The end of the beginning

2002 was a difficult year for the entire IT industry, but the knowledge-management sector has faired comparatively well. Eric Woods reviews the key trends that emerged in the KM technology market over the past 12 months, and looks forward to what the industry can expect in 2003.

The knowledge-management movement may be able to trace its lineage back to at least the 1980s, but its rise to prominence was very much a product of the dotcom years. Concepts such as intellectual capital were seized upon as a convincing way to explain the vast differences between stock-market valuations and the actual revenues (never mind profits) of high-tech companies. Knowledge became a sort of ‘dark matter’ – hard to quantify or value but essential to balance our equations. This, however, did little to create a realistic, rigorous approach to knowledge management.

So with traditional market verities re-exerting themselves with a vengeance, does knowledge management still have something to offer? The answer is a definite ‘yes’. The most powerful argument for this is that our equations still do not add up, and looking at the issues raised by knowledge management helps us to realise this. We are still learning how to manage the complexities of virtual teams and virtual companies. We are still trying to grasp how we handle huge information flows and exploit the new communications infrastructure we call the internet. We also do not yet understand the real nature of a global, high-tech market and what it may evolve into. Simply listen to the continued cries of ‘no visibility’ coming from leading companies and economists as they grapple with the continuing crisis in the technology market if you require evidence of this.

Knowledge management remains the best label we have for the task of grappling with the organisation and technical challenges raised by these issues. One sign that companies still believe that knowledge management can make a difference to core performance is their continued investment in knowledge-management technologies. Although 2002 was a tough year for everyone involved in IT, the knowledge-management market has in fact faired better than many other areas. The knowledge-management and business-intelligence sector of the enterprise-software market is the only one to have shown any sustained growth in 2002. Ovum estimates that the market as a whole was worth more than $16bn in 2002. It is a market, however, that is undergoing important changes while still remaining highly innovative.

The KM market in 2002

We have already seen considerable change in the software market in the past 12 months, not all of it negative. Some technologies have fallen out of favour, while others, more suited to the needs of business in the current climate, have moved up the priority list. Web content-management tools, for example, have been eclipsed by a growing demand for more extensive content-management solutions that can underpin an enterprise-wide content-management strategy. Business-intelligence technologies – data warehousing, Olap and data mining – are back in fashion as companies look to sweat their customer data in order to maintain revenues and margins. Small portal vendors are struggling as this nascent market starts to mature and we see bigger players gaining market dominance. And, of course, vendors whose business strategy was too closely associated with the hype of the dotcom boom are desperately trying to reposition and restructure for survival. The general demand for core knowledge-management technologies, however, has not lessened and while investment may be down in areas such as telecommunications, in the public sector we are seeing new levels of interest and investment.

The most significant trend in 2002, however, has been the level of acquisition activity. Stronger suppliers have taken advantage of market conditions to add to their offering or grow their customer base, while weaker ones are looking to merger or acquisition as a way out of the difficult position they have found themselves in. While acquisitions reflect the problems that small vendors face in a difficult market, there is much that is positive in this trend. It should lead to the integration of a number of innovative knowledge-management technologies into broader platform offerings. This should help make knowledge management more cost effective for many organisations, particularly companies that cannot afford best-of-breed approaches.

Ovum's KM model

figure 1 - Ovum's KM model

Going forward: five trends to watch in 2003

While the onus in 2002 may have been on survival, the importance of innovation in the knowledge-management market has not changed. Important developments are still taking place that will have a significant impact on the corporate architecture of knowledge-based companies. Further acquisitions and mergers will also characterise the market through 2003, but there are five other key trends that have emerged in 2002 that will also continue to grow in significance in 2003.

Technology consolidation: integrated knowledge-management suites

The acquisition activity of recent months has not just been about the buying up of weaker players. Many of the acquisitions point towards a shift in the competitive landscape as vendors – particularly those of content-management solutions – strive to offer a complete product that can address all the requirements for knowledge management in both a business-to-employee and business-to-business setting. In the latter part of 2002, for example, we saw Documentum buying eRoom (a collaboration-tool vendor) and Vignette acquiring Epicentric (a portal vendor). Both targets were well respected start-ups with proven products and real customers. Vendors such as Documentum, Hummingbird, Open Text and Divine are building a portfolio of tools that can address a wide range of information and knowledge-management tasks.

We have also seen IBM, Microsoft and Oracle all filling in gaps in their knowledge-management offerings in the past year. In 2003, we expect to see them leveraging these additions more effectively. With IBM now targeting content management and Oracle attacking the collaboration market, there is an opportunity for a number of titanic clashes in the knowledge-management space. In future, organisations looking for a strategic knowledge-management platform will face an interesting choice between the content-management-based solutions offered by specialist vendors and the application-server-centric strategies favoured by the industry giants.

Collaboration: the time has come (again)

The collaboration software market is going through a critical phase in its evolution. New business demands and new technologies are combining to transform the market. Over the next two years we will see collaboration in the enterprise transformed as internet and wireless technologies change the way we work together. Many of these changes have been underway for sometime, but they are now reaching critical mass.

A range of new entrants and innovative solutions has risen to challenge the dominance of IBM Lotus as the default platform for enterprise collaboration. IBM itself has embarked on a significant organisational and technical transformation of its products in order to meet the challenges and the opportunities offered. And while Microsoft casts a long shadow over the market, it faces some difficult decisions over its strategy for collaboration.

the KM/BI market 2002-2006 (projected)

figure 2 - the KM/BI market 2002-2006 (projected)

The next two to three years will see a significant transformation of the collaboration-software market. We will continue to see the adoption of innovative point solutions, but there will be a growing need for a more manageable and coherent approach to managing collaboration across the enterprise. Existing platform vendors will have to adapt their offerings to support more flexible and better integrated collaboration services. Smaller vendors will need to expand their offerings, typically through acquisition or merger. All players will need to adapt quickly to changes in the overall technical environment and, in particular, the emergence of web-service-based architecture for application integration and the gradual development of the wireless enterprise.

