WakeUp IBM OpenText Offers Lessons on Cloud Computing

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You can almost see it. An overweight IBM sits at the back of the cloud class while the teacher gives out prizes for cloud movement. OpenText gets a full set of gold stars ... IBM a terse note saying it could do much better.

If you hadn’t seen already, OpenText reported its financial results for the first fiscal quarter last night. In a consistently difficult global economic situation, it has managed to double its revenues on the back of its cloud computing initiatives. Compare this with IBM's dismal news earlier in the week. Despite the fact that it sees cloud computing as one of its future growth stimuli, IBM is not growing fast enough for investors.

OpenText Cloud Revenues

That is not to say that IBM is being slack. For IBM, cloud delivered as a service grew 80 percent year-over-year  with revenues of $3.1 billion (up from $2.8 billion in the second quarter). But unfortunately this is still a small piece of IBM’s overall business and not enough to make up for poor performances elsewhere.

Maybe IBM is just too big and bloated to move in the rapidly transitioning cloud market, and maybe it needs to divest more of its poor performing businesses to really jump on the cloud train. But it should do something.

All that aside, today is OpenText’s day in the sun — and it must be lapping up the market love smothering its business operations.

it looks like its agility around cloud computing and its strategy of transitioning its global customers to the cloud combined with its development of local data zones for data sovereignty is really making the difference. Take note, Microsoft!

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It’s true that OpenText’s cloud fortunes are rising on the back of a surge in interest in cloud computing as more and more enterprises see the economic value of renting rather than buying technology.
But there are a lot of cloud companies that haven’t been able to exploit this so the OpenText figures this quarter are just as much about good business as they are about cloud computing or enterprise information management.

That said, Open Text expects cloud services to account for 28 percent to 33 percent of total revenue in fiscal 2015.

A Good Quarter

In the most recent quarter, OpenText's net profits rose to $64.6 million from $30.6 million a year earlier on revenues of $453.8 million, up from $324.5 million — up 40 percent in the past year.

Of that revenue, the cloud services business accounted for $150 million. That business experienced  its best ever growth rate: 260 percent. CEO Mark Barrenechea call this the best first quarter in company history.

That said, licensing was up, but fell short of expectations. Take that as a sure sign that the business market is still fragile after years of economic turmoil, with business buyers still reluctant to invest in software. Even so, licenses earned $58.6 million, up 6 percent, the company said.

Customer support revenue for the quarter was also up 9 percent at $183.9 million, compared to $168.4 million in the same period last year. Professional services and other revenue for the quarter was $61.3 million, up slightly from $59.1 million in the same period last year.

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OpenText’s Strategy

If the figures from OpenText seem particularly good compared with some of the other financials that have come over the past couple of weeks, it’s no accident. OpenText has been slowly building up over years and launched an ambitions enterprise information management strategy called Red Oxygen.

The idea was to build an information management portfolio that could offer enterprises the entire range of EIM products for all their business purposes, built on the earlier five pillars strategy outlined in 2012. The strategy it seems, is paying off off . Barrenechea also intends to continue on this path:

We'll also be emphasizing to our customers the value we can offer in key areas including reducing the cost of the information needs by standardizing on Open Text, a transition to managed services to lower operating and capital cost, and the ability to reduce people cost by fully automating their EIM platforms and cost of ownership, which is topical and offers our customers immediate and measurable benefits."

Expect more from OpenText at Enterprise World next month.

Title image by Pewari  (Flickr) via a CC BY-NC-SA 2.0 license.