In a Troubled WCM Sector Analysts See 3 Innovators

Fireworks may explode in the night sky as the US celebrates the Fourth of July weekend, but things are much quieter in the web content management market.

The frenetic pace of nine-figure WCM acquisitions of the past four years ended before Christmas, and the once-deep river of venture capital funding for fledgling players ran dry long ago.

Market shifts and technology trends -- the somewhat surprising strength of mobile, the stampede to Software-as-a-Service (SaaS), a growing infatuation with digital marketing -- were missed by many players, leaving the field "fragmented" and "troubled," according to fresh research by Matt Mullen and Alan Pelz-Sharpe at 451 Research.

Sluggish Market

As of now, they estimated, "WCM is only about $1.5 billion in size as a stand-alone market, has slow-to-neutral growth and is not likely to grow significantly over the coming years."

That could be worrisome for companies like Oracle, which paid $160 million for FatWire back in 2011, or SDL, which bet $107 million on Alterian the same year. Those were just two of the 10 deals the analysts listed between 2010 and 2013 based on faith that the market was poised for rapid growth.

VCs and corporate investors were just as zealous, shoveling $118.6 million into Acquia alone and pushing tens of millions more into CrownPeak, DotNetNuke, CoreMedia, Telerik, Ektron, TerminalFour, eZ Systems and others. As is the nature of venture investing, much of that cash flowed earlier, between 1999 and 2007.

"In some cases, VC investments are unlikely to be returned via a cash-rich sales or IPO," said the authors, "and finding another round of outside investment is going to be difficult for many smaller vendors in the space."

It's not that the market is dead.

The customer bases of some vendors could attract investment from larger players looking for new markets, a few vendors are doing well and at least three firms have emerged as leaders in innovation, according to the 451 report.

HP Autonomy is finding new interest in its Interwoven line, the product of a $775 million 2009 acquisition by then independent Autonomy. TerminalFour is finding demand in the higher education market.

Telerik sees demand for its web development tools, and CrownPeak -- the original Web CMS SaaS vendor -- is also seeing a nice uptick in sales, the analysts wrote.

Strategic Advantages

The three big "trend buckers," they said, are Acquia, Adobe and Sitecore.

Version 6.0 of Adobe's Experience Manager, which grew on the 2010 acquisition of Day Software, supports three deployment scenarios -- on premises, on demand and dedicated managed.

"The not inconsiderable task of managing the differing deployment methods with a single set of source code (and, therefore, the same set of common functionality regardless of method) is now complete, giving the company a far simpler implementation path for future versions of AEM," the paper said.

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Sitecore has adapted to the market by turning to so-called "brown-field" sites. "It focuses its efforts upon SMB and enterprise firms with complicated first-generation WCM systems in need of renewal and upgrade. It wins out against its competitors due to its ability and willingness to work with and integrate the multiple legacy applications that customers typically have," according to the analysts.

Acquia, a commercial version of the open source Drupal platform, has targeted installations of OpenText and HP Autonomy, and has also had luck in converting older users to the cloud version of its product. With an update of the Drupal core code expected soon -- the exact time is difficult to predict with open source products --  most Acquia modules that sit on Drupal will need to be rewritten.

"The 'ready when its ready' roadmap is challenging for enterprises that need predictability on when an how they will be required to spend their IT services budgets," Mullen and Pelz-Sharpe wrote.

Still, challenges remain.

"There will always be a need for Web CMS," the analysts said. "But over time, there is going to be a much bigger need for enterprise-grade process-driven products that leverage digital asset management, personalization, e-commerce and BPM -- situations in which WCM is simply a mechanism for exposing content."