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The Implications of Covid-19 For The DAM Industry – Part 2

This two part special feature article on the implications of Covid-19 for the Digital Asset Management Industry has been written by DAM News Editor, Ralph WindsorPart One was published yesterday.

Introduction

In part one of this article, I examined the economic context of Covid-19 and made some comparisons with the 2008 financial crisis.  In the second instalment, I examine DAM Lite (including Dropbox’s ‘Spaces’ product) as well as the impact on Digital Asset Managers,  consultants and what might happen to on-premise DAM.

The Reprise of DAM Lite?

The DAM mid-market has looked vulnerable for a long time, partly because it is at-risk from above and below in terms of price points.  This is one of the factors why a number of vendors shuttered their DAM Lite solutions.

I would anticipate that Covid-19 will cause a stratification of the market, so the high end providers seek the larger Digital Transformation projects, while everyone else has to think seriously about their pricing policies and cheaper competition.  That does not necessarily mean a resumption of DAM Lite, however.

In the last few years, we wrote this segment off as essentially a dead concept because the economics of developing it compared with the revenue obtained just didn’t stack up.  This is a view I still hold, however, there are caveats.  The current mid-market is more than likely to come under far more intense price pressure now.  There are a few of the VC funded firms who have been using their price points to try to persuade prospective buyers of their enterprise credentials.  That trick is going to become quite difficult to continue to pull off if the level of scrutiny increases.  Rather than DAM Lite returning because it is cheaper,  instead I expect the mid-market to become far more deflationary and the costs of what are considered ‘regular’ platforms to reduce to the kind of prices associated with DAM Lite.  To limit this, some vendors might elect to ditch per-user charges and use a single organisation-wide fee, but even those costs will need to be kept in-check.  Many current mid-market DAM vendors are going to need to think very carefully about their positioning and I expect a lot of agonising and hand-wringing over price points, especially in view of the next point.

The Dropbox Cometh

To-date, the DAM market has just about managed to repel the threat of Dropbox.  There have been some abortive attempts to take them on, but most vendors have been reduced to issuing negative marketing about the product’s unsuitability as a DAM (with some justification, it must be said).  Up until now, the threat hasn’t been taken all that seriously, but Covid-19 (or more accurately, the economic consequences of it) might change that.  Late last year, Dropbox announced Dropbox Spaces.  Where before, Dropbox has seemed a bit like a DAM, but not really a proper one, this is getting a bit closer:

We think technology should reduce distractions and take busywork off your plate. That’s why Dropbox is building the world’s first smart workspace—to bring all of your team’s content together while letting you use the tools you love, so you can focus on the work that matters.” [Read More]

Dropbox have been circling the DAM market for several years.  In 2018 (and maybe 2019) I observed that they sent a representative to the Henry Stewart New York DAM conference.  There are many aspects of Dropbox Spaces that are inadequate when measured up against a more fully featured DAM, but we are entering more cash-strapped times and I can foresee more end-users being required to use it because the features appear to ‘tick all the boxes’ but for a cheaper price.  In addition, there are some aspects of it which are potentially superior to pure Cloud DAM applications, in particular the following:

The Dropbox workspace now includes a For you tab within Dropbox in the Windows system tray and macOS menu bar. It uses machine intelligence to surface personalized suggestions and details to make users’ work lives easier. As with other DBXi features, the For you tab gets smarter over time the more users interact with it.” [Read More]

David Diamond has mentioned in the past that the DAM is ideally integrated directly into the operating system, a point he re-iterated in our interview with him last year.  Dropbox Spaces appears to (at least partially) fulfil that goal.  A few other vendors have attempted some OS integrations, but not to the same extent.

One of the other benefits Dropbox will have over specialist DAMs is access to user data.  We have discussed this previously on DAM News and it is where the real untapped potential in AI lies.  Dropbox have access to millions more users than all DAM vendors.  They can leverage that data in a way that is difficult to directly compete with for DAM vendors as they lack the same user scale.  Their disadvantage is that they cannot adapt the product to specific requirements.  There will, however, be a significant number of consultants, resellers (and maybe some vendors) who might regard this as a potential method of survival.  A couple of years ago I wrote about the threats implicit in DAM vendors becoming de-facto channel partners for Dropbox.  But that was then, this is now and I can see a Dropbox-based DAM infrastructure being a far more compelling option, even though it poses all kinds of long-term commercial risks for anyone who pursues this approach.

