Expert System: Interesting Financials

April 6, 2019

Expert System SpA is a firm providing semantic software that extracts knowledge from text by replicating human processes. I noticed information on the company’s Web site which informed me:

  • The company had sales revenues of 28.7 million euros for 2018
  • The company’s growth was 343 percent compared to 2017
  • The net financial position was 12.4 million euros up from 8.8 million euros in March 2017.

Remarkable financial performance.

Out of curiosity I navigated to Google Finance and plugged in Expert System Spa to see what data the GOOG could offer.

Here’s the chart displayed on April 6, 2019:

image

The firm’s stock does not seem to be responding as we enter the second quarter of 2019.

Google’s data about the firm’s financials is interesting:

image

Notice that the firm’s revenue appears to be declining, if one assumes that Google’s data are accurate. The decrease is about 11 percent. More telling, the cost of those revenues is increasing at a couple of percentage points each month.

Let’s step back. What do the data on the firm’s Web site and the Google Finance service suggest?

  1. In the midst of the Hewlett Packard Autonomy litigation and the 2008 revelations about the financials of Fast Search & Transfer, getting consistent numbers related to search and retrieval systems seems to remain a challenge.
  2. Generating sustainable, robust revenue by selling artificial intelligence, semantics, and other buzzwords is difficult. I would anticipate that the uptake of open source software like Elasticsearch and the growing dominance of Amazon text processing are likely to make life more and more difficult for firms such as Expert System.
  3. The companies generating money from text processing are delivering value which derives from more than buzzwords. Examples include Amazon, Google, and Facebook. For those wanting content processing, these “platforms” provide search and indexing as a utility function which integrates with other services.

To sum up, there are a number of companies selling text processing technologies which look to the past. Examples range from Expert System to Exalead to Smartlogic to others. These companies’ solutions are not tuned to handle these content types in a seamless manner:

  1. Emojis embedded in text messages
  2. Audio and video content which Google has only begun to process at scale
  3. Images which are a controversial content type but an increasingly important way to convey certain types of data about products, services, and even encoded information among teens and bad actors
  4. Chat streams which if encrypted must be processed for metadata which include geocodes, comprehensive date and time tags, ISP in the transmission chain, and the content which may be intentionally obfuscated within a specialized operating environment.

The companies will sell natural language processing and plain vanilla text analysis are slipping out of the mainstream. Some are gone like Dieselpoint. Others are clinging to a specialized market like dtSearch. Some like X1 are trying to rework older code bases to catch up with the market for eDiscovery tools.

The question becomes. “What will happen to these search and retrieval firms wedded to text?”

My speculative  views are:

  1. Interesting exits will occur. Concept Searching was purchased by Netwrix, for example, in a deal which may be a bet on government contracting work for Microsoft procurements.
  2. More pivots will take place; for example, EasyAsk to online commerce, X1 to eDiscovery, and Coveo to customer support, among others.
  3. Attivio-type strategy flip flopping among Big Data, analytics, and search will take place.
  4. De-emphasis of search will occur. A good example is the declining visibility of IBM OmniFind and to some degree Watson as a findability tool.
  5. Retreat into a single language market. A good example is the trajectory of Exorbyte.
  6. Withering will take place; for example, Ambar, Oracle’s various search flavors, and SLI Systems, among others.

And what about Expert System SpA?

The company is working hard to generate sales, make news, and remain relevant. The challenge for some (perhaps most?) of these firms is that significant changes in findability are afoot. The content types have shifted from text to what I call “text plus.” The access method is mobile.

Expert System may be a helpful company to watch. As its management leads the firm forward into a multi-content, mobile future, the performance of Expert System may provide guideposts for the dozens of companies competing for available revenue.

That’s revenue Amazon and other giants for which search is an item on a punch list covet. If I am correct, Expert System may find itself between a rock and a hard place as the tectonic plates of content accelerate their movement.

Stephen E Arnold, April 6, 2019

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