Hewlett-Packard CEO Leo Apotheker is in such a hurry to build a software business, he's bidding $10 billion for Autonomy to gain roughly $1 billion in annual software revenue. In my view it's a start, but it certainly won't get HP where it needs to be in one fell swoop.

One financial analyst cut to the chase when he asked Apotheker to comment on the price paid and rationale for Autonomy's acquisition given that it represents "less than 1% of HP revenues but will cost 15% of the company's market capitalization."

Apotheker's response was that Autonomy will "position HP as a leader" in the enterprise information management market, "complement HP's existing technology," and "significantly enhance HP's financial profile." Autonomy is profitable and growing at a good clip, but, well, let's just say that HP's depiction of it as a powerhouse in unstructured data-analysis and cloud computing is a bit of stretch. Let's dig into the details.

Autonomy is absolutely a leader in information management, but it's not in some of the hottest segments.

Autonomy's core offering is Autonomy IDOL, a portfolio of enterprise-oriented search software that accounts for about two thirds of the company's revenue. Autonomy is an undisputed leader in enterprise search on the strength of its own product and acquisitions of other well-known search vendors including Verity. The search business has natural affinities with its email and document archiving and e-discovery businesses.

Autonomy has a very impressive customer list and a long list of software-vendor customers, including Adobe, EMC, Oracle, and Xerox, that embed Autonomy search engines in their products. That's because search engines are needed all over the place--for websites, intranets, shared servers, and within enterprise applications to search transactional documents, knowledge bases and so on. Autonomy has very sophisticated search capabilities including federation--the ability to search across many repositories and sources--and video and image search. But with all that said, enterprise search isn't a hot, mission-critical business priority.

Among the hottest areas are business analytics and big-data analysis. A small, but fast-growing pocket of big data is in analyzing unstructured data (mostly text) in email, CRM comment fields, and social networks like Facebook and Twitter. These analytics-intensive areas are driving interest in everything from Hadoop to text-mining to customer-sentiment and social-network-analysis applications.

Autonomy is moving into some of these areas with natural-language search and sentiment analysis capabilities. But the bulk of Autonomy's unstructured data revenue is around conventional search (IDOL), Web content management (Autonomy TeamSite, formerly Interwoven), document management (iManage), and a bunch of products and services around email and document archiving, e-discovery, and records management.

Don't get me wrong. These are important categories of software that fit HP's vision of becoming an information management powerhouse. What's more, the search, document management, and Web content management pieces in particular fill gaps in HP's portfolio. But these are not the hottest, most strategic categories in information management. There's little, and certainly little revenue, in Autonomy's portfolio that's tied to big-data analytics or applying predictive analytics to spot your most important customers, your biggest business risks, or the best product and profit opportunities.

Adapting To Cloud, Not Dominating It

Does Autonomy justify HP's excitement about its cloud computing and software-as-a-service (SaaS) billing? Yes and no. About one third of Autonomy's IDOL search business ($190 million out of $574 million) was tied to cloud deployment in 2010. Autonomy also stores more than 31 petabytes of data through its email and document archiving, and e-discovery services, putting cloud-related revenue at about one third of company's roughly $1 billion in revenue expected for this year.