Archive for May, 2009

Sevin Rosen gets it: Portfolio companies should focus on the fundamentals

I was doing my usual scan of VC firms to look at portfolio companies and who was backing them. In the process, I ran across a 2007 press release on how Sevin Rosen sponsored grants to companies at an Austin-based incubator. “Recipients receive financial support and mentoring from Sevin Rosen partners to shape business strategies, identify strategic partners and acquire customers.” I really like this kind of partnership. The incubator provides resources to start-ups to help them build the business and Sevin Rosen gets an early look at who might be worth supporting on a larger scale. More importantly, by the time the business is ready to stand on its own, the fundamentals will provide a strong platform to succeed.

Not every start-up is wildly successful. Having a good idea that spreads like wildfire is obviously what every VC want to discover when it pumps millions into a company. Barring that, a company that has slow, steady growth is better than one that fails. A lot of companies in the late 90′s focused on “rock star” executive teams who would use their connections to grow rapidly. But if those teams stumbled, companies often lacked the fundamentals to grow organically. Product marketing and product management would often be absent due to a focus on marketing budgets meant to create buzz and hotshot developers who could code anything you tell them to, but who was doing the telling? A good idea needs nurturing in a slow growth company and protection in a rapidly growing one. Good processes provide the best possible foundation for success regardless of the pace the company sets. I am sure Sevin Rosen does everything it can to bring in top talent at the executive level to try and hit the sweet spot that propels a company to success, but it is the early commitment to building a foundation for that protects the company from failure.

In that same way that VCs require annual financial audits of their portolio companies, they ought to conduct performance audits as well to determine if they have the right people and processes in place throughout the organization. Executive teams are highly visible, but seeing whether there is good communication and integration between sales, marketing, and development is not readily apparent. An audit would help ensure that the machine functions as it should and that the VC firms get all they can from investments.

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Open Text and Vignette not a CA-style acquisition

I just read a post on OSTATIC that compared the Open Text acquisition of Vignette to the old days of CA. I am guilty of that kind of thinking as well, since that was the first thing I thought and said. But it only took a few minutes to remind me of how wrong I was.

First, a reminder of how painful the old CA acquisitions were. CA would track down software companies with strong annual renewals and declining sales, buy them, gut them, and hold customers hostage in perpetuity. Customers hated CA, but often continued to use the products because they fulfilled a need. They had nowhere else to go for the niches they products filled. This is hardly the case for Open Text and Vignette.

Some things are similar. Vignette has strong annual renewals and declining sales and Open Text did buy them at a bargain price. (They did not have to gut Vignette, since that company shed costs [people] over the previous year to continue to show profitability.) But the final key for the CA-Open Text analogy to work would be holding the customers hostage. That is not going to happen. Yes, some companies are entrenched with Vignette to the point where it would be quite painful to move away. But, a failure to continue to enhance Web Content Management solutions to handle an ever-changing set of web technologies would make even the most ardent Vignette supporters look elsewhere. And, unlike the niche CA products, Vignette has strong competitors: Interwoven was outpacing them when Autonomy acquired them earlier this year; open source solutions continue to add features and customers to build credibility for that market segment; and a host of smaller WCM solutions are awaiting the chance to grab some market share.

According to the press releases, Vignette will remain a wholly owned subsidiary of Open Text. This is probably due to the location of Vignette in United States, while Open Text is a Canadian company. Still, it has the benefit of preserving the Vignette brand and thus keeping the focus on WCM for the company. Open Text is seen as an ECM vendor without a clear focus on WCM, so the Vignette brand provides immediate visibility into the Web market. This type of acquisition would never have happened with CA. The first thing the old CA would have done would have been to destroy the brand by either changing the name or adding the obligatory “CA” prefix to the products (e.g., the XOSoft acquisition by CA resulted in product names like “CA XOSoft Content Distribution”.) Retaining the name, retains visibility, which means if Vignette fails to keep pace in the WCM space it will be much more noticable than if they were operating under the Open Text brand and attrition will come that much more quickly.

I actually like the acquisition for two reasons. First, Vignette has a stronger financial position to build upon. Second, Open Text probably has some ideas on what to do with the transactional content management solutions within the Vignette portfolio. These types of solutions are the bread and butter of Open Text, while Vignette often saw them as a distraction. A renewed focus and funding for Vignette can only be good in the short term. Long term, it is still all about execution.

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What can Social Content Management learn from ECM?

I have been looking at companies like Emojo who are attempting to create a new Social Content Management (SCM) category to position themselves against traditional ECM vendors. I have no idea whether this is good, bad, or even possible. Do communities who participate in user-generated content want to feel “managed”? Probably not, but they can benefit from many of the attributes ECM has incorporated over the years. The question is whether SCM is the province of a new breed of tools, or an adaptation of ECM solutions that allows the participation of SOA and RESTful services in the content management architecture.

Wikis, blogs, and forums are simply tools around which communities congregate and share content. This content can take the form of documents, presentations, video, images, or anything else. Traditional ECM shines in its ability to manage controlled content sources. In SCM, it is the documents on Scribd, YouTube videos, and RSS feeds that need to be monitored and managed with notifications of missing content or changes in content.  ECM also shines when it comes to scalable solutions that incorporate localization and template/content reuse across multiple sites. Multi-national organizations participate in discussions that take place across borders and boundaries.  SCM should incorporate the ability to manage multi-lingual posts, allow editors the ability to translate and promote posts to localized blogs, and allow cross-posts.

I guess to me it just seems like SCM should be part and parcel of ECM. If it can survive as a category on its own, it should be riding higher on the hype cycle right about now.

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