An additional factor influencing the development of the market will be the increasing need for collaboration capabilities to be embedded in mainstream business applications such as customer-relationship-management packages. As a result, a wide range of software vendors will need to offer a collaborative aspect to their product set. They will achieve this through development, acquisition or, in many cases, partnering. In doing so, they will further drive the adoption of collaboration tools.

Expertise location: a litmus test for knowledge management

Expertise location could be one of the most important growth areas for knowledge-management technology in the coming years. If it proves to be attractive, expertise location will not only create a new market opportunity, it will also act as a lever for other intelligent software solutions within the enterprise. However, it also remains one of the most challenging areas of knowledge-management technology and has so far been restricted to early adopters.

One reason for the slow take-up has been concerns over user privacy, but these may be exaggerated. More importantly, the idea of sharing expertise through technology remains alien to most organisations. Expertise remains a closely guarded asset and one that is only shared fully in trusted and, usually, face-to-face environments. It has therefore been difficult to build the critical mass of contributed knowledge needed to make most of these products effective.

But there are signs that the expertise-management tools may be ready for the big time. For the first time we are seeing real user interest in expertise identification as companies look to extend their knowledge-management infrastructure. And expertise location is no longer the sole preserve of small start-ups such as Tacit, who have been trying to bootstrap a market that requires considerable customer education. IBM Lotus’s entry into the market, with its Knowledge Discovery System, has given the market greater validation. 2002 also saw a further push into this market from the likes of Verity (with its support for ‘social networks’) and Autonomy (with its recently released Collaboration and Enterprise Networks offering). We expect to see more portal, collaboration and content-management vendors acquiring or licensing expertise-location technology for use in their products in 2003. This will lead the way for expertise location to become an extension of existing knowledge-management capabilities rather than an esoteric, standalone technology.

the evolution of knowledge-management software

figure 3 - the evolution of knowledge-management software

How real is real-time?

One of the key themes of 2002 has been the need for real-time business information if companies are to respond quickly to turbulent market conditions. We will see this theme developed further and also placed under increasing scrutiny in 2003. The need to provide information to decision makers in real-time is already spurring renewed interest in business-intelligence tools for the analysis of structured data, particularly advanced analytics and data mining.

In future, we will see a greater integration of disparate technologies into a corporate infrastructure that can close the loop between operational systems and decision-support tools. These developments will enhance the role of the enterprise portal as the default information-delivery platform and so hasten the integration of the portal with core infrastructure technologies such as application servers and application-integration tools. It will also drive take-up of information delivery to wireless devices, and of real-time messaging and collaboration.

The move towards a real-time, closed-loop decision-support system should be seen as an ambitious goal, not a short-term fix. 2003 will see a backlash against some of the over-selling of so called ‘real-time’ solutions, but the basic drive towards a more integrated and more intelligent reporting and monitoring of the business will not slow down.

The rise of the semantic enterprise

The failure of companies to respond quickly enough to changing conditions is also prompting many of them to take a more holistic view of their information architecture. In the next 12 months we will see more organisations questioning some of the established limits on information flow in the organisation – between front and back office, between operational and reporting and analysis systems, and between structured and unstructured information.

The growing prominence of knowledge-management technologies across all organisations is spurring a need to develop a more holistic view of how information is managed and accessed. There is a recognition that we need to breakdown existing silos of information. In the past this has been one of the primary goals of collaboration tools, content-management repositories, data warehouses and CRM systems. Each of these initiatives has attempted to address the problems of information islands, but in the end they have often raised as many problems and barriers as they have solved.

The rising interest in taxonomies and information classification suggests, however, that we are becoming more sophisticated in how we view and manage information assets across our organisations. In addition, the emergence of common and, more importantly, workable standards for information exchange and application integration, holds out the possibility that we may finally be able to overcome the recurrent barriers to developing a unified approach to managing information and knowledge across an organisation.

Web-services standards will provide the technical basis of such integration. And the increasing use of XML as a standard for information description holds out the hope of developing semantically rich infrastructures in which new forms of information publishing, information discovery and information sharing will be possible.

Reasons to be cheerful

Reviewing the past 12 months from any perspective is a fairly gloomy task. Most people in the IT industry were glad to say goodbye to 2002, even if they are wary of what lies ahead. But that does not mean there have not been positive elements to the year. I believe we will eventually look back on this period and see it as the real proving ground for the ideas and technologies behind knowledge management.

The revolution we have seen in business in the past few years is largely down to new opportunities for communication, information exchange and collaboration. The internet, the web, intranets and, of course, mobile technology have all created a new sense of interconnectedness that spans traditional boundaries of time, geography and organisation. We cannot back away from the quest to understand these changes and their impact on our businesses. We have to continue the task of engineering our organisations to be efficient at, and open to, all forms of communication and collaboration. Only then can we really make use of the human assets we have in our workforce and the relationships we have with partners, suppliers and customers.

For these reasons, organisations continue to see knowledge and information management as key areas for investment. Knowledge management and business intelligence will continue to be the fastest growing segment of the software market over the next five years. But that investment also has to prove its value in terms of bottom-line business requirements. This will be the biggest challenge for providers and users of knowledge-management technology in 2003, as it was in 2002. But who would argue that it should be any other way?

Eric Woods is research director at Ovum. He can be contacted at: exw@ovum.com