HP's bombshell announcement that it is to acquire Autonomy has left many questioning where this leaves the UK software industry. Computer Weekly asks the experts what the deal means for UK home-grown tech talent and what HP is likely to achieve with the latest addition to its portfolio.
The technology industry has been trying to get its bearings following HP's announcement that it intends to ditch its WebOS devices and steer the business in an enterprise software direction with the acquisition of Autonomy.
HP CEO Léo Apotheker said Autonomy will remain in the UK. Although this news has been well received by the UK tech community, Richard Holway, co-founder of analyst firm TechMarketView, has his doubts.
"Mike Lynch [founder of Autonomy] has said he will stay on to head up HP's software division in Cambridge, but Lynch is an entrepreneur rather than a corporate guy, so I wouldn't be surprised if he moves on in six months and an American takes charge and moves operations to the US," he said. "This means talent will go overseas. It also means we will lose all those entry-level jobs for bright British [tech graduates], which Lynch was great at attracting to Autonomy."
Holway said a geographical move would be bad news for the UK tech industry. "If Autonomy moved, that would undoubtedly impact the Cambridge cluster, which Autonomy was the white heat behind. We need companies that are prepared to stay the course and become the next HPs, Microsofts and Googles - we've never been able to do that, and that is why this acquisition is so sad," he said.
HP's long game
"I think Léo Apotheker has lost the plot. I find it difficult to see how this fits in with HP's other software initiative," said Holway.
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Quocirca analyst Clive Longbottom agreed. "Apotheker has come in from a software company [SAP] and has consequently looked at HP as a software company. I don't think that is something HP is, has been or ever will be. Its history in this particular area has been abysmal. To then suddenly hand big chunks of its core market to competitors seems ludicrous. Dell in particular must be killing itself laughing," he said.
"HP needs to look at the type of organisation it wants to be. It couldn't have gone forward as it has been, but opting for continually big change instead of building on what works is its mistake. And these announcements will really hack off most of its channel," Longbottom said.
Ovum analyst Tim Jennings believed the shock announcements could impact HP's credibility as a predictable strategic IT supplier. "This is potentially very bad for HP, as enterprise and public sector IT executives feel that predictability is a critical trait for major technology suppliers, and HP continues to reinforce the impression that it is unpredictable," he said.
He suggested that enterprise and public sector IT managers should use this period of disruption at HP as an opportunity to drive hard bargains in product and services procurement projects.
More acquisitions are likely if HP is to make this change in direction work, Jennings said. "If HP is looking to Autonomy as an engine for growth, it will need further acquisitions to broaden its coverage. It will need to be on an aggressive acquisition trail and will have to plough ahead with its software growth. This is a massive change management exercise. One can compare it to IBM's, which took about 10 years," he added.
The deal will bring strong search and analytics capabilities, and a deep and broad portfolio of e-discovery, archiving, and records management offerings to HP, said Brian Hill, security and risk analyst at Forrester.
But he predicted the transition for both HP and its customers is unlikely to be smooth. "While this purchase holds promise, I am sceptical about how it will translate to near-term and mid-term advantage for enterprise customers focused on information risk management. HP's CEO said bringing Autonomy into the HP world will be seamless and highly complementary. I'm not so sure," he said.
But Ovum analyst Mike Davis said the acquisition could be a good move for HP. "From a business perspective there were dozens of reasons for HP to acquire Autonomy. We believe this is a great strategic move by HP. Autonomy is top of the league in enterprise search and getting there in e-discovery, ECM and latterly structured information. Buying Autonomy moves HP into the 'big league' of enterprise software suppliers alongside IBM, Microsoft, Oracle and SAP," he said.
What next for UK IT?
Quocirca's Longbottom said it is important not to overstate the impact this acquisition will have on the British technology sector. "The UK is still as dynamic as ever in terms of the ideas coming out. We have a good enough infrastructure to allow organisations to get off the ground, but we generally don't have the capacity to allow them to flourish. The only direction they can feasibly go to build the market is west," he said.
But Ovum's Jennings said we shouldn't overlook smaller players which are very innovative in the software market. "The software industry has traditionally been US-centric. I think over time we will see China and Asia Pacific become increasingly stronger players. It is important for the UK economy to make sure it supports innovation in software, even if we don't grow major companies," he said.
So where does this leave ARM and Sage, the last two globally significant UK-based technology companies? "Both are vulnerable - ARM in particular, because it has so many patents and we have always thought a company such as Microsoft or SAP might buy Sage," said TechMarketView's Holway.
Although the jury is still out about the wisdom of its overall strategy, there is no denying that Autonomy is a successful company and has the potential to help HP move into enterprise software. Which is also the reason why Autonomy's change in ownership is a shame from the UK tech industry's perspective.
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19 Aug 2011