HP-Autonomy and the KPMG Due Diligence Document
June 15, 2019
I noted this article in The Register, a UK online publication: “HP CFO Cathie Lesjak Didn’t Even Read KPMG’s Autonomy Due Diligence Before $11bn Biz Gobble.” The write up reports that Hewlett Packard professionals did not read a report about Autonomy prepared by the accounting and consulting services firm KPMG. DarkCyber finds the information in the article interesting. We noted this statement in the Register’s write up:
Barrister Robert Miles QC asked her: “I think you didn’t, yourself, read a due diligence report prepared by KPMG, is that right?” Lesjak replied: “I did not.”
As intriguing as this exchange between Autonomy’s attorney and an HP executive involved in the astounding $11 billion purchase, the Register provides a link to the “confidential” and “draft” report about the finances of Autonomy.
The document is available at this link. Note: that confidential documents can be removed from public access at any time. DarkCyber, an organization with more time but fewer resources than HP, read the document online.
DarkCyber’s conclusion is that HP’s failure to read the KPMG draft deprived the HP executives of information germane to the purchase price of $11 billion.
Other items of interest to DarkCyber in the KPMG document dated August 9, 2011, were:
- KPMG itself lacked access to certain information; for example, certain details related to Autonomy’s income taxes
- Autonomy’s financials (top line revenue and profits) were softening after the $870 million in revenue reported in FY2010
- Autonomy used a method known as “Tower” in order to achieve certain financial objectives; namely, obtain maximum financial benefits from its activities such as loans.
The KPMG report is a “draft” and its authors presented sufficient information (even though that information is incomplete) to call into question the purchase of Autonomy for $11 billion.
The deal did not work out for either HP or Autonomy. HP lost traction with its shareholders. Autonomy found itself mired in an unpleasant and highly visible legal battle.
DarkCyber’s view is that companies engaged in search, retrieval, content processing, and allied disciplines have an unusual track record. For example, a number of little known companies simply failed to meet their revenue objectives and went out of business. Examples include Delphes (Canada), Entopia (Israel), InQuire, and others.
Other firms engaged in Autonomy-type software and services sought buyers in order to avoid financial problems. Examples include Exalead (acquired by Dassault), Vivisimo (acquired by IBM), and others.
Convera and Fast Search & Transfer are examples of enterprise search and Autonomy-type services caught in the same business quagmire as Autonomy; that is, robust promises about technology, difficulties generating sustainable revenue, problems in satisfying customers, and problems controlling infrastructure, R&D, and customer support costs. Convera (once Excalibur) was rescued by Allen & Company but was unable to deliver satisfactory solutions to information processing needs at Intel and the NBA. Fast Search & Transfer was involved in a financial investigation related to the company’s balance sheets. Microsoft stepped in and bought Fast Search in 2008.
Most of these problems with Autonomy-type companies stemmed from a combination of these miscalculations, errors in judgment, or over optimistic marketing:
- Search and retrieval is difficult to define; therefore, whatever system is installed at an organization will disappoint most of a system’s users. For this reason, large companies have a specialized system for legal, one for bench chemists, one for marketing, etc. Due to disenchantment, competitors can make a sale only to face clamors for engineering fixes or termination of the contract. Sustainable revenues are, therefore, a characteristic of Autonomy-type companies. (The KPMG report makes clear that Autonomy relied on acquisitions to increase its top line revenue.)
- Enterprise search vendors typically over promise and under deliver. Sales professionals and marketers glibly explain the value of unlocking the hidden value of an organization’s data. The reality is that the costs of determining what data are available, who can view certain data, cleansing and validating that data, indexing the data, and then keeping the indexes up to date and in line with access privileges is a significant burden. The cost of “unlocking’ exceed the available resources and appetite for investment in many licensees of Autonomy-type search systems. (The KPMG rolls these costs into undifferentiated line items, a serious omission. These costs help explain the “you can’t get there from here” problem inherent in Autonomy-type software.)
- Autonomy-type systems from the period covered in the KPMG report were mostly proprietary code. Over time, these code bases became increasingly complex and at the same time more fragile. As a result, the costs of standing up a system, fine tuning it, and then tailoring it to the needs of the licensee grew over time. Like the content preparation work in item 2, the ongoing costs of the Autonomy-type system added another set of hard to control costs. (The KPMG report does not provide detail related to the costs of triage engineering to fix urgent problems, on-going fixes, and work needed to keep the foundation system current with competitors’ innovations.)
There are other issues with the KPMG which DarkCyber noticed.
Net net: KPMG did a good job making clear that the deal was likely to be a difficult one due to the tax methods, the intra company financial processes, and the mechanisms used to allow Autonomy to demonstrate growth and reasonable margins over the period of time covered by the KPMG professionals.
