Lexmark and Hewlett Packard: The Coming Discovery about Search
July 16, 2012
I read “Hewlett Packard Falls on Lexmark’s Warning.” Bad economic news is not going to get me too excited. The economy has been heading downhill since late 2007 or early 2008. Despite the talking heads’ optimism on CNBC, the recovery, turnaround, or upswing strikes me as disconnected from reality. Well, I suppose it is television, which has its own reality. But the financial asphalt does skin the knees of some big outfits.
Which brings us to this passage in the MarketWatch story:
Lexmark’s warning also suggests problems for H-P in its own printer business. Once considered the Silicon Valley giant’s crown jewel, H-P’s printer business has struggled with slower growth. One reason is the overall decline in demand — but there’s also the growing sense that users simply aren’t printing as much as they used to.
HP paid $10 billion for Autonomy Corporation and watched as the founder and some other Autonomy professionals walked out the door eight months after the deal closed. I have written about the messages HP has been sending about its plans to make Autonomy a big data powerhouse. When I check on Autonomy in my Overflight service, I notice that Autonomy is not generating the media and blog coverage it did prior to its acquisition by HP. My hunch is that HP does not appreciate the excellent marketing Autonomy did over the last decade. I think HP believed the marketing.
Wake up indeed. A happy quack to Warshjipsifr.com.
Lexmark paid unknown amounts for Brainware, the trigram search vendor and back office forms processing company, and for ISYS Search Software, founded more than a decade ago by Ian Davies. You can read a Search Wizards Speak interview with a Brainware executive and with an ISYS executive on the ArnoldIT.com Web site. Lexmark like HP believed that search and search related services would generate big money quickly and consistently.
I think both HP and Lexmark are in for some skinned knees and bloody noses. Here’s why:
First, search is a tough enterprise function to squish into a tidy little box. I enjoy pointing out that Solr / Lucene offers a viable alternative to for fee proprietary search systems. My hunch is that HP and Lexmark do not understand that the costs of maintaining proprietary systems, the costs of integrating proprietary search into on premises or cloud solutions, the costs of customer support, and the costs of effective marketing quite literally could break the piggy banks. Fortunately I am not the person who has to make these deals pay for the purchase price, cover costs, and generate sufficient revenue to make up for lost printer and ink revenue. I think the challenge is too much for a goose in rural Kentucky. I think it might be too much for high powered hardware executives at HP and Lexmark, but that’s just my opinion.
Second, search does require services. What’s interesting is that fixing a broken search system is not the same as repairing a printer or an ink cartridge. The costs associated with troubleshooting and remediating a problem are tough to control. With headcount for skilled engineers getting more and more expensive, open ended problem solving is going to cause some CFOs to get a bad headache. The challenge will be figuring out how to keep customers on the reservation while preventing disenchanted licensees from embracing an alternative. Open source search, maybe?
Third, the amounts of money involved almost force HP and Lexmark to find a way to stack high prices on anything using or touching their respective search technologies. Even if the competition is available at a lower price, HP and Lexmark may not be in any position to cut prices. With few pricing options, both companies may find themselves in a Microsoft aQuantitative bind. The market does not care and the money is just not recoverable.
Uncomfortable position? You bet your bippy.
Stephen E. Arnold, July 6, 2012
Sponsored by Ikanow
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