Documentum was founded in the summer of 1990 by database engineers Howard Shao and John Newton. Documentum leveraged Shao and Newton’s relational database knowledge with software systems dedicated to enterprise document management. Documentum software has the capacity to interface with many operating platforms and manages unstructured content such as technical procedure documents, medical records, financial, and inventory data.
During the timeframe examined during the Harvard Business School case “Documentum, Inc.”, Documentum was in “Stage One – Growth” as they were a new industry that offered a superior buyer surplus compared with the available substitutes. This surplus was founded on innovative product features through the management of unstructured document information. Documentum was focused on automating the business processes of large enterprises. As a startup, they were required to bridge the trust gap of that enterprise. It has been noted that firms choosing to implement technology developed by fledgling companies are essentially sticking out their proverbial neck. Firms were required to front significant investment in capital and resources and the failure rates in such automation projects were very high (on the order of 15% - 50% depending on the project). Furthermore, Documentum faced challenges related to their financial viability, product development and testing resources, and their execution experience. Documentum’s primary cost driver was research and development in an amount relating to 328% of sales percentage for 1992. While working on the New Drug Application processing system, Documentum was forced to extend its products core functionality and their system integrator spent several hundred hours customizing the Documentum software in order for it to meet the customer demands. While the differences between the applications