In addition to Dropbox, I expect similar moves with Google Drive and Box also.  There is a DAM vendor who use Google Drive and quite a number of more conventional DAMs integrate with it; the same is true of Box as well.

To counter these threats, the marketing departments of current DAM vendors are going to have to work harder than they ever have before.  In addition, the product divisions will need to be not just talking about what value their systems bring to the table, but actively demonstrating it.  This will mean more than gimmicks like ROI calculators, but genuine innovation and a willingness to engage with DAM user’s real world problems.  Copying the other team’s ideas is not an effective strategy in the post Covid-19 world which we are now moving towards.

Digital Asset Managers Compete With DAM Systems

The role of Digital Asset Managers is an interesting case.  Historically, they would have been some of the first people to get sacked or laid-off during any economic downturn (and even when there wasn’t one).  Further, many vendors used to market their systems by claiming that they removed the necessity to even have a Digital Asset Manager at all.  The increased demand for DAM systems has led most end-users to the realisation that they are essential to the smooth running of a DAM initiative, however, which means it is more likely that Digital Asset Managers will be retained.  Over the last few years especially, there has been a lot of demand for skilled Digital Asset Managers and I foresee more resistance to firing them now, indeed, some organisations may also see this as a potential opportunity to resolve these recruitment problems.  Compared with a decade ago, there is far greater awareness of the value that Digital Asset Managers offer.

To take the counter argument, there is undoubtedly going to be pressure applied to minimise expenditure on human resources of all kinds.  Just as it was in 2008, hiring freezes will be commonplace.  Combined with this has been the trend for DAM vendors to incorporate third party AI Image Recognition tools into their products.  If you talk to vendors privately (and occasionally publicly too), most will concede that the automated keywording tools are generally useless.  Nonetheless, vendors still promote the benefits of them when marketing their systems.  It is certainly conceivable that in a scenario where there is not enough budget for both a subscription to a Cloud DAM system and a human Digital Asset Manager, vendors will revert to an old marketing tactic from 15-20 years ago of claiming that their solution removes the need for a full-time DAM administrator.  Buyers should be very wary of believing this kind of rhetoric.

It is widely acknowledged that the biggest bottleneck in DAM is properly cataloguing assets so they can be found, full automation of this process remains one of the ‘holy grail’ problems (and with all the likelihood of success which that analogy implies).  A lot of investment money is probably going to continue to get thrown at this problem and some of the mega-vendors like Google and Amazon etc. will still have the cash necessary to do so.  As such, while the technology is unlikely to ever be good enough, the fact it might get better than what is available now could be sufficient to convince many that it is a risk worth taking.  Perhaps more than ever, Digital Asset Managers will need to demonstrate the value they generate as well as being quite vocal and proactive about it.  In addition, while remuneration remains an on-going cause for dissatisfaction among Digital Asset Managers, now might be quite a bad time to ask for a raise.

DAM Consultants: Specialists Mostly Out of Favour

If the economics are looking tight for DAM vendors and Digital Asset Managers, they appear even more stark for DAM consultants.  In the same way that a number of Digital Asset Managers are potentially likely to get culled, many organisations are going to be required to slash any fees spent on consulting services too.

The consultant offer will have to be highly technical and will probably seem more like a niche software developer or technical architect role.  Alternatively, it will be suited to those who are prepared to get their hands very dirty dealing with all aspects of DAM initiatives, from solution implementation through to cataloguing assets (and all points in-between).  We have written before about the attributes of effective DAM consultants, and anyone seeking gainful employment will need to be even more effective than ever before.  As with everything else, the bottom line questions are going to be: Do we need this person?  Can’t we just do it ourselves?

With regard to the analyst sector, the situation gets more extreme.  As should be obvious to most readers by now, it all comes down to cost.  The question that will get asked is: why are we spending money on this?  Can we get something similar cheaper elsewhere or just do without it?

