Continuation of “The Offer: Part 1, Fast Responds”

Comments from the industry speak volumes. Within 36 hours of the Microsoft announcement to buy FAST, upwards of 500 stories hit the global media.

The most telling comment was from Microsoft itself. Microsoft Business Division president Jeff Raikes said: “Fast has the best people and the best technology.”

BusinessWeek also noted significant comments from Raikes.

Corporate search “will be for workers tomorrow what Internet search is for consumers today,” he said in a conference call after the deal was announced. Fast’s software may also help Microsoft improve its Web search engine while bolstering the company’s research and development efforts in Europe, added Raikes.

I originally found it interesting that Paul McDougal classified enterprise search as “a relatively new market” But Chris Kanaracus also reported that “the move means that enterprise search has truly arrived as a software category”.

Paul McDougal illustrated why this topic, even beyond the deal, is such an important issue – why enterprise search has significance beyond internet or even intranet search:

Corporate networks, by contrast, contain mountains of structured and unstructured data archived in numerous formats, some of them decades old and stored away in highly secure servers. So, for instance, engineers at an aircraft manufacturer might have a tough time finding schematics for an older airplane model if they’re suddenly needed for a crash investigation.

It’s a costly problem. A company that employs 1,000 information workers can expect to lose $5 million in annual salary costs on time spent searching for documents, according to IDC.

Benjamin Romano, of the Seattle Times, reported similar thoughts and suggests that “the acquisition signals Microsoft is serious about enterprise search, a market still very much up for grabs.” [emphasis added]

Benjamin also rightly suggests that, “Particularly for companies in information-intensive or regulated industries, search is becoming the starting point for many tasks — in much the same way it has become the starting point for navigating the Internet.” The conservative potential for such an industry is pegged by IDC analyst Susan Feldman at an annual growth of 20 percent.

While many accurately note the Microsoft offering as a 42% premium (which I reported earlier is really at par when sliced another way), John Blossom suggests the offer is “relative pocket change”. Concise and insightful, John introduces a reality check suggesting that FAST has been challenged by “a sales strategy that reached beyond their ability to deliver on ambitious promises”. He then also notes that Microsoft “failed to create any significant sales momentum behind its own enterprise search efforts”. He suggests that the results of the offer will, “bring together two impressive partners that promise to dominate enterprise platforms for some time to come”…“FAST’s rapid growth over the past few years into an increasingly dominant position in enterprise search markets is just the ticket that Microsoft needs to position itself in increasingly competitive enterprise platform markets.” Lastly, he reinforces his earlier financial comment: “it’s a major investment in securing Microsoft’s future cash flow.”

BusinessWeek reiterates this with comments from a financial analyst:

Buying Fast will cost Microsoft less than three weeks’ worth of free cash flow, and could provide better returns on the company’s $21.6 billion cash pile than stock buybacks and dividends, says Brendan Barnicle, a vice-president and senior research analyst at Pacific Crest Securities.

Chris Kanaracus offered related comments from Robert Tennant, CEO of Recommind, who has his own view of the potential of this market.

“We believe that search is really important to the next generation of all software,” he said. “It provides information access with context. We believe that you’ll see search … woven within the fabric of other applications.”

But then FAST talked about one important aspect of this concept and what they’re doing to address it, at last year’s conference (I’m looking forward to what the latest will be at this year’s conference).

So while Robert suggests that “search is really important to the next generation of all software”, here’s my predictive synthesis of the greatest yet-to-be-explored, yet-to-be-tapped industry potential – the ‘now’ great adventure before us: Enterprise, The Final Frontier

[Don’t take this analogy too lightly. Their trips were ultimately funded by the exploration (ala. search) of new knowledge.]