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Wednesday, April 22, 2009

Insights from Lawson CUE 2009

Lawson invited me to attend its annual conference in San Diego this week. I last attended Lawson's CUE in 2005, so this was a good opportunity to catch up on the latest with this vendor of enterprise software. It was also a chance to spend some time with like-minded bloggers such as Vinnie Mirchandani and Michael Krigsman. And by like-minded I mean those that write from the perspective of technology-buyers.

Here are some of the points that to me were most meaningful, from discussions with Lawson executives and customers as well as from dialog in the analyst meetings. I'll try to comment beyond what is in the announcements and press releases.

Lawson Refining Its Vertical Industry Focus
Dean Hager, the Lawson executive in charge of product management, laid out what I thought was a coherent rationale for Lawson's current industry focus. I've always been a fan of industry-focused strategies, and I like Lawson's identification of narrow sub-sectors that offer growth. For example, Lawson's M3 (the former Intentia product) has been, for some time, focused on the fashion industry, among other sectors.

But Dean pointed out that Lawson is targeting not fashion manufacturers per se, but rather organizations where the focus is on fashion design, sourcing, and distribution. As much apparel production has been outsourced to low-cost locations, such as China and India, the greatest opportunity for Lawson is not in manufacturing but in these higher value links in the supply chain.

Likewise, Lawson's M3 has always been strong among equipment manufacturers. But rather than focus on this entire sector, Lawson is targeting firms that sell and service or rent their equipment, since the most profitable segment is the aftermarket sub-sector.

One challenge facing Lawson is in differentiating itself from the two largest enterprise software vendors: SAP and Oracle. Lawson is unlikely to beat either of these players in total application software sales. But by adopting a strategy of targeting narrow verticals it is quite reasonable for Lawson to seek to dominate them. Dean quotes the work of Geoffrey Moore along these lines, and I agree. The strategy is right. Whether Lawson will be successful in execution is the real test, of course.

Technology Update
At CUE 2005, I spent some time learning about the new Lawson System Foundation (LSF), with its Landmark design tools. So now, four years later, I was interested to learn what progress Lawson had made. Here, the word was encouraging, with 90% of S3 customers and 400 M3 customers reportedly taken delivery of the latest versions under LSF.

I was also encouraged about plans to roll out use of Lawson's development toolset, Lawson Application Designer (LAD), to partners and even customers. Lawson's professional services group has already been building some LAD-based apps as custom development for select customers. The next step will be to roll out to this capability to partners, with the goal of expanding the ecosystem of software developers around Lawson. I feel this move is really key, as a core enterprise system vendor, such as Lawson, can only be successful if there are many other parties surrounding it that have a way to make money supporting Lawson. Lawson simply does not have the global or even national scale to reach every opportunity: only by making itself attractive to VARs and other local service providers will it be able to leverage its investment in its core products.

Smart Office and Enterprise Search
Dean Hager spent a good part of his keynote demonstrating Lawson's new user interface, dubbed Smart Office, and the new enterprise search capability. Smart Office is essentially a Windows desktop that holds a number of "widgets" tailored according to the user's job or "role." Lawson gives you a starting set of widgets for typical roles, but you can then tailor them further. The whole look-and-feel is Vista-like. The product shows extremely well.

I notice that vendors like to demo the user interface. It's something that's easy to show and also something that everyone in the audience can understand. That's not the case if the vendor tried to show functionality: for example, improvements in calculation of available-to-promise or how drop-ship orders can be tracked.

User interface features may grab the attention of prospects, but ultimately they are not essential to success. I know of no ERP implementation that failed because user interface wasn't slick enough. On the other hand, I have seen plenty of ERP implementations that floundered because functionality did not work as expected.

Still, I must admit, Lawson's new Smart Office is pretty slick. I was told by someone closer to the action, however, that there are few if any implementations outside of Lawson's beta sites. Hopefully that will change, as new prospects buy it and plan for it as part of greenfield implementations.

The new Enterprise Search capability also looks promising. Built on top of the open source Apache Lucine software, it allows users to quickly find all occurrences of key data in Lawson data structures, regardless of the file or format. For example, if there is another "peanut scare," a food manufacturer could find all places where a certain peanut product was referenced, whether in purchase requisitions, customer orders, manufacturing records, or bills-of-material. The capability can also extend to non-Lawson data, such as data on the user's own desktop.

