Can Big Data Actually Be The Thing That Saves HP?11:25 AM EST Wed. Dec. 19, 2012
Things couldn't get much worse for Hewlett-Packard. HP's stunning announcement last month that it was taking an $8.8 billion write-down and launching an investigation into accounting improprieties related to its $11.1 billion Autonomy acquisition came amid a host of financial struggles for the IT giant. Some are due to industry headwinds, such as slowdowns in PC and printer sales and weakening enterprise IT spending. Other problems are of HP's own doing, such as its $8 billion charge from its 2008 acquisition of EDS and an enterprise services business hampered by an outdated infrastructure and sales model.
The magnitude of the problems HP is facing is a powerful argument for why the company needs to focus on building out its big data portfolio. Research firm Gartner expects big data to drive $28 billion in IT spending this year and $34 billion in 2013. And according to IDC, 90 percent of digital content will be unstructured data -- i.e., the emails, voice and video Autonomy technology handles -- by 2015.
[Related: Reaping Big Data Benefits]
In Autonomy and Vertica, which it acquired in March 2011, HP has two unique and powerful big data technologies that represent a combined investment of nearly $11.5 billion. Given the nascent state of the big data market, HP could carve out a dominant position if it plays its cards right.
HP CEO Meg Whitman has said she intends to extend Vertica and Autonomy across HP's entire portfolio of products, including printers and enterprise hardware. At the HP Discover conference in Frankfurt last week, she stressed HP's commitment to Autonomy's technologies, according to published reports. The company released updated Autonomy and Vertica products at the conference and in recent months, HP has brought in two high-profile software executives, Robert Youngjohns and George Kadifa, to oversee what will be one of the most important technology development campaigns in its 73-year history.
While it's still early days, HP says it has made progress in leveraging its big data assets. "[Big data analytics] is a new area that we are building, and it's actually doubling, if not tripling, on an ongoing basis, so it's a great opportunity for us," Kadifa told Wall Street analysts in October.
HP declined to make Youngjohns and Kadifa available to answer questions about the company's big data strategy. But the consensus opinion that emerged in the course of recent interviews with more than a dozen HP channel partners, former employees and current employees is that HP, at this stage, is still feeling its way with Vertica and Autonomy. Before it can become a force in big data, HP will first have to eliminate longstanding organizational barriers and get the channel involved in explaining to customers what big data is and how it can help them, sources told CRN. The channel will be key to sales as well as damage control.
"The Autonomy accounting issues aren't helping HP's overall value story, and this is why HP needs the channel and its local customer relationships to drive positive awareness and growth," one HP partner told CRN.
HP's spotty track record with previous software acquisitions has earned it a reputation as "a place where software goes to die," which is why even staunch HP proponents are guardedly optimistic about the company's prospects in big data.
NEXT: Tumultuous Beginnings
HP acquired U.K.-based Autonomy about six months after its Vertica purchase, and then tried merging the groups in November of that year. But to say that marriage got off to a rough start would be an understatement. Problems arose almost immediately last November after HP combined the two companies to create its new Information Management division, led by Autonomy co-founder and former CEO Mike Lynch.
HP went out to customers and partners with what it considered to be an unbeatable big data story. HP sales reps championed the combination of Autonomy's "unstructured" search and analytics technology and Vertica's high-performance columnar database as something no other vendor could match.
Despite the never-ending drama surrounding the company, HP is still citing the Autonomy-Vertica combination as a competitive advantage. "HP is the only company that can process 100 percent of information, whether it be structured, semi-structured or unstructured data," an HP spokesperson said in an email. But at least one HP partner who bought into the vision early on is disillusioned with the direction of HP's big data strategy and has chosen to work with other vendors.
"HP's early marketing spin was that with Autonomy and Vertica, we could go into accounts and pitch both. That sounded good, and we did buy into it initially," said the partner, who requested anonymity. As has often been the case at HP over the years, the initial failure of the Autonomy-Vertica marriage wasn't due to technology shortcomings, but the sort of endemic internal political friction that has plagued the company for years. Early on, Autonomy's Lynch made it clear that Autonomy would be getting the lion's share of attention in the Information Management unit.
