In 2012 I undertook a research project for the European Commission to assess the opportunities and barriers that enterprise search software companies faced in building successful businesses. The project was stimulated by the acquisitions that had taken place over the previous few years and the concern of the Commission that the EU might be dependent on US companies for enterprise search software.
The barriers have remained largely unchanged. The most important barrier is that there is a significant shortage of people with the skills to support the development, installation and management of enterprise search applications. Experienced search managers can command high salaries and their organisations will make every effort to retain them as finding someone to replace them, especially with similar expertise and experience, is going to be very difficult.
The second barrier is that product differentiation is very difficult to achieve. At the present time search software vendors are promising AI/ML magic with no evidence as to the eventual performance. It is very difficult for them to build a business case for investment in their software, and also difficult to invest ahead of demand in the systems integration skills needed to implement enterprise search, especially in multi-national organisations.
The major change has been the market dominance of ‘enterprise search’ by Microsoft. The Microsoft applications are optimised to provide effective search of Microsoft files in Microsoft repositories, with the exception of Azure Cognitive Search. In effect the Microsoft search functionality is free because it is an element of Microsoft 365 which dominates the office productivity market. Replacing this search with either another commercial or an open source product is very difficult as an element of the business case has to be a justification of why investment needs to be made in replacing the ‘free’ Microsoft search application. SharePoint search may well be seen as ‘good enough’ by a CIO as they have no experience of other search applications and improving search, with its very limited immediate impact, comes way down the priority list for investment.
The only public search companies are ElasticSearch, which is open source, and Coveo, which now specialises in e-commerce search. Indeed e-commerce search is very much in demand because it is easy to make a business case around increased sales and customer retention.
In total there are over 70 companies offering enterprise search software. Most are small businesses that focus on their national market, especially in the USA. They are all funded by venture capital, and investors are always looking for a return on their investment. The only exit strategy investors have available are to sell the technology to a larger company, which is what happened with the companies acquired in the late 2010s. There was no value in the client base. The most visible effect of this technology acquisition is the case of Attivio, which sold its technology IP to ServiceNow with the result that Attivio was not able to continue in business and many clients were left without an immediate replacement option.