[BusinessTeam] From SAR daily -- Vignette

Message-ID: <6B75EF096AE0BE428B8CEDEA89C5F63278231E@exchange01.lab49.com> · Tue Jan 23 16:48:04 2001 UTC

Content's Conundrum: To Vignette or Not To Vignette 

by Andy Pelander 

Vignette \vin-yet\ n: Austin-based content-management software provider 
that 
may or may not be useful for every website company that needs its content 
managed. 

Among high-end content-management firms geared for top-tier online 
companies, Vignette Corporation (Nasdaq: VIGN) may be the only game in 
town, 
according to those who use the system software most: nerds. But not all 
nerds--developers, programmers, producers, information architects, and 
business journalists--are sold completely on the idea that Vignette is the

best way to build a dynamic website. 

Founded in 1995, Vignette applications--which organize, personalize, 
aggregate, and even syndicate online and wireless content--evolved from 
script originally written by engineers at CNET looking to bundle huge 
amounts of tech news and information onto webpages in a way that holds the

server and a website's database together. The resulting application allows

multiple users to edit the content and use the system with little 
technical 
know-how. Basically, it's an app that simplifies how companies update 
their 
online content. 

CNET managed to design a piece of software--or middleware, as it's 
classified--that acts as a giant sieve separating content delivery from 
that 
content's database. The software was purchased by Vignette, renamed 
StoryServer, then bundled with Vignette's own development software. It is 
used today by some 1,200 Internet companies, some of which pay in excess 
of 
$1 million to own the complete Vignette application outright, while others

are billed according to site traffic and other factors. 

But not every content company is convinced Vignette's app is so killer. 

Do You Vignette? 

Young Paik, once the lead engineer for the late entertainment webcaster 
DEN, 
recalls using Vignette to install and develop a very elaborate and 
redundant 
system that made the company's streaming-media sites virtually crash 
proof. 
Vignette allowed DEN to fulfill its online business 
processes--copywriting, 
programming, legal components, advertising information--within a central 
network. 

The system was set up, Paik says, so that a copywriter could write in MS 
Word and dump copy into the system, for instance, without learning any new

technology; the Vignette system automatically transferred text into HTML. 
Plus, if components A, B, and C of an online project were complete, the 
system alerted the person responsible for component D that his work was 
past 
due. 

"Without this system, A, B, and C have to go through a technical person to

be input into the system," Paik says. "With the system, non-technical 
types 
were able to submit data and--boom!--you have a webpage." 

--------------------------------------------------------------------------

-- 
---- 
"They say they want to 'grow with you,' which really meant 'the more 
popular 
you become, the more expensive it gets.'" 
---Young Paik, former lead engineer at DEN 

--------------------------------------------------------------------------

-- 
---- 

Web producers who manage various pieces of the system--different 
streaming-media pages and sections within DEN, for instance--with a solid 
content-management application can supervise content without a 
computer-science degree. And despite an installation and maintenance that 
Paik calls "purposely designed to require Vignette consultants" and, 
therefore, "basically impossible" even for seasoned IT professionals, DEN 
was satisfied with Vignette. 

But somewhere along the line something went awry, because DEN eventually 
switched from Vignette to Allaire's Cold Fusion application. 

Paik's first complaint was the cost, which he says grew prohibitive. 
Initially, DEN opted not to purchase the application, agreeing instead to 
a 
customized cost structure that billed the company per page view. Vignette 
charged DEN its fee based on logs kept of site traffic. That wound up 
costing over $1.5 million annually, Paik says, since the deal was 
structured 
like a lease with both upfront and periodic costs. 

"It was supposed to be some kind of profit-sharing cost model," Paik said,

who now works for another streaming-media firm still under radar. "They 
say 
they want to 'grow with you,' which really meant 'the more popular you 
become, the more expensive it gets.' 

"But the pageviews for us didn't indicate increased revenue," he said. 

A second alternative for DEN would have been Allaire's Spectra, its 
flagship 
management system, which costs a barebones $7,500 per server. Vignette 
users 
pay an upfront fee to use its development-environment software, followed 
by 
a per-server fee, which can vary depending on site load. The resulting 
price 
range spans the scope of time and space by comparison, costing clients 
anywhere from $25,000 to several million dollars. 

One of the reasons Launch.com has recently decided to switch from Vignette

to an ASP-based solution was the roughly $20,000 a year it was paying for 
each server powering its site, says Shane Bishop, a Santa Monica-based 
producer for the company. Initially, when Launch.com was quoted a server 
cost estimate, the company was told its Vignette-enabled system would 
require three servers. According to Bishop's estimate of $20,000 annually 
for each server, Launch.com was justified in its disbelief when it learned

that 12 servers would actually be required, stretching the 
content-management budget considerably. 