I like features like this, which blur the line between ERP data and other enterprise information. Few organizations have all of their enterprise data in their ERP systems. Whether customers will be willing to let Lawson be the hub for enterprise search is an open question, but Lawson is making a good move to try. I also like that Lawson is building this capability on open source technology.

Touchy on Subject of Maintenance Fees
CEO Harry Debes spoke in his keynote about Lawson's new Value Improvement Program (VIP) for software maintenance. The program allows customers to fix maintenance costs for three years and extends maintenance for discontinued products. In addition, there are new maintenance offerings to improve incident response time, extend hours of coverage, provide better resolution of critical issues, and give a single point of contact for the customer. The goal, according to Debes, is to increase value to the customer without increasing cost.

Software maintenance costs are a subject of keen interest to some of us, so during the analyst meeting afterwards with Dean Hager, Dennis Howlett (via Internet) asked something to the effect of whether Lawson was prepared to work with customers to reduce maintenance costs. Dean thought for a moment and then said, essentially, no. His answer was that, in order to serve customers, it is important for Lawson to be financially healthy and maintenance revenues are a part of Lawson's financial health (I'm paraphrasing here). Others followed up with questions regarding the value that customers receive for their maintenance dollars. To both, Dean repeated essentially the same point, that Lawson would not cut maintenance fees. I then attempted to give Dean an out by asking whether Lawson's offer of tiered maintenance (Bronze and Silver) was in fact a way to give customers flexibility in how much they wanted to pay. But Dean didn't take the out and again repeated that Lawson would not cut maintenance fees.

I found the entire exchange to be odd. The only explanation I can come up with is that, with a number of financial analysts in the room, Lawson finds it important to reassure Wall Street that its maintenance revenue stream is not threatened. A couple of us later checked with Lawson's PR group concerning pricing for Lawson's two tiers and found that Silver is priced annually at 22% of software license cost, while Bronze is just a two point discount, at 20%. We were underwhelmed, to say the least.

Is it just coincidental that the 22% number is exactly the same as Oracle's and also the same as SAP's new one-size-fits-all enterprise support?

SAP is getting quite a bit of resistance from its customers worldwide, who resent being put on a forced march to unbudgeted-for maintenance increases. Now it appears that Lawson is heading down the same path: arguing that the increased costs are justified by the better value of its VIP program. Ultimately, it is customers that will need to decide whether the increased costs are justified. I would just like to see some vendor try a different approach and really attempt to compete on lower costs and flexibility in maintenance programs.

Thanks to Lawson, though, for giving us a forum to ask these questions.

Customer Experiences
Lawson arranged for me to interview two M3 customers, without PR folks present, which I appreciate. I always learn something from speaking with customers, and this was no exception. From Shahi Exports in the apparel sector, an installed M3 customer of three years, I learned that current economic conditions are putting strains on planning systems. Customers are holding orders until the last minute, giving planners little time to determine resource availability. This would likely be a problem regardless of the system and many apparel manufacturers are turning to point solutions to solve the problem. I also heard about challenges in localizations for international markets, always an issue for vendors that want to sell worldwide.

I also spoke with Jeff Greenway, of Washingon-based Bargreen Ellingson, which is just seven weeks into a new M3 implementation. It was good to hear that Lawson is able to make new sales in this economy. (A check with a friend who works for Lawson confirmed that there are new M3 deals closing in several key verticals.) For a mid-size business, Bargreen Elligson appears to be well-positioned for success, with a full-time core team of eight, several full-time M3 consultants, and a reasonable timetable for go-live. Jeff outlined his project plan and approach at a high level and assuming the effort is successful, it should make a good case study.

Other bloggers are posting their insights:

Related posts
Layoffs at Lawson
Update on Lawson's strategy
Lawson's performance better than it appears: CEO
Blogging from the Lawson user conference (my 2005 report)

by Frank Scavo, 4/22/2009 07:16:00 AM | permalink | e-mail this!

 Reader Comments:

Thanks for the recap, it sounds like Lawson is making progress in some areas with M3, but the maintenance issue will likely always be a battle in terms of pricing.

