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Open Text the New CA

In the high-tech arena, many companies names really stand out.  Not only for their products but also their business style.  Most have connotations of both positive and some negative.  But one stands out on it’s own, Computer Associates, or CA as it is more commonly known.

Strangely enough I have never meet an employee of CA.  A company of such size should have at least an active partner community.   I don’t mean to offend any employees when I say this but we have all heard CA used synonymously with the grim reaper, vultures, or even bottom feeders.  And based on it’s latest acquisition at least one company is following their business model, Open Text.

Are you picking on CA?
Now what CA does is not a bad thing.  If you think about it, without vultures there’d be a lot of road kill out there.  But I really don’t see a lot of people proud to shout out that they work at CA.  Maybe I do know a few but they’re just afraid to admit it.  And in recent years CA has tried to change their image (note to CA, follow ValueJet’s lead and change your name (now AirTran)). 

CA’s business plan has been to acquire companies with large customer bases and good , if not surprisingly quite often solid, products but lacking the marketing momentum to keep going independently.  CA then keeps these as separate business units and focuses on the maintenance stream but make very little if any engineering effort to improve the product.  (Note two to CA, with all the low cost labor in India maybe it’s time to do some enhancements.)  They seem to continuously be buying just about any company as long as it fits that model.  And the model works, even outside high-tech.  Just look at Big Lots or even the Internet retailer Woot.  But it doesn’t mean growth.

Are you picking on OT?
Why is it that I believe that Open Text is the next CA?  Just look at today’s acquisition.  Either the executives at Open Text have ADD or they’ve gone senile, or it’s their business model.  You see they already owned a web content management company, Red Dot through their acquisition of Hummingbird.  In fact strangely enough, Hummingbird and Open Text themselves overlapped

Ok, so what?  They’ve acquired overlapping technologies.
Well years ago I didn’t think it did either until someone very well versed in acquisitions pointed something interesting to me.  Just because you buy the company doesn’t mean you buy the customers.  Those of you in the customer shoes reading this know I’m right.  You made your technology selection for a reason and those don’t change when company A buys competitor B.  In fact, as vendor you spend more money re-acquiring those customers. 

Those that know me, know that I like to see things for myself.  And the interesting part is that the math was very simple.  If it holds true that people make technology decisions based specific reasons that are not part of your product, you start in a negative cash position.  The acquisition costs are sunk costs and all you really get you permission to see the customer.  You still need to sell them on your technology, IF you’re going to combine platforms.  And often you will find yourself back in competition for those same customers.  That’s a high cost of customer acquisition. 

But if you’re NOT going to combine platforms then it’s really about the viability of the company as a whole to keep the product alive, often the customers are happy to see the risk of a small or dying company suddenly replaced by the strength of a large company.

Ah, thanks for the finance lesson.  But what about OT?
When one looks at Open Text, you quickly see it’s a multi-product company and not an ECM platform company.  Sure there’s fud that get’s thrown out into the market but with Open Text you really need to choose several platforms to do what one ECM platform will do.  In the end, if you:

Oh that’s right now there’s two platforms to chose from RedDot and Vignette.

So it’s either oversight or a business plan.  And if you look at the fact that we’re going on three years after the acquisition of Hummingbird and platform unification is not discussed then one can only assume that each platform will stay separate.  And in these financial times very few company can run several duplicate product lines or, taking it a step further, continue to improve on duplicate platforms.  To steal a phrase.

I’ve worked with Microsoft.  I have friends at Microsoft.  Microsoft is a partner of mine.  Open Text, you are no Microsoft.

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