According to sources who attended the Information Management group's first meeting, Lynch's adversarial tone came as a shock to the Vertica team and set the stage for what would end up being a brief yet tense relationship.
"When Lynch spoke to the Vertica group for the first time, he said, 'You guys are structured data, and 80 percent of the world is unstructured data, so we're going to divert 80 percent of this group's resources to Autonomy,' " said one source, who requested anonymity because he is not authorized to speak about the matter.
Lynch insisted on personally reviewing the resume of every Vertica job candidate prior to their being hired, and his slow response ended up foiling the Vertica team's effort to hire an intern for the following summer, another source told CRN.
NEXT: The Vertica/Autonomy Split
In the space of a few weeks, the Vertica team grew so frustrated with Lynch's domineering that employees created a T-shirt to voice their anger. The shirt, which bears an image of a coiled rattlesnake and reads 'Don't Tread On Me, Vertica Systems, Cambridge, Mass.,' is a reference to the Gadsen flag used by the original 13 American colonies during the pre-Revolutionary War era.
In March of this year, Vertica CEO Chris Lynch left HP. Then, in a move insiders say was aimed at quieting the discord, HP moved Vertica away from Autonomy and into its software division. Autonomy's troubles were just beginning, though, as several high-profile executives jumped ship, including its president, Sushovan Hussein, CTO Peter Menell, CMO Nicole Eagan and COO Andy Kanter. Then in May, Lynch was shown the door after what Whitman described as "disappointing" financial results.
"Disappointing" doesn't begin to describe Autonomy's performance, however. Sources told CRN that while Lynch clashed with Whitman during company meetings, the last straw was when he missed HP's services revenue, renewals and new license targets by more than 90 percent during HP's fiscal second quarter.
HP is accusing Lynch of accounting improprieties and has referred the matter to authorities in the U.S. and U.K. Lynch, for his part, has vehemently denied any wrongdoing and created a public website to rebut HP's claims.
It’s all good theater, but sources told CRN that even without the accounting issues, Autonomy is more of a solutions and consulting company than a product company, and HP has found integrating it to be a tougher challenge than expected. Sources also said Autonomy has a huge portfolio of products, which confuses customers and partners and overlaps with some of HP's existing portfolio. Figuring out which parts fit with HP's big data plans is one of the challenges HP will face as it tries to integrate the assets from the Autonomy deal.
Autonomy has too many products and HP will need to figure out which fit best with its big data vision, Joe Heinzen, senior vice president of sales at MicroTech, a Vienna, Va.-based solution provider that was an Autonomy partner long before HP acquired it, told CRN. Autonomy partners have also suffered from a lack of access to training, Heinzen said, and the company's server-based licensing model has also been a barrier to sales.
Autonomy has operated for years under the assumption that its unique technology would give it an unassailable market position, but Heinzen believes it's high time for HP to change this culture.
"Autonomy is a very sophisticated product that works well with data, video or voice. But there are products out there that are also equipped to handle those data types," Heinzen said. "Autonomy has been reluctant to accept that other companies can do what they do. They've been drinking their own Kool-Aid."
NEXT: Baby Steps
MicroTech's adventurousness aside, the fact remains that most of HP's Autonomy and Vertica sales have been direct. At a roundtable meeting with partners in October, Whitman divulged that about 15 percent of Autonomy and Vertica sales go through the channel and said she intends to boost this into the 40 percent range.
One partner who has been fielding inquiries about Autonomy has been frustrated with what he says is a lack of clear communication from HP about when it will give the green light to partners to sell Autonomy products. Because of this, he says HP is missing a golden opportunity to showcase its big data assets in the context of enterprise hardware deals.
"We're missing out on discussions about HP converged infrastructure with Vertica and Autonomy as part of the solution," said the source, who spoke on the condition of anonymity. "We have had salespeople sell significant amounts of converged infrastructure hardware and software, recognized revenue and had customers be happy. But that was a one-off situation. That is still the big frustration -- we're not able to have a programmatic discussion."