As to Lawson Smart Client, based on personal experience with it I'd say the widget functionality is nice, but more importantly Smart Client offers an easy way to take system-specific terminology and translate that into a much more user-friendly format. I.E., status codes can read "Shipped" or "Invoiced" rather than just numbers. You can also color-code records based on criteria, such as highlighting certain customer orders in yellow if they're held up for some reason. With a little bit of up-front effort, the user learning curve for implementation (and new hires) can be sharply reduced.
Hi Frank,

To take up your point about maintenance, I’m surprised that yet again a representative of a large enterprise software vendor doesn’t take the opportunity to more forcefully defend the company.

To an extent, SAP also ‘keeps its head down’ on the issue of maintenance. I find this puzzling, given that it provides value that runs into millions annually for its clients.

So in my latest blog I’ve written SAP and annual maintenance – a defence as a detailed response to the criticism that has been running for nearly a year now. To me there are seven themes/questions that keep being repeated by SAP’s critics, some or all of which are also levelled at Lawson and the other large vendors.

Your comments about my answers to the questions are very welcome. You will find my blog at www.stroma.eu

To update your points on the "VIP" progam. The cost of entry is the purchase of a new Module from lawson that is great than $40k. That is the only way to lock in your maintenance for 3 Years. Roughly breakeven for customers and will actuall cost more after 3 years b/c they will adding more licnense support for the new module at the 20-22% range. Sneaky if you ask me.

Also, Adding better support at no cost to the customer. You pointed out that Lawson sells Bronze and Silver support. So for 20% (Bronze) you get support, but for 22% (Silver) you can get better support. I dont understand how this is promoted as better support with no additional cost to the customer? You have to upgrade and pay 2% to get better support.

I wish a vendor would have Good Support period and not charge high prices for better support, again a sneaky approach to more value for the customer without the additional cost.
I don't know Lawson, and their support service. But, we need to understand that support and maintenance for software cost money to the developers. in some cases, need also 24 x 7, correction patches,etc'. the fact is that also Oracle, SAP and other vendors charge the same rate 20-22% plus / minus. to compare, SUN can charge you 30% for 24 x7 worldwide support. SO, I'm not happy with this, but it seems reasonable for me. J. L.
Frank - your blog is a great resource and I enjoy reading it.

In answer to your statement "I would just like to see some vendor try a different approach and really attempt to compete on lower costs and flexibility in maintenance programs", I'd like to offer my company's take on support (I'm sure there are many other smaller niche-specific software companies like mine out there who operate similarly).

We are a niche software provider that focuses on small-medium sized businesses in the industrial distribution marketplace. We specialize in fluid power, hose & rubber products, process control & automation distributors.

Because we are a privately owned company and not in the Mergers & Acquisitions game, we can offer low pricing and flexible support plans.

Unlike many of our competitors, we separate our maintenance plans from our support plans. Our customers only pay for the support they use, unlike one of our major competitors which require their customers to pay a hefty upfront annual fee for a combined maintenance and support plan.

With Tribute, they can buy prepaid hours for phone support at a discount or just pay for what they use. (Yes, we still provide "old fashioned" phone support by staff here in the good 'ole USA).

We also provide support for those not on the subscription service/maintenance plan - another option that many of the M&A players do not allow.

Our subscription service/maintenance plan runs 17% of the software costs and 100% of that goes back into the company for operational costs and continual development of our two products - which, by the way, is directed by our customers through our Program Review Boards and Users Groups.

So, we're out here, Frank, and with a base of loyal and happy customers but without the huge advertising budgets and over-inflated maintenance costs. Instead of squeezing money out of legacy clients, we continually invest in both our UNIX and Windows-based products so that our customers (the only folks we have to please) have the tools they need to get ahead in this tough economy.

Nina Baker
Sales & Marketing Coordinator
Tribute, Inc.
Nina, thanks for the info. Assuming it's all true (and I have no reason to doubt it is), I think this is a winning strategy.

Vendors that practice this approach might not make as much money in the short run, but in the long run they'll have customers for life.

Good luck to you and your team.
Thanks Frank! We establish partnerships with our customers (trite but true) and they are our best source of referrals and advertising. They're even willing to make an appearance on our blog! Check it out. http://blog.tribute.com
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