OpenText: Making Profit In the Cloud

OpenText’s products handle data whizzing around inside large organisations. But right now it is particularly excited about two big issues: the shift to the cloud, and the fall-out from the grisly story of HP’s $11 billion purchase of rival Autonomy, still causing ructions despite closing in 2011.

Both are actually good news for OpenText,  CEO Mark Barrenechea told TechWeekEurope. He also plugged the company’s latest products, which include a DropBox competitor, adding to the list of firms offering a “business-grade” alternative to the ubiquitous cloud cloud storage service.

Autonomy loses to us

“Autonomy is absolutely falling apart,”  Barrenechea told TechWeek. “We are offering a switch campaign to let Autonomy customers have an equivalent solution from OpenText and have a future for what is arguably their most important data.

Despite clearly regretting the price, HP maintains that its wider channels are creating opportunities for Autonomy, but Barrenechea laughs at this: “In HP’s own words, Autonomy was a disastrous acquisition. They used all their cash, they got it wrong, and they wrote it off. Customers are concerned where Autonomy is going.”

He twists the knife in the Autonomy wound – citing HP as a satisfied OpenText customer: “When HP chose to extend their SAP offering for invoice management, they chose OpenText. When HP decided on what internal portal they wanted to use, they chose OpenText. We are delighted to have them as a customer.”

The deals appear to date from before HP’s Autonomy acquisition – but continue to this day, said Barrenechea: “They are a happy reference customer.”

The Financial Services Authority – which is investigating the HP deal – is also a rather nice reference customer for OpenText to plug.

Enterprise Information Management

In fact, Autonony only covers one part of “enterprise information management” (EIM) – a space OpenText is staking out, bigger than the more limited field of enterprise content management (ECM), which was OpenText’s manor in 2011 when we met its chief strategy officer Tom Jenkins.  Barrenechea spoke to us at an event in Twickenham, London to explain the new focus.

“EIM is the next generation of information management software for CIOs,” he told us. “They are done extracting value from ERP systems, and are moving on to the other 80 percent of data which is unstructured.”

EIM also includes “discovery” (sifting big data sets for items of interest, in cases of alleged fraud, for instance) which is also Autonomy’s home turf. Other elements are business process management (BPM) where players like Tibco operate, and  customer experience management, where Barrenechea reckons Adobe is the biggest competitor. The final part is information exchange.

For a $1 billion (£652bn) company, OpenText has a pretty low profile, but it sells mostly to large companies who are already aware of it.

The Dropbox opportunity

That could change, with OpenText’s recent announcement of the Tempo series of products, which are touted as more secure, alternatives to popular cloud content applications such as Dropbox and Evernote, aimed at enterprises but also at smaller organisations.

One of the offerings, Tempo Box, is a mobile content sharing app: “Tempo Box works natively across iOS, Android and Windows, on smartphones and tablets to get ubiquitous access to content, anywhere in the world. It’s been getting quite a bit of adoption.”

Why the need for an enterprise Dropbox? “I would note that in Section 3, Paragraph 4 of the Dropbox license agreement, if you are a Dropbox user, you are agreeing that Dropbox can use your content.  We think that is the wrong way for an enterprise company to behave. ”

Similarly, Tempo Note is for sharing creative workspaces on tablets, managed centrally. It’s more enterprise-ready than Evernote, said Barrechea: “Evernote had a huge security breach recently. Their system was not well written and well managed, and all Evernote users had their data exposed publicly. We think we can solve that problem.”

Finally, there is Tempo Social, OpenText’s social networking and collaboration offering, which opens up shareable workspaces.

Can OpenText use the cloud?

That might all sound modern, but OpenText has emerged from the old days of licensed software, and will surely have to shift to the cloud, won’t it?

Barrenechea is in no hurry on that score: “Primarily our customers continue to look for the traditional economic model of licence plus maintenance. We do have a monthly subscription price for some offerings, but most of our business remains a licence plus maintenance charge.”

For managed hosting, OpenText operates a licence model, but the Tempo series is offered on a per month subscription price, he said.

Does OpenText’s traditional business make it hard to adapt to the cloud, though? It’s been argued that Software-as-a-Service (SaaS) will cannibalise licensed software, and vendors are mad to do this voluntarily with their own products. Barranchea denied this was a worry: “All these offerings are additive to what we are doing. We are not taking away from our own business.”

“Secondly, and more importantly, we are profitable in the cloud,” he said. “What is going to hit the market is looking at all these SaaS and cloud providers who can’t generate a dollar of profit. They may think this is some funky business model but at the end of the day you have to generate profit, and if you don’t generate profit, you don’t survive.”

OpenText entered the cloud in 2012, through the acquisition of EasyLink, and this is profitable: “We are generating 60 percent operating profit in cloud in our first three quarters. We have generated more profit than [SAP acquisition] SuccessFactors, Linkedin and Workday combined.  The attributes that customers are looking for – ease of use, mobility, running apps at your place not my place – we believe in those attributes, but we are going to do it profitably.”

“And,” he said, “we don’t disclose our customer’s data.”

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