The Shake-Up of the Document Industry

2016 was a turbulent year for the document industry, with one high-profile acquisition, merger, or split after another. As we have seen HP, Xerox, and now Lexmark separate their printing equipment manufacturing business from the software and/or services business, it begs the question: What is the path to the transformation of the printing industry? At the same time, we are seeing ongoing consolidation in the software space. As we look toward 2017, we review some of the biggest technology moves that shook the document industry.

HP

Just before the completion of its separation into two companies in December 2015, HP Inc. announced the formation of the HP Software group (formerly Marketing Optimization), with a portfolio that included HP Exstream (customer communications management); HP TeamSite (web content management), along with HP MediaBin for digital asset management and HP Optimost; HP Qfiniti (contact center); and HP Aurasma (augmented reality). The group soon unraveled with the sale of most of these assets (TeamSite, MediaBin, Qfiniti, and Aurasma) to OpenText in April 2016. OpenText completed the acquisition in June 2016 by purchasing Exstream, along with HP Output Management; HP TeleForm (a capture and data extraction solution); and HP LiquidOffice (a process automation solution that includes capture and electronic forms capabilities).

With the divestiture of its software portfolio, HP Inc. is inarguably a hardware company focusing on its PC and printer businesses—and on the lucrative ink/toner annuity stream. Its strategy is now concentrated on growing and maintaining share of that market.

Lexmark

In April 2016, Lexmark agreed to be acquired by a consortium of Chinese investors led by Apex Technology, along with PAG Asia Capital and Legend Capital Management Co. That deal closed this past December with a couple of new twists—the organization will have new leadership, as Chief Executive Officer Paul Rooke leaves the company to be replaced by David Reeder, formerly Lexmark Vice President and Chief Financial Officer. Furthermore, after almost a decade of building a software organization through 14 different acquisitions, the Enterprise Software group will be spun off and rebranded back to the name of the largest acquisition—Kofax.

There are a number of unanswered questions about the future of the new Kofax, including whether it will be acquired by a competitor or if it will be recapitalized by Apex’s private equity partners as a privately held, independent software company. We have confirmed that the new company will retain 100% of Lexmark Enterprise Software group's IP, but it remains to be seen how the new Kofax positions itself and its large suite of products.

Dell/EMC

In September 2016, OpenText announced a definitive agreement to acquire Dell EMC's Enterprise Content Division (ECD). This acquisition brings OpenText the large, global Documentum customer base and will make OpenText the clear market share leader in the content management space, while further reinforcing its market position in the customer communications management (CCM) arena. It also gives OpenText a much stronger capture solution and brings it a packaged case management solution.

Dell has been divesting non-core businesses to reduce the debt load from its $60 billion acquisition of EMC, which closed in September 2016, and EMC and ECD was understandably on the list of planned divestitures.

Xerox

Xerox finalized its separation into two companies on December 31, 2016—Xerox, a technology company, and Conduent, a business process outsourcing provider—essentially undoing Xerox’s acquisition of Affiliated Computer Services (ACS) in 2009. Jeff Jacobson will assume the role of Xerox Chief Executive Officer post-separation. The “new” Xerox is getting back to basics. Its strategy is to simplify the organization, increase focus on core technologies and capabilities, add distribution channels, and shift the portfolio from mature product lines to growth areas. Its plan to drive growth is based on four planks: strengthening its “connected office” portfolio, increasing participation in the mid-market, growing in graphic communications and high-end production, and expanding its market leadership in document outsourcing.

With the separation, Xerox can now focus on its core business, unfettered by the business process outsourcing (BPO) arm of the company. Investments and research and development (R&D) will be concentrated on this core business.

OpenText

OpenText has been the beneficiary of much of the industry turmoil in 2016. The company has grown by acquisition from $410 million FY06 to $1.9 billion in FY16. Dell EMC's ECD is OpenText's largest acquisition to date. OpenText Release 16 EP1, launched at the end of October, provides a view into how the company will integrate and position its customer experience management applications: OpenText Experience Suite features a single application in each of the key customer experience areas, including web content management (OpenText TeamSite); customer communications management (OpenText Exstream, enhanced with full real-time transactional capabilities of Communications Center); digital asset management (OpenText Media Management); and customer care and support (OpenText Qfiniti and OpenText Explore). Customers can extend the Experience Suite Platform with OpenText MediaBin, OpenText Web Experience Management, OpenText Optimost, and OpenText Experience Analytics, which continue to receive strong investments. We look to 2017 to understand how the company rationalizes its enterprise content management (ECM) portfolio.

Holly Muscolino is the Research Vice President of the Content Technologies and Document Workflow group at IDC and is responsible for research related to enterprise content management, including records management and case management. Follow Holly on Twitter @hmuscolino.