Fast to Pursue BI: The Grass is Always Greener

I found this InformationWeek story about the Norwegian firm Fast Search and Transfer (FS+T), a failed Internet search provider which, to its credit, successfully reincarnated itself as an enterprise search vendor and now is #2 in the enterprise search market, with about $160M in 2006 sales. Autonomy is #1 with about $250M in 2006 sales.

I've always believed that FS+T's success was as much about Verity as it was about FS+T. The way I see it, the story goes something like this.

• Verity pioneers the enterprise search market with their topic-based search. The first time I think I saw their product was in the 1980s, when I was still at Ingres.

• Verity goes through various ups and downs over the years. In the mid-1990s they hire my Versant colleague, the eminently likeable, sleeves-up salesguy Anthony Bettencourt, to run sales. Bettencourt does well, but leaves the company amidst management disagreements. The board later re-hires Bettencourt and eventually puts him in charge.

• Bettencourt does a great job with sales growth and financial management, but as he gets further into his tenure, I believe he makes two key mistakes: (1) he underinvests in core technology, creating an opportunity for someone else (FS+T) to grab category technology leadership and (2) he -- and I'd bet $100 this was at the board's urging -- distracts the company with an "intellectual capital management" initiative that only compounds the first mistake.

In short, Verity made a mistake that I see recur consistently in Silicon Valley. Companies repeatedly take their core market for granted, get distracted with a strategic vision (which was undoubtedly conceived at a board meeting or management retreat) and then do an absolutely brilliant job of executing the doomed strategy -- turning the whole company on a dime. Then, as the new strategy fails, the company realizes that the best strategies come from customers and the market, not management offsites, and they decide to focus back on their core business.

If they're lucky no one has taken their market away in the meantime. If they're not, they end up like Verity or Informatica (see aside in this post), both of whom allowed their core markets to be robbed out from underneath them while on strategic junkets to "intellectual capital management" or "analytic applications," respectively.

I call this "the grass is always greener" problem.

Now I'm not arguing that companies shouldn't change. Yes, Oracle was smart to build an applications business on top of its DBMS franchise. Cognos did a tremendous job of slowly and steadily re-inventing itself as a business intelligence vendor, in a graceful transition from their application development tools business (PowerHouse).

But I am arguing that companies need to be darn careful about declaring their own markets commodities. Why? Because the first time I heard "relational databases are commoditizing" was in the late 1980s -- before most people had even heard of them. I heard that tidbit, of course, at Ingres, which consequently decided to focus on the "better market" for application development tools (where runtimes almost immediately became free). Instead of commoditizing, the relational database market became the oligopoly that it is today, driving huge margins for Oracle. Oops.

So I find great irony in seeing a company like Fast Search, which got on the map because of Verity's lack of focus, itself starting to lose focus on its core market. You can almost see in the marketing charts the implicit message that "enterprise search is commoditizing" and that "the Google Appliance is going to own the low end of the enterprise search market -- but that's OK because we don't focus there."

Now you can argue that it's about growth and vision and that a $160M company really can support 4 different search platforms, 9 different solution areas, and over 30 different individual solutions -- and take on the $5B database vendors and the $1B BI vendors in the process. But I'm not buying it. I see lack of focus.

Now there are good reasons to believe the grass is greener on the BI side of the fence. BI vendors are 5-6 times bigger than enterprise search vendors (e.g., comparing the $1.2B Business Objects to the $200M Autonomy). And Google isn't eating the low end of the BI market. And there are some interesting parallels between BI and search -- in particular, the parallel between guided navigation a la Endeca and the navigation of multi-dimensional OLAP cubes. But that doesn't mean enterprise search vendors should try to become BI vendors. (It might mean, to the contrary, that BI vendors should acquire enterprise search vendors.)

Personally, I have always believed that Fast Search's past success resulted from two things: (1) exploitation of Verity's miscues, which I sometimes colorfully refer to as "feasting on Verity's carcass" and (2) an extremely driven COO in Ali Riaz. Now that Verity's carcass has been purchased by Autonomy and that Ali Riaz has left, we'll have to see how well they do going forward.

Sometimes I wonder if Endeca isn't going to do to Fast what Fast did to Verity. As they say in French, on verra. No matter the outcome, it should be fun to watch.