Mongoose Search Blog

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The past 3 years have seen significant consolidation in the enterprise search market. Traditionally led by smaller players, the top of this space is likely to be led from January 2012 by very large software and services companies.

These acquisitions have had a major impact on the market, to the point where certain analyst firms stopped releasing absolute ranking of search vendors. These have also created uncertainties for customers and prospects who naturally feel vulnerable to those changes.

Souvenirs

This is not the first time the enterprise search market has seen acquisitions. In 2006, Autonomy acquired Verity (at the time the largest player in the market) and in 2007, FAST Search acquired Convera RetrievalWare. But unlike these 2 acquisitions, the purchase of FAST, Exalead, Autonomy and soon Endeca are likely to have a much better outcome for customers, for prospects and for the technology.

The Verity and RetrievalWare acquisitions were nothing more than purchase of market share. In both cases the technology became extinct, customers were politely told to adopt a completely different product and the staff were let go or had their lives made so uninteresting that they went on their own.

The glass is half full

The FAST, Exalead, Autonomy and Endeca acquisitions are the result of genuine interest from much bigger software or services houses who  have in some cases been trying to go after this market unsuccessfully for years.

In this instance, the buyer is very likely to seek guidance from – and listen to – their new colleagues, as well as invest in the technology. Obviously, it will not prevent them from keeping their own agenda, but at least this agenda will incorporate points defined by the company acquired.

The Autonomy case is too recent, the Endeca deal is not sealed yet but in the cases of both Dassault/Exalead and Microsoft/FAST, the parent has been increasing investment in R&D and making significant efforts to stabilise the products to the delight of the customers.

FAST has initially been made one of the core workloads of Microsoft’s key business product – SharePoint – and if existing customers and partners listen to their trustful contacts, they will learn that the next version of Microsoft search will go beyond SharePoint, also exist as a standalone offering and make it to other Microsoft products.

Within Dassault, Exalead has kept on innovating, acquiring new customers with an ever stronger technology stack, covering brilliantly unexpected use cases. With its customers, Exalead focuses now on high value search applications, away from the traditional “I want a search box” project.

Autonomy IDOL is likely to benefit even more from its acquisition by HP. Recognised for a long time as the poor man of R&D investment by both analysts and existing customers (LinkedIn & analyst blogs), IDOL will probably finally see R&D investment and may get some of the management interfaces and front-end frameworks that the other 3 have had for years now.

And finally, Endeca is likely to be a cornerstone in Oracle’s strategy. Unlike the previous 3, it is easy even for the untrained eye to see the alignment of Endeca and Oracle. For Internet business, Oracle has over the years invested in acquiring top of the league web CMSs and e-Commerce technologies which Endeca complements very well, possessing not only a search platform but also a key set of tools used at some of the top media and most top e-commerce companies.
Oracle has, for as long as I can remember, been into “big data” but more in the business of storing big data and less so in retrieving it efficiently and intuitively. Endeca on the other hand has been showing promising investments in retrieval and analysis of big data.

Noise has a loudspeaker

The reader might ask “if everything is so positive, why is the feeling on the blogs and in professional communities so negative?” There are multiple reasons for that.

The first one is that other vendors, as well as consultancies working on other technologies, will profusely spread FUD to sell their own software / services / skills. A little bit of research typically separates the truth from the myth.

I have seen analysts saying that the Endeca acquisition would push customers to Open Source. I would love to see someone used to Endeca InFront’s ETL tools, Business console, SEO kit and front-end framework switch to Solr. They would probably end up at the psychiatric hospital after 2 weeks. A simple investigation highlights the gap.

The second one is that acquisitions do not happen overnight and tend to significantly slow the acquired companies in their plans. For customers it creates an uncomfortable period where everything seems to be up in the air. It is down to the acquiring companies to make sure that the message is communicated clearly, that despite a vision for technology alignment, innovation keeps going and that the legal hoops are not also felt by customers and partners. Companies have, so far, done a very average job at this.

Finally, the acquisition of an agile, leading company by a software or services giant has some drawbacks and those feeling it the most are typically the customers and the employees of the company being acquired (I exclude here any in-house legal teams who certainly do not have a good time either). Typically, bigger players come to a market with a very different perspective from the company they acquired. As a result, they often come with an agenda that is different and alignment is required and sometimes painful.
First and foremost, bigger players have other bigger players on their radar and not necessarily the smaller, top of the league ones. This hampers innovation as bigger players aim at stabilising their products to target large scale sales to their existing prospect / customer base. Moreover, the idea of losing a couple of sales because you are not top of the league is less important when your pipeline in 100 times the size of a smaller but more innovative competitor.

