Hewlett Packard, Autonomy and Human Information: Case study
Hewlett Packard also referred, as HP is a corporation based in California. The company deals with information technology products making it the largest technology corporation in the world. This company was started in 1939 by Dave Packard and Bill Hewlett hence the name Hewlett-Packard. Between the years 1958 to 2008, Hewlett Packard made about 116 acquisitions in a bid to expand its printing business. In the year 1989, this corporation acquired Apollo Computers worth about US $500 million, which enabled it to become the leading computer workstation supplier. In 1995, HP acquired another computer manufacturer, Convex Computers worth 150 million US dollars (Hp.com, 2012).
To increase its market borders and operations, HP decided to merge with other companies. One of such companies is the Compaq, a personal computer manufacturer. The merger between the two corporations took place in 2001 following the appointment of Carly Fiorina as the HP CEO in 1999. The merger was aimed at modernizing HP operation culture laying enormous emphasis on business profits. Although the company showed a market share growth valued from 54.43 to about 74.50 dollars, HP was not efficient as expected (Hp.com, 2012). This was contributed by failure of both companies to meet targets in the industry. The resulting effect was lying down of HP workers and Price Water House Coopers stopping its audit activities. Immediately, the company tried a plan to acquire Compaq for 25 billion US $ (Nytimes.com, 2012).
Following negotiations from both corporations, the merger became approved in September 2001. Later in the year 2002, Hewlett Packard made the largest acquisition when it merged with a computer manufacturer called Compaq for a price of 25 million US dollars. This was to counter stiff competition in the market. However, Compaq stakeholders had a negative view on this move. They claimed that selling Compaq computers with a HP logo denied Compaq loyalty it had from its customers. In addition, there was a question on the member`s synchronization due to change in organizational culture, which was an initial reason for the merger. On her side, Fiorina believed that this merger would double the working unit, increase the market share hence competes with the giant company, IBM (Hp.com, 2012).
The combined efforts of both Compaq and HP companies competed with Dell taking a large share in marketing of personal computers. Since this period of acquisitions, Hewlett Packard has seen a tremendous growth in product development and market satisfaction. Although the company has served the globe in providing IT solutions and products, its expansion especially on internet business has lead to complexion in its operations making it hard for the corporation to manage its businesses. It streamlined its internet business using Microsoft SQL Server 2005, Microsoft BizTalk Server 2006, and Windows Server 2003. This has helped the corporation to consolidate its storefront online, which serves both home and office computer users, healthcare, education different markets and the government. This helped it capture orders and increase its logistical revenue (Hp.com, 2012).
Merging of Hewlett Packard, Autonomy and the merger`s effect on Human Information versus Big Data
Autonomy is a software company, which aids organizations globally to understand the full meaning of human information. Human information includes contents such as documents, pictures, video, emails, audio social media and mobile communications. Autonomy uses pattern- matching and groundbreaking technology to understand the data. It also assists computers in capturing the meaning of full information including big data structured in the databases from other sources such as click streams, sensors, gene sequencing and algorithmic trading. Autonomy aids businesses and corporations in reducing complexity as well as unlocking the real data value (Autonomy.com, 2012).
It provides meaningful solutions, understanding the full range of business information and its internal relationships. Human information is in its unstructured form since it normally does not fit into the columns and rows of the database. It exists in formats such as email messages, books, chats, phone calls or surveillances. Unstructured data is growing threefold to that of structured data hence 90 % of all information is unstructured. The challenge that faces the modern business is the difficulties in understanding and extracting value from human information. This is the reason why HP merged with Autonomy to manage this big data (Hp.com, 2012). The merger was meant to create a mutual relationship between the two corporation where each would assist the other one acquire more profits and better reputation (Autonomy.com, 2012).
Big data consists of both structured and unstructured information. As observed by HP`S Brian Ng, Big Data has a significant advantage to every business. Managing big Data is a challenge, as the business needs to define various factors in terms of operations and success. These includes organizational and process alignment, technology and business alignment. Before merging with Autonomy, HP had conducted a research and found out that 50 percent of businesses and organizations were ineffective in their strategic information procedures (Hp.com, 2012). The effect of merging came up with uncertainties since business requirements must also be changed. This means that there is a lot of learning and exploration on how HP could have approached it in a business perspective. It is a critical to guide and manage the big data, as it requires thorough assessment, concept proof and methodologies that need to be implemented effectively in a bid to enhance success probability (Nytimes.com, 2012).