"We were led to believe the application was very robust, which, from a 
theoretical standpoint it is--you can scale your site well using 
Vignette," 
Bishop said. "But in reality, the development environment is not that 
friendly, and when we got into it, it became hugely expensive." 

Launch.com's biggest complaints stemmed from developers who insisted that 
a 
number of key functionalities promised by Vignette failed to deliver. 

"The software was fine four years ago and still is today if you're not 
going 
to push anything beyond text content through your system," Bishop said. 
"But 
most content is kept in databases today for syndication and other reasons,

and dynamic and personalized content like on My Yahoo, for instance, is 
not 
handled well by Vignette. And there's a lot of that now, so I think 
Vignette 
may be a bit of an older technology." 

The Stone Cold Fusion Alternative 

According to Vignette spokesman Jim Hahn, the company was founded as a 
service for the Internet's biggest companies. Before the company's 
founders, 
Neil Webber and Ross Garber, started shaping their software, they 
collected 
business magazines for several months that featured top-level 
technology-company executives on the covers. Then they called the 
executives 
on the covers of magazines stacked around them and asked, "What's the one 
thing you need?" 

"They all said content management," Hahn said. 

So from its earliest days, Vignette has targeted the bigwigs and, in 
essence, Hahn admits, has conceded the remaining middle- and lower-end 
markets to the Allaires and Tridions of the world, the makers of 
alternative 
content-management software. "It was a conscious business decision," Hahn 
said. "We're after the biggest names." 

To look at Vignette's client list, which includes mainstays Bertelsmann, 
JP 
Morgan Chase, Compaq, Daimler Chrysler, Hewlett Packard, Terra Networks, 
and 
United Airlines, as well as Q4 newcomers Dow Jones, the U.S. Army, and 
Volkswagen, it's no wonder comparably smaller operations such as DEN and 
Launch.com find its cost structure a tad pricey. 

DEN's Paik said he used Vignette for a year, until it became too expensive

to operate. To make site modifications DEN programmers needed to buy 
prepackaged Vignette modification programs, Paik said, that cost a 
fortune. 
"If we wanted to add an e-mail function or credit-card processing software

to the existing functionality, we had no choice but to use their 
applications," he said. 

DEN switched to Cold Fusion some 13 months and nearly $2 million after 
signing on with Vignette. 

"Cold Fusion served the same purpose--middleware that connects a server to

a 
database--and can be used to program specialized and customized webpages 
like My Yahoo just as well and for much less money," Paik said. 

Because Cold Fusion's programming language is similar to HTML, in-house 
DEN 
developers could learn it and save money. Prepackaged Cold Fusion programs

are often free. 

"Clients come to me and say, 'We need Vignette,'" says Josh Massie, 
director 
of information architecture for Los Angeles-based webshop DNA Studio. "And

I 
always ask, 'Why? What about your business and their software make you 
think 
you need it?'" 

Massie acts as a middleman in many respects when developing websites and 
content-management solutions for clients, and is often the one who calls 
firms like Vignette and BroadVision for pricing quotes. But because the 
cost 
structures are case-by-case, it can be difficult to get an accurate 
estimate. 

When asked how much Vignette costs, spokesman Hahn said his company 
doesn't 
give out that information. "What we do do, however, is go into a company 
and 
map out what the customer wants to do, then tailor a solution to fit their

needs." Prices range according to site size and amount of content, but 
Vignette's average deal price in Q4 was $540,000, Hahn said. 

Hahn says Vignette doesn't deal with webshops, only with the customer. He 
also says he's not aware of any company that has ever installed Vignette 
software and then decided to switch to a different application. 

"Trying to price out a solution for clients is impossible sometimes," 
Massie 
says, whose firm has produced sites for HBO, Warner Brothers, and Sony 
Entertainment. "There's no standard. I've been asked how many developers 
will be working on the project on an ongoing basis, and when I don't know 
I'm told that if it's three it will cost a certain amount and if it's 10 
it 
will be more." 

Many of his clients come to DNA Studio expecting it to be 
Vignette-compatible, but often Massie is able to develop solutions 
in-house 
that are cheaper and more personalized. 

"I think [the Vignette pricing structure] is highway robbery many times, 
because clients don't understand how they're being billed. It comes down 
to 
whatever they can stick you for. So we've decided to do it all in-house, 
because it's cheaper for our clients and it's cheaper for us. And it's 
better. We get exactly what we want this way." 

One such DNA Studio client that had a large-enough e-commerce business to 
merit a system of Vignette's capability but decided otherwise was 
Dunk.net, 
a retail play that peddles Shaq- and Mike Piazza-endorsed retail items. 
DNA 
Studio helped craft an ASP-run solution specifically for Dunk.net instead.

