HP's Board: What were they thinking?!

What are they thinking? HP buying Autonomy! It took everybody by surprise, probably because it isn't the most logical of moves in today's industry. The last rumor I heard connected to Autonomy was nearly a year ago that they were considering buying the Documentum (or should I say "Intelligent Information") division of EMC. But HP giving up on mobile and the PC business to go into search, content management, customer engagement and a much bigger, fuzzier information management realm? 

As a product strategy it could have been kind of interesting. Get out of the commodity PC and device business, concentrate on servers and build competitive advantage on the software of the most valuable assets on those servers. It's really too bad they didn't think through the whole Palm acquisition before starting this, but it could have been disruptive. However, this acquisition makes no sense on a lot of different levels. There are three things that will make this impossible - personalities, dis-economies of scale, and trying to do this in a post-technology market.

First, the personalities. I could just about imagine Mark Hurd making this work, maybe. However, Leo Apotheker? Did the HP board not realize why Leo was "asked to leave" SAP after a little under a year and a half in the sole CEO job. Perhaps they attributed it to a fatal flaw in the Hasso Plattner-dominated SAP organization. In reality, he was demotivating the whole organization with unclear direction. He was a competent technocrat elevated beyond his abilities in one of software's most demanding leadership positions. Hardly the leadership needed to integrate and realign a major Silicon Valley legend. In addition, his actions in relation to lawsuits from Oracle. Is run and hide really a strategy? Compare this with the decisive way that Larry Page has handled lawsuits against Google. On top of this swing from we are in mobile and now we are in only in servers, can we really discern vision. What are you going to think if you own HP hardware, HP software or Autonomy software? Is this guy going to stick with it? 

Best defense is to run and hide? An enthusiastic receptionist at Oracle shared this with me last year.

The other personality is Mike Lynch, or Doctor Lynch as he apparently insists on being called by staff. Mike is an extremely intelligent man and has steered Autonomy well through the economic downturn. Creating the largest British tech company, he should be an inspiration to all of us British software companies. He brilliantly positioned the mathematical musings of an 18th Century British theologian, Dr. Thomas Bayes, and turned it into the branding of a must have piece of software. Software that was originally designed to detect submarines. Simply brilliant marketing! However, the man can be very difficult. My colleague John Powell and I met with Mike Lynch ostensibly to OEM some software from Autonomy. What we got was an hour lecture on information management and then finally toward the end he explained that IDOL was everything we needed without listening to our requirements. Autonomy's sales guy saw us out at the end of the meeting and apologized. We didn't really see much reason to proceed. 

"Call me the Doctor." Michael Lynch: photo CIO Magazine.

Combine these two personalities and how will the two work? Will Lynch subordinate himself to Apotheker? Will Lynch take over? And how can you swing a giant supertanker of a company like HP in an entirely new direction quick enough? Not only are you jettisoning whole product lines, but you are putting existing and future integrated products into an uncertain future. HP as a hardware company has not exactly distinguished itself in software. EMC actually acquitted itself in software after the Documentum acquisition by the sheer charisma and software sales/marketing expertise of Dave DeWalt. Although both Apotheker and Lynch have tons of software experience, their leadership styles and personalities seem misaligned with the realities of try to change the direction of HP. 

HP, with its large size, organization and bureaucracy, will not be able change quickly for all the reasons of "Innovator's Dilemma", "Competitive Strategy", "Innovation and Entrepreneurship" and all those other business books that say it just isn't going to happen. This isn't Larry Ellison or Bill Gates saying "Just do it!" These are both interlopers interfering with a Silicon Valley institution. At this scale, you aren't going to get new solutions that combine the best of both HP hardware and Autonomy software to create magical new software for the Cloud. Despite Autonomy's claims that it does 30% of its business in the Cloud, that business is actually.... It is not clear that anyone is using or even capable of using the IDOL suite as part of SaaS solution. Is the vision to just take same old hardware and same old software and host it in a farm somewhere. Now is the time for innovation for new solutions that deal with the coming privacy, security and scale issues. However, that is likely to be done by new startups. Perhaps the HP of old could have done it. Not this one.

Is this the Exxon Valdez or HP changing course?

Finally, IDOL (Information Data Operating Layer) is a complex concept and it is the basis for the potential new range of server-based offerings. It is also the basis for Autonomy's cloud offering, supposedly the reason why HP is buying Autonomy. As Nick Patience notes in the 451 report, it's not super clear what Autonomy's cloud offering is, how much of the business it really represents and how big a growth factor it is. Is it "IDOL Cloud", is it Zantaz SaaS, is it some other offering that allows HP to play in the new Cloud world?

Complex concepts don't sell well now. We are in a post-technology world where people are going to ask what are you doing for me. HP/Autonomy can start going on about Bayesian distributions et al. However, what HP/Autonomy will get from customers is: does it work on my iPad and does it work with Google. Playing a full stack game against IBM and Oracle is a hard defensive or offensive move with a confusing message.

I love Cringely's thoughts written back in February on who is going to take over this mess. But maybe he's wrong and maybe Mike Lynch will get the job. If you go by the Wall Street Journal's Al Lewis, he's just going to kill the company.

Comments

[Sardire]

> Autonomy "IDOL Cloud"

Amusing and 'Dr Lynch' thinks this trumps semantic web / linked data cloud computing.

[Dave Kellog]

I'll put $10 with John on Lynch getting the whole schbang. Note, not $100 -- but $10. Strangers things have happened.

[Brent Williams]

John,

I agree completely about the craziness of this deal. I have not met Leo so can't comment directly on whether he's the choice to run HP, but I note that HP has never had good "software karma" in the 35+ years I have been buying and working on their products. I think the hardware mentality is so embedded in their DNA that it won't likely change in my lifetime. Sad but true.

Based on conversations I have had friends who covered Autonomy and have had extensive contact with "Doctor" Lynch, I seriously doubt that he can run a larger company like HP. Autonomy is stitched together out of enough pieces that I would be willing to bet that IDOL is more than slide-ware. Just another "mega architecture" that never actually ships anything useful.

Big companies buy little ones to try and acquire some "magic." It never works. It's exactly like some folk traditions that say eating rhinoceros horn will give one certain "enhanced capabilities." The horn eater ends up broke and un-enhanced, and the rhino ends up needlessly dead.

Despite the utter lack of evidence that this sort of acquisition contributes any magic to the acquirer, big bloated companies that have utterly lost their way keep signing up to do more deals like this. Look at Oracle. They started their acquisition binge in 2003, and the change in their market cap from the day before the Peoplesoft deal was announced to today is approximately the same as the amount they have paid for their purchases. Maybe less. In other words, the Street sees zero synergy despite Larry's unending blather about how wonderful it is.