Endeca Deal Ups Ante in Oracle Fight with HP
October 19, 2011
Today American computer technology corporation Oracle entered into an agreement to purchase Endeca Technologies, a Cambridge MA vendor of software for unstructured data analytics and business intelligence for an undisclosed sum.
Who cares about this deal? Hewlett Packard to name one company. Other organizations will see this as a little known software company which has been absorbed by a far larger database and enterprise software firm. Search is now a bit like Norton Utilities, an add in.
After the deal closes, Oracle allegedly will create a comprehensive technology platform to process, store, manage, search and analyze structured and unstructured information together enabling businesses to make stronger and more profitable decisions.According to the Computer World article, “Oracle Boosts Enterprise Search with Endeca Purchase” Oracle said in a statement:
The purchase will allow Oracle to offer a range of technologies that will help enterprises process, store, search and analyze both structured and unstructured data in an integrated fashion.
Despite the range of customers and products that Endeca brings to the table, we suspect that the amount Oracle paid is probably hefty. Endeca has ingested more than $70 million since the late 1990s. Stephen E Arnold, author of The New Landscape of Search, told me:
Endeca tried to pull off an IPO several years ago. That did not take place. Endeca then raised additional money from Intel and SAP’s venture unit. Endeca was not able to generate the type of revenue Autonomy had achieved. Oracle’s purchase of Endeca complements or complicates the firm’s search and content processing cost situation. Now Oracle has the aging Oracle Text, the somewhat inefficient Secure Enterprise Search 11g system, the InQuira natural language processing system, the TripleHop tagging systems, and the Endeca Guided Navigation system. One thing is certain: consulting and engineering services will be required to herd these different technologies forward in a cohesive manner. Like Hewlett Packard, Oracle may be betting on big companies with an appetite for expensive engineering to make the deal pay, regardless of the price Oracle paid for Endeca. With Microsoft bundling Fast Search with some SharePoint licenses, Oracle’s desire for a high margin, no brainer upsell may be tough to achieve.
We foresee three primary challenges in Oracle’s future:-
- Avoiding the high cost base of supporting and enhancing quite different search technologies. This is a strategy that Autonomy was able to implement, but enterprise software vendor OpenText has not yet been able to make work at Autonomy’s scale.
- Fighting successfully against HP and Autonomy for services revenue in a market where search is a commodity and becoming a component in a larger software system. Exalead has implemented this strategy effectively. Now Oracle and HP will have to differentiate their offerings and maintain margins and fees for search solutions decline. Autonomy has outperformed Endeca for many years in both management acumen and revenue production.
- Finding a way to keep costs under control. Search is an expensive proposition, and Oracle will have to do more than get a Fortune 500 firm to sign on for Endeca’s solution. Oracle will have to boost margins, implement Endeca’s consultative approach to search, and invest in Endeca’s eCommerce, business intelligence, and unstructured data technology. eCommerce may be a tough challenge due to the increasing interest in open source solutions such as eBay’s acquisition of Magenta.
Our question: Who will emerge to challenge Dassault Exalead in search based applications? IBM OmniFind and Watson, an open source vendor, one of the many newcomers to search? Will Endeca’s MBA style approach to consultative engineering pay dividends to Oracle, a company with some US Marines type qualities? Culture shock, anyone?
Stay tuned.
Jasmine Ashton, October 18, 2011
Sponsored by Pandia.com
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