HP could have balanced technologies that are emerging concerning big data. During its merger with Autonomy, it would have laid its focus on technologies that have business capabilities but not on traditional ones such as architecture, enterprise data, master data, data integration, quality as well as metadata. These traditional capabilities only form the foundation of the emerging capabilities. HP relied heavily on Autonomy`s architecture and enterprise data hence risking its big data solutions. This made it incapable of leveraging it for an enterprise value. The overall effect that HP had on its big data is that it created technology based solutions rather than business – based solutions. If well managed, HP could have brought strong expertise and experience in its big data management. In addition, Autonomy could have brought its strong heritage and deal with HP big data challenges to bring both traditional and social media data together for better customer product knowledge (Nytimes.com, 2012).
What will happen with HP “Meaning Based Data Protection”?
After the acquisition of Autonomy, HP was desperate because the disparate storefronts hardened the process of accessing regulatory fees and taxes. For instance, in the united state, every state has a sales tax rate that access fees for various computer components to cater for the environmental disposal costs. It also became difficult to implement changes in the internal process that emerged from corporate directives, different organizational culture and business rules. It is crucial for the company to streamline its storefront infrastructure in order to provide better customer experience through gaining information that is more accurate. It was also necessary to improve performance by increasing margin and revenue as well as improve internal processes (Nytimes.com, 2012).
Managing the storefronts became more complex due to geographical segments, market size and vertical industries array. Since HP lacked tools to ease visibility of available products in its supply chain, communication with its customers during shipping of the products became a problem. In addition, it became hard to inform the customers on their purchases as well as track cash flow as the company failed to supply invoices to the customers until shipping of the orders. Logistical services were also affected because the company added cost price of its products in offering this service. This made HP products more expensive to that of the competitors, which affected the business. During this period, the company reduced sales and customers (Wajih, 2012).
The fragmentation of internet businesses made it difficult to develop and establish set rates for the shipping services. This hindered the logistic process of satisfying customer orders in terms of cost and effectiveness. This forced the company to add a generic cost to the product price making the products more expensive when compared to that of the competitors. This affected the market and limited the company`s ability to compete (Wajih, 2012). According to the business experts, this created room for the competitors to grow and gain powers that are more competitive. Customers also the quality products they used to have from HP, thereby reducing their relationship (Hp.com, 2012).
The technology behind the merger was the `Intelligent Data Operating Layer also known as IDOL. It allows searching and processing of text from database, video, text files, streams or audio. This processing of information was referred to as Meaning-Based Computing by Autonomy (Beal, 2011). On November 2011, Hewlett-Packard announced a new platform based on big data analytics, the HP Next Generation Information Platform. This platform combined unstructured data analytics engine of the Autonomy, Vertica`s and IDOL 10 as well as the real-time analytics database. This move was taken by HP in a bid to strengthen its business software solutions in integration and other services. The platforms combined unstructured information with the structured data handling both in an integrated manner (Bizjournals.com, 2012).
There was no clear balance of the emerging big data technologies with core capacities and foundation. For an organization to compete adequately in the market, it must focus on big data capabilities without negatively affecting the traditional capabilities such as master data, enterprise data, architecture, metadata, data quality, and data integration. Failure to have corresponding foundation pieces exposed the corporation to a risk of having the big data solution altered and, thus interfering with the ability of levering for the enterprise wide value. Failure to have strong expertise and experience in the management of big data influenced detrimental effects on technology and service perception (Hp.com, 2012). Poor capturing, integration, sharing, protection, and analyses hindered the corporation from generating adequate profits. Challenges were also noted on governance, information strategy, master data, and integration management (Beal, 2011).
From analysts` point of view, just one month before the HP downfall, Autonomy was making impressive deals like the 50 deals, which were worth about 1 million US dollars in a period of one year and its average deal size was mounting to about 815,000 US dollars. Growth in SaaS business was found to be about 34 % and recorded no net debt. Since Leo Apotheker became the CEO of HP, investors have been against the appointment (Beal, 2011). They claim that the previous CEO, Mark Hurd worked miraculously for the benefit of the company. Management of HP is to blame for the overall problem. Apotheker seems to be conservative as he sticks to things he understands well as he has been dealing with the sale of software for many years. The experience he gained during this period would have helped HP build a service and software model and apply this to the strategies he had for the company (Bizjournals.com, 2012).
