EMC's Content Play (continued)
The facts are simple. EMC, the storage company, bought Documentum, an enterprise applications company, for something like 6-7 times revenues (net). JD Edwards, by contrast went for 2 times revenues (net), and Baan went for 1/2 of revenues.
What makes Documentum so valuable, especially to a hardware company?
Well, to begin with, EMC is not a pure hardware company. They sell a lot of software that manages storage, and their strategic direction is to sell even more.
EMC already dominates the market for immediate access storage (the kind you have on your disk drive in your computer). What they want to do now is appeal to all the people who have to archive some things that are now in immediate access storage, but don't want to put them in cold storage.
There are a lot of people out there. People who every year have to get all those e-mail messages off the corporate disk drives, but know that putting them onto a tape drive or CD is pretty much like putting a body in a cryogenic device. Yeah, they're there, but they'll never come back to life.
Fair enough. What's interesting to us is that EMC believes that they can do more with a software package that partially helps them solve this problem than SSA thought they could do with Baan or PeopleSoft thought they could do with JD Edwards. In effect, EMC believes that people value the ability to store past transactions in a sensible way more than they value the ability to incorporate new automation.
A sobering thought. In the longer version of this piece, we describe why that might be a reasonable stance.
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