HP seemed oblivious to the issues “enterprise search” posed; specifically, enterprise search is a niche business delivering expensive, proprietary solutions which rarely satisfy its users regardless of the vendor involved.
HP wanted to buy and buy big and fast. Autonomy appeared to be the solution to HP’s problems. KPMG identified the issues. Impulse buy? Maybe. Uninformed buy? Looks like it. Did Autonomy buff its show car software? Of course, getting the customer to buy is the objective.
Profiles of selected Autonomy-type software vendors are available without charge at the Xenky.com Vendors Web page. You can find that collection of vendor profiles at this link.
Stephen E Arnold, June 15, 2019
Windows and Search: A Work in Progress, Slow Progress
June 13, 2019
Unless you know a file’s specific name, trying to find it using the Windows search function sucks. The Windows search function is notoriously bad in each version from 1995 to the latest Windows 10. Searching on a Windows PC is so bad that Apple makes a point of stating how fast and accurate its Spotlight Search function is. In June 2019, Microsoft debuted its latest Windows version dubbed 1903. MS Power User explores how Windows’ 1903 has changed search (or so Microsoft claims) in the article, “How To Use The Enhanced Windows 10 Search in 1903.”
It is hard to understand how a company that revolutionized how people interact with computers cannot get a simple function correct. Yes, search has its own complexities that require well written code, but it remains one of the simplest machine learning functions compared to language translation, photo editing, and processing audio files. MS Power User agrees that Microsoft let the ball drop when it comes to search, but 1903 might be software patch it needs:
“Microsoft’s Windows 10 has had search as one of its pain points ever since it debuted. Search was often panned for being slow, inaccurate and sometimes just for not finding anything at all. With Windows 10 1903, Microsoft has tackled that. First. Cortana and Search were split apart so the Windows team could tackle both individually. This means that Cortana gets better at Cortana things, while search gets better at Search things. With 1903, those seeds have already borne some fruit.”
To improve search with 1903, users have to adjust the search settings. Windows 1903 has two options: “classic search” and “enhanced search.” By selecting the enhanced search option, the full power of Windows search is projected over a computer’s entire hard drive. Windows classic search sucks. Why is Microsoft still including it in their OS when there is a better option? In fact, why are they even forcing users to choose between the classic and the enhanced search?
A good OS should not make its user work harder. A good OS is a tool that is supposed to easily organize and communicate information. Windows, you are letting me down.
Whitney Grace, June 13, 2019
Google: Can Semantic Relaxing Display More Ads?
June 10, 2019
For some reason, vendors of search systems have shuddered if a user’s query returns a null set. the idea is that a user sends a query to a system or more correctly an index. The terms in the query do not match entries in the database. The system displays a message which says, “No results match your query.”
For some individuals, that null set response is high value information. One can bump into null sets when running queries on a Web site; for example, send the anti fungicide query to the Arnold Information Technology blog at this link. Here’s the result:
From this response, one knows that there is no content containing the search phrase. That’s valuable for some people.
To address this problem, modern systems “relax” the query. The idea is that the user did not want what he or she typed in the search box. The search system then changes the query and displays those results to the stupid user. Other systems take action and display results which the system determines are related to the query. You can see these relaxed results when you enter the query shadowdragon into Google. Here are the results:
Google ignored my spelling and displays information about a video game, not the little known company Shadowdragon. At least Google told me what it did and offers a way to rerun the query using the word I actually entered. But the point is that the search was “relaxed.”
The purpose of semantic expansion is a variation of Endeca’s facets. The idea is that a key word belongs to a category. If a system can identify a category, then the user can get more results by selecting the category and maybe finding something useful. Endeca’s wine demonstration makes this function and its value clear.
Google Makes Search, Mmmmm, Better
June 7, 2019
“First AR Objects Launch in Google Search with 3D Animals” reports that Google makes search better again. Search for an animal on a supported device while you are doing the Google Lens thing and you will see a three dimensional animal. I would be thrilled if a query returned relevant results. Plus, I am okay with relevant links directing me to a relevant document which may or may not contain an illustration. Ah, progress. What happens if Google reconnects with a robot company so that as one looks at an AR rendering of a tiger, a robot tiger comes to the user’s location and snarls. Relevant? Heck, yes.
