In the past week mega-vendor Autonomy saw its share price plummet by 20% -- a huge drop by anyone's standards.  Much discussed in the financial press, it's also news that will be much discussed and publicized by Autonomy's competitors. 

Today I was asked by one of our advisory customers whether they should be concerned about the state of Autonomy, who were a short-list candidate in their RFP process.  It was a great question, but a tricky one to answer. So how did I answer?  Well, there's several issues here: 

• First off, most of us who watch Autonomy have been expecting this for a long time -- as their level of growth against the grain was largely unsustainable, even given their rapid pace of acquisitions
• Valuation swings like this are not necessarily indicative of shifts in product and support quality
• Though their market cap has dropped, Autonomy has a huge war chest of cash, and are a $1B company; so they are highly unlikely to go under or frankly even suffer much -- other than the owners' share valuation is worth less than it was a few days back.
• The longstanding iManage document management product is solid, with a large and loyal installed base likely to keep the product viable in one form or another regardless
• All that being said, Autonomy could themselves be acquired at some point

But then I veered off on a tangent (not like me at all...), and noted that when vendors like Autonomy are on a shortlist it's important to evaluate them differently than a vendor who offers a single, focused product offering (i.e., most ECM and WCM firms).  Autonomy is a big company -- big because it has grown via multiple acquisitions, often of vendors that themselves grew via acquisition.

Take for example the iManage product that my client was inquiring about.  iManage started out as an innovative Silicon Valley startup, who then got bought by web content management goliath Interwoven, who in turn got acquired by Autonomy.  So in evaluating Autonomy as a potential supplier, a sound question to ask is whether this is just a bid by Autonomy to sell you all sorts of stuff (and they have a lot of stuff), or whether this bid is actually driven by the rump iManage team. If the latter then they may be worth serious consideration. If the former then they should quickly get the heave-ho.

Another question one might ask is how well-loved is this product within Autonomy's huge portfolio of offerings? Take for example Meridio, a successful software firm from Northern Ireland that had carved out a solid niche for itself, particularly in records management for SharePoint environments. At one point the rumor mill was rife with gossip that Microsoft themselves would buy Meridio, such was the fervent manner in which Redmond was apt to recommend Meridio to its enterprise customers. As it turned out Microsoft did not buy Meridio; instead Autonomy did. Since then Meridio has continued operate out of Northern Ireland, but they and their product have hardly set the world alight. We see Meridio less and less in the marketplace, and Microsoft now recommends their own records management functionality rather than Meridio's.  Autonomy then bought another record management system when they acquired Interwoven in 2009, and then subsequently in 2010 bought CA's records management products.

Does Autonomy need all these different record management systems? Nope of course not, but when you acquire and acquire and acquire bundles of technology, by default you end up with overlap. And sadly there is only so much love to go around, and there's doesn't seem to be a lot going Meridio's way these days.

OK, I'm picking here on Autonomy, but these kind of considerations are common enough in the enterprise software world. A big, strong vendor is no guarantee that the product you are buying from them is equally strong. And even though most vendors in the ECM space are relatively small, a handful of big vendors tend to dominate.  Thus, the way we would go about assessing a bid from Autonomy would be equally valid of a bid from Oracle, IBM, HP, or Open Text: look at the product group more than the vendor.