Caching the Fever 

For a site such as Dunk.net, one of the Vignette strengths spokesman Hahn 
most proudly boasts is nearly useless, diminishing its value. Vignette's 
caching technology is particularly useful for sites with sizable content 
libraries, not e-commerce plays. Client sites with caching technology 
access 
information frequently summoned from the database by one user and then 
display a cache version of the same page to subsequent users. This 
prevents 
a website from having to retrieve data from its database everytime a 
different user wants to read an article about personal finance on CNN.com,

for instance. 

The technology essentially creates a temporary file on a company's server 
similar to the way Internet Explorer creates temp files on a user's PC. 
The 
technology was patented by CNET and inherited by Vignette. 

"I like the software very much," said Carlos Pero, IT director for 
ARTISTdirect, who's been working with Vignette since 1996 when he worked 
at 
the Chicago Tribune, one of Vignette's oldest clients. "High-horsepower 
sites only have to tap the database once, tapping only the pulled file and

not the server the second time. It's not a useful function for eBay, but 
it's good for the publishing world." 

Though other content-management applications offer their own caching 
technology, it is features like it that give Vignette continued success 
among client companies that can afford not to be as conscious of 
development 
costs. 

Last Thursday, Vignette reported a fourth-quarter profit of $649,000 
(cash-flow positive), up from a loss of $2.7 million in Q4 1999. Its 
revenue 
totaled $123.9 million for the three-month period ending Dec. 31, up 203 
percent from Q4 1999 and up 12 percent from Q3 2000. And while every 
revenue 
dollar Vignette earned in Q4 only cost 5 cents (net loss of $6.3 million 
in 
Q4), the company was downgraded by six analysts yesterday, including 
Salomon 
Smith Barney, Deutsche Banc, and Dain Rauscher. 

Vignette will also take a one-time fee in the range of $45 million to $55 
million for restructuring in Q1 2001 due to IT softening in the 
marketplace, 
and plans to lay off 15 percent of its 2,300 employees to reduce costs. 

Vignette expects the restructuring to lower operating costs by $100 
million 
this year, according to Hahn, following a stock decline in 2000 that led 
the 
firm's share price from over $100 last March to this morning's $7.59. 

Not All Content Sites Are Alike 

Who should use Vignette applications? Vignette, a company whose IPO was 
among the top performers in 1999, would likely answer "more companies." 
But 
experts--those who work to implement the software daily--say the answer is

more complicated than that. 

Although geared toward large websites, Vignette was not the tool of choice

for a megasite like Yahoo. Nor was any other third-party content 
management 
system, as Yahoo uses proprietary software designed by its own engineers. 
But if Vignette had existed when Yahoo first began developing sites such 
as 
My Yahoo, which debuted in 1996, it would have considered two core 
functions: scalability and speed. 

"Granted, Vignette wasn't around in the early days of Yahoo," Scott Gatz, 
director of production for Yahoo, says. "But had it been, we still would 
have wanted to control our own destiny. We didn't want to be tied to a 
third 
party's development cycle." 

"It's true, we use our own software, but with an off-the-shelf application

we'd want to know if it is going to be able to scale to Yahoo size and 
will 
it be able to run at Yahoo speed," he says. 

ARTISTdirect's Pero estimates that one in 20 companies that install 
Vignette 
applications decide it's too much for their site or is too expensive and 
uninstall. "But the other 19 realize that it's better to rely on a good 
software provider than to try to craft their own, spending valuable 
software 
engineering resources," he said. 

"I think they're putting out good software that I can implement simply," 
Pero says. "Clearly, Vignette is a very good environment to develop in. 
But 
their product also gives you enough rope to hang yourself with. And by 
that 
I mean it's very easy to build a site in Vignette that is difficult to 
maintain from a data or template standpoint, and probably not reliable." 

Experts agree that companies should begin the content-management system 
search by identifying their content needs and whether an application of 
Vignette's cost and size is necessary. 

"To my knowledge, we have never uninstalled Vignette for any reasons 
pertaining to cost or excessive power," says Jonathan Monetti, director of

business development at Qwest Interactive, the IT professional services 
arm 
of Qwest Communications and a marquee Vignette partner since 1995. "Its 
performance and stability actually make it a very cost-effective solution 
for content management when compared to other environments." 

One can surmise that Vignette has trouble being all things to all people, 
with some companies hailing the software while others pull their hair out.

The software, while used by sites both gargantuan and comparatively 
modest, 
seems best geared for large-scale operations. 

"If I was a start-up company I wouldn't choose Vignette unless I'm 
something 
highly technical, like a huge wireless play or something involving partner

companies that are very large," Massie says. 

"It comes down to cost, man hours, and need," Massie says. "Can you 
quantify 
the kind of cost required to run this application? Is your site so robust 
that you need a site-management app of this size?" 

Feedback: letters@siliconalleyreporter.com 

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