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Wednesday, March 31, 2010

Lawson's cloud services: good start, but no SaaS

Lawson announced a new cloud computing program today, but it's only an incremental step in the right direction.

Extension of Lawson's existing managed services offering
For some time, Lawson has been providing managed services to customers of its traditional on-premise ERP and talent management on-premise software. Under that program, Lawson hosts its software in one of its partner's data centers and provides application management, patch management, and other service that are traditionally the responsibility of the customer. The customer buy a perpetual license to Lawson's software but lets Lawson operate it, for a fee.

The new program adds a few new twists.
  • First, instead of hosting in a partner's data center, Lawson will now deploy its software on Amazon's Web Services Infrastructure (a virtual data center, if you will). In addition, Lawson is now offering a subscription option, whereby the customer can lease the software and pay for it on a monthly basis, along with the costs for Amazon's infrastructure charges and Lawson's managed services.

  • At the end of the subscription period (somewhere between one to four years) the customer will now have an option to either continue the subscription or convert to a perpetual license, with an unspecified credit given for the period of subscription--sort of a "lease-to-buy" option.

  • Using Amazon's cloud, Lawson is now also offering a 14-day test-drive option at an (assumed-to-be) nominal charge, whereby the prospect can work with the software for 14 days using their own business processes and data.
Close but no cigar
After speaking with Jeff Comport, Lawson's senior VP of product management, however, I feel there is less here than meets the eye.
  1. Meeting the PR need. In my opinion, Lawson's cloud services, now give Lawson something to say when analysts, press, and prospects ask, "What are you doing about the cloud?" Beyond that, there's not much here beyond traditional software offered on a hosted basis--something that vendors have been doing since the ASP days of the late 1990s.

  2. Flexibility. Lawson's press release points out the advantages to customers in being able to automate the provisioning or setup of additional Lawson software instances (e.g. for testing changes or upgrades) or to meet spikes in business volume. But these are features of Amazon's cloud infrastructure, not of Lawson's software.

  3. Subscription pricing, no doubt, is something new, but that's just a contract option--it has nothing to do with how the software is designed, deployed, and maintained. And whether it actually saves money, or simply spreads it out over time--well, that will depend on the terms of the deal.

  4. The 14-day test drive is a bit too short for my taste. Jeff positioned the test drive as something more than a demo but less than a full blown conference room pilot. I can see why Lawson would want to cut its presales expenses by shortening the demo cycle, but I'd rather see an option to do a full-blow prototype. I prefer RightNow's approach--unlimited capacity to do a 90 day pilot test. But that's hard to do cost-effectively without a multi-tenant offering, which RightNow has but Lawson doesn't.

  5. No SaaS offering. As just mentioned, nothing in Lawson's announcement today has anything to do with software-as-a-service. It is simply the same Lawson software, deployed as a single instance, in Amazon's cloud. Every patch or regulatory update that's needed has to be applied to each customer separately--either by the customer or by Lawson. Customers still need to go through periodic version upgrades. The cost savings are only those reflected in the lower cost of the infrastructure (the smallest element of ERP TCO)--and even that will depend on how much of those savings Lawson keeps for itself, as opposed to passing on to the customer.
Lawson backpedals on "Collapse of SaaS"
So does this mean Lawson's CEO, Harry Debes, is retracting his 2008 proclamation that the the SaaS market would collapse in two years?
This "on demand", SaaS phenomenon is something I've lived through three times in my career now. The first time, it was called "service bureaus". The second time, it was "application service providers", and now it's called SaaS.
So, in Harry's mind, "SaaS" equals "application service providers." Well, what Lawson is now doing with Amazon looks an awful lot like an application service provider.

How does Lawson avoid calling its new program a retreat from Debes' earlier proclamation? The press release vaguely alludes SaaS competitors as offering "commodity software," while positioning Lawson's approach of offering "single-instance ownership and control" as superior.

I'm not convinced. The overhead and expense, even with Lawson's new offering on Amazon's cloud, will be far above what SaaS providers experience. True multi-tenant SaaS providers, such as Salesforce.com and NetSuite, make changes once, and the entire customer base experiences them instantly. This is especially a benefit to users of HRM and financial management systems (two of Lawson's horizontal sweet spots), where regulatory changes are not optional.

Don't get me wrong. Lawson's moving the infrastructure layer to Amazon's cloud services is a good move. In the absence of a strategy to offer true software as a service, prospects now will at least have the option of a low-cost and flexible cloud infrastructure. And for prospects that find Lawson meets their needs in terms of functionality--this may well be the best option for them.

Furthermore, Jeff is right--there are very few if any true SaaS alternatives for full-blown ERP functionality for larger companies. NetSuite, Plex, and others are focused on the SMB market. SAP's Business ByDesign is still not yet in general release, and when it is, it will also target the SMB space. Workday is targeting larger organizations, but it's stated desire to be a full ERP replacement is probably years away.

So Lawson still has time. But during this time, I just wish Lawson would establish a clear direction to at least offer some of its strong HRM and financial management systems, for example, as a true service. If it doesn't do so, it may find its lunch being eaten by the cloud-based providers such as Workday and Intacct. It may not happen tomorrow, but it will happen.

My fellow Enteprise Advocate Vinnie Mirchandani also weighs in: Lawson: I'm OK, you are not OK.

Fellow Advocate Dennis Howlete, has a similar view to mine and Vinnie's on ZDNet: Lawson teams with Amazon for cloud ERP--ahem.

Update: I pinged Naomi Bloom, who is an expert on HRM, and HRM SaaS providers in particular about this post, and she unleashed a string of Twitter messages on this subject, which I'll quote here:
  • When PeopleSoft made client server de riguer, suddenly every old mainframe product was recast as client server. Remember screen scraping?
  • As I'm reading all the posts on Lawson's hosting their ERP and TM apps "in the Amazon cloud," I'm having deja vu.
  • Anything can be hosted, anything can be surrounded with managed services. But don't be fooled. True Saas is the future.
  • Lawson had better rearchitect and quickly. Let's hope our old friend Jeff Comport knows this and is hustling big time to make it happen.
  • If you have a terrific, modern multi-tenant product, it's a business decision to run it single tenant, cloud or on-premise.
  • If all you have is older, single tenant software, best you can do is find lower cost hosting/managed services. I rest my case!
Related posts
Workday pushing high-end SaaS for the enterprise
A game-changing play in enterprise software
Insights from Lawson CUE 2009
Update on Lawson's strategy

by Frank Scavo, 3/31/2010 02:12:00 PM | permalink | e-mail this!

 Reader Comments:

Frank, an excellent article, as usual. I'd like to make one small correction: my company, Plex, doesn't serve just the SMB market. Our "sweet spot" is mid-sized companies, between $100 million and $1 billion in revenue, but our fastest growth area is in large enterprises, those with several billion in annual revenues. These companies suffer the most from the problems of legacy ERP systems: lack of flexibility, expensive and complex licensing and maintenance programs, multiple versions in multiple locations, and problems upgrading due to customizations and one-off integration projects. The true SaaS model takes care of all of these issues, and that is what's driving these companies to look at robust SaaS solutions.

Plex is, however, focused solely on manufacturers, especially automotive parts suppliers and OEMs, A&D manufacturers, medical device manufacturers, and food and beverage processing.

Keep up the good work.

Patrick Fetterman
VP Marketing
Plex Systems
Patrick, thanks for the feedback. I am interested in more details behind Plex's ability to serve larger organizations. I don't seem to have contact info for you, however. Can you reach out to me through my email address, in the right column?

Thanks again.
Great post, Frank.

To me, it seems that Lawson's trying to get a little bit pregnant. It admits that there might be advantages to clouds but, as you point out, aren't really making a full commitment to SaaS.

I suppose that I have mixed feelings. Kudos to Lawson for understanding that the market is changing. On the other hand, is this enough to sway prospective clients? Isn't a true SaaS alternative (read: Workday, Netsuite) still preferable?

I honestly don't know the answers to these questions.

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