Microsoft's Fast Search Bid Puts Heat On Google, IBM

Microsoft's move is likely to put the spotlight on other specialized search vendors, such as Autonomy and Endeca Technologies.
With its planned $1.2 billion acquisition of Fast Search & Transfer, Microsoft is looking to become a player in one of tech's next big growth markets -- software that lets business users quickly troll through the reams of unstructured information that's locked away in corporate databases.

A relatively new market, enterprise search also is attracting investment from other heavyweights like IBM and Google. But the highly specialized field is presently the domain of a handful of standalone specialists.

Microsoft is so eager to change that it's willing to pay what amounts to a 42% share premium under a deal disclosed Tuesday for a company that's expected to post a $130 million loss in 2007.

Why the urgency? Enterprise search "is for workers tomorrow what Internet search is for consumers today -- an indispensable tool that helps them quickly find the information they need," said Microsoft Business Division president Jeff Raikes, speaking Tuesday on a conference call.

And it could be a gold mine for the first big vendor that gets it right.

Business cycles are getting shorter. The time line in virtually all industries for developing new products and delivering services is squeezed. To keep up, workers need software that lets them get their hands on information as quickly as possible. "You can find football scores online in five seconds, but finding something inside a company can take five hours," said Raikes.

Raikes said Microsoft is targeting Fast because "they have the best technology out there."

Microsoft isn't alone in chasing this opportunity. IBM is building a portfolio of tools and services under its Omnifind brand that's designed to make efficient enterprise search a reality.

The company last year beefed up Omnifind Enterprise Edition, adding a version that offers a single interface with which users can sift through and analyze documents stored across IBM's Lotus Domino servers. IBM has also partnered with Yahoo to offer a free, downloadable version of Omnifind that businesses can implement to improve intranet search results.

For its part, Google recently introduced version 5.0 of its Google Search Appliance -- a combination of hardware and software that can be added to a network. The offering is meant to apply Google's formidable Internet search technology to corporate environments.

But Google won't win this market on past laurels. Businesses present to search engines an environment that's more formidable than the Internet. Web documents are stored in a handful of formats like HTML and XML -- and are deliberately exposed to public browsing.

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.

That fact has given rise to several highly specialized search vendors, including Fast, the United Kingdom's Autonomy, and Cambridge, Mass.-based Endeca Technologies.

With Fast likely to join Microsoft, Raikes believes his company is at the head of the pack in this nascent market. "We're going to deliver on the vision of much more effective search," said Raikes.

Microsoft plans to marry Fast's enterprise technology with its SharePoint software -- a suite of server and desktop products that give workers an interface through which they can retrieve information and collaborate with colleagues.

It's a combination that Google and IBM will have to match -- and analysts say that's sure to put Autonomy and Endeca in play. "It's certain that other large vendors will look at the acquisition of high-end solution providers rather than develop their own," says Mike Davis, senior analyst at U.K. research firm Ovum.

Shares of Autonomy gained nearly 10% in Tuesday trading on the London Stock Exchange. Endeca, which has an existing partnership with IBM, is privately held.

Microsoft said its offer to buy Fast has received approval from Fast's board and that it expects the deal to close in the second quarter of the 2008 calendar year.

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