Search Acquisitions

November 18, 2011

One of my two or three readers sent me a link to “Acquisition: The Elephant in the Meeting Room.” I don’t have strong feelings one way or the other about Mongoose, the write up, or the enterprise search sector. I have identified some of the buzzwords used to dance around the little-discussed problem of lousy enterprise search systems. If you want to catch up on the obfuscation in which marketers and “real” consultants are entangled, you may find “Search Silver Bullets, Elixirs, and Magic Potions: Thinking about Findability in 2012” a thought starter.

The main point of the Elephant article, it seems to me, is summarized in this passage:

Should you be wary of acquisitions? Not as much as you might read in the blogs and professional communities.

The write up mentions a number of high profile acquisitions and provides some color for the reasons behind the deals. My view of some of the recent deals is different from the Mongoose write up. I suppose that at age 67, I have been watching and participating in the sale of large and small companies. I learned in my work at Booz, Allen & Hamilton before it became an azure chip firm, that the reasons for a corporate action are often difficult to discern from the outside looking in.

The table below provides a run down of my personal take on why certain deals took place.

Company Buying Company Bought ArnoldIT Comment
Autonomy Stratify Autonomy solved a problem at Iron Mountain and gained customers and upsell opportunities for archiving and eDiscovery
Hewlett Packard Autonomy Sell services around Autonomy’s technologies
IBM i2 Group Delivers customers in law enforcement and intelligence; complements tools like Cognos and SPSS Clementine
OpenText Nstein Open Text grows via acquisitions; Nstein adds “smart” indexing to SGML search, BRS, Fulcrum, etc.
Oracle InQuira Upsell opportunities and customers in customer support; NLP technology a minor consideration
Oracle Endeca Consulting services opportunities; response to Hewlett Packard’s moves
SAP Aleri Address perceived weaknesses in existing systems
SAP Inxight via Business Objects Inxight came along for the ride when SAP bought Business Objects
SAS Teragram Fill a strategic void in unstructured text processing
Symantec Clearwell Systems Customers and Clearwell cloud capabilities in legal sector
Thomson Reuters Lexalytics Bought “rights” as a defensive measure and fill a weakness gap created with ClearForest/Calais

I have more detailed information but per the About page, that information will not appear in the free blog. Also, the licensing deals enterprise search vendors pursue provide insights into weaknesses and tactical motives as well; for example, Microsoft’s tie up with Cognition Technologies, a company the azure chip crowd and the legions of failed webmasters, unemployed clinical psychologists, and out of work home economics majors know well. I will not cover licensing tie ups either. I have a report on the search vendors who are now looking for a buyer. Quite a few vendors are “on the bubble.” This means that a bad quarter will lead to a total shut down of the company. That information will not be provided in a free blog post, but it is important if a company is tire kicking a used car which will fall apart when driven off the lot.

What does this table suggest? Here are three points that struck me:

  1. On the surface, buyers are looking for revenue; that is, standing orders and upsell opportunities. Forget technology. The deals are designed to allow a company with weak top line revenue growth to pump up that number quickly.
  2. Technology on the surface is not the reason for the deal. People come with the purchase and some of them will be retained. The technology is usually handled as a “not invented here” capability and, over time, remains static or gently loses its cutting edge (assuming it had one in the first place). Some of the recent deals are for technology which dates from the late 1990s. In case you don’t think of search as an old function, many systems are running on decades old innovations.
  3. The moves are defensive; for example, a purchaser has a problem and needs a fix or the acquirer is afraid of technology so the company buys a company with a promising technology to keep it from a competitor.

Let’s assume the table above is reasonably accurate. How does its information stack up with the Mongoose write up?

First, existing customers are likely to be unaffected. Acquirers don’t purchase companies to make radical changes. In fact, due to the cost of maintaining a search system, the acquiring company invests sparingly or, in some cases, only when a paying customer wants a function and will pay for it. In short, it is status quo time.

Second, sales and marketing professionals explain benefits using any angle that closes a deal. In my experience, the marketing messages get “wrapped” with the notion that the new owner has more resources, but the reality is that the marketing baloney keeps pace with the buzzwords in the market. A good example is the chatter about social search. One vendor has rolled out a “social framework.” Scratch the surface and the 1998 technology is visible.

Third, companies have to grow via acquisition because of their size, their lack of innovation, or the perception that a deal will generate “synergies.” The reality is that acquisitions are often a way to take action without having to do the hard work of developing a solution with available staff. Google is now buying innovation, enticing developers, and tapping into innovation in Israel as if Israel was not a big part of Google’s technology capabilities for the last decade. Google is out of innovation fuel although I am sure a 20 something will set me straight with that Googley sincerity I enjoy so much.

The Mongoose write up ends his article with six tips aimed at a person working in an organization acquiring a search system. The first suggestion is what I call the “road map card.” This is consulting work, but most procurement teams arrive with a bias for a system so the road map is often a validation of decision. The dust up over the National Archives job may have some color from this approach.

The second suggestion is to figure out what is marketing and what is real. Good luck with that. Most procurements rely on demonstrations and looking at existing implementations. If the resources are not available, no search system can deliver what is on display in a demo. Therefore, the trick is to know how much money and time are available and then match what is shown with what it cost to deliver that function. Money, not marketing, is the key. With appropriate resources most modern search systems can do a very good job. Without money, even the best search system will be a flop.

The third suggestion is to figure out the technology of the search system. My view is that more search and content processing is being subsumed into other enterprise applications and certain search functions will be heading to the cloud. As a result, focusing on technology is okay if it is the right slice of technology. Get the on premises versus cloud thing wrong and there will be some issues. Get the technical capabilities of the licensee orthogonal to what is required to make the search system work and there is trouble. In short, technology is important but the right mental view of technology is more important.

The fourth suggestion is to create a plan B. In my experience, forget acquisitions. Most search customers do not have a plan B. A procurement team is lucky if it has a plan A. With more than half of the enterprise search implementations dissatisfying users, it is pretty obvious that a flawed plan A will lead to a potentially flawed plan B. A different approach is needed because those unable to get plan A correct are the go-to team for plan B. If the plans are done by consultants, that’s an invitation for more trouble in findability. Consultants may be English majors or individuals with zero implementation expertise. There are exceptions, but there are more carpet baggers than experienced implementers of complex search systems.

The fifth suggestion is to get involved with the vendor. This is a tricky idea. Sales professionals know how to play some licensees the way Myron Florin played his accordion. The key is effective management. A quickly look at the financial statements of many organizations makes clear that effective management is not a core competency of the organization. In fact, acquirers of search vendors often illustrate their management flaws. One example is the Hewlett Packard termination of the CEO who developed the firm’s “be like IBM and SAP” strategy.

The final suggestion baffled me. The idea of avoiding vendors “when there is doubt.” In my experience, if a vendor has potentially useful technology, it is important to understand that system. Avoiding knowledge is one of the characteristics of some folks younger than I that fosters failed search implementations. The “you don’t know what you don’t know” is a dangerous policy.

Let’s face it. Search is difficult. Figuring out how to solve user problems begins with the users. The notion of who owns a vendor is important but comes lower in my check list. As a 67 year old addled goose, why worry about the Mongoose? I am not. I find the subject fascinating and a trigger for many “experts” having an opportunity to find their future elsewhere.

Stephen E Arnold, November 18, 2011

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