OpenText Bucks Financial Trends With Sterling Cloud Computing Performance

5 minute read
David Roe avatar

You may recall a couple of weeks ago we reported apretty black week in terms of financial results with Microsoft, IBM and Google allputting in a miserable show for their respective financial quarters. Well, it took Canadian EIM Company OpenText to buck the trend, and it has done so in spectacular fashion given the poor state of developed economies.

Obviously OpenText is not as hefty as the other three information management gorillas we mentioned here, but the way they bucked the trend is instructive, and a lesson in how adaptability can make a big financial difference to the bottom line.

It wasn’t all smooth sailing for OpenText; its net income fell to US$ 19.4 million in spite of a 10 percent revenue increase, due to an income tax provision of US$ 16.2 million.

But even after profits were adjusted, it easily beat Wall Street expectations by a spectacular performance in the cloud computing space.

OpenText Cloud Computing

Keeping in mind that OpenText did nothing in the cloud computing space in the same quarter last year, of the company’s total revenue ofUS$ 326.2 million for this, its first quarter,US$ 44.9 million of this came out of cloud computing this year.

Clearly, OpenText, which has been developing its cloud offerings for a while, has built them up in such a way so as to ensure that even when economies around the world are still looking sickly, it can still turn a profit.

This is particularly telling when you consider the cloud offerings of Google, IBM and Microsoft and the fact that their cloud offerings couldn’t provide them with better quarters.

It may be that it is just taking longer for these companies to turn the cloud into money just because of the sheer scale involved, but even still, this shows OpenText as an agile company that is able to respond to not just technology challenges, but also to business challenges.

But enough plaudits here; this is not an advertisement for OpenText, but just an observation on the value of cloud computing done well to the overall health of a company.

OpenText Licensing

To underline that it is worth noting that OpenText’s licensing revenue fell 14 percent to US$ 55.7 million in the quarter, with its overall performance boosted by the cloud elements. This follows similar patterns with other IT companies as corporation’s hold off buying, and reflects possible problems with future demand here. License revenue broken down by vertical was a follows:

  • 18% financial services,
  • 18% services,
  • 17% from technology,
  • 12% from basic materials,
  • 12% from consumer packaged goods,
  • 9% from public sector

There are also a number of other verticals that are less well represented, which goes to show that information management is something that runs right across the board, with CEO Mark J. Barrenechea expecting demand to pick up here in the second half of the 2013 financial year.

Learning Opportunities

OpenText’s Future

With abuild up of steam around cloud computing, it is interesting to see what Barrenecheais expecting to happen in the coming quarters in this regard; after all, if it ain't broke, don’t fix it!

Just a quick aside in relation to future plans. Barrenechea also mentioned in the analysts call following the results that OpenText will also be investing heavily in developing its sales teams throughout the year. He said they will be building a multichannel sales organization, a direct sales force, a partner sales force, a telesales organization and even a self-service store over time.

But back to the real meat, which in this quarter and in the immediate future is going to be in cloud computing.

OpenText hasn’t been dragging its feet on this one and already, only 100 days after the acquisition of cloud security vendor EasyLink that integration of all Open Text’s data centers has been completed enabling OpenText to deliver all their solutions globally. And those solutions are going to be built specifically for EIM:

Our Cloud is being purposely built for EIM, we see new EIM applications being built to address big data, mobile and social needs and we are helping our customers save costs through infrastructure consolidation. We are not a generalized Amazon. We are an EIM Cloud. Last quarter, we had 21,000 active customers, approximately 2 million end users and completed over 40 million transactions in our Cloud."

The services that OpenText is, and will be, providing through the cloud is information exchange that will  seamlessly integrate with everyday business processes. This includes data of any type including SMS, fax, EDI, telex while new services for archived BPM and managed file transfer will go live at the end of the month.

OpenText has also had an extraordinarily productive year across a whole range of upgrades and new releases across its existing ranges and has also outlined its enterprise information management strategy.

The quarter reported goes to the end of September 30 so we are due the next set of results three months from now. It will be interesting then to see if its cloud success continues. Watch this space. 

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