Why People Really Are More Important Than Technology In Digital Asset Management
This feature article was written by Ralph Windsor, DAM News editor and Project Director of DAM Consultatns, Daydream.
As 2019 draws to a close, a number of key themes have begun to emerge this year which are noteworthy for predicting what might happen in 2020 (and perhaps the decade that follows).
- 2019 has seen an ongoing increase in the significance of digital asset supply chains for DAM users.
- The role of resellers, integrators and channel partners has become more important.
- The overall DAM software market has not grown significantly.
- There has been some consolidation in the DAM software industry, but it is still very fragmented with no single entity controlling more than 3-4% (at most).
- DAM vendors have given up any attempts to scale user volumes and instead have focused on chasing enterprise business (smaller number of higher value customers) or professional services.
- Commodity AI image recognition has largely been abandoned as an ineffectual gimmick by many DAM users.
- There has been a massive increase in demand for skilled Digital Asset Managers (the human kind) and the complexity or skill level of the role has also risen correspondingly.
- Pay rates for contract Digital Asset Managers (or those acting as consultants) have increased as more of them have found out how much they can earn by swapping permanent roles for freelance ones.
The Rise and Rise of Digital Asset Supply Chains
Digital asset supply chains have been a feature in previous years, but 2019 has seen the concept really take off. We ran a series of webinars about this topic in September and October and they were over-subscribed to the extent we had to increase the allocated places. As well as users, there were both vendors and partners (the latter were particularly well represented).
The reasons for this are quite simple. The DAM software market has not innovated to any great degree for several years, but nonetheless, digital assets are being utilised across a wide range of other media channels and associated technologies. This has necessitated the integration of DAM systems with an ever wider range of counterparties as well as facilities to monitor and manage the flow of data. Upstream and downstream integration is what is driving many updates to DAM solutions now.
The Importance of Integrators and Resellers in DAM
Following the previous point, from what I have seen of the available DAM tools, there is some provision of capabilities to help with managing digital asset supply chains (especially in terms of integration connectors) but overall vendors do not handle this task effectively if they take it on in-house. Either they have a very limited understanding of their clients’ problems or a lack of resources to provide the level of assistance required.
There are a whole host of other issues regarding contractual responsibility and ownership of the delivery process, but there is now a gradual acceptance that partners are better placed to deal with the intricate details of many implementations. The main reason is focus: vendors spend most of their time dealing with core issues like scalability and extensibility, implementation partners are more responsive to the practical needs of a specific end-user’s requirements and how to implement them. In view of the following point, the lack of an effective partnership strategy is likely to have led many vendors to the growth brick-wall which they are now running into.
Lack of Growth in The DAM Software Market
The vast majority of the business DAM vendors are competing for now is replacement-oriented rather than new users who have never done DAM before. This is an indicator of a mature market, not one that is growing. New money is not being found for DAM systems; end-users are typically on at least their second DAM (quite often their third, fourth or even fifth). Certainly there are a lot of people who still don’t know what ‘Digital Asset Management’ means, but this is more related to corporate amnesia in larger organisations. Even if they didn’t realise to begin with, many new enterprise DAM users discover quite soon that this is a path their predecessors have travelled down previously.
We debunked the myth that the DAM market is achieving double digit compound growth earlier this year. By most credible estimates, it has stabilised at a value of somewhere around $1bn (USD). Based on a maximum market share of 4% (see next point) this presupposes a DAM-related turnover of $40m (USD). Clearly those vendors for whom DAM is just one source of revenue will have higher overall numbers, but not specifically from the sales of DAM software.
This begs two questions: why is the market not growing? If we are in a mature market, why is there not more consolidation? The next point should answer both.
Lack of Consolidation and The Fragmented Nature of The DAM Market
Consolidation is talked about a lot in DAM, yet there hasn’t actually been a lot of it relative to the number of market participants. In recent times, I can only think of Aprimo’s tie up with ADAM, Bynder’s acquisition of WebDAM and Sitecore’s purchase of Stylelabs (also in 2018). Indeed, the first and last examples are more like horizontal integration than consolidation, per sé.
In the last year, I have had two commercially more aggressive DAM vendors ask me whether there are legacy firms who would be willing to sell their customers to them. No deals that I was aware of were ever struck, however. The reason for this is that legacy DAM is surprisingly lucrative. An older (and wiser) former colleague once remarked to me that “there is a lot of money in old tech”. For DAM systems, this is definitely true.
Vendors who elect to cease actively developing their platforms and instead simply maintain them (and do so as cost-efficiently as possible) can make a decent return before customers eventually migrate elsewhere – which could take many years. Similarly, the zone of potential agreement for making a fair valuation of customer lists is exceptionally difficult to negotiate. Setting aside financial issues, there is the more straightforward risk that clients will simply find someone else on their own rather than move to the suitor’s own platform.
The bottom line is that DAM software businesses are not great acquisitions. The only exception is where the suitor simply leaves them to run as legacy concerns and just banks the on-going service and hosting revenues. DAM technology is complex; migration from one platform to another is time-consuming, skilled and resource-intensive. As such, it is easy to see why acquiring vendors might just decide to leave this problem on the back-burner for an indefinite period.
