HP's Autonomy deal is no flight of fantasy

HP's Autonomy deal is no flight of fantasy

Summary: HP needs to regain its former abilities to not only see ahead but shape the future. With Autonomy, it may have created the chance to do just that, but its other moves don't create confidence

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TOPICS: Tech Industry
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HP isn't just inventive, it's re-inventive. In its history, it has changed course many times — from being a test equipment manufacturer from the 1950s, it dominated the market for scientific and engineering IT in the 1970s, and then became a leading light in enterprise and consumer computing.

Each time, it took its expertise — indeed, dominance — in one area and used it to move into another. Each time, the HP qualities of foresight, inventiveness, impeccable engineering and thorough understanding of the field helped it stay ahead.

In aviation, this is known as keeping in front of the aircraft. You're thinking ahead, beyond the current manoeuvre, and preparing for the situations you're not yet in. The other side of the coin is getting behind the aircraft: you become reactive, trying to understand what's happening and concentrating on getting back into full control. By the time you reach a decision, things have changed and you have to start over. When things are changing fast, that can be fatal.

Lagging or leading?

HP's latest change in strategy, although logical, feels more like lagging than leading. The company is retreating from WebOS: it blames the market failure of its current products on insufficiently attractive hardware, but it doesn't really matter.

The shape of mobile OS has been set, and it doesn't include any Palm legacy. So, yes, it makes sense to stop pouring money into a catch-up race where you're going to have to be as big as Apple, Google or Microsoft to even play. But that's reactive, not inventive, and it doesn't help frame HP's mobile future. Like shutting down a faulty engine, it will help keep you in the air, but it won't get you going any faster.

It's the same with spinning off the PC division. This has been an obvious move ever since IBM did it in 2004, when the falling margins and changing commercial landscape clearly forewarned of a market which would only get harder and less lucrative. HP's Personal Systems Group makes up 30 percent of the company's revenue, but only 15 percent of the earnings: everything else contributes more percentage-wise in earnings than in revenue, so using the company's resources to build on those areas instead of PCs is a very investor-friendly decision.

But 30 percent in revenues is a lot of cashflow, and HP is particularly strong in selling PCs — mostly notebooks — to corporates, which also take its much more profitable printing and server products. Without a strong indication of what and how those revenues will be replaced, and a demonstrably cogent understanding of how HP's relationships with the channel and with its big corporate customers will be affected, this too runs the risk of looking like an obvious decision that should have been made a while ago. It's a late tactical move rather than an early strategic one.

Autonomy acquisition

The one clear strategic move HP has made is the Autonomy acquisition. Autonomy has been described as a 'search company', which is true in the way that Airbus is in public transportation.

The Cambridge company's unique technology uses Bayesian probability theory to find patterns in data, something broadly accepted as the single most effective approach to massive sets of real world information — in other words, the bedrock of much corporate IT and many cloud strategies.

In 15 years, Autonomy has used that far-sighted bet to collect more than 20,000 high-value corporate clients, and is showing strong growth and persistent profitability. There are no other companies like it. It's Google in a suit.

For Autonomy to be in the position of owning and profiting from a key technology that matches the major IT trend of the 21st century to date, it has to have foresight, inventiveness, impeccable engineering and excellent understanding — the very qualities that once helped HP stay ahead of the game, and which that company now so badly needs to rediscover.

With Autonomy, HP has a golden opportunity to find the clear air above the turbulence and to regain control of not only its market, but its future.


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Topic: Tech Industry

Rupert Goodwins

About Rupert Goodwins

Rupert started off as a nerdy lad expecting to be an electronics engineer, but having tried it for a while discovered that journalism was more fun. He ended up on PC Magazine in the early '90s, before that evolved into ZDNet UK - and Rupert evolved with them into an online journalist.

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