Vendor
Genesis
Fred Sorkin, Chairman & CEO, and Barry Litwin, President, founded Hummingbird
Ltd. (NASDAQ: HUMC, TSE: HUM) in 1984. The company began selling
a PC-to-Unix connectivity product named Exceed in 1990. Exceed,
which currently holds over 70% global market share in the PC-to-Unix connectivity
market, fueled Hummingbird's growth in the early to mid 1990s. In 1995,
growth in this market began to subside and Hummingbird started acquiring
software vendors to move into other markets. The company's major acquisitions
include the following:
- June1999
- The company finalized its acquisition of PC DOCS to enter the Knowledge/Document
Management market.
- March
1999 - Hummingbird acquired Leonard's Logic for its Genio product
and moved into the ETL (Extract Transform Load) market. Hummingbird
also acquired Financial Software Solution to expand its Business Intelligence
offering to Financial Services clients.
- January
1998 - The company acquired Andyne Computing to enter the Business
Intelligence market.
The vision
to build a corporate portal product emerged in early 1999 when Hummingbird
realized it could leverage its expertise in Business Intelligence, Knowledge
Management, Document Management and ETL. In January of 2000 the company
began shipping Hummingbird EIP (Enterprise Information Portal).
Early sales were strong in smaller law and financial services firms, and
sales to the Global 2000 steadily increased over the following seven months.
By October 2000 Hummingbird closed 101 portal deals that represented 33,000
seats. The company will make the second generation of the product, Hummingbird
EIP 4, generally available some time this month.
For TEC's
high-level definition of a corporate portal please click
here. Hummingbird EIP includes such typical corporate portal features
as web-based access (no client installation), single log-on, secure access
to internal data from outside the firewall, a unified search across all
data sources and a personalized user-interface. Hummingbird develops XML-based
APIs called e-Clips to integrate applications into the portal. e-Clips
use a similar technology to Plumtree's Gadgets (see Plumtree
Fuels Growth With New Corporate Portal Product for more information
on Plumtree). There are currently over 200 e-Clips available through Hummingbird,
the majority of which are designed for such content feeds as iSyndicate
and Moreover.
The company
does offer e-Clips pre-built to integrate Hummingbird Business Intelligence
and Knowledge/Document Management products into the portal and e-Clips
for Cognos applications are for sale through Hummingbird. Cognos
is currently the only third party vendor for which there are e-Clips,
but the company states that it is in the process of developing applications
for six other undisclosed vendors. Hummingbird EIP also features group
messaging and document sharing to enable collaboration. In addition to
the portal product, Hummingbird recently launched EIPCentral.com, a website
for portal developers to discuss portals, download e-Clips, and view product
documentation.
Hummingbird's
Competitive Position
The corporate portal market consists of vendors from primarily three segments.
The first is mid-sized enterprise software vendors who have developed
portal products. This includes such vendors as Hummingbird, Brio,
Cognos, and Hyperion. The second is pure play portal vendors that
only sell a portal product. Plumtree, InfoImage and Viador
are vendors in this segment. The third segment is large technology vendors
in which portal products make up a small percentage of their revenue.
This segment is made up of Microsoft, Oracle, IBM
and SAS.
Hummingbird's
annual revenues are in the middle of the pack among vendors in the first
segment. Note that Hummingbird does not break down total revenue into
product revenue and service revenue. The company did state that product
revenue has consistently been approximately 70% of total revenue while
maintenance and services make up the remaining 30%. Figure 1 compares
annual revenue among these vendors. Note that the fiscal year end of each
competitor is not the same: Hummingbird - 9/31, Brio - 3/31, Cognos -
2/28, Hyperion - 3/31. Thus Hummingbird's revenue over the same calendar
time period as the other three competitors is slightly higher than what
appears in the graph due to the company's revenue growth.
Figure
1.
Hummingbird
has had healthy annual revenue growth over the past three years. Figure
2 indicates that the company's annual revenue growth rate has been increasing
over the past three years, while its competitors' growth rates have been
flattening or declining.
Figure
2.
Vendor
Strategy and Trajectory
During the late 1990s Hummingbird acquired vendors to incorporate new
technology into its offerings. Now, part of Hummingbird's strategy is
to acquire technology vendors to increase market share within the markets
that it currently operates.
Hummingbird
is focusing internal development on integrating its current portfolio
of technologies. Future product development will focus on what the company
calls "application collaboration" which will allow portal users to drag
and drop any installed Hummingbird Business Intelligence or Knowledge/Document
Management tools into the portal. This will allow business users to customize
aspects of their portal that currently require an IT professional.
The
company clearly sees its corporate portal product as a tool to cross-sell
its Business Intelligence and Knowledge Management products because it
can offer out-of-the-box integration with these products. Therefore current
Business Intelligence or Knowledge Management customers can add a portal
with limited additional cost and risk integrating existing Hummingbird
products.
The
company has invested reasonably in product development and sales and marketing
over the past six quarters. Figure 3 shows product development and sales
and marketing expenses as a percent of revenue have consistently been
above 50%.
Figure
3.
Spending
in these areas is partially why Hummingbird has operated around breakeven.
