The most high profile of the 27,000 job losses at HP announced by Meg Whitman last night ( see today's other post - HP cuts jobs but ducks challenges) was that of Autonomy
founder Dr Mike Lynch. HP’s Chief Strategy Officer, Bill Vegthe, will take over. To show how sudden this was, reread Lynch's interview in the FT in March 12 - Autonomy's new horizons in California. Whitman said last night that Autonomy had suffered very disappointing licensing revenues in Q2 ‘with a significant decline year-over-year.’ Whitman said “it is not the product ... It’s not the market ... It’s not the competition. This is classic entrepreneurial company scaling challenges – it’s a whole different ball game’.
You will remember that Autonomy was one of the UK’s major software success stories. A FTSE100 company it was a world beater in unstructured search. It was so good that HP, under its previous CEO Leo Apotheker, thought it was worth $10b last August. At the time we questioned the acquisition on a number of fronts. HP and Autonomy – where are the synegies? In HP and Autonomy we questioned how Lynch and his team at Cambridge would fit into the HP bureaucratic machine. After discussion with Lynch on the morning of 22nd Aug 11, I put forward two scenarios – reproduced below. Even at the time, although Lynch hoped for the ‘positive’ scenario, he inferred to me that he thought the ‘negative scenario’ was the most likely. As it happened, we were surprisingly correct. The negative scenario anticipated both Apotheker’s, then Lynch’s departure and the ‘entrepreneurial’ Autonomy just not fitting in to HP.
So what really happened? 'Sources close to the situation' told me this morning that it really was the HP bureaucracy that caused most of management team and many of the top developers to walk in the last few months. We hear tales of HP conference calls with 53 HP attendees to 1 from Autonomy. We hear of small operational decisions involving huge HP input and delay. It was a bit like GM trying to run an F1 team. There are also rumours doing the rounds that the team left because they had all made their fortunes. I think this is a bit of an insult to the kind of people that Lynch had gathered around him who all tended to put the satisfaction of the job top of their agenda.
This is obviously bad news for Autonomy’s people in Cambridge. But in some respects it might be good news for Lynch and UK-based software development. Lynch built Autonomy#1 from scratch with no money and no team. How different it will be for Autonomy#2 – whatever that might be. It would undoubtedly be Cambridge based – Lynch’s physical and emotional home.
As for HP, we shed a tear for this once great company. The list of once great companies acquired by HP over the last decade or so, only to disappear without trace, adds yet another likely casualty.
Reproduced from my post of 22nd August 2011
The positive scenario
HP’s and Lynch’s views on databases and unstructured data prevails. HP’s new Software unit, built around/out of Autonomy in Cambridge thrives. Lynch is allowed to operate independently and loves the new power that the position provides to ‘go change things’. HP’s undoubted strengths allow growth to accelerate – both organically and inorganically. Indeed, Autonomy could – and should – spawn a host of complementary acquisitions. Far from diminishing the power of the Cambridge Cluster, HP strengthens it. Expertise flocks to the area and multiple new start-ups are created to ‘service’ the new giant (as has happened around Microsoft and Google in the US). HP’s new Software operation provides even more entry level jobs in the UK.
The negative scenario
Global economic woes and self-inflicted HP wounds severely weaken HP and Apotheker’s position is under threat. In any event, “rumours of the death of structured data prove to have been greatly exaggerated”. Whereas Autonomy was seen as agnostic by partners like Microsoft, SAP and Oracle, it is now in direct competition with them. The ‘great expectations’ are not met.
The heavy corporate machine that is HP descends on Lynch and Autonomy saying “We are only here to help you…” Lynch finds the environment unbearable and quits either to form new Cambridge based start-ups or tend his sheep (or both). Newly enriched Autonomy staff follow suit. HP decides that, in the circumstances, it is easier to manage the operation back in the US. Offers excellent relocation packages to the key engineers that remain. Entry level recruitment in Cambridge stalls. The Cambridge Cluster is seriously weakened.