Autonomy: An Anomaly or Bellwether for Search?
February 24, 2013
I don’t pay much attention to the corporate calisthenics at Hewlett Packard. I noted the chatter about layoffs at Autonomy. (See “Layoffs, Hiring to Come at HP’s Autonomy Unit.”) I chuckled at the notion that HP’s management team would write off billions and then try to sell Autonomy. (See HP: “Jefferies Analyst Says CEO Whitman Unlikely To Sell Autonomy, EDS.”)
Allegedly HP is in profit making mode, has its act together, and now sees Android as a way into the booming mobile market. Too late? No, never to late for a giant company which has tilled the ground for generations of MBA students to analyze and discuss. Few companies are quite the case study breeder reactor which HP has become.
The larger question is, “Is Autonomy an anomaly or a bellwether for search, analytics, and content processing?”
A happy quack to this outstanding surprise image from Jokeroo. See http://www.jokeroo.com/pictures/funny/very-unpleasant-surprise.html
Let’s look at the upside. Some folks at HP obviously perceived Autonomy’s technology, industry stature, and customer list as having value. The dollar amount assigned to the “value” is a subject of discussion. The point is that search such looked tempting and too good to pass up. HP talked to wizards, gurus, and poobahs. The information added up to $10 or $11 billion for the deal. The number, after the oddball write off, should have been closer to $2 billion. One cannot argue with the powerful enervating effect talk about the payoff from search and line extensions causes among “rational” managers.
The write down suggests three post-sale revelations or understandings from my vantage point in rural Kentucky:
- Search sounds good but it is tough to sell regardless of the economic climate. Selling search is not what the buyer expected. Hence, the understanding of the cost of sales flipped on the “insight” circuit. Panic does not capture the feeling I believe rippled through the HP offices. Holy cow! What now? Good question.
- Search is not a product like a candy bar or box of breakfast cereal or a toaster. Search is a permanent work in progress. Customers want the equivalent of a West Coast Customs rebuild of an already expensive, exotic vehicle. The resources required to get search to work as the marketers have asserted are enough to make grown investment bankers cry. In my experience, many do or work like the devil to spruce up the goose and sell it at the highest possible price. Some investors have told me, “Never again” after learning first hand that search is a money pit among money pits.
- Search requires massive customer support. Customers are never happy, which is one reason why large organizations have multiple enterprise search systems, eDiscovery systems, specialized search systems for chemical or engineering data, indexing systems, embedded search systems, and search systems for their other search systems. Yep, this is the meaning of a federated search or unified information access. Unhappy customers cancel deals and become more resistant to other products from a vendor. Bad karma with a big price tag. Yikes!
Autonomy, in my view, was an anomaly in terms of revenue. No other enterprise search vendor has come close to its revenues. Endeca was roughly one eighth the size of Autonomy’s $800 or $900 million in r3evenue. Google won’t say how much money it makes from its Google Search Appliance and probably won’t. Not even mighty Google has been able to ignite the revenues of a search toaster. Aren’t toasters commodities? Yep. Search is a customized vehicle which annoys its owner. Oh, oh.
On the other hand, Autonomy is a bellwether. I watch with some interest the floundering at the big companies which have purchased “enterprise search systems” in the last few years. Microsoft Fast, Lexmark Isys and Brainware, IBM iPhrase and Vivisimo, Dassault and Exalead, etc. I also note the outright failures of search vendors; for example, Convera, Delphes, Entopia, etc.
The big question is search a viable business? Who wants to do search? Fewer and fewer companies. That’s why companies which are really into information retrieval use more double talk than General Mills when describing a cereal as healthy. Search vendors are analytics companies, customer support enablers, business intelligence vendors, and various buzzword combinations.
I applaud Autonomy. It did what no other search company did. I don’t thing there will be another Autonomy-type play soon. An HP? Well, the company now understands why I have been reminding people that search is hard, expensive, and complicated.
HP just paid $10 billion or so for the lesson. Reading Beyond Search is still free. Such a deal.
Stephen E Arnold, February 24, 2013
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