The ongoing collapse of Autonomy is just the latest verification that big, installed software packages for the enterprise are doomed. Everything Autonomy stood for – in-sourcing sophisticated technology for highly specialized tasks – has proven to be a sham.

Just look at the allegations of accounting irregularities. According to Hewlett PackardAutonomy’s commoditized hardware expenses were co-mingled with higher margin software revenues. In order for the business to look profitable, they needed to sell a bunch of hardware but had to book it as software revenue in order to make their numbers. In situations like this, companies rarely – if ever – see the value that was represented during the sales process.

Everyone in Silicon Valley knows how this game is played, that’s why they are moving to the cloud. That includes Hewlett Packard, which for some reason saw buying Autonomy as a hybrid cloud play. The plan to create a “private cloud’ using Autonomy software to handle the sophisticated stuff never made sense, even if Autonomy hadn’t been (allegedly) cooking the books.

It was never going to work, and in fact, never has at a large scale. This is the the myth of the big local install. Law firm and corporate executives have been convinced that funding large multi-year deployments can eventually result in cost reduction and increased efficiency somewhere down the road. Hogwash.

Autonomy Could Kill Hewlett Packard- What Would They Do to You?

The economics simply do not work. Inevitably, it is a strategy doomed for failure by a technology landscape that is evolving far more rapidly than any traditional process can accommodate. So for those in information governance and eDiscovery, it’s time for self-analysis. Did Autonomy’s marketing and positioning work because it was a real value, or were they smart enough to just sell people what they wanted to hear and not worry about if it ever lived up to that promise? Hewlett Packard has said it was the latter and wrote down almost 7 billion not long after acquiring the company. How many Autonomy customers are heading for a similar reckoning?

If you are still a local installer, when are you planning on your write down?

 


Rakesh Madhava is CEO of Nextpoint, which he founded in 2001. Rakesh has more than 17 years of experience in legal technology and trial support with specific experience in white collar criminal defense, breach of contract, intellectual property, shareholder suits, tortious interference suits and product liability. During his career, Rakesh has been retained by a number of Fortune 500 companies including Exxon, Verizon, Morgan Stanley and Astellas Pharmaceutical as well as many of the top law firms in the nation. Notable cases Rakesh has personally supported include U.S. v. Ryan, U.S. v. Razmilovic, et al. (Symbol Technologies),and Coleman (Ron Perelman) v. Morgan Stanley.