Stephen E Arnold, June 7, 2019
Autonomy CFO: Sentenced
May 14, 2019
I read ”Autonomy’s Former CFO Sushovan Hussain Sentenced to Five Years in Jail.” The article reported that Sushovan Hussain will be incarcerated for 60 months and then “subject to “a further three years ‘supervised release’.” In addition to the sentence, Mr. Hussain has been fined $4 million and another $6.1 million described as a “forfeiture payment.” This $6.1 is the money Mr. Hussain allegedly received as a result of the sale of Autonomy to Hewlett Packard. HP bought Autonomy for about $11 billion in 2011. (HP news release is here.)
The write up states:
In summing up, Breyer stated that Hussain had been involved in a “methodological long-term pattern” of making false statements and added that Hussain believed that in a high-growth business, such as Autonomy, future growth would effectively cover-up any false statements. Breyer also argued that Hussain had used his position to corrupt “a number of innocent people”, chivvying them into becoming a part of the fraud.
If you are unfamiliar with the technical details and some of Autonomy’s background, you will find a profile I wrote years ago in the Xenky archive. This is a version of my final report, and it has not been updated, but it provides some context for the interest Autonomy generated in its search, retrieval, and content processing systems.
The Register, a UK publication, provides periodic updates about the trial currently underway in England. You can locate these reports at www.theregister.co.uk. Use the search function to locate the stories.
Some History of Enterprise Search
This sentence and fine was more aggressive than the judgment against the former Fast Search & Transfer founder, John Lervik, who after a series of legal processes, was cleared of wrong doing in 2016. Microsoft purchased Fast Search & Transfer in 2008.
Autonomy and Fast Search were the two vendors of enterprise search which were the most widely licensed information access systems in the period 2005 to 2010 when appetite for proprietary search began to decline. The acquisition of Vivisimo by IBM and the purchase of Exalead by Dassault did not lead to litigation. Other search vendors sold out or simply tried to reinvent themselves in a somewhat challenging search for revenues. Today, the most widely used enterprise search system is Elasticsearch, which is available as open source software. Endeca has been absorbed into Oracle. Delphis and Entopia went out of business. OpenText rolled up a number of search companies, which are now largely forgotten; for example, Fulcrum and BRS. There are a number of interesting case studies waiting to be written; for example, the trajectory of Convera from “inventor” to consulting business, the fate of Verity and IBM’s Stairs as well as other companies helping to expand search’s version of the tulip craze centuries ago.
Stephen E Arnold, May 14, 2019
Google: What Does Relevance Mean?
May 11, 2019
Here’s the question for you: “What’s relevance?” The answer — if I understand the allegedly true information in “Google Creates ‘Dedicated Placement’ in Search results for AMP Stories, Starting with Travel Category” — is what Google decides you may see.
Forget the AMP thing because it is a content tiering play. No AMP, no display in a special section of results. Simple. Easy to understand, right?
Why is this important?
- Most users (searchers) accept what Google delivers, and Google delivers what generates revenue..
- The majority of users want convenience and will not want to spend time “looking for information”. (When one does not exert data energy, what one gets is good enough. Try to explain this information issue, the fish only know water. The world of gaseous oxygen is a tough concept.
- Users do not perceive the scope of the machinations which content producers and advertisers eager for clicks and eyeballs undertake in order to appear in the special AMP listing. Few care or have the knowledge foundation to discern the machinery grinding away.
Google pulls the strings. Relevance is what generates revenues or helps Google meet its objectives.
Who controls relevance for a particular person looking for information?
Does this redefinition of relevance impact me and my DarkCyber researchers? No. The reason is that we know that search results on Google are skewed. We know content disappears from the index. We know that to track down a particular citation or document we have to resort to old fashioned methods. Phone calls, use of niche search tools, and even visits to libraries with information on microfilm are not unusual for us.
The problem is that for a majority of people looking for information online, those skills and the knowledge which lubricates their functioning is either gone or quickly eroding.
Try to find the US Army’s updated guideline for software procurement via Google? Try to locate information about Threatgrid and its connections to other security firms. Try to locate documents germane to the CMS MIC program which back up and sometimes replaces FBI personnel’s investigations of health care fraud. Try to find English language content about Moonwalk, a video service of considerable interest to some people.
For years, I have retained some interesting content because I know that content may not be findable the next time I use the “AMP’ed” up Google or the other aggressively filtering Web indexing systems. Sometimes you can hear my team’s teeth gnashing over the whine of our local storage systems.
I call this the findability crisis. Someone has public information, but others cannot find it. Therefore, that information is effectively unfindable or “gone.” Hasta la vista.” And there’s no, “I’ll be back” for these content objects.
With shallower indexing and deletion of “old” content (which some call either history or evidence), the world of free, ad supported Web search and retrieval is going medieval. To get information, one has to be one of the top one percent of information professionals.
Interesting? Only if one knows what’s happening, gentle reader.
