Is HP Right? Autonomy Salesperson Shares Internal Emails

Julie188 writes "You know how HP said it uncovered $5 billion worth of 'improper' revenue at Autonomy? One thing HP has accused Autonomy of doing is booking software-as-a-service contracts as software licensing deals. So how might that type of accounting work? A former Autonomy salesperson fighting a legal battle with HP says she's seen it happen firsthand. She's shared internal Autonomy emails and documents that show the details of one deal. '[While working for software company CA, Virginia Briody] had closed a four-year $1.22 million hosting/software-as-a-service deal with a customer, Pioneer Investments, and was paid her full commission, over $100,000, she says. Autonomy bought the software unit from CA on June 9, 2010, and Briody became an employee of Autonomy and Autonomy inherited the Pioneer contract. But there was an issue. Autonomy didn't acquire all the pieces called for in the original contract, Briody says. It didn't have a partnership with the hosting facility and it didn't gain from CA a critical piece of compliance software the customer needed, she says. Autonomy needed to find substitutions or Pioneer would cancel the contract, Briody says. So in the fall of 2010, she signed a new deal with Pioneer and walked away with a four-year, $1.859 million contract of which Autonomy execs considered $1.8 million as new revenue, she says.'"

Re:I'm not a nerd anymore...

[Rockoon]

Real nerds dont restrict themselves to computers, gadgetry, coding, and scifi.

..and how dare you leave out physics/chemistry.

Re:I'm not a nerd anymore...

[todrules]

They hired Deloitte to do their due diligence. They didn't. This is why HP is now suing Deloitte, because they (allegedly) dropped the ball.

Re:I'm not a nerd anymore...

[pesho]

Because their business plan was not to run their business, but to sell it as quickly as possible to the first idiot that they can dupe. The bigger the number at the bottom of their accounting sheet, the easier it would have been to get HP's CEO Apotheker salivating. The bigger the potential reward, the less like he was to do his due diligence. This is standard conman operating procedure.If this particular case does not turn out to be an insulated incident it can put a lot of people in jail.

Re:I'm not a nerd anymore...

[alexander_686]

Because sometimes Autonomy did is the right choice. Companies can either book the revenue upfront or over the lifespan of the contract. No matter which one you pick it can be abused, so the trick is to pick the right one for the situation – which is a subjective accounting decision – and these subjective accounting decisions can be influenced by upper management.

Software Licensing Deals = buy. You buy a car from Ford and finance it though Ford. Ford books the car as a sale up front. This is

Software as Service = Lease: You lease a car for 36months from for and finance it though Ford. Ford books the revenue 1/36 each month.

The accounting issue is that the client was buying software (recognize profit today) and maintenance / support (recognize profit over a period of time) as a single, lump sum. Allocating costs between the 2 is subjective – and open to abuse.