Digital media: The puzzle master

Open Text's chairman, Tom Jenkins, is piecing together a national digital media strategy.

For the amount of attention it gets, Waterloo is still a quiet burg of just over 120,000 people nestled amid prime southwestern Ontario farmland. The entire region, including the larger cities of Kitchener and Cambridge, has a population approaching only 500,000. And yet even here, in this small city that Tom Jenkins has called home for more than two decades while building Open Text Corp. (TSX: OTC) into Canada’s largest software company with nearly $800 million in annual revenue, the executive chairman, chief strategy officer and former CEO is largely anonymous.

With a stocky five-foot-nine build, short grey hair, folksy drawl and love of Sudoku puzzles, Jenkins’s star quality is negligible. There’s no dramatic sweep of silvery hair like Mike Lazaridis has or the aggressive domed pate of Jim Balsillie, the nearly iconic co-CEOs of Research In Motion who put Waterloo on the map, first with their BlackBerry business, and then by spending tens of millions of dollars of their personal fortunes to establish research institutes (and chase pro hockey franchises). Jenkins could easily be mistaken for your average sales guy, modest in almost every way, except for one thing: his ambition to make Canada a global powerhouse in digital media.

“Investment in information and communications technologies accounts for more than 50% of the reason why other countries are becoming more competitive than us, but, for some reason, we have not made those investments in Canada,” says Jenkins. “Digital media is a pre-eminent example of where the puck is going. It’s important that Canada build capacity in digital media right across the spectrum.”

But, like many things that happen in Waterloo, some credit for Jenkins’s emergence on the national scene must go to RIM’s leaders, who the father of three calls his “brethren across the parking lot. Both Jim and Mike had really started to show some leadership in areas that they knew, and, quite frankly, they had admonished me as one of their colleagues in Waterloo as to why I had not engaged in the same way,” says Jenkins. “I thought about it, and I realized they were right.”

Jenkins has definitely taken that admonishment to heart. Case in point, for two days in early June, Jenkins and Open Text were going to be front and centre at the Canada 3.0 conference, which is trying to develop a national digital media action plan. More than 1,000 players in business, academia and government converged on, of all places, Stratford — a quaint town even smaller and, well, more rural than Waterloo. Why Stratford, best known as a destination for more than half-a-million theatre lovers who take in some Shakespeare each summer? Because this is the future home of the Stratford Institute, a new University of Waterloo think-tank and higher-learning centre — also championed by Jenkins and Open Text — that will explore digital media opportunities by blending together liberal arts, computer science and business marketing.

The Stratford Institute is also the anchor for another of Jenkins’s pet projects, the Canadian Digital Media Network, a concept the federal government awarded $10.7 million in January, to go with almost $40 million pledged by Open Text and provincial and local governments. The plan is for the Stratford Institute to join forces with a new innovation centre in the works for downtown Kitchener, where entrepreneurs and researchers can access digital imaging and studio technologies, and startup business services, mentors and venture capital. Together, they will try to link in other digital-media clusters in Toronto, Montreal, Vancouver and elsewhere. The ultimate goal: to spur greater collaboration between researchers and entrepreneurs across Canada.

In little more than two years, Jenkins has somehow positioned the Waterloo region — and even more surprisingly, Stratford, a 40-minute drive west — as the focal point for Canadian digital media. That’s no small feat. The region is not known for creating 3-D animation, video games, mobile entertainment and the like, which thrive in Canada’s three largest cities. Waterloo is known as the home of RIM, of course, and to a lesser extent Open Text and a handful of other smaller, publicly traded tech companies — Dalsa, Descartes Systems and Sandvine. Not one of them is a video-game developer or digital-content creator. But Jenkins rejects this narrow definition of digital media. For him, the technologies underlying, say, 3-D visualization and simulation or the ways people will manipulate and organize digital visual information without keyboards hold a promise that extends far beyond consumer entertainment and into every industry segment, academic research and government.

Jenkins’s vision is sweeping. “We are taking all of society and digitizing it,” he says. “We are not going to do it in a year, and we’re not going to do it in any one person’s lifetime. The vast majority of information is still outside the digital world, but over time we will turn everything in the analog world into digital.” In this way, digital media is redefined as how one creates and uses increasingly pervasive digital information, not just an end product.

And that is why digital media matters to Open Text. The company has spent the past decade quietly building and acquiring the pieces of software infrastructure that allow some of the world’s biggest organizations to retain control over their overwhelming quantities of digital content — in all its many forms. As Jenkins sees it, Open Text makes tools for a world that is rapidly digitizing.

But this isn’t just an Open Text strategy. Jenkins argues it’s an issue of national competitiveness. On one hand, he says, Canadians need to be making and commercializing the tools that will digitize the world; on the other, Canadians need to have ready access to those tools to continually improve productivity in a fast-changing world. Either way, Jenkins sees the Canadian Digital Media Network and the Stratford Institute as a foundation for the country’s digital coming of age.

These initiatives also represent a rite of passage for Open Text. The company is emerging from being an oft-overlooked and underestimated software maker into a leading corporate citizen that plays a role in influencing national policy and economic development. Such a transformation goes beyond a PR exercise or even good strategy. For Jenkins, it is a personal opportunity to establish himself as something other than just a successful tech entrepreneur: a leading business thinker.