Relevance? Yep, new definition. New world of information. Knowledge is not power. Knowledge is danger maybe?
Stephen E Arnold, May 11, 2019
Facebook Search: Fun for Some?
April 19, 2019
Ah, Facebook. The news about millions of exposed passwords was almost lost in the buzz sparked by the now infamous “Report.” Every week, it seems, there is a Facebook goodie to delight.
Despite its modest flaws, Facebook might be a social media network becoming a fave of the Mashable reports in “Facebook’s Search Feature Has Some Pretty Creepy Suggestions” about the firm’s search function.
Allegedly the Facebook search function allowed users to search for photos of women, but not men. Inti De Ceukelaire, a Belgian security researcher, discovered that when he typed in “photos of my female friends,” he got the desired results. However, doing the opposite with “photos of my male friends” yielded memes Risqué search phrases were also automatically suggested:
“That discrepancy is troubling enough, but it gets worse. While testing out these searches, the first automatically suggested query was “photos of my female friends in bikinis,” which returned photos of women in bikinis, as well as one image of a topless woman, which would appear to violate Facebook’s rules against nudity. Facebook removed the image following Mashable’s inquiry. Separately, “photos of my female friends at the beach” was also suggested.”
Mashable continued to test the big and discovered more questionable searches that contained what might be thought of as a “creep” factor. Searches with male in the search phrase, though, were more innocuous. Facebook reports that suggested search phrases are not based on an individual user’s history, but all of Facebook. In other words,
Who coded this search function? Maybe some men? Men just having fun?
Whitney Grace, April 18, 2019
Quantum Search: Consultants, Rev Your Engines
April 18, 2019
Search is a utility function. A number of companies have tried to make it into a platform upon which a business or a government agency’s mission rests. Nope.
In fact, for a decade I published “Beyond Search” and just got tired of repeating myself. Search works if one has a bounded domain, controlled vocabularies, consistent indexing, and technology which embraces precision and recall.
Today, not so much. People talk about search and lose their grip on the accuracy, relevance, and verifiability of the information retrieved. It’s not just wonky psycho-economic studies which cannot be replicated. Just try running the same query on two different mobile phones owned by two different people.
Against this background, please, read “How the Quantum Search Algorithm Works.” The paper contains some interesting ideas; for example:
It’s incredible that you need only examine an NN-item search space on the order of \sqrt{N}N?times in order to find what you’re looking for. And, from a practical point of view, we so often use brute search algorithms that it’s exciting we can get this quadratic speedup. It seems almost like a free lunch. Of course, quantum computers still being theoretical, it’s not quite a free lunch – more like a multi-billion dollar, multi-decade lunch!
Yes, incredible.
However, the real impact of this quantum search write up will be upon the search engine optimization crowd. How quickly will methods for undermining relevance be found.
Net net: Quantum or not, search seems destined to repeat its 50 year history in a more technically sophisticated computational environment. Consultants, abandon your tired explanations of federated search. Forget mere geo-tagging. Drill right into the heart of quantum possibilities. I am eagerly awaiting a Forrester wave report on quantum search and a Gartner magic quadrant, filled with subjective possibilities.
Stephen E Arnold, April 18, 2019
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:
The firm’s stock does not seem to be responding as we enter the second quarter of 2019.
Netwrix Buys Concept Searching
April 5, 2019
Late last year we learned that Concept Searching was selling itself to Netwrix. I don’t pay much attention to “finding” solutions. I thought of Concept Searching in the context of the delay in awarding the JEDI contract. Concept Searching might be a nifty add on if Microsoft gets the $10 billion deal.
Concept Searching had positioned itself as an indexing outfit and taxonomy management tool. The company struck me as having a Microsoft-centric focus and dabbled in enterprise search and jousted with Smartlogic.
According to the company’s founder Martin Garland:
Concept Searching is excited about becoming a part of Netwrix. Merging our unique technology with its exceptional Netwrix Auditor product delivers a new level of protection to organizations concerned about data security, with the ability to identify and remediate personal or organizationally defined sensitive information, regardless of where it is stored or how it was ingested. The expanded team will enable us to be even more agile, increasingly responsive to our clients’ needs, and to deliver a platform for growth to both client bases and ensure we maintain our leadership position in delivering world-class metadata-driven solutions.
Netwrix is a software company focused exclusively on providing IT security and operations teams with pervasive visibility into user behavior, system configurations and data sensitivity across hybrid IT infrastructures to protect data regardless of its location. The company has 10,000 customers.
DarkCyber believes that like Exalead’s acquisition by Dassault or OpenText’s purchase of assorted search and retrieval systems, it will be interesting to watch how this acquisition works out.
Stephen E Arnold, April 5, 2019
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