Search Technologies finds a new home in Accenture Analytics
Although the deal was closed on 31 July the news about Search Technologies being acquired by Accenture Analytics only broke yesterday. The title of this blog is to highlight that the fact that Co-Founder, President and CEO Kamran Khan seems to have been looking for a purchaser for the business which he set up in 2005. He worked with Paul Nelson at Excalibur Technologies, which was built on the RetrievalWare software that Paul had initially developed in the early 1990s. The Excalibur story is a complex one, as it was originally acquired by Intel, became Convera and was then acquired by FAST Search and Transfer in 2007 and so moved on into Microsoft less than a year later. The Search Technologies site misses out the Intel and FAST deals. The RetrievalWare technology made extensive use of natural language processing and content analytics and was way ahead of its time, but also the market demand.
Search Technologies had around 200 staff at the time of the acquisition, many of them developers, and there can be no dispute that the technology base of the company is very sound. The Accenture deal sends a strong signal to the market that content analytics is a very important market segment, which is good for everyone in the search community. I can see Accenture Analytics clients being very pleased with the deal as it will substantially enhance the technical sophistication of the firm. The shareholders of Search Technologies will also be pleased with the financial outcome as a reward for their commitment to growing the business.
Professional services deals are always interesting, and I speak with the experience of trying to acquire Gartner for Reed Publishing in the early 1980s. We did not proceed to do so and I learned a great deal from the experience. There is a critical mass problem with professional services companies which relates to utilisation, or the number of days billed. Depending on the structure of the firm there is a point when the costs of running a business of (say) 200 people eat in to the margins, and it is very difficult to grow the business at any speed. From the acquiring firm perspective the challenge is how to keep hold on the most talented of the team who may well find life in a corporate giant of 400,000 employees somewhat ‘different’. I can quote you many examples of deals in which professions of commitment by the acquiring firm about maintaining the independence of a very much smaller business did not work out. Remember Endeca, Vivisimo, Isys Search and FAST Search?
You can own the firm but owning the creative talent is more challenging, and before long they leave to start new businesses or join smaller firms where they have more control over the direction. It would also not surprise me to find that day rates for Search Technologies staff increase from their current levels. That may be fine with Accenture clients who will not notice the difference but not so fine with companies that are not clients. Holding on to these clients (to which Accenture would hope to cross sell new services ) is going to be a challenge.
The sheer size, a decade of experience and a global footprint meant that for many companies Search Technologies were the only game in town. Firms such as Perficient and The Digital Group work primarily in North America and Findwise only operates in Europe. That is going to be a problem for multi-national companies who already have enterprise integration partners but had no big issues with using Search Technologies alongside these partners. Accenture may be a different proposition. As a result the US firms may start looking at Europe and the European firms may start looking at the USA with the objective of providing the end-to-end service that could be obtained from Search Technologies.
In the long term I think there will be a lot of winners. The clients of Accenture will have access to a wealth of experience, the Search Technologies team will enjoy working on some mammoth projects, the profile of search and content analytics should be increased and market opportunities will open up on a regional level for both European and US firms. I suspect that the losers will be companies with global business interests who may find it difficult to make a case for following Search Technologies into the Accenture fold, especially if Search Technologies’ proprietary software (e.g. their connectors) are seamlessly merged (again remember what happened to Vivisimo and Endeca) into the Accenture Insights Package.