In addition, bigger companies typically come with process. And usually one that employees of that small agile company will not welcome kindly. Add to this the usual rationalisation of staff and immediately talent retention becomes an issue. All the more acute when that talent tends to escape to the competition. This on its own can have a huge impact. As an example Microsoft/FAST has had a hard time against Google/Endeca/Exalead/Attivio, not because the technology was poor but because the Microsoft sales people were facing armies of ex-FAST employees who knew the product inside out, including its weaknesses.
The retention of the sales staff is only a minor part of the issue. What customers are really concerned with is the retention of R&D staff (who can be a bit religious sometimes). This inevitably leads to gaps in the technology and roadmap.

Keep calm and carry on (intelligently)

Should companies be concerned about acquisitions?

The answer is slightly different depending on whether you are an existing or prospective customer.

For prospects, the task is a lot easier. Most of the work consists of evaluating your alignment with both the company acquiring the vendor and the technology itself. For instance, in most cases if a company is a Microsoft shop, it makes sense (particularly commercially) to leverage the FAST platform (there are exceptions of course).

Do not believe all the beautiful messages from marketing, as recent history has been showing that is it not uncommon to promise one thing and do another. Thoroughly assess your commitment to companies’ software and services, as well as the risks associated with a potential technology revamp aligned with the acquirer’s vision.

If you don’t feel comfortable, do this exercise yourself – don’t just rely on analysts’ reports. Leverage those of course but hire a consultancy firm which you are confident with to do the work for you. A few thousands of dollars now could save you hundreds of thousands in the very near future.

For existing customers, the problem statement is slightly different.

Customers with a light commitment (small installation) would be in the same position as a prospect but with a lot more insider information. Drastic changes to the technology in big companies don’t happen overnight and as a result any customer probably has 2 years of breathing time. By then, the internal teams would have had time to go through a process of re-evaluation and to summarise the expected costs of change, should this happen.

Customers with a heavy commitment to the technology will be in a very different situation. And those are typically the most unhappy ones if it turns out that the alignment is not there. Large installations mean significant costs of change and re-training which far outweigh the cost of purchasing and installing new software. These customers will however benefit from additional attention from the acquiring company which will try to keep them under its wing for as long as possible even if there is an evident gap. Customers should be aware of that and not sit comfortably waiting for a resolution that will in all evidence never come. It is better to be alone than in bad company. For these highly-committed customers, I would advise to leverage your contacts deep with the organisation that has been acquired to get some accurate insider information and evaluate early with some assistance if necessary if they are likely to be winners or have to change direction.

Autonomy, Endeca, next

The natural question that these acquisitions have left behind is: Who is next?

The technology giants’ interest and investment in the market leaves most (not all) smaller companies struggling for their space in a highly disputed market. Larger companies have a tendency to drive the prices down. As an example, for the public sector, FAST is now about 5% or less of the price it was before the Microsoft acquisition. Add to that the pressure brought by the Google Search Appliance (cheap prices, minimal setup, simplicity) and that leaves little room for manoeuvre for less advanced vendors. From then on, the idea of being acquired will sound interesting to the execs (a lot less so to the staff).

On the other hand, technology giants who are not in this market (I would also include here those who are, but are struggling to get anywhere) are starting to look at it with intensity. Some because they recognise that search is a key workload to have under your wing, others simply because they are growing wary that other big giants have it and they don’t. It wouldn’t be too surprising to see Adobe or SAP complementing their suites. It would also make sense for IBM to do something in that space considering that they have been struggling with search for a while, but they have much bigger fish to fry for the moment on the software front.

The real question is “who is left to be acquired?” considering that the top ones have already been purchased. Attivio and Vivisimo are top choices but whether they would want to be acquired is a totally different matter.

So, in short

Should you be wary of acquisitions?

Not as much as you might read in the blogs and professional communities.

1. Have a strong roadmap and a firm vision of where YOU want to take your platform.
2. Separate the marketing advertisements and the FUD from the real information then thoroughly evaluate the directions of both the acquired and the acquirer.
3. Assess your commitment to the technology stack of the acquiring company.
4. Start creating your plan B early if you are an existing customer and see that there may be a mismatch. Don’t wait until your version of the product becomes legacy.
5. Get highly involved with the vendor if you foresee great potential benefits in the acquisition (both existing and prospective customers).
6. Stay away when there is doubt (prospective customers) – other technologies with less uncertainties attached are a better option.

By Aurélien Dubot – Aurelien.Dubot@mongoosesearch.com