Jenkins has been a local champion for years: speaking to entrepreneurs, mentoring through Communitech, even co-chairing a 2006 meeting in Stratford that looked at economic policy initiatives for the region — which was when the idea for a University of Waterloo satellite campus was first discussed.

But he never expected the call he got two summers ago. It was the Prime Minister’s Office asking if he was willing to serve on the five-person Competition Policy Review Panel, chaired by Lynton (Red) Wilson, spend a year travelling the country and the world and examine the issues necessary to create a new economic blueprint for Canada. These were issues he’d never taken the time to chew over. “It was a big eye-opener for me,” he says. “When you’re running a globally competitive company, you don’t have time to think about anything else.” The panel’s report was issued a year ago, with some of its recommendations already being adopted by the federal and provincial governments.

But a national champion is not something Jenkins thought he’d be. He’s surprised he’s still working at Open Text 15 years after he was brought on as chief operating officer. “I thought I would be starting companies every four or five years,” he says. “I’m an entrepreneur.”

As the son of a Stelco steelworker in Hamilton, a young Jenkins relied on high marks and scholarships to pay for three separate degrees, each of which touched on technology and business. After working at a number of small high-tech startups, he moved to Waterloo in 1987 to join Dalsa Inc., a University of Waterloo spinoff that was then in the early stages of building a business based on manufacturing image sensors. After seven years of tackling several executive positions, Jenkins got a call from another promising local tech business that needed help getting off the ground — Open Text.

The early history of Open Text ought to be canonized in Canadian technology folklore, but it’s not widely known. Started in the mid-1980s as a groundbreaking University of Waterloo computer science research project — putting the complete Oxford English Dictionary into an easily searchable and modifiable computer database — Open Text by 1991 had become a small consulting company selling its search engine mostly to university libraries. By the time Jenkins joined in the summer of 1994, at the age of 35, the company had 21 employees, a small but successful suite of corporate search-engine software, and $1 million in venture capital that it was burning through.

Fortunately, the Internet was emerging as a new market, and Open Text, based on the work of co-founder Tim Bray (who would go on to create the XML coding language that now forms a basic building block of the modern web) launched in 1995 one of the first online search engines. It struck a deal to become the search engine of a quirky, up-and-coming web directory called Yahoo!, splitting ad revenues 50-50. But when giant Digital Equipment Corp. offered Yahoo! its Alta Vista search engine for nothing more than branding, Open Text wasn’t willing to match the offer — much to the dismay of investors and analysts covering its new Nasdaq-listed stock.

Instead, Open Text decided to focus on search engines for corporate intranets. “Amongst the management and the board of that time, it was pretty logical,” says Jenkins. “It was quite clear that [search engines] was a game that was going to be consumer-driven, a game that you needed to play out of San Francisco or New York. Back then, there was no fibre cable to Waterloo. We were running all our servers out of Palo Alto.”

Times have changed, but Open Text’s bet on the corporate market has paid off. As the market for intranet search engines evolved, Jenkins steered the company into a category of corporate software called enterprise content management (a now standard term that was, in fact, coined by the company), which helps companies organize and search information of all kinds within their organizations. In 2008, the global ECM market was worth US$3.4 billion, according to market research firm Gartner Group, and Open Text held a 15.3% market share, second only to IBM’s 22.4% share. Although Open Text is not as large as most of its competitors — including EMC and Microsoft — it successfully positions itself as an independent that works well with others.

It’s also generally regarded as a well-managed operation that has an aggressive but smart acquisition strategy led by Jenkins. Open Text’s recent deals include the approximately US$489-million milestone purchase of Toronto-based competitor Hummingbird Ltd. in 2006, a smaller deal in April to take over struggling Toronto startup Vizible Corp. (terms were not disclosed), and a US$310-million offer in early May for Vignette Corp. (Nasdaq: VIGN) of Austin, Tex., the last independent ECM player that has more than $100 million in revenue. In 2008, despite all the turmoil in the markets, Open Text’s stock was among the best performers on the TSX, up 17.8%. (This year, it was up 2.6% as of June 3.)

While Open Text has been running relatively smoothly over the past few years, expanding its Canadian operations to the point where about 1,000 of its 3,500 or so employees work in the country, other larger Canadian flagship tech companies have been acquired (ATI Technologies, Cognos) or badly faltered (Nortel Networks). That has left Open Text, along with RIM, with what Jenkins regards as an opportunity and a responsibility to show leadership in the Canadian market for R&D.

Jenkins estimates Open Text will likely spend more than $1 billion on R&D over the next five years, while the company has previously spent about a quarter of that amount to this point in its history. “You can imagine what the company can do in digital media by spending four or five times the amount in a fraction of the time,” says Jenkins. “The innovations here are starting to become world scale.”

But Jenkins also recognizes that as a flagship, Open Text can become a channel for smaller domestic firms to the global market. “We bring expertise, and the knowledge of serving 50 million corporate users,” says Jenkins, “but probably the most profound value is that when someone has a spark of a great idea, we can give them a better-than-fighting chance of actually getting that better mousetrap out to the world.”

That’s the broader mindset of an emerging business leader on display. One who is thinking long term about developing the new digital skills that Open Text and other tech firms will need to compete, and helping to spur a national approach to commercializing new ideas and research. It’s time someone sparks that kind of discussion and research, and Jenkins figures it might as well be him. Even if at first people don’t recognize him on the street.