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Why There’s Radical Change Ahead For Vendors In The Digital Asset Management Industry

by Naresh Sarwan on December 11, 2012

Matthew Gonnering, CEO of DAM vendor, Widen has written an article for VentureBeat.com called Why there’s radical change ahead for the digital asset management industry:

The increased demand for digital assets occurs in tandem with the rise of multiple content distribution channels. Social, web and mobile channels intensify the pressure for marketers, accelerating the pace for delivering brand messages to market. DAM systems that manage the complete lifecycle of digital assets — creation, management, distribution, archiving, repurposing – will rev up to handle more assets, more distribution point, more classification parameters.” [Read More]

I think the title of this item is something of a misnomer, it’s not really about the digital asset management industry, but instead is more of a description of the trends in play right now (arguably have played out).  There’s the usual stuff about cloud distribution models; that well-known Frost & Sullivan stat about this being a $1bn industry by 2013 (although the industry will collectively have probably paid out about $1bn in marketing and R&D to convince customers to take notice too) and content marketing being the next big thing.  Perhaps this is news to some, but I doubt it’s going to be noteworthy for either most seasoned DAM industry observers, nor savvier venture capital and private equity investors either.  I do have to wonder if this was originally written a few years ago in 2008 or 2009 possibly?

The sub-text of the article suggests a dangerous complacency that was a characteristic of the latter stages of the dotcom era.  There is an assumption that demand will just roll-on with people investing increasing capital into implementation of ever more sophisticated product.  I don’t think it’s going to play out like that and the next stages of the DAM industry are going to get more demanding for vendors.  The big change I can see in prospect is the end of the mid-range DAM system as it falls between two ends of the market but not into either.

The acquisition trends in progress indicate consolidation at the pricier end of the market with more of them wanting to own the complete digital media supply chain and land grab their customer’s budgets.  The CEOs of those businesses are hoping to increase revenue by monopolising what is available; their investors are looking for exit routes and making their chosen vendors look big enough to be potentially of interest (or even a threat) to other larger enterprise software players.  This means the higher end vendors will be pushed to go after bigger deals and the consequences of failure to acquire customers may be tragic for some – a ‘death or glory’ proposition in other words.

At the other end of the market, there are two forks developing.  You can do more and more with Amazon and other commodity cloud providers now and the owners of those platforms are also helping to develop toolkits and features that make it easier for their channel partners to compete with each other and chase the price down to practically zero.  To meet that demand, the open source DAM vendors might find themselves marginalised by DAM plug-ins and media processing servers which exploit WCM platforms that many of the target developers will be familiar with rather than them needing to learn some completely new solutions.

On the other fork, there will be lots of demand for simple and easy to use DAM systems that work as rapidly as Dropbox, Google docs etc but can handle larger volumes of media.  There are many Cloud vendors (maybe Widen included) who might say this is their target market and where they are (currently) experiencing major customer growth.  This is also where there will be most competition in DAM with further cross-fertilisation from the DIY DAM segment where small teams of developers believe they can organise themselves into becoming DAM vendors too.  As well as competition from each other, the more straightforward file distribution services will expand their offerings and siphon off the very low end who have next to no budget.

The typical pattern for most tech sector trends is that as a particular market emerges from the early adopter phase, the number of participants increases exponentially until a maturity stage commences (what we are in now) and then there is a gradual shake-out and market stratification into the very big and micro players.  It is possible to survive this at points in between, but only via either specialisation or synthesis of different markets (niches).  Companies need to anticipate this happening and have plans in place well beforehand or they will not have enough time to change course and compete in more profitable segments.  I don’t see any evidence that suggests DAM will be any different, do you?

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{ 1 comment… read it below or add one }

Ralph Windsor December 11, 2012 at 6:15 pm

It’s an interesting analysis of the market here Naresh, but I’m not sure I can go along with all of it. I would agree with the points about the Gonnering article, it does look like one he dusted off from a few years back and your aside about the investment required to to achieve $1bn revenue sounds plausible to me also.

Over the demise of the mid-range DAM, this is a theory you have been expounding for quite a while now. I can see the logic, but it’s a bit too simplistic also. I notice you’ve started giving yourself a bit of a get-out clause if this prediction doesn’t play out with the point about “synthesis of different markets”. I think you might be finding a lot of ‘synthesised DAM markets’ in the near future – I guess this is the fragmentation point you keep making also?

The WCM sector is still has numerous players even though it’s been around since 1997-98 (later than DAM but not that much and it’s been more popular and understood for relatively longer too). There are a few big platforms that have emerged in WCM (Drupal or WordPress being a couple I can think of) but people still build and market WCM apps.

I can’t see a single DAM platform that will be satisfactory to handle all mid-range needs, this is why lots of vendors have built their own and what might keep them in business too. There is still significant demand from organisations that don’t want a kind of ‘SAP for digital assets’ which it looks like a lot of the larger vendors are trying to position themselves as offering.

Quite a few mid-range providers might prefer to become systems integrators using someone else’s platform rather than remain as vendors who build their own. But the options if you want to do that are a bit limited and are they really going to either timeshare off some bigger vendor’s platform (such as who?) or try and string something together with S3, Dropbox etc?

In summary: I think you’ve zoomed out to the management consultant ‘helicopter view’ too quickly here and like that Chinese fellow said about the French revolution, “It’s too early to tell”.

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