The squeeze that will take place in the DAM market will be hardest on expensive specialists (unless there is a proven need and the skills or knowledge they offer are hard to acquire).  Anything that does not serve a multiplicity of different purposes will be perceived as poor value for money and a candidate to be replaced or simply scrapped.

No More ‘Basic DAM’ Education

As I mentioned in part one, a whole generation of marketers are now well aware of the capabilities of Digital Asset Management and understand what it does, how it works etc.  For a reasonable period of time, it was possible to earn a living as a DAM consultant regurgitating the basics and repeating clichés and platitudes about how great metadata is, that you need governance etc.  Those times were drawing to a close before, and the arrival of Covid-19 has hastened them.  Clients will want extra special insights they can’t acquire themselves very easily.  Simplistic or facile analysis is easy to come by and few will be willing to pay hard cash for it.

The End-Game For Cloud vs On-Premise?

The decline of purely on-premise DAM products was also underway before the current situation, this will surely hasten it and even sectors which were deemed too sensitive for hosted DAM will be obliged to re-evaluate their objections if the lockdown has significantly impacted their productivity because their DAM cannot be accessed.

One of the few scenarios which will keep an on-premise DAM from getting replaced is in the more specialist production DAM market where the digital asset files are too large to be hosted on the cloud.  With that said, I can foresee more Cloud vendors seeing this as an opportunity to challenge for these remaining legacy markets.  The problem of large files and limited bandwidth is not unique to DAM and the Cloud hosting vendors (Amazon, Google, Microsoft etc.) will be eager to solve it also.

Hybrid DAM was always a special case and one that was sometimes more intellectually interesting than it was practical (with a few notable exceptions).  I would expect the demand for hybrid solutions to diminish along with on-premise.  With that said, in the medium term, there might still be a role for it as a method of transitioning to Cloud DAM.  While the large file problem probably will get resolved eventually, that could still take time and there will be many users who will still need both methods of delivery.  The main issue will come down to cost, however.  If a hybrid option is expensive because it requires a lot of fiddly customisation and configuration then it may just get ditched and either users will be forced to make do with slower access to files or some very old legacy on-premise DAMs will linger on far longer than anyone expected.  The latter outcome is not at all unusual in IT systems (of all kinds).

DAM Panic Buying

One interesting effect of the budget reviews which I discussed in part one is that some middle managers might see the writing on the wall right now and recognise that if they want to upgrade or replace their DAM, they better get on with it right away before any budget they have got is removed.  As such, it is possible there could be a rush of purchasing activity in the short-medium term, not entirely unlike the panic buying that we have all witnessed at supermarkets when the lockdowns first got imposed.

Two factors which mitigate against that, however, is that a number of other types of systems will also compete for these pockets of budgets while they remain.  The second issue is that if there are delays in purchasing processes, these requirements may be set aside before they are closed, or potentially just abandoned not long afterwards.  Very few larger organisations will want to commit to long-term agreements with vendors because they will have their own fixed cost issues to deal with.

Conclusion

There are some common themes emerging in this two part series:

  • Lots of downward deflationary cost pressure
  • The near-complete domination of the cloud
  • Greater scrutiny, especially by those with budget responsibility
  • The need to demonstrate greater value

The last point, especially has been an underlying factor in DAM for years.  Covid-19 is the catalyst event to force it to the forefront.  Too much of the DAM sector is facile and relies on lazily repeating phrases like ‘People, Process, Technology’, ‘Metadata is Good’ etc. but without ever really doing anything to demonstrate a full understanding of what they mean and how to apply them to end-user needs.  The latter group have accepted this unsatisfactory state of affairs and been willing to keep spending on DAM solutions, but now they cannot (even if they still wanted to).

The economics of this are likely to be brutal and difficult for everyone to deal with over the next two years.  With that said, there might also be a long-term opportunity for those who are able to adapt and survive.  Operators who are able to be innovative and find solutions or strategies which enhance the productivity of their clients are more likely to prosper at the expense of those who are not.  Some genuine ‘out of the box’ thinking will be required.  Doing what everyone else does and hoping there is enough business to go around will not work in the world we are now in.


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