Worldwide market for KM worth a massive $12.3 billion by 2004, says Ovum

After an initial period of hype and early adopter experimentation, the knowledge management (KM) market is entering a new and critical second phase - acceptance by the early majority of end-user organisations. This second phase is characterised by the widespread deployment of intranets as a platform for KM, according to new research just out from Ovum, the independent research and consulting company.

In an authoritative new report, Knowledge Management: Building the Collaborative Enterprise, Ovum finds that the KM market is growing rapidly and will continue to evolve and expand over the next five years as KM becomes a core element of corporate IT strategies. Ovum forecasts that the worldwide market for KM software is set to increase from $515 million in 1999 to $3.5 billion by 2004. In the same period, KM services will grow from $2.6 billion to reach $8.8 billion.

"KM addresses some of the most important business issues facing modern organisations - issues that concern both their internal adaptation and their relationships to the external world," says Madan Sheina, a senior KM analyst at Ovum. "Organisations across a wide range of vertical sectors are now actively looking to KM for bottom-line improvements. They recognise that in a `knowledge-based economy`, intellectual capital is their prime asset and has to be managed as such."

But Ovum warns the KM vendor community that this new phase also presents a new set of challenges for them. "While the KM market continues to grow quickly, it is becoming much more competitive as it is targeted by big players, including Microsoft and IBM/Lotus, offering wide coverage," adds Sheina. "As the initial hype fades, new categories such as `portal software` will become increasingly popular with vendors seeking differentiation. KM will also be linked with, and will generate, many new concepts and technologies over the coming years. But the basic market drivers and user requirements for KM will remain the same, even though the labels and suppliers may change."

Ovum also points out that the rise of KM is closely associated with the development of the corporate intranet. "Intranets have been used by many user organisations to challenge and bypass existing barriers to communication," continues Sheina. "They have also forced organisations to think through their information content strategy, from the capture of ideas to the structure of data, and the storage and distribution of knowledge. These organisations are now evolving their intranets to provide a platform for KM - specifically to develop a new breed of collaborative applications in areas such as product development, customer relationship management and competitive intelligence."

A key area identified by Ovum for further development and expansion in the KM market is support in the creation of `virtual` communities within and beyond the corporate firewall. The provision of enterprise-scale support for distributed teams will become one of the most important factors for competition amongst KM vendors over the next two years. Equally important will be the ability to expand and tailor that support to enable these communities to involve business partners, suppliers and customers.

Ovum believes that the `corporate portal` has a logical role to play within an intranet-based KM strategy and serves as a simple label for the more complex developments in the management and analysis of unstructured information that is driving the KM software market. Users need to access portal offerings from the perspective of their overall KM support; vendors must ensure they do not mistake the tactical advantage offered by portal hype with the more fundamental changes that KM and intranets are driving in the software market. "One of the unfortunate effects of the portal hype, however, is that it is obscuring some of the most important developments associated with KM technology," concludes Sheina.