of a video or image," Berry said. "Delivering that in document form is table stakes."

Being able to collaborate and share files that are on premises into a cloud workflow is a valuable proposition for enterprise companies that have years of documents, images and videos built up in-house and need to modernize that workflow to be more mobile and agile.

"The broader ECM market has been going through -- and pardon the cliché -- a disruption period," McKinnon said. "Legacy technology is hitting its limit of being able to move quickly and nimbly and address the use cases customers want to see. How we use content and collaborate across boundaries -- content management tools need to support those new cases."

Buying a maintenance stream

According to Berry, the OpenText acquisition of Hightail is designed to accommodate those new use cases around hybrid ECM, such as sharing and collaborating on larger files in a hybrid on-premises and cloud environment. But in addition to hopefully filling a void, the OpenText acquisition is also reminiscent of its other maintenance stream buys.

"The OpenText business model centers mostly on providing convalescence care for tool sets that failed to thrive on their own," said Tony Byrne, founder of Real Story Group, a research and advisory firm in Olney, Md. "It's a responsible caretaker, but these acquired products typically just drift to end of life and we suspect Hightail will be no different."

Berry at OpenText has a differing opinion on the idea that the Hightail acquisition is simply providing a maintenance stream and that due to its file-sharing capabilities and its integration possibilities, Hightail will be a valuable product in the OpenText platform.

"What we were encouraged by is [Hightail] did a lot of work modernizing architecture and that makes it easy for us to integrate," Berry said. "It this was monolithic architecture that would have been a challenge."

Equity firm snatches up Alfresco

While OpenText continues its history of buying up smaller players and folding them into the OpenText platform, Alfresco hopes it can continue growth with an influx of private equity money.

McKinnon said she sees Alfresco at an interesting inflection point in the ECM marketspace. McKinnon described Alfresco as one of the newer first-generation ECM vendors or one of the older next-generation ECM vendors with a greater focus on SaaS.

"Alfresco is architected in this century and comes from an architecture that caters to open source and they've always had a good integration story," McKinnon said. "At the same time, Alfresco hit that point in a company's growth trajectory of asking itself 'Where do we go next?'"

McKinnon added that it appeared Alfresco was positioning itself for an IPO, but that never materialized. This new ownership structure will allow Alfresco to continue to operate and potentially grow, but she said that Alfresco partners are "cautiously optimistic."

"If it ends up being as positive as they paint the picture, then it's an infusion of new energy and new capital," McKinnon said. "I haven't caught many negative signals other than the typical reaction you see when these things happen."

Financial terms for both the OpenText acquisition of Hightail and the sale of Alfresco to a private equity firm were not disclosed.

Pricing and product information for OpenText and Hightail integrations will be available later this year, according to Berry, with roadmaps and concrete dates expected at Enterprise World, OpenText's annual user conference. Pricing for Hightail's existing file-sharing and creative collaboration tools can be found on the vendor's website.

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