The second problem that HP could face is the loss of Meaning Based Data Protection. In every organization, data protection is crucial as far as running of the organization is concerned. Data security ensures that company`s information does not leak to the outside world. It involves data restoration, back up, regulation of archives and control of data, conceptual, policy-based procedures and automation (Beal, 2011). Autonomy with its IDOL performed these duties to HP as one of the aim for merging. This would allow HP to converge its back up systems as well as recovery operations in the cloud (Hp.com, 2012).
Autonomy was to provide scalability and security in the cloud. However, following the fall of the merger, Meaning Based Data Protection of HP was at a great risk. This may be the reason why HP is running at a loss since its Meaning Based Data was used by Autonomy for its selfish gain. In view of the fact that Meaning Based Data Protection helps a business to maximize its enterprise value in reducing Information Technology costs, this failed to happen in the case of HP. It is therefore evident that Autonomy did not perform its mandate effectively. This is because some of the hardware that were sold at a lower price lacked IDOL product. HP is now facing a problem in its Data Protection as its confidential information may be lost, deleted or violated because of Autonomy`s errant actions from its malicious employees (Beal, 2011).
In addition, the Business Process and content management of HP was affected since it failed to improve its productivity in its enterprise processes. Autonomy is to blame for HP failure because the technology company was not responsive to information capturing across its channels. It also failed to collaborate and effectively comply with policies regarding information. In addition, real-time data faced much challenges and record management became a problem to HP Company. Autonomy was to use its record manager in providing solutions to record management to enable better compliance, business performance and knowledge management (Harrison, 2012).
Who is actually to blame for the fall of Autonomy and why?
According to HP current CEO, the integration of the software will solve customers` Information Technology challenges. The CEO further mentioned that Autonomy would increase HP capabilities in managing and extracting meaning from data for better foresight, insight as well as decision making process. However, the fourth quarter results of the company were not impressive, and this was because of acquisition of Autonomy worth 11 billion US dollars in 2011. Meg Whitman, HP CEO confirmed that the problem was discovered when a whistleblower emerged after Mike Lynch left Autonomy as the CEO in May 2012 (Hp.com, 2012). The whistleblower claimed that the company is facing severe accounting improprieties. Although Whitman was a board member during the approval of the acquisition, the information that was relied on came from Deloitte and KPMG (Bizjournals.com, 2012).
The blame game is directed to Delloite, investment advisors, HP and the auditors of the Autonomy. The two auditing firms should have acted in an honest manner before the fall out particularly when HP was buying Autonomy in 2011. They should have checked accounting books and avoid manipulation of information. However, it might have happened that the auditors relied on the information provided by the management and therefore could not suspect any inaccuracy. It is not clear how HP solely relied on the auditors` report without making an effort of reinvesting. Analysts feel that it could have interrogated suppliers and customers and use this information to dig deep.
The management of Autonomy is also accused of using improprieties and misrepresentations (Nytimes.com, 2012). The merger was seen as a willing effort that would misguide investors and buyers as well as inflating financial metrics of HP. Serious questionable deals were revealed after the departure of Mike Lynch from Autonomy. Following these allegations, HP hired Price Water Coopers to investigate the matter and unfortunately, discovered accounting problems such as the mischaracterization of revenue margin, low sales on hardware that were not associated with IDOL, improper licenses inclusion and creation of revenue to non-existent customers (Nytimes.com, 2012).
Financial experts consider the merger between Hewlett Packard and Autonomy corporations as a disaster to human information and big data. As noted by the Managing Director, Mr. Victor Basta, since the acquisition of Autonomy, HP has not been able to compete with its competitors such as Dell and IBM. Victor feels that Autonomy being a software company could have assisted HP builds a much larger business solutions. Unfortunately, to progress as a software-touting hardware dealers calls for a fundamental shift in organizational culture, which is not easy to achieve (Nytimes.com, 2012). The merger resulted to a brutal culture clash with HP having a slow, polite moving bureaucracy and autonomy being used to an “in-your face sales culture”. Lack of strategic measures to harmonize the two cultures brought tension and poor coordination (Bizjournals.com, 2012).
The merger has seen the corporation record a loss of $8.9 billion this year, which is the largest in the recent history. In addition, revenue fell by approximately seven percent in the fourth quarter ending on October 31, 2012. This loss is associated with accounting issues and poor performance. Hp confirmed that it was misled to overpay the acquisition of Autonomy where it was then duped. According to HP, more that five million dollars of the cost of Autonomy were that of outright misrepresentation, accounting improprieties and disclosure failures. HP blames the former managers of Autonomy because of presenting malicious information, which resulted to heavy losses in terms of the quality of product, quality of customer service and monetary value (Nytimes.com, 2012).
