For a FTSE 250 technology company Autonomy goes about its business pretty quietly. Even with a billion-pound market capitalisation and a whole gamut of large global companies as clients – Vodafone, BP, Ford, GlaxoSmithKline and Coca Cola - it maintains a pretty low profile.
This may change after co-founder and chief executive Dr Michael Lynch’s recent heavy criticism of Google for ‘dumbing down’ search technology. His outbursts do, of course, give a vague indication of Autonomy’s raison d’être.
While Autonomy mystically refers to its technology as ‘meaning-based computing’, understanding what it does is easier than you would expect. Simplistically, it provides methods for scouring through, and making sense of, the massive growth in ‘unstructured’ information that businesses hold, whether it be through documents, emails, telephone conversations or other media.
This information is difficult to sift through and make useful for businesses, but Autonomy’s technology enables companies to do just that. It can take the form of tracking illegal activity in a company, or in Ford’s case enabling the company to transform its text, audio and video files in its research libraries so its 150,000 employees can be up to date on new projects.
For group CFO Sushovan Hussain explaining what the company does has been merely a side issue during his five-year tenure. The business, itself just ten years old, has weathered the dotcom collapse, increasing regulation and gone through various share placings on financial markets.
Throw in more than $600m (£330m) of acquisitions last year, including the purchase of main rival Verity, and it is easy to understand why Hussain has had plenty on his plate. ‘I see myself primarily as a financial policeman, but this past year has been extremely busy.’
Meeting shareholders and analysts, shuttling between Autonomy’s dual head offices in Cambridge and San Francisco and integrating Verity have been immedia te issues. Making sure the figures add up and keeping up the company’s momentum of growth are long-term goals. Autonomy has reported positive quarterly profit figures for three years. ‘We’ve already achieved cost synergies from the acquisition. Verity suffered big Sox compliance costs, their quarterly bill being more than our annual fee was.’
But the momentum of growth will depend on the heartbeat of all technology businesses: research and development investment, which is vital for the future of the company, Hussain explains.‘For our search and categorisation functions, Autonomy has to have the R&D focus to make it powerful.’
Despite working in one of the most technologically expansive and savvy businesses, Hussain is more old fashioned when it comes to the company’s finance function.
He sees a professional accountancy qualification as ‘key’ when looking at new recruits. ‘The chartered accounting qualification is still the gold standard, or one of the other qualifications. We look for the same when we recruit overseas, and also for some operational experience.’
His own experience, as an ICAEW-qualified accountant (he trained at Ernst & Whinney), set him on the path to taking on his role as finance director. In particular, his experience at oil and gas business LASMO, where he helped to fend off a hostile takeover by Enterprise Oil, gave him M&A experience that proved invaluable when he was ‘quizzed’ by Autonomy management for his job.
M&A and corporate development are two areas that Hussain believes are fundamentals that need to be ticked off on a potential FD’s CV, also vital is some operational experience as a divisional FD. ‘It’s all about gaining diverse experience to be a CFO of a large company, understanding real nitty-gritty stuff, like supervising payroll and checking invoices.’
But it’s ultimately all about information, whether it’s ‘unstructured’ or ‘structured’. In Autonomy’s case, the latter relates to numerical data, which is much easier to assimilate, process and analyse. Even though Autonomy leaves structured data to database giants, such as Oracle, it does not mean that finance directors are averse to Autonomy’s charms.
Hussain says that growth in business compliance issues has seen his company provide risk assessment tools and investigative technology, much of its work driven specifically by Sarbanes–Oxley.
Of the much-feared US compliance regime, Hussain says Autonomy made the decision to quit its listing on NASDAQ because of the onerous requirements of Sox. ‘Costs to [meet listing requirements] were prohibitive, astronomical – the listing equated to many thousands of dollars in cost per trade’.
As most major US shareholders in the company bought shares through its LSE listing, the decision to quit NASDAQ was easy, and major investors such as Fidelity were ‘supportive’.
Autonomy listed on EASDAQ in 1998, the pan-European technology stock exchange that went belly-up in 2003 as the dotcom bubble burst. ‘There was no AIM market back then, it was nascent,’ Hussain says of the now popular London-based Alternative Investment Market. Fortunately it avoided EASDAQ’s problems by delisting. It is now listed on the LSE.
For a brief time, back in 2001 during the heady days of the internet boom, Autonomy scaled the heights of the FTSE 100. Now it just operates on the LSE, and finds itself almost without peer, in terms of both the lack of thriving technology businesses on the exchange, and within its own marketplace.
Last year Autonomy stepped up a gear when it purchased rival Verity for $500m. The deal was hailed by the company as a ‘complementary fit’, while many industry commentators thought the purchase was more important for Autonomy in terms of creating mass.
With Google pushing heavily into the corporate search market, and Microsoft, IBM and Oracle sniffing around as well, the view of the industry could well be spot on. Hussain admits the company was intent on ‘taking market share’, and the deal has already seen the company post its highest quarterly revenues at $56m for the first quarter of 2006, compared with $18m a year earlier.
Both sets of management planned ahead for the deal, and only 5% of the total workforce was lost. As Autonomy was more technology focused, Hussain says that Verity’s strong sales and marketing teams complimented his company – so both back offices and respective product lines fitted together snugly.
He’s also proud of how the company has got itself into a ‘unique’ market position, but admits that Google is looking to compete on its turf. One Autonomy product, a corporate search engine known as ULTRASEEK, is directly up against the ubiquitous Google.
Overall Hussain is comfortable that the market for search technologies is large enough for all. Autonomy will keep on investing in R&D, and the rest will fall into place. ‘R&D is the lifeblood,’ he says. With 80% of data in unstructured form, a booming compliance market and IT budgets rising, Hussain thinks the FTSE 250 company is well positioned.
Whether he will be as comfortable if Google keeps improving its corporate search engine is another matter. But he is certainly not a worried man, and more relaxed about Google than his boss.
Cross Atlantic antics
Sushovan Hussain, chief financial officer of Autonomy, does plenty of traveling back and forth between the company’s dual head offices in Cambridge and San Francisco.
However, his previous experience in senior financial roles at oil company LASMO has seen him based in some of the world’s most exotic and uninhabited regions in the world.
After being involved in fending off a hostile takeover of his employers LASMO by Enterprise Oil, he moved to Venezuela with his young family as finance manager of what he describes as a ‘massive operation’.
‘While you can get good experience at 24, 25 or 26 years old doing general ledgers, the real experience comes as the head of finance.’
After a year in that role he moved to one of the provinces on the Western side of Pakistan. ‘The local indigenous population didn’t have TV, they lived in tribes. We had to be extremely careful in developing a $500m (£275m) gas field. Liquifying the gas, heating it up is tricky and you have to be extremely careful in not displacing the indigenous population and looking after the historical sights in what was a desert.’
To ensure that LASMO was working with the environment as much as possible rather than against it, the company hired experts in the area, who told him that the company could not build anywhere near an ancient wall. ‘We were very environmentally aware,’ he recalls.
You may also like
If budgeting is to have any value at all, it needs a radical overhaul. In today's dynamic marketplace, budgeting can no longer serve as a company's only management system; it must integrate with and support dedicated strategy management systems, process improvement systems, and the like. In this paper, Professor Peter Horvath and Dr Ralf Sauter present what's wrong with the current approach to budgeting and how to fix it.
In this white paper CCH provide checklists to help accountants and finance professionals both in practice and in business examine these issues and make plans. Also includes a case study of a large commercial organisation working through the first year of mandatory iXBRL filing.