Today, Hyland laid off around 1,000 members of its staff, about 20% of the company. That’s awful news for all those impacted, the staff members, their families, and their extended communities. Was it a surprise? Well, yes and no. It wasn’t a surprise that layoffs were coming; the scale of the layoffs was.
These are tough economic times for the industry as a whole. Even though the Information and Automation Management sector has been reasonably well insulated from the worst of it, it’s not immune to its impact. Past downturns have been similar in that when things get tough, enterprises want to automate more and more, in the often mistaken belief that they can make quick but long-term positive changes to their businesses. But that is the kicker; the automation side of our sector tends to ride these waves, and the information management side of things takes more of a hit.
Add to all this the fact that traditional on-premises document management systems have been a tough sell for years, and the scale of change needed at firms like Hyland becomes obvious. The bottom line is that Hyland’s business was built upon on-premises document management systems, particularly OnBase. Though Hyland, like all their competitors, has been pushing their customers to move to the cloud for over a decade, it’s not easy, as it’s not seen as a priority for the customer. It’s Martec’s Law in action; though technology advances quickly, adopting those newer technologies proceeds much slower.
It also has to be noted that Hyland is not the same company it was 20 years ago. We recently wrote about how OpenText (its closest competitor) has transformed itself over the years, and so in its own way, has Hyland. In the latter’s case, ownership by private equity (PE) firm Thoma Bravo means by default that announcements such as those this week should not surprise as Hyland is part of a broad portfolio of companies, past and present, including Kofax, Nintex, and over one hundred more. PE firms need to manage their portfolios as an entirety for their institutional investors and deliver a return through ongoing revenue generation and divesting those companies for a premium at a future date. Hence, the combination of a tough economy and future economic uncertainty, the PE operating model, and a gradual shift to the cloud will lead to situations like this.
Exactly where the job cuts have been targeted, and what the restructuring will look like, it’s too early to tell. But in our estimation, there will be less focus on OnBase and more on Alfresco & Nuxeo, from a document management perspective moving forward. And barring any major status shift, it may also be that there will, over the next year or two, be more focus on the automation side of things at Hyland, as that’s what customers want to buy these days and always have money, even in the most challenging times for automation projects.