Consolidation in the Knowledge Management Sector

With all the fear currently residing in the market, consolidation is being widely discussed. The topic of consolidation is often thrown about as if deals are started and closed over a weekend. This is not the case, which is why attrition is end result for most companies struggling to make it in the knowledge services industry. In contrast to Wall Street consensus, content management providers may be more likely candidates to consolidate the LMS/LCMS space than the large enterprise software providers. LMS/LCMS technology has more value to the content management companies due to the synergies between their enterprise applications and the administrative, delivery, personalization and authoring tools contained in the LMS/LCMS applications.

The reasons content management vendors are driving consolidation of the knowledge management platform include:

• Due to the scale, the acquisition of an LMS vendor would have more financial impact on the business models of a content management provider than an enterprise software provider. Also, content management providers have a pressing need to accelerate profitability and to strengthen customer relationships and long-term growth prospects.
• Several content management providers have more than $100 million to effect consolidation and expand their product offerings. Broadening their offerings would enable the content management vendors to provide close to an end-to-end solution.
• A broader offering would reduce confusion in the marketplace, validating the complete knowledge management platform. A broader offering could possibly stabilize pricing and would offer long-term up-sell opportunities to vendors that can communicate the value of an integrated platform to customers.
• Niches of the knowledge management industry are too small to interest the enterprise software players. They will only own industry-leading companies with north of $100 million in revenues and profitability and CAGRs greater than their own business models.
• Although several enterprise software providers have grassroots LMS efforts in process, their products can be seen as category fillers as opposed to best-of-breed solutions. It is apparent that the enterprise software players will continue to struggle near term with internally grown offerings until market forces push the decision process or a leader separates itself from the pack.