This morning, SDL announced that it would pay US$14.7 million to acquire XyEnterprise in its latest move to expand its global information management capabilities. The acquisition is the most recent example of consolidation in the fragmented content management system (CMS) sector. SDL acquires good technology at an attractive price (1.48 times revenue versus the 2.5 or more multiplier of better economic times), while Xy distances itself from competitors in the SGML-morphed-to-XML CMS sector.

Earlier this year, enterprise search leader Autonomy and enterprise content management (ECM) aspirant Open Text purchased industry pioneers Interwoven and Vignette, respectively. In their heyday, both Interwoven and Vignette had been active consolidators, each swallowing a variety of smaller and specialty vendors as they assembled their own ECM portfolios. Two years ago, SDL entered the sector with its purchase of web content management supplier Tridion. Nine months later, it bought a controlling interest in component CMS vendor Trisoft, completing that acquisition in September 2008. With this latest deal, SDL plants itself more firmly in the content management sector.

Last week, we spoke with XyEnterprise CEO Kevin Duffy and SDL’s Howard Schwartz (ex-Trados and Uniscape). They focused on the synergies to be achieved by having two component-based CMS products in the SDL portfolio rather than competing for every deal and developing the same software modules:

• A new division for component CMS. Instead of pitching CMS through its language-centric SDL Trados division, the company put Xy and Trisoft into the newly created SDL XySoft, with Duffy as the CEO. The Xy team will benefit from Trisoft’s Belgian headquarters and European footprint, while Trisoft will gain access to the U.S. market through Xy’s Massachusetts-based operation.
• Joint customers, existing integrations. The companies have a long history of working together. Four years ago, Xy integrated SDL TMS with its publishing solution, acknowledging the globalization requirements of joint customers such as Kohler and Tweddle.
  
• XML at the core, different foci for the market. Rather than tackle the fragmented and ill-defined ECM market with a combined offering. SDL will push Trisoft into DITA oppportunities and Xy into S1000D deals. The two product groups will develop new applications and modify existing ones that can be shared by Trisoft and Xy.

As we noted when it bought Tridion, these CMS products introduce SDL to corporate computing at the point in the buying cycle when top management is involved, when information architectures are being discussed, and when products worth hundreds of thousands or millions of dollars are being sold. This new acquisition has the potential to pull SDL even more firmly into the mainstream of corporate information architectures. For Xy, it gains the imprimatur of a publicly traded company behind it and turns a competitor into a collaborator.

However, the deal does come at a critical time for SDL, as it faces increased price pressure, more competition from both commercial and open-source solutions, and heightened buyer expectations in its core computer-aided translation (CAT ) tool market. Meanwhile, its ambitious project to unify its multiple translation management systems into a single solution continues, with delivery of the first version expected next year (see our members-only “SDL Refines Product Roadmap“). While XyEnterprise will add nearly US$10 million in new revenue to SDL’s turnover, just as importantly it brings in more development staff and seasoned executives with deep knowledge and experience in the CMS market.