OpenText gets on the IoT bus

Jun 9, 2017 | Hot Topics

I know I’m way behind on event reports but need to let you know about this:

Earlier this week, OpenText, the document management and collaboration vendor, announced that it is acquiring Covisint Corporation, a cloud platform for automotive and Internet of Things (IoT) applications. Why does this matter? Because it’s another sign that there’s huge interest from all sides of the corporation in IoT, though not many clear indications of how it’s all going to shake out.

So, why Covisint? There’s a wealth of data stored in OpenText (just as there is in ERP, PLM and all of the other databases hanging around but not connected) that can be used to make better operational decisions. OpenText plans to use Covisint to build a cloud-based IoT platform, initially targeted at the automotive industry. You may recognize the name: Covisint, was started back in 2000 as an online marketplace by Ford, GM and what was then known as DaimlerChrysler. Like lot of the markets created during the Internet bubble, it struggled to generate revenue and most of us lost track of it. A quick SEC search says that it was sold to Compuware in 2004 and spun off via an IPO in 2013.

Today, Covisint is a provider of cloud-based services for projects like connected cars. This includes something called identity management, a crucial piece of technology that secures what Covisint calls the identity lifecycle: managing authorizations “to provision, revoke and audit access to multiple enterprise applications”. The point: providing convenient access without compromising security. That’s critical in all IoT implementations, and OpenText hope to parlay Covisint’s roots in automotive into other industries in which it operates.

And, why now? Covisint has been struggling and investors have called on it to explore ways to build shareholder value, including letting itself be acquired. Covisint reported total revenue of US $70 million last year, down 8% from the prior year. OpenText’s purchase price totals US$103 million, quite a bit lower than some investors had been expecting but still a decent 20% premium over the recent share price.

OpenText intends to fund the acquisition with cash on hand.  The transaction is expected to close in the third quarter of 2017 and is subject to customary closing conditions, including approval by shareholders of Covisint. I’ve seen rumblings on line that some are hoping for a higher offer, but it’s not clear that one is in the offing.

I think this acquisition tell us a lot about the IoT. It’s a wild wild west, with no clear winners in sight. Will OpenText win the battle for connected cars? Remains to be seen. But even if it doesn’t, Covisint and its identity management software just gave it entry into a lot of conversations it couldn’t have had last week.