Open Text targets IBM in aggressive artificial intelligence push

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Canadian enterprise-software stalwart Open Text Corp. is taking an aggressive stand against giant rival International Business Machines Corp. (IBM) as it launches its artificial intelligence (AI) platform.

The company stores and manages vast troves of content for corporate and government customers. Through its AI platform, Magellan, it will enable its customers to deploy machine-learning algorithms to sweep through their data managed by Open Text to unearth useful trends and indicators, such as when they should maintain equipment or take efforts to retain disaffected employees.

With the launch, Open Text is expanding in a competitive business-intelligence and analytics-software sector that market research firm Gartner believes is worth $18-billion (U.S.) this year – and taking specific aim at IBM, which has been publicly pushing the benefits of using its IBM Watson AI platform. "We've all heard this idea that if you buy IBM technology, you'll never lose your job," Open Text chief executive Mark Barrenechea said in an interview. "I'm on a mission to smash that notion. You're at risk to lose your job if you select IBM."

He said Open Text's Magellan is both significantly cheaper than and preferable to IBM's Watson because it allows its clients to plug their own algorithms into its system rather than relying on IBM's "closed system."

"We'll be able to differentiate on price, openness and relevancy," he said.

In response, IBM said in an e-mailed statement it is "an established leader in the AI space" and has "built an open platform for enterprises, startups and developers to build with our Watson services … It's nice to see Open Text following our lead and we hope they, too, will bring new value and insights to important business and societal challenges."

Outspoken Silicon Valley venture capitalist Chamath Palihapitiya called IBM's Watson "a joke" two months ago, saying IBM was marketing the product to ignorant customers.

AI has been one of the hottest areas of technology investment of late, fuelled by the widespread belief that machine learning will transform how business is done. Global tech giants have actively snapped up AI experts – including many Canadian university educated and employed research scientists, while startups such as Montreal's Element AI have scored huge venture financings.

At the same time, investors shouldn't necessarily expect Open Text's AI focus and tough talk will transform it into a high-growth machine. The company has been expanding revenues by between 10 per cent and 20 per cent annually, but most of that has come from acquisitions, while sales expansion from existing businesses has only been rising by low single-digit percentages.

"Our investor approach remains the same: we are efficient capital allocators and we lead with mergers and acquisitions," Mr. Barrenechea said. He added that the company has the capacity to "support a couple of billion dollars" of acquisitions, just months after it closed a $1.6-billion acquisition of Dell Inc.'s enterprise-content division. "We'll continue to lead by looking at value companies, value metrics, continuing our double-digit growth rates led by M&A. That's not going to change one iota."

Nick Patience, research vice-president with 451 Research, said Open Text "has had some of this technology going back quite a while" and "is fairly well positioned to take advantage of [a pick up in demand] because they've been doing stuff like this on a smaller scale for years." However, "it's not going to transform the company overnight but is a logical step for a company with the assets Open Text has … I think it's eventually a step-change" for the firm, he added.

BMO Nesbitt Burns Inc. analyst Thanos Moschopoulos said in an e-mail that Open Text's new platform is "interesting," but that it "probably won't move the needle" in the near term owing to the newness of the product and Open Text's existing roughly $2-billion in revenues.

"We'll need to see some customer deployments before we can get a good handle on how meaningful Magellan could be," Mr. Moschopoulos said. "But it's nice to see that the company is innovating, despite having had a lot on their plate with the integration of all of ‎their recent acquisitions."