It’s certainly been an interesting few months for anyone involved with Lawson, ERP and software in general. Oracle’s acquisition of PeopleSoft is becoming a reality, and Lawson is trying to woo the defectors (which is good news for Lawson’s iSeries clients—but more on that in a moment).
Naturally, everyone wants to know what all this means for Lawson. First, though, let’s look at a few of Lawson’s own recent news items.
1. Jay Coughlan offered the first of his 100-day updates on Lawson’s 1000-day journey to remake the business software industry (see http://phx.corporate-ir.net/phoenix.zhtml?c=129966&p=irol-newsArticle&ID=643201). For those of you who bothered to read this, it was a real snoozer. The big result of the first 100 days? A reorganization, which is of course marketing-speak for layoffs; this leads us to Lawson’s next news topic.
2. Lawson announced plans to lay off 75 more people (see http://www.bizjournals.com/twincities/stories/2004/12/06/daily52.html). This is actually a multi-part story. If you‘ve closely followed Lawson’s press releases and financial results announcements, you’ve noticed that there are actually multiple sets of layoffs: 100 were to be laid off, as announced in September, then 75 more were identified in November to be laid off. In addition, Lawson is “continuing to evaluate other cost reduction opportunities that may result in additional charges in the second quarter ending Nov. 30, 2004, and during the remainder of fiscal 2005.”
Lawson’s Financial Picture
So, it sounds like more layoffs are possible. What I’ve heard is to expect a layoff of 30-40 non-billable services consultants by the end of Lawson’s 3rd quarter, which ends in February 2005. Some of these layoffs were certainly to be expected. When Lawson chose to rely upon only itself and only two of its partners for the recent v8 technology upgrade cycle, Lawson had to hire a lot of consultants who—now that the upgrades are complete—are presumably sitting idle. Of course, it’s the other earlier layoffs that have me most worried, since a lot of them were in development. By cutting developers, Lawson is waving a big red flag. Cut the basis for your company (remember—it all starts with developers), and the rest of the company will eventually follow.
By becoming a public company, Lawson is now “playing to the Street”, where every move is scrutinized for its effect on quarterly earnings. It’s no longer only about long-term growth. The stock analysts have long thought of Lawson as too fat, and they’d like to see them lean and mean. The shareholders (at least those who have not cashed out via options) are obviously getting restless. Lawson’s stock price is still less than half of its original $14/share IPO price. But don’t interpret their performance on Wall Street as operational success or failure. Their balance sheet and cash position are both pretty strong. True, Lawson is very focused on the short term–all public companies are. I did some quick research on Lawson’s operating expenses compared to some others:
||*SMGA = Sales & Mktg/Gen & Admin
What stands out is that while Lawson is in-line on R&D spending, they’re still over-spending on sales & marketing. Perhaps that’s just the price of being the underdog?
The New ERP Landscape
And, underdog they are. Oracle’s acquisition of PeopleSoft (coupled with PeopleSoft’s previous acquisition of J.D. Edwards) consolidates the ERP industry into three big players: SAP, Oracle, and Microsoft. Microsoft you say? Hey, Microsoft now owns Great Plains, Solomon, and Navision. And, they’re about to release a new version of their Office Small Business Accounting (see http://www.microsoft.com/office/editions/prodinfo/smallbusiness/accounting/overview.mspx). All three vendors are clearly top-tier providers, with brand-name recognition. While Lawson doesn’t like it (and they never want to admit it), they’re still in the second-tier. Lawson simply doesn’t have the marketing money or the name recognition to effectively compete against these three titans, each of whom also happen to own their own “plumbing” (i.e. database, middleware, etc.) in addition to their business applications.
SAP and Oracle are obviously vying for the top-tier, and Microsoft is coming up from the bottom? What should Lawson do? Own the middle of course! I would much rather have a slew of Fortune 1000 (or smaller) clients than to have a single Fortune 50 client. Should Lawson consider a price point reduction? After all, they are now in a category unto themselves, so do they have to adjust their prices to match?
Oracle is notorious for its disdain towards its clients (although I think it’s largely undeserved, as it’s more a reflection of Larry Ellison’s arrogance than Oracle as a company). What can Lawson do? Satisfy its own customers before worrying about getting new ones. Stop trying to “win the big one”, and take care of the customers it already has. We all know it’s easier to sell to an existing customer than to lose one and have to replace it.
Ever seen an SAP solution map? It can be sold broadly as a solution for everything, without really specializing in anything. What can Lawson do? Create, enhance and continue to serve its own niche markets. Which—by the way—Lawson does pretty well now, but are they targeting the wrong niches? Where is Lawson’s strength and where are they focused? Healthcare and public sector are tough markets to play in, notorious for not having any capital to spend on software. On a hospital-by-hospital basis, the margins are too small for them to compete. But own the whole sector, and you’re positioned to compete. The key player to watch here is Siemens, whose own Soarian Financials may very well end up competing against (or perhaps even replacing) Lawson as the preferred financial software in Siemens’