As I write, WebDAM has not yet been integrated into Bynder and remains a separate platform. I talked about this in my assessment of that deal nearly two years ago, migrating some 500+ customers is technically demanding, even before you even get into ‘softer’ areas like training, change management etc. It is ironic that the same inorganic and inelegant model used by Content Tech behemoths such as OpenText is now being copied by sections of the Cloud/SaaS end of the market.
From an investment perspective, a ‘warehouse’ operation that derives a decent proportion of its business from legacy acquisitions without investing into them is somewhat unappealing. We have talked about North Plains quite a lot on DAM News in the past. At one time, they were very well respected in the DAM software market and other vendors would be wary if they knew they were going into pitches against them. Two acquisitions later and several years of very little other than maintenance updates means their brand positioning is now essentially a busted flush. They too had venture capital backing; their fate should be something of a warning to those who plan to copy the same model.
DAM Vendors Give Up On Low Cost, Large User Volume Business
In the last few years, there has been an evacuation of the low-end or ‘DAM Lite’ segment of the market. While there are firms active in this area, many have carried out the same back of envelope calculations that I did and worked out that this just isn’t worthwhile because of the inherent lack of scalability in the DAM software business. Fair play to those who remain, I hope they prove me wrong.
As we often note on DAM News, you need to look at what vendors do, not what they say to discover their true intentions. The case of Bynder is instructive. In 2017, they announced the release of ‘Orbit’ – their freemium DAM, which was not universally well-received by the DAM market at the time. Six months later they acquired WebDAM for a fee well in excess of their annual revenues (which implies the money was provided by someone else). Another six months later, Orbit was abandoned and it was (at the time) CEO, Chris Hall who was required to make the announcement of its closure. A further six months down the track in February 2019, they announced their 2018 results, but the press soundbites are all from Bob Hickey, COO of Bynder (and former general manager of WebDAM) Chris Hall doesn’t feature. In the same month, the Bynder CEO position became a joint one with Chris sharing duties with Shelley Perry. Finally, in October, it was announced that Bert van der Zwan is taking over as CEO.
There are a couple of ways to view this round of corporate musical chairs. One is that Chris Hall simply wanted to take a well-earned break from the cut and thrust of running a tech business. The other more Shakespearean take is that the original release of Orbit was an attempt by Chris to project Bynder into the realm of the tech unicorns by going after what they believed was a large untapped market of prospective DAM Lite users who would transition away from Dropbox if offered an alternative.
Some readers might recall their description that Orbit was “for everyone, even your mom. Your neighbour. Your friends who still use Dropbox and Box“. For whatever reason – quite possibly the ones I have discussed in other articles, there was then a volte face manoeuvre and someone at Insight Partners (the VC firm who funded Bynder) decided that they did not have the same level of enthusiasm for this idea. A ‘strategic intervention’ appears to have been made with the WebDAM acquisition (who were owned by Shutterstock and whom Insight Partners also have an equity interest in). The positioning of the firm was subsequently modified to present Bynder as ‘Enterprise DAM’ – i.e. a smaller number of customers, with higher annual licence and service fees.
I have singled out Bynder in this analysis, but the same ‘strategic reviews’ are being conducted elsewhere too. Widen also closed down their DAM Lite solution, SmartImage last year. That of itself isn’t especially noteworthy, since then, however, they have rowed away from Digital Asset Management software as their exclusive focus and into consulting and more recently design services. They also closed down their educational DAM resource site digitalassetmanagement.com. I have noted them generalising their offer and presenting themselves using promotional slogans like “Why don’t we just get Widen to do it” to imply that if, for example, you needed someone to build you a car park, they might have a go at that too.
These are all symptoms of DAM vendors not being able to generate enough revenue from their core market to achieve what they believe is their true potential. It’s a realisation that the DAM software market has hit a growth brick wall. The Digital Asset Management problem is complex and demanding to solve. Not only that, there is no shortage of competitors who also want to try their luck. This won’t ever become a low cost, high volume market, which is why mega-vendors like Amazon, Google, Microsoft etc. are content to sell the tools to allow someone else to try and get something out of it, without participating themselves.
Commodity AI Image Recognition Is Acknowledged As a Gimmick
In the vast majority of DAM implementations I have either been involved with (or heard about) in the last year, the commodity AI image recognition facility present in many DAMs has been disabled either before launch or not long afterwards. The reasons for this have been discussed at length elsewhere. Although some vendors continue to put out PR about AI image recognition, the majority now tacitly admit that it is over-rated – which we predicted it would be nearly four years ago.
Two realisations have either already hit vendors or will do quite soon. The first is that while it is possible to get some credible results from AI and Machine Learning, custom development work is necessary because the problem domains are complex and need a lot of fine tuning. The off-the-peg AI components are blunt instruments that lack precision and subtlety when used without customisation. Unfortunately, this is the last thing vendors want to get involved with as they are then supporting some obscure task-specific requirement which could break and/or produce strange results at random.
