The 4 Cs of the Sale of Alfresco—Cash, Change, Cloud, and Crystal Ball
Now that the dust has settled on the announcement about the sale of Alfresco to Thomas H. Lee Partners (THL), I thought I’d share our perspective. To put it bluntly, this is good news. Alfresco brought Doug Dennerline in as CEO five years ago to either sell the company or take it public. So, as far as we are concerned, this was an expected outcome. I did not have a rosy outlook when Documentum was purchased by OpenText as I did not believe it would be a good strategic move for Documentum or their customers, read more about that here. To categorize my thoughts on this sale, I give you the 4 Cs of the Sale of Alfresco—Cash, Change, Cloud, and Crystal Ball.
CASH for Growth: Alfresco is poised for explosive growth and has needed cash to grow for some time. Frankly, the uncertainty surrounding the sale was worse than the reality as THL has a great track record of buying and investing in companies. Thank goodness one of the “rip and flip” firms did not buy Alfresco. Our customers, both current and prospective, can remain calm and continue with their digital transformation initiatives. If you look a bit closer at THL’s investment strategy, as I did, I think it is easy to see that Alfresco was a strategic portfolio purchase. THL focuses on growth-oriented businesses and it seems like Alfresco is a very good fit. Alfresco is disruptive, cloud-native, and aligned to a wide array of industries. I also find it interesting that Alfresco fits into all four of THL’s core sectors. It is clear they are an asset in the Media, Information Services, and Technology sector, but they will also benefit from introductions to the other industry sectors that THL manages. I believe most firms would benefit from an operationally-intensive partnership that helps identify and implement improvements to all aspects of their business. Alfresco could certainly benefit from this fresh approach—this is not intended as a dig; any firm would benefit from this approach.
I just completed a course on innovation at Stanford’s Graduate School of Business in partnership with Vistage. A key part of this program was reviewing case studies. As such, I was hoping to dig up a case study about THL’s success in acquiring, growing, and operationally improving companies. I did not find an independent case study, but the press written about THL’s acquisitions are largely very positive and in line with my observations above.
CHANGE is Good: There will be some changes within the leadership, engineering, and sales teams after the deal is finalized. This is normal and expected. However, THL does not typically replace all of the executives when they buy a company. Instead, they trust the team that has built the company to continue. It is rumored that Doug Dennerline will be moving on which you can read about here. However, I don’t see this as a significant change. Doug built a great team that will continue in his absence.
CLOUD First: Zia is very optimistic about Alfresco’s future. We are helping our customers digitally transform their businesses by consolidating ECM systems and moving many of them to the cloud. We have several large, active projects right now where customers are shutting down their data centers and moving entirely to cloud platforms. It’s a good thing companies are thinking this way because both structured and unstructured content are exploding. We wrote a guest blog on this for AIIM a couple of years ago and most of our observations are spot on. Content is doubling faster and faster and more of this content is unstructured. You simply can’t manage this content with your existing platforms, instead, you must have a cloud-first and mobile technology platform and architecture that you are moving toward.
One tool isn’t enough, it is an integrated world. Most of our customers are looking to consolidate systems and select best-of-breed software platforms to solve their business problems. This means our software partners need to play nice with each other to support our customers complex business problems. In fact, most of our customers have Google Docs, Microsoft SharePoint, Box, Salesforce, ASG, SAAS ERP, and HR platforms. Zia has been very successful integrating these platforms for our customers and Alfresco helps Zia achieve this integration by having an open business model. Specifically, Alfresco embraces open APIs, open source software, and an open and transparent business model.
Crystal Ball: A few predictions about Alfresco’s future.
Double Down: Alfresco will double down on cloud-first architecture and you’ll see tighter integration to AWS. I shared my thoughts on this and in my last blog after attending Alfresco DevCon.
Community Growth: Alfresco is embracing its open source community again. This is healthy and drives innovation that is difficult to compete with from closed-source companies.
Buying Spree: I see a buying spree. I believe THL will help acquire a couple of missing components to bolster Alfresco’s digital business platform. I’d like to see an artificial intelligence/machine learning tool as well as a digital analytics tool. These are important components that will strengthen the platform.
Tech Partner Investment: Last, I hope we see tighter integration to Alfresco’s technology partners.There is a robust community of technology partners that need more attention to make these integrations highly valuable and easy to use.
If you have any questions about the sale of Alfresco or anything else, please reach out to me at mmahon@ziaconsulting.com. I am happy to answer questions.