Figure 4 illustrates the company's quarterly revenue and net income. Hummingbird
posted losses in two of the previous six quarters. Net income has slowly
increased over the past four quarters. The net profit margin for 4Q00
was 9.6%
Figure
4.
ANALYSIS
Vendor Strengths
Installed
Base: One of Hummingbird's biggest strengths may lie in its installed
base for Exceed. The company boasts a 70% market share and has sold products
to 75% of the Fortune 500. Hummingbird can tap its proven success and
customer contacts to sell its portal product.
Diverse
Product Line: Hummingbird hopes to use its portal product to cross-sell
existing applications. With over twenty products in Knowledge/Document
Management, Business Intelligence/Analytics, and Data Integration there
are plenty of opportunities to cross-sell existing products.
Owns
Portal Technologies: Hummingbird owns the Business Intelligence, Knowledge/Document
Management, and Data Integration technologies, which allow it to offer
quick integration and "application collaboration." Pure play vendors will
be challenged to provide that level of integration via co-development
partnerships.
Reasonable
Level of Resources to Commit to Portal Development: Although Hummingbird
is much smaller than the likes of Microsoft, Oracle and IBM, and is not
as big as competitors Cognos and Hyperion, the company is considerably
larger than any of the pure play portal vendors. Thus if the portal market
does explode, Hummingbird will likely have more resources to devote to
portal development than any of the pure play competitors.
Vendor
Challenges
Sustaining Profitability: Wall Street has recently put stringent
expectations of profitability on business application vendors, yet to
remain competitive in the market large amounts of cash need to be invested
in sales and marketing and product development. It is a challenge for
any vendor to invest sufficiently in these areas to support top line growth
while at the same time generate net income. Figure 2 indicates that Hummingbird
has had three consecutive quarters in the black, but short term actions
could have been taken to produce a positive fourth quarter at the expense
of the following first quarter. Hummingbird's next quarter results should
help indicate if the company is on a true path to profitability.
Third
Party e-Clip Development: Most portal products from Business Intelligence
or Knowledge Management vendors currently support the vendors' own products,
e-mail, and content feeds. Many vendors claim to have a truly horizontal
portal that provides each employee with the right information at the right
time. A truly horizontal portal should be able to provide the necessary
functionality from any business application to the proper user at any
time or place. TEC is unaware of any portal vendor that supports enough
third party applications to truly provide this level of functionality.
It is important for any corporate portal vendor to focus on supporting
third party applications from Business Intelligence, ERP and CRM. Plumtree
has significantly more third party development (i.e. Gadget development)
than most portal vendors.
BOTTOM
LINE
Vendor Predictions
TEC
predicts that Hummingbird has a solid chance of success in the portal
market. Although the company entered the market only seven months ago,
Hummingbird has generated $8M-$12M in revenue from portal sales to date.
For the first nine months of 2000 Plumtree generated $17.5M, indicating
opportunities Hummingbird lost from a later time to market are counterbalanced
by other strengths.
Hummingbird
stated that it plans to acquire other software vendors or professional
services firms to build market share. It would not be out of the question
if Hummingbird decided to acquire a pure play portal vendor for the same
purpose. A pure play vendor could provide market share as well as technology
and established partnerships. If Hummingbird could find a portal vendor
that has already forged relationships with major business application
vendors and uses similar technology for its adaptors, the acquisition
could provide a quick way for Hummingbird to establish important partnerships
(assuming the agreements will carry over) and attain any technology related
benefits from the acquired vendor. Furthermore, the value of community-based
assets like EIPCentral.com would increase as more users and e-Clips are
added. Note that TEC is not alluding to an acquisition of any specific
vendor.
Vendor
Recommendations
TEC believes that Hummingbird's ability to be a leader in the corporate
portal market will partly depend on the company's ability to do the following:
- Provide
a portfolio of e-Clips that support major business application vendors
including ERP and CRM vendors in particular.
- Provide
custom e-Clip development services or partnerships with integrators
to provide these services.
User
Recommendations
Portal
products vary among the following characteristics:
- The number
of third party business applications supported
- The level
of functionality provided for the business applications out of the box
o The collaboration and Knowledge Management functionality of the portal
itself
- Scalability
- Platform
Support
At this time
Hummingbird's portal supports relatively few business applications but
has very strong support for its own Business Intelligence and Knowledge
Management applications, which are very powerful. Current Hummingbird
customers should find this product very useful, if business problems exist
that require a portal. This would include problems around disseminating
information from existing Hummingbird applications throughout the organization
(especially for users requiring remote access).
Corporate
Portals Defined
TEC describes
corporate portals (also referred to as Enterprise Information Portals
or EIPs) as web-based technology used to disseminate business information
to employees and other constituents of an organization. Each individual
constituent receives only personally relevant business information. Corporate
portals can pull information from internal business applications as well
as from external data sources, including automated web searches. The following
diagram illustrates a generic corporate portal architecture at a high
level.
Figure
5.
Both the
business constituents and the data sources can be internal or external.
Typical portal technology consists of; middleware, a personalization engine,
security, and search agents. The search agents search internal and external
data sources. Other servers and data stores may fall between the data
sources and the portal technology.