Converged infrastructure on which big data applications run is the fastest-growing portion of the partner's business, with revenue growing five times this year compared to last. "Would there have been additional revenue if I could sell Vertica and Autonomy? Absolutely," he told CRN.
HP in July appointed Stephen Reny, senior vice president of market development for Autonomy, to serve as the unit's channel chief. He told CRN at the time that HP does plan on rolling Autonomy out to the channel, but declined to provide a time frame for when this would happen.
Meanwhile, there is talk in the channel that HP's certification requirements for Autonomy are exceedingly difficult, and that it is requiring partners to pay an up-front fee for the right to sell Autonomy products. HP didn't respond to a request for comment on whether it is offering formal Autonomy certification and training to partners or whether it is charging partners to sell Autonomy. Vertica doesn't yet have a formal channel program either, although sources said HP recently began reaching out to select partners to discuss sales arrangements. Kadifa, HP's software chief, told All Things Digital in October that Vertica could eventually be a billion-dollar business, but without channel distribution, it's tough to see how he arrived at this figure.
NEXT: Vertica's Channel Lag
Despite the turmoil, Autonomy and Vertica are highly regarded technologies and HP has made some progress in working them into its repertoire. Vertica saw "triple-digit" revenue growth in HP's fiscal 2012, CEO Meg Whitman said in last month's fourth-quarter earnings call. At its Discover conference last week HP rolled out Vertica Analytics Platform 6.1, code-named Bulldozer, which promises faster performance, deeper Hadoop integration and easier deployments with Amazon EC2 clouds.
HP also updated two existing Autonomy offerings: Marketing Performance Suite, a set of analytics tools aimed at chief marketing officers; and Legal and Compliance Performance Suite, which is targeted at chief compliance officers and general counsel. HP also has integrated Autonomy's core search technology, Intelligent Data Operating Layer (IDOL), into its StoreAll storage platform, after doing the same in June with its Data Protection 7 backup and recovery software.
HP's big data strategy to date has primarily aimed at organizations in the public sector, banking, retail and telecom markets. MicroTech is getting creative with Autonomy and Vertica to serve the needs of its federal customers.
Heinzen recently designed an architecture for a government agency, which he declined to name for security reasons, that combines Vertica and Autonomy with database technology from Sqrrl, a Boston-based big data startup, and other tools.
Heinzen said his creation, developed with the support of MicroTech CEO Tony Jimenez, can aggregate large amounts of data from relational databases and Hadoop clusters while also securing data at the cell level. "With this I can aggregate data and process it against thousands of nodes, and it allows easy lockdown and access," he told CRN. "You take the programmer and system analysts out of the equation because it's easy enough for the subject matter experts to use."
Heinzen says his big data architecture isn't just for government agencies but is also applicable in enterprises, especially insurance, health care and other types of organizations that need to silo data for regulatory compliance reasons.
"Autonomy IDOL is the core technology here, but the problem with it is that it requires a lot of work to develop an application because it's very sophisticated. And there is a shortage of tech talent to do that," he said. "So I am looking for a way to deploy the technology without the pain of implementation."
NEXT: What About The Channel Programs?
HP partners aren't the only ones growing impatient with Vertica's slow move to the channel. "I do have to admit that while Vertica is still growing strong, both in talent and sales, the lack of leverage through the HP channels has been a bit disappointing," a source close to HP told CRN. "Forward progress is there; it is just slower than we'd like."
Not all of Vertica's issues are HP's fault. Despite having a highly regarded technology, Vertica for years has not been effective in marketing its products, sources told CRN. HP recently appointed a new vice president of marketing for Vertica, Chris Selland, but that position had been vacant since June when Scott Howser left to become vice president of marketing at Hadapt, a Boston-based big data startup.