The second big realisation is that there are people who can take on this kind of single use-case complexity for them. They are partners and integrators whose raison d’etre is to adapt a platform to the needs of a particular end user. If there is anyone who will make something useful from AI/ML and DAM, it is likely to be this group. The APIs of vendor platforms are gradually improving (although still far from perfect) and this implies that a third party could use them like a toolbox to implement something that feels like a custom implementation, even though it isn’t.
The problem, however, is that DAM vendors are also worrying about their lack of revenue. A number are now effectively moving into professional services because they can’t generate enough cash from their core products to attain their growth ambitions. There is a conflicted state where on the one hand they want their tools to remain clean and unburdened by complexity just to support the needs of a single user, but on the other they need to grow. As explained earlier, if some vendors are thinking that becoming consultants or even graphic designers is a reasonable commercial option, it makes sense that they might not be willing to gift a third party an opportunity which they hoped to get a slice of themselves.
Like everything else in DAM, this has all happened before. Once more, the actors and the scenery change, but the plot stays the same. I invite readers to consider the following from our interview with David Diamond earlier this year:
“Years after I worked at Canto, one of the company’s more powerful partners told me how Canto was making it increasingly difficult for partners to be successful. The theory amongst partners, I was told, was that Canto saw partners making too much money and they wanted a bigger piece of it. This wasn’t a surprise to me because I saw the launch of Canto Professional Services while I was still at Canto. I considered it to be a colossal strategic blunder. I recall fighting with the company’s then CEO about it because I didn’t think we should be competing with the very partners who had delivered to us all those killer DAM installations and creative Cumulus add-ons.” [Read More]
Sharp Increase in Demand for Human Beings With Digital Asset Management Skills
This year has seen a substantial increase in demand for skilled and experienced Digital Asset Managers. Week after week on LinkedIn, I come across adverts and requests for people who have digital asset library management expertise. To the external observer, this seems incongruous, if there was one job that most people would have predicted the swift demise of, it is this kind of role. Yet, this is far from the case. Why is that?
To those who have been paying attention while reading this article, it should not be a surprise. The obvious answer as to why Digital Asset Managers are in hot demand right now is because the technology is not delivering. More advanced human software is necessary to manage ever more sophisticated digital asset supply chains. Further, the software is more generic than might have once been the case, so someone has to go off and work out how to get all those square pegs to fit into round holes. In essence, end user digital asset management requirements have increased at a faster pace than the software can keep up with them, so skilled human beings are needed to fill the gaps. This pattern of behaviour is (once again) something which has been repeated in DAM many times over the last 25-30 years.
On the occasions when I deal with clients who are established media businesses (and who have been early adopters of DAM technology) what you tend to find is while there will be a particular DAM system deployed, a) it probably won’t be the only one and b) there will be a supporting cast of people as well as ad-hoc ancillary tools which keep the assets flowing to where they need to go. What media businesses do with DAM now offers a road map for where others will probably be heading soon also.
For those who operate in the media sector, it is usually a given that a single piece of software will not answer all your Digital Asset Management requirements because they are too complex and there are too many moving parts; the tech merely provides a supporting role. This phrase that people in DAM are prone to repeat (without ever really thinking about the meaning of) – ‘People, Process, Technology’ really is true. The tech is the least important piece of the puzzle. Despite this, a hugely disproportionate amount of time, money and attention is given to the final item. In addition, critical topics like metadata are treated in a blasé and off-hand manner.
Earlier this year, we covered an article by Ian Matzen on ‘the DAM crisis’, where he proposed some reasons why so many digital asset manager positions remain unfilled. The following quote is one example:
“Companies don’t know what to do with digital asset managers. To what position do you promote a DAM manager… DAM director, chief asset officer? Unless C-suite understands the great value DAM brings to the company, these staff may be the first to be let go during a restructure. They may think “why do we need folks to run our DAM program if we have a vendor’s professional services to do this for us?” To my fellow DAM professionals, this is what we need our DAM conversation to be about.” [Read More]
The sell-side of the market has fetishized technology for self-interest reasons and the less experienced buy-side has blind faith it will deliver the promised silver bullet. This is the little mentioned truth about Digital Asset Management, whatever side of the line you work on: Digital Asset Management is first and foremost a people business; the work involved is far more complex and demanding than it is given credit for. This is why the DAM software market does not scale, why you still need skilled digital asset managers and why DAM vendors have begun to turn back to more professional services oriented business models.
More so than many other tech sectors, DAM depends heavily on people to get credible results. This should not be news to anyone who has some experience of this market. The ‘people, process technology’ phrase has become a cliché, but only because it is true. While many would prefer that ‘people’ referred to discussions about change management, organisational culture and looking after staff etc, it is also an indicator of the limitations of the DAM sector as a commercial investment. The topics I have just listed certainly are important, but the fact human beings remain integral to successful Digital Asset Management should give anyone who was planning to get rich from DAM some pause for thought.
If the topics I have discussed in this feature article are of interest and you want to discuss them with me in-person, next month I will be moderating a panel on user adoption at The Insight Exchange Network DAM Practitioner’s Summit being held in New York on 30th-31st January. Use discount code: M131DNW to get $100 off the ticket price.
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