A Norwegian newspaper did an expose’ on FAST, dated June 28. Helpful search industry participants quickly distributed English translations to a variety of commentators, including me. TechCrunch posted a scan of part of the article.
The gist is that FAST followed a pattern very common in the packaged enterprise software industry:
- It had trouble meeting its growth targets.
- It inflated reported revenue (in the high-margin software industry, inflating license revenue has a huge impact on profits).
- One technique whereby it inflated revenue was to count deals that actually closed after quarter end.
- Another technique was to count deals as closed in which the customer hadn’t actually fully committed to buy.
There’s nothing new here. Back in the 1980s, we used to joke that MSA made 10% of its annual revenue and 100% of its profits between the 32nd and 40th of December.
Often, such problems are associated with difficulties getting product installations to succeed. Stephen Arnold suggests that’s exactly what happened in the case of FAST:
So, Fast Search’s problems began as soon as the company decided to push into the enterprise search market. The adjustments were, as noted in the documents I cited in my previous Fast Search analyses and in the TechCrunch article, small at the outset. Who knew that a customer would not pay his license fee installment? Then more customers groused about slow installs and the up front payments were not followed by any other payments. One Fast Search licensee told me that his Global 1000 company would not pay until Fast Search produced an engineer who could complete the installation per the task order. Well, Fast Search got an engineer to the client, but it was six months after I heard the complaint. Not surprisingly, this big outfit turned to a smaller vendor who got a different system up and running in three weeks.