HP's Business Critical Systems and Industry Standard Server units were supposed to be the primary internal sales channel for Vertica, but that has yet to be happen, sources told CRN. The problem here is that HP's internal sales reps are giving preferential treatment to SAP Hana and Microsoft SQL Server, and sometimes even Oracle, in deals where Vertica could be an option, sources said.
"It happened all the time. I got sabotaged more than once," one source who has witnessed this firsthand told CRN, speaking on condition of anonymity.
HP did not respond when asked if it plans to adjust its sales compensation plan to incent salespeople to lead with Vertica over competing products.
Further complicating matters, there is an Apache Hadoop contingent within HP that doesn't work well with Autonomy and Vertica, essentially viewing them as competitors, sources told CRN. In July, HP and Cloudera, a Boston-based Hadoop startup, teamed up to release a preconfigured HP AppSystem appliance and reference architecture.
"There are islands within HP that want to be a big data powerhouse. But the executive team has its work cut out for it in trying to manage the problematic parts of the company," said one source with knowledge of the inter-departmental conflicts within HP.
The Autonomy accounting scandal, and HP's broader financial turmoil, could give employees plenty of motivation to seek positions at other companies. Interestingly enough, all the upheaval doesn't seem to be affecting morale; employees are simply taking advantage of opportunities in a hot market, sources said. Competition in the big data space is fierce at the moment, so it's not surprising that both the Vertica and Autonomy units have lost significant amounts of employees.
Vertica has been particularly hard-hit, losing around 30 employees from an original post-acquisition head count of around 130, sources told CRN. Though most of Vertica's top engineers have remained on board, the litmus test for their long-term commitment to HP will come next April when at least four top engineers will receive tenure-based cash bonuses, sources told CRN.
"Vertica has superior engineering talent, but HP stands to lose many people that are well-established in the big data space," one source with knowledge of the situation told CRN.
It is unclear how many Autonomy employees remain from the roughly 1,800 that joined HP in the acquisition. HP declined to provide a current head count for Autonomy or to comment on how many employees have left since the deal closed, but a spokesperson told CRN last week the remaining staff has reacted positively to being part of HP. "Autonomy employees have responded well to greater integration with HP. In fact, attrition is lower than pre-acquisition levels," the HP spokesperson said in an email.
NEXT: Reunited – Does It Feel So Good?
In September, HP hired former Microsoft executive Youngjohns to run Autonomy and moved the unit into HP Software, which includes Vertica, enterprise security products and applications and IT infrastructure operations management offerings. With Autonomy and Vertica now on equal footing in the HP Software unit, under Kadifa's direction, the conflicts that marred their earlier marriage appear to have been removed.
HP's remaining Vertica employees are optimistic that the reunion will enable a healthier relationship between the groups, one source with knowledge of the situation told CRN. Vertica is planning to expand its engineering team and the unit has permission to increase head count by 50 percent to 60 percent in fiscal 2013, the source said. This could help HP leverage what it claims as a key advantage over other big data vendors: the ability to manage both structured and unstructured data.
Alan Pelz-Sharpe, research director for content management and collaboration at 451 Research, believes that HP will leverage the core IDOL technology better than Autonomy has done. "The stand-alone system [used by Autonomy] was never a very good idea," Pelz-Sharpe told CRN. "But by embedding it in hardware, printers and infrastructure, I think HP can do well with it."
IDOL also fits nicely in HP's records management, and e-discovery portfolios, said Pelz-Sharpe, who expects to also see simple, IDOL-based software embedded in HP's multifunction printers in future releases.
With Autonomy and Vertica, HP has technology assets to propel it into a leading position in the big data space. The problem, as it has always been with HP, is that software assets haven't often flourished in HP's hardware-centric culture. Whitman, upon taking over as CEO, identified organizational silos as one of the obstacles she intended to get rid of. If she manages to fulfill this pledge, and HP can find a way to avoid further organizational turmoil, HP's big data vision could become reality.
"HP has the tools and technology to be a powerhouse in big data. Whether they can fully execute on that is a whole different thing. You have to hope there can be some stability in the next few years," Pelz-Sharpe told CRN.