OpenText Buying Vignette and the Impact of Open Source Content Management

My first thought when I saw that OpenText is buying Vignette, one of the oldest providers of content and portal management software, for $310 million, was what a huge player Vignette was as the commercial web ramped up. It was founded in 1995, when all businesses were suddenly forced to build online presences, wrestle with HTML, online collaboration and other new concepts. The number of big businesses that run sites and intranets on Vignette is still long, including Disney, Wachovia, Martha Stewart, Fox NewsDigital, and more. Open source content management solutions have continuously taken business away from proprietary players like Vignette, though, especially as the free and low cost platforms have matured. 

OStatic runs on Drupal, for example, a completely free platform. It works fine for us, and we never need to pay for support or services. As we covered recently in our interview with Alfresco Software Chairman John Newton, Alfresco is doing extremely well with its open source enterprise content management platforms, so we asked the folks there about how they see the Vignette acquisition.

Alfresco's John Newton pointed to the same downward decline that came to mind for me when I thought of Vignette's high-profile heyday and where the company is now:

“With Vignette's downward decline, its acquisition does not come as a surprise. What is a surprise is that OpenText seems to be becoming the Computer Associates of content technology. What's wrong with the other WCM companies they bought?”

Indeed, Computer Associates is famous as the proprietary software company that bought nearly every other proprietary software company in sight, only to never really create a unified, solid strategy will all the applications it inherited. OpenText has acquired Odesta, Hummingbird (a $489 million acquisition) and other content management systems over the years. I'm not sure Vignette is going to make a whole lot of sense, for $310 million, when OpenText is really being squeezed by free and nearly-free competitive solutions.

Matt Asay, Alfresco's VP of business development, and author of The Open Road open source blog weighed in with us on the question of whether OpenText's Vignette purchase might be an example of a proprietary vendor seeking to improve its odds against open source by lessening customer choice:

"The proprietary software world's response to the economic crisis is consolidation and retrenchment: find more efficient ways to sell to existing customers. Open source vendors like Alfresco, on the other hand, have been growing through the downturn by providing new value to new customers at low prices. This is the right recipe for winning customers today and in the future."

Matt pointed out that consolidation of the type seen in the OpenText/Vignette acquisition runs contrary to how open source solutions move forward:

"Consolidation has everything to do with vendors, and very little to do with customers. It's a way for vendors to slim their costs by buying a ready-made pool of potential buyers to be upsold and cross-sold on products they never cared to buy in the first place, but now are forced into buying because there is no choice. Open source, contrarily, maximizes choice by providing more options just a download away."

Matt also pointed to cost savings as a key part of what has been wrong with Vignette's business and right with open source content management platforms:

"Alfresco was already reaping the fruits of customer dissatisfaction with Vignette and other proprietary solutions. We expect this to continue: Alfresco and other open source solutions offer higher-quality software at lower cost. According to Forrester, 87 percent of companies it surveyed that have tried open source have realized cost savings, while 92 percent indicated that open source met or exceeded quality expectations. How can proprietary vendors like OpenText compete with better quality at a lower price? They can't, and they aren't."

I generally agree that content management platforms represent an area where the costly proprietary players are facing severe competition from open source platforms. I do think OpenText, with Vignette, will retain many businesses that won't make a switch simply because of how long and entrenched their Vignette content management efforts have been. Vignette has fallen very far from the status it once had, though, and it faces daunting problems in winning new customers. That has a lot to do with the maturity of competitive open source platforms.