Management conflicts between the founders of the two corporations have worsened the situation. The HP`s Chief Executive, Ms. Whitman was noted saying that sustained efforts have been made to inflate Autonomy`s profitability and revenue. However, the Autonomy`s founder, Mr. Michael Lynch denied the allegations of improper accounting and accused its partner of mismanagement. According to the report released by the Wall Street Journal on Tuesday, HP has requested UK Serious Fraud Office, Exchange Commission and the U.S Securities to open investigations (Bizjournals.com, 2012).
The in-fight and conflicts between the two companies is to blame for the deteriorating performance. Some of the negative effects of this merger include costs cuts, executive turn over, reduced demand for the products, and mounting debts. Mr. Lynch added that august 2011 when the deal was announced, Autonomy was known as the biggest software company in Britain and the second largest in Europe (Autonomy.com, 2012). It had a wide range of customers including banks, agencies, big corporation and law firms from a different region (Nytimes.com, 2012). During that time, HP was confident that Autonomy was crucial for its transformation to a higher-margin software seller. HP feels that Autonomy had mischaracterized some low-margin hardware sales as software before it was acquired. It also had recognized a number of deals with partners as profit or revenue even when the products were not sold (Bizjournals.com, 2012).
It is not possible to determine whether American`s agencies had jurisdiction because Autonomy did not trade on the U.S money market before the deal with HP. It is believed that the HP`s internal team was quite aware of the accounting irregularities long before the deal. This team has been blame for failing to advice the management on time leading to whom she relied on before the deal for failing to inform her of the irregularities. Ms. Whitman also blamed Mr. Shame Robinson, former strategy chief and Mr. Apotheker, her predecessor for failing to respond promptly to request for comment. According to her, his predecessor failed to implement critical initiative that resulted to unworthy and desperate acquisition of Autonomy Corporation (Bizjournals.com, 2012).
On the other hand, Leo Apotheker insisted that no one has the right to blame him for the troubled acquisition of the Autonomy Company. He confirmed that Whitman was one of the board members during the acquisition time, and thus must be the first person to carry the blame. According to Apotheker, all the HP`s directors must share the blame associated with failures to take timely responsibilities and corrective actions. He argued that no chief executive could ever make such critical decisions in isolation without involving the other team members (Nytimes.com, 2012).
According to the report presented by Reuters, Apotheker communicated through an email that the agreement was achieved after several board meetings led by the Chairman. It is evident that the management team from the two corporations should share the blame of the incurred losses. Whatever the case, those at the losing end are the investors (Bizjournals.com, 2012). They decided to take action and sued the company with claims that it has accused Lynch of the fall out. The HP investors pointed out that the board of directors has a case to answer regarding the matter. This is because the board has been given the responsibility by the shareholders to protect and manage interests of the shareholders (Nytimes.com, 2012).
Poor management realized in the merger contributed to the disaster. With effected management, it is not possible to experience such mishandling of funds and resources. Lack of unity, teamwork and appropriate work ethics is another gap that led to the great disaster. Poor coordination especially on critical issues such as accounting hit the merger, affected its stability and threatened its future. Trust and respect, which is crucial for a smooth running of activities, was not available between the two parties. This created room for the competitors to sell their products with minimum competition (Nytimes.com, 2012).
The merger resulted to detrimental effect on the performance of both companies. Immediately the deal was made, Autonomy`s sales reduced drastically affecting the availability of human information. Autonomy recorded a dramatic reduction of customers, hence reduced profits and customers` confidence. Challenges in planning, strategic decision-making and implementation failures were realized in the merger. This made it difficult to maintain quality services to the customers such as adequate data security, availability and accuracy (Beal, 2011). A crucial challenge realized in the merger was identifying the best option for the integration of information systems in two strategic dimensions. The first dimension deals with the computer architecture location, which ranges from full centralization to an approach that is fully distributed (Bizjournals.com, 2012).
What was the effect of the merger on the reputation of the company?
The third problem facing HP is the loss of its reputation and image to the public and customers. Reputation is the overall evaluation a company is held by its stakeholders, both internal and external. This is based on its past business activities and what it holds for the future. Over the years, HP has been a reputable company, which had earned a lot of credibility, reliability as well as trustworthy to its stakeholders due to its unique and quality products. What HP failed to understand is that reputation is not earned by rating the asset base of the organization, but according to stakeholders` perception regarding its business activities. During the merger, HP forgot that its stakeholders are watching and if anything goes wrong, then its reputation would hang on a balance (Harrison, 2012).
Reputation goes hand in hand with the brand name of the company. Such a company has a high integrity and must maintain the quality of its services to customers in order to maintain their confidence and perception (Beal, 2011). Recently, HP lacked integrity that it had earned over the years affecting its operations and loss of brand name. Diminishing reputation has affected HP`s business deals with British technology companies as they find it hard to conduct business with HP in future. Reputation is a complex and intangible concept, which may take time to change. Losing reputation comes with a cost as observed in the case of HP as its share price was affected. A survey conducted by international analysts` shows that Chief Executive Officers plays an extremely crucial part in building a company`s reputation. This means that HP reputation has been on the hands of its former and current CEOs (Bizjournals.com, 2012).
There is no doubt that management of HP contributed to its failure. HP is on the road to losing qualities that a company should have to be regarded reputable. The company has lost its management values as poor management contributed to its failure. It also does not have clear goals for its future and current planning. Its financial status has become poor, unprofitable and has lost growth prospects. The workplace environment has been affected as the company has laid-off its workers due to the challenges it is currently facing. In addition, HP customers have questioned the quality of its products as most products believed to contain the IDOL product were lacking (Beal, 2011). Analysts from Ovum believe that the fall of the merger will affect the credibility of HP as it now becomes an unpredictable company. There was a prediction during the merger that if HP was looking for Autonomy as its growth engine, then it will have to look for more acquisitions in broadening its coverage.
A risk and security analyst from Forrester, Brian Hill had also predicted that the move would affect HP`s loyalty to the customers. The fall out of the two companies has also affected the credibility of the Cambridge technology used by Autonomy. This is because many people who had a lot of trust for Hewlett Packard developed a perception that the technology that came with Autonomy was the one that contributed to the failure of the merger. It is evident that reputation of a trusted company can affect many businesses when it fails. This means that all suppliers and distributors of HP products will suffer financially due to this mess. It is crucial for both HP and Autonomy to understand that the aftermath of data breach and information alteration may include a long lasting damage of the brand equity, customers` confidence and reputation. Preparing for a breach before it happens is a recommendable practice that both HP and Autonomy could have adopted (Harrison, 2012).
Preparedness creates room for the workers to familiarize with issues that are likely to occur and thus, take the first initiative when the problem is realized in the system. Swift and decisive response could have enabled HP minimize expenses, risks and offers protection to the brand. This enables reassuring of the customers, soothing shareholders and appeasing regulators. Timely response to issues can facilitate salvaging the reputation of a company and minimize the damage of the brand name. It is crucial to understand that reduced risk of brand damage is equivalent to increased company longevity (Guardian, 2012). Planning and effective response to management issues can help a firm such HP, and Autonomy reduce the reputation loss associated with brand name damage. This loss is hard to gain back and therefore every organization must strive to avoid (Bizjournals.com, 2012).
In conclusion, Hewlett – Packard was a company that was respectable by its stakeholders. However, its recent poor performance has made it loss its glory. Merging with Autonomy was in an attempt to reinvent the company based on technological advancement and increase its market niche. The chief executive officer Mr. Leo Apotheker had an ambitious dream for this company despite that he failed to foresee the problem on time and therefore failed to act. In addition to this, auditors could have done their work thoroughly instead of relying on the financial information provided by Autonomy management team. This seems that Autonomy management knew that something was amiss during the whole process of acquisition. HP on the other hand, trusted the audited finances rather than hiring private contractors to do an interrogation to Autonomy`s suppliers and customers, dig deep into the matter and get a clear image of what was happening.
In addition, the price that HP acquired Autonomy was much higher even than the value of the company itself leading to massive losses. Now the two companies are blaming each other for the fall-out, but HP is the one on the losing end. Once a reputable company, HP is now struggling with the mess, creating more confusion to its shareholders and stakeholders who are now claiming that the company downplayed them for failure of informing them about the disputed merger. Although reputation is had earned, there is room for HP to improve its performance and learn from its experience. HP concentrated on building and advancing technology but overlooked other issues leading to its poor performance.
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Hewlett Packard, Autonomy and Human Information: Case study