Monday, July 23, 2007

Update on Lawson's strategy

I interviewed Barry Wilderman, VP Business Strategy at Lawson Software, yesterday. I haven't written much about Lawson recently, so I thought it would be good to get the story from Barry, apart from the usual press releases and announcements.

Barry was named to his post this past January. Previously, he was a senior VP at META Group, where he was an ERP market analyst. I've met Barry in the past and have appreciated the analysis he did at META on the total cost of ownership (TCO) of ERP systems. He was a good catch for Lawson.

Some of the key points from our phone discussion.
  1. We discussed Lawson's SOA framework, Landmark. Introduced over two years ago, Landmark incorporates pattern, or domain-specific language, to allow business analysts to build applications without knowledge of programming. So far, Lawson's human capital management (HCM) offering is built on Landmark as well as its new strategic sourcing application. Eventually, all of Lawson's products will transition to this new technology environment.

  2. Landmark is built entirely on IBM technology, such as Websphere. I've long felt that application software vendors have no business building application development tools, so I agree with this strategy. At the same time, however, doesn't this reliance on IBM pose a problem to Lawson customers who do not use IBM technology? Barry agreed that this could be a problem to a customer that has standardized, say, on Microsoft's competing .NET technology. However, if Lawson is a key component of the customer's application portfolio, it should justify the transition.

  3. I pointed out that many other software vendors have stumbled when they tried to make a major technology transition. Witness all the vendors from the host-based era who tried to make the transition to client-server. For example, the former System Software Associates (SSA) went into bankruptcy as the result of its attempt to move its AS/400 host-based product, BPCS, to a client-server architecture. J.D. Edwards had problems for several years in its transition from its host-based World product to its client-server and web-based offering, One World.

  4. Barry didn't agree with my analogy, however, indicating that Lawson had already made the transition to Websphere for its entire product line, and that the move to Landmark was more of an evolution than a wholesale technology overhaul. So, the introduction of SOA and workflow should be less disruptive and can be accomplished in stages.

  5. How does Lawson compete with SAP and Oracle? These days I'm hearing of many cases where prospects are not considering other vendors and when they do, SAP and Oracle are difficult to beat. Barry indicated that Lawson competes by focusing on key verticals, such as healthcare and retail. When they compete in their sweet spot, they do not lose many deals.

  6. Lawson made a major acquisition two years ago when it merged with Intentia, a Swedish-based vendor that is strong in manufacturing and asset-based businesses, especially in Europe. Has this merger been successful, and how much cross-selling is taking place between customers of Lawson and Intentia. Barry indicated that there have been a handful of cross-sales of M3 (the former Intentia product) to Lawson customers, mostly of Intentia's enterprise asset management (EAM) offerings. There have also been a few sales of M3 in total into Lawson's installed base in the U.S. There have not yet been a lot of sales of Lawson's HCM into Intentia's customer base in Europe, however, largely because of the need to provide compliance with European regulations.

  7. Finally, Barry said that he wants to communicate a more sophisticated message concerning Lawson's total cost of ownership, that Lawson delivers more value per dollar invested. In his view, Lawson installs faster, is easier to understand, and takes less time to implement. Of course, these are claims that are put forth by nearly all enterprise system vendors. Barry's previous work at Meta did show that Lawson (along with QAD) had the lowest TCO of seven or so major ERP vendors. Whether those results still hold true now, five or six years later, are unclear.

  8. All of the major vendors are making significant efforts to simplify and speed implementation, and there is anecdotal evidence that those efforts are bearing fruit. At the same time, much of the cost of implementation is outside of the control of the vendor. A client that is well-organized for the effort, who has a well-trained project team and understands the need for business process improvement and change management will realize a much lower TCO than the client that expects the vendor to do all the work.
Still, Lawson continues to be one of the largest enterprise system vendors that has managed to show enough success to remain independent during this period of software vendor consolidation. Its share price is at its highest point since 2002, which vindicate Lawson's CEO Harry Debes and his email to me earlier this year.

Comparing Lawson's share performance over the past six months with SAP and Oracle (see below), it would appears that the market agrees.

Update, 9:36 a.m.: This morning, Computerworld has an interview with Lawson CEO Harry Debes, where he talks at length about competing with SAP and Oracle.

Related posts
Lawson and IBM team for ERP sales to mid-market
Lawson's performance better than it appears: CEO
Lawson acquiring Intentia
Blogging from the Lawson user conference

Thursday, July 19, 2007

SAP sales jump, defying Oracle's PR campaign

Following Oracle's outstanding quarterly results last month, SAP has posted its own preliminary results for its most recent quarter. SAP reports an 18% jump in software revenue over the same quarter last year, and a 10% rise in revenue overall.

Furthermore, SAP indicated that it is gaining market share against its rivals. According to unnamed industry analyst research, SAP's share of the worldwide market for "core enterprise applications" increased over the past year by three percentage points to 26%.

In nearly every public announcement of its financial results, Oracle has been comparing itself to SAP. SAP's most recent results show that Oracle's success doesn't mean it is triumphing over SAP. It just means that there's a robust market for enterprise software this year.

A rising tide lifts all boats.

SAP's quarterly results can be found on its web site.

Related posts
Oracle's Q4 beats estimates

Tuesday, July 10, 2007

IT budgets are lagging behind corporate revenues

Over at Computer Economics, we've just published our 2007/2008 IT Spending, Staffing, and Technology Trends study.IT spending, staffing, and technology trends

One of the key findings is that the median IT budget growth rate in the U.S. and Canada is accelerating to 5.0% this year, from 4.1% reported in 2006. At the same time, the median IT budget as a percentage of revenue is falling to 1.8%, from 2.0% last year. The only way to interpret these two statistics is to understand that IT spending is lagging behind corporate revenues.

This is not bad news. What it means is that IT managers generally are able to support the growth of the business without corresponding increases in IT spending. Our study shows that the large majority of companies are increasing their IT spending--but they are doing it at a pace that is less than the growth of the business.

In the last part of the 1990s, IT budgets grew at much greater rates because of Y2K and the dot-com boom. Then, during the recession in the early part of this decade, IT spending actually fell in a significant number of companies. From 1997 through 2003, IT budgets were a story of boom-and-bust.

What I like about today is that these major disruptions in IT spending appear to be over--at least for now. We seem to have entered a period where most companies are expanding their IT budgets in a restrained but consistent way. This is a far easier environment in which to plan IT investments.

On the staffing side, increases in headcount are somewhat more restrained, but most companies are adding IT staff members this year. And, there's still no end to the increase in the level of outsourcing.

These findings and more are presented in the study. There's a complete description on the Computer Economics website. There's also a press release.

Tuesday, July 03, 2007

SAP admits wrongdoing in Oracle lawsuit

SAP filed its response to Oracle's complaint last night, admitting that its TomorrowNow subsidiary engaged in some inappropriate downloads of Oracle intellectual property.

SAP reasserts the rights of its TN unit to download materials on behalf of Oracle customers who have the rights to those materials. It points out that "Oracle’s complaint does not challenge the basic propriety of third party support, nor do its factual allegations support the inflammatory statements" of Oracle's complaint.

At the same time, SAP claimed that the Oracle materials did not leave TN's internal systems, which are separate from the rest of SAP's network. SAP's response says,
Upon acquiring TN, SAP AG and SAP America put in place extensive policies to assure that no allegedly confidential material of Oracle obtained by TN on behalf of its customers would reach SAP AG or SAP America. Defendants are unaware of any breach of these policies, and believe that none has occurred.
It continues,
Oracle’s allegation that TN’s downloading conduct was “corporate theft” or involved SAP AG or SAP America is simply untrue.
SAP also announced that it is installing a new head over its TN unit. Former SAP Americas COO Mark White will now oversee TN, with founder and CEO Andrew Nelson reporting to White.

I think SAP is smart to admit any wrongdoing at this point. Any such activities would eventually be exposed anyway during Oracle's discovery process, leading to a drip by drip release of negative information about SAP. At this point, the issue would is to what extent TN or SAP benefited from the downloaded materials and what damages should be awarded.

SAP takes its turn at throwing punches at Oracle:
Oracle professes surprise and confusion about how TN can provide services more cost-effectively than Oracle. The answer is simple – TN does not force its service customers to pay artificially inflated prices for service to fund Oracle’s future acquisition and integration of products that customers do not want or need.
Of course, SAP does not mention that its own maintenance fees for customers of SAP software are pretty much in line with Oracle's. So, SAP should be careful about continuing this line of reasoning.

More seriously, in my opinion, SAP indicated that the U.S. Department of Justice is investigating SAP and TN. I speculated earlier that this lawsuit could lead to criminal charges against SAP, TN, or individuals implicated in the illicit activities.

SAP's response to Oracle's complaint is available here. SAP has also issued a press release on this matter.

Related posts
Oracle now charges SAP with copyright violation
Latest on the Oracle/SAP lawsuit
Oracle/SAP lawsuit: view from Rimini Street
SAP subject to criminal charges?
Oracle sues SAP and its TomorrowNow unit