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Perspectives on building technology businesses and AcceleratorIndia from Cartezia

The sale of Autonomy to Hewlett Packard: good news or bad news?

Saturday, August 27, 2011

I was asked that question on Radio 4’s Today programme.  I believe it is neither – but inevitable.  Hewlett Packard has purchased Autonomy for $7bn in order to migrate into software. It makes a lot of sense for the Board of Hewlett Packard to buy Autonomy as it recognises that the exponential growth of data means that the world needs ever smarter ways of searching, interpreting and visualising it. There is structured and unstructured data and the awesome team at Autonomy built solutions that companies could use and paid for.

Autonomy became one of UK’s best kept secrets! A giant, in terms of being a 2700 employee software company, out of Cambridge. I say giant – because many Cambridge companies peak out well before they reach 500.  Mike Lynch the founder, together with a team, started out from his College bedroom and has shown emphatically that founders can grow into CEOs of Publicly listed companies. He and Jonathan Milner (AbCam)  have demonstrated the ability to make the transition from student to employer, from entrepreneur to CEO, from techie to businessman.  That they have made amazing sums of money at a personal level is just reward for doing what they did; for becoming role models for future generations and hopefully demonstrating their ability to give back, over time.  They have also enabled members of their teams to become very wealthy through stock options.  The good news for Cambridge is that there are now more tech savvy entrepreneurs with money who will hopefully come round again and both do and encourage innovative start ups.

It is hard to say that the acquisition by HP will be all good news for some people at Autonomy or indeed for Cambridge. It will certainly be good to have such a great brand name come to Cambridge, especially as they want to enter the software marketplace. Perhaps they will plug into the environment and enable other Computer Lab based projects and products to get out there. We wait and see who turns up at The Eagle!

The question in my mind for HP – which has had its fair share of trials and tribulations recently at board level is – do they have the competences to sell software? They have deep expertise in hardware sales. I wait to see how their commercial experience, access to markets and sales forces adapt to the changes.

There are many people in the business media and the citizenry of Cambridge that will lament the passing of yet another Cambridge company into the hands of a US giant. Cambridge produces companies that have deep technology – that go into other people’s products. There are very few, actually almost none, where a company has produced a consumer product, other than a long time ago, the Acorn computer or Sinclair ZX range. Perhaps we will see Cambridge Temperature Concepts flourish into a consumer product company.  This means – for Cambridge companies to succeed they need to focus on narrow parts of the value chain and for them to grow – they need to be able to reach out across wider parts of the value chain – and there is little appetite for that in the UK among big companies or among financial institutions. So – what choice is there for founders of deep tech companies other than to sell – so that their products can reach the big world out there. Oh yes and of course – show me anyone from the media or from the chattering classes that will turn down the possibility of walking away with £600m as reward for their efforts!! Way to Go Mike – Beat the bankers with real products! 

 

Listen to Mike Lynch via the Centre for Entrepreneurial Learning at the Judge Business School's podcasts: Building a Dream Team – part of CfEL's Entrepreneurs and Experts series.