EMC, the giant storage and enterprise software vendor, has acquired the Enterprise DRM vendor Authentica. The deal was completed last Monday; financial terms were undisclosed. Authentica's technology will be integrated with EMC's Documentum enterprise content management (ECM) platform.
This is a a pivot point in the development of the Enterprise DRM market. It is a sign of both growth in the market and the inevitable consolidation that comes with that growth. There are many synergies between ECM software -- of which Documentum is perhaps the prime example -- and Enterprise DRM.
An ECM system provides security and access controls on content within the ECM repository (database), but once the content is checked out of the repository, all controls are off... unless the content is packaged with Enterprise DRM. The trick is to get the access policy-setting capabilities of the Enterprise DRM technology to line up and integrate with those of the ECM system. This is not as simple as it may sound, because -- among other things -- security and access control models in ECM systems tend to be very sophisticated and difficult to emulate in DRM solutions.
All of the high-end Enterprise DRM vendors have integrations with Documentum and other ECM platforms. EMC intends to integrate Authentica's core policy management technology into the Documentum product line so that a single policy engine drives both the repository and the encryption of documents outside of the repository. ECM expects to offer an integrated solution sometime later this year and will sell Authentica's existing product lines for the foreseeable future.
In the longer term, EMC intends to integrate Enterprise DRM capabilities with multiple client DRM technologies, not just Authentica's. In particular, they would like to be able to integrate their server-side content packaging capabilities with client-side DRM application interfaces from the likes of Microsoft and Adobe. That is a difficult, long-range task, one that the Authentica technologists will now help EMC pursue.
In one sense, this kind of deal was inevitable. Most of the high-end Enterprise DRM vendors have been (not-so-secretly) attempting to get themselves acquired by EMC/Documentum or some other ECM vendor. For its part, Documentum has been sniffing around the DRM market for years -- even preceding its own acquisition by EMC -- and industry watchers have been waiting for this proverbial shoe to drop.
Among the contenders, Authentica has a mature platform and a large installed base, particularly in vertical markets that EMC considers to be "security-sensitive" and therefore ripe for DRM technology, such as government, energy, financial services, and life sciences/healthcare. Authentica's CEO, John Bruce, will report to EMC Software Group President Dave DeWalt, and most of the remaining Authentica staff will stay in place; other logistics of the acquisition have yet to be determined.
In addition to the technological synergies between ECM and Enterprise DRM, EMC's acquisition of Authentica should provide a boost to the Enterprise DRM market in general by addressing one of the largest obstacles to growth: customer education. One problem with Enterprise DRM is that it does not (yet) have a clearly identifable customer target, and small companies such as Authentica and its direct competitors have been challenged in finding audiences for their pitches that have a combination of business needs, technological understanding, and budgets. With EMC's enterprise software salesforce eventually trained and on the case, this obstacle should recede: EMC is more skilled in enterprise software sales than its competitors in the Enterprise DRM market.
As for other Enterprise DRM vendors like SealedMedia and Liquid Machines that have existing integrations and relationships with EMC/Documentum: EMC states that its partnerships with those vendors will continue. This is not unusual when a large platform vendor acquires a more specialized piece of technology. Vendors like EMC are extremely sales-driven; sales pipelines involving the likes of SealedMedia and Liquid Machines won't be shut off. All of these vendors have told us informally that they are enjoying sales above expectations and robust pipelines.
At the same time, SealedMedia and Liquid Machines will need to "fish or cut bait" in the near future. It may be an awkward few months for these vendors as the dust settles around this acquisition. (Liquid Machines has indicated to us that it is not up for sale.) But if the recent past is any guide, similar deals will be forthcoming: ECM vendors like EMC/Documentum, FileNet, OpenText, Stellent, and others have steadily matched each other in acquiring various types of add-on technologies, such as records management, collaboration, and digital asset management (DAM). We predicted at the end of 2004 that IBM will acquire SealedMedia; although 2005 is over, we stick by that prediction -- especially because IBM is not exclusively committed to a single ECM platform, and SealedMedia has shown the ability to integrate with several of them.
As a result of Authentica's acquisition, there are now three major IT vendors in the Enterprise DRM space: Microsoft, Adobe, and EMC. Consolidation and acquisitions will continue, but that's a normal part of pre-"Tornado" growth in a healthy software market.
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