Jun 21, 2016
OpenText announced yesterday that it has entered into a definitive agreement to acquire the Customer Communications Management (CCM) assets from HP Inc for USD $315M following an earlier acquisition of HP Inc’s customer engagement software assets for USD $170M (read InfoTrends’ blog on this here). The transaction is expected to be finalized by early 2017 and is subject to regulatory approvals and closing conditions.
Included in the sale this time is HP Exstream, HP Output Management, HP TeleForm and HP LiquidOffice for CCM, process automation, and document delivery solutions. Additionally, OpenText and HP Inc also announced that they will look into opportunities to work together to continue to expand their software solutions to benefit customers of both companies while moving forward with this transaction.
According to the announcement, OpenText expects to generate between USD $110M and USD $125M of annualized revenues, which means they are seeking a 2.5 to 3 year return on investment.
HP Refocusing its Business
This divestment by HP Inc may indicate how desperate it needs to reign in costs. Over the last 12 months, HP Inc shares have fallen by nearly 10%. Despite this drop, by fully divesting its CCM and customer engagement software assets, HP Inc is obviously stepping away from directly serving this growth market. Especially, the enterprise market is offering growth opportunities for this type of solutions.
In general, InfoTrends observes three growth strategies for CCM and customer engagement-related solutions when considering traditional CCM as a starting point. For reference, we define traditional CCM as technology with composition capabilities for production at its core. These strategies include:
- Expanding traditional CCM solutions to cover more of the print production chain. Besides composition, these solutions focus on automating print production workflows up to complete Automated Document Factories (ADFs).
- Expanding into communication-intensive business processes within enterprises. Value is created by empowering business users to manage customer communications themselves and relieve the strain on IT.
- Completely diversifying products and markets by focusing technology on other enterprise needs that are not directly related to document composition, but more broadly support the customer communications need.
HP Inc, currently a leader in the CCM space, had all the right ingredients in its software portfolio (with HP Exstream, HP TeamSite, HP Qfiniti, HP Aurasma, and the HP Hub) to expand its reach into the enterprise. From this perspective, the strategy behind their recent divestments in this space is not entirely clear. In retrospect, maybe this software should have gone to (stayed with) the HP Enterprise side of the business.
Integration is Key for OpenText’s Success in the Long Run
OpenText clearly saw the opportunity that HP Inc was providing them with these software assets. With this acquisition, OpenText continues to expand its portfolio to become one of the world’s largest provider of Enterprise Information Management (EIM) solutions. OpenText recently brought together its interactive communications and correspondence capabilities (Legodo), as well as its structured communications capabilities (StreamServe) as part of its OpenText16 release, which signaled it was starting to think more holistically about the CCM market. These acquisitions from HP Inc will dramatically expand its focus on this market.
It remains to be seen how HP Inc’s CCM software assets will be integrated into OpenText’s existing CCM portfolio; however, OpenText will immediately benefit from HP Inc’s installed base by tapping into its strong service and license annuity streams; a strategy that OpenText has deployed successfully with other software acquisitions.
In the long run, integration into the broader OpenText portfolio will be important to ensure fast time-to-market (marketing, prospecting, sales, implementation, support), keep development cost under control, eliminate redundant development efforts, and to lower deployment cost. This is not an easy task to undertake and history has shown many examples of companies that have stumbled during the integration phase.
HP Inc’s divestiture of this porfolio to OpenText represents the difficult market conditions that solutions providers and vendors are playing in today. Either you are successful in a niche or you better offer a holistic enterprise solution that supports not only customer communications, but a broader enterprise information play.
The future working relationship between OpenText and HP Inc remains to be seen, but most likely this latest announcement includes a partnership opportunity for HP Inc that allows the company to continue to offer customers and prospects CCM and engagement-related capabilities through OpenText post-acquisition.
Associate Director, Customer Engagement Technologies Advisory Services
Clients of InfoTrends’ Customer Engagement Technologies advisory service have full access to the research and insights referenced within this blog post. We will soon be completing our Customer Engagement Technologies State of the Market 2016, which includes relevant insights from 800+ enterprises from North America, South America, and Western Europe. For more information on how to gain access to the results, contact Jennifer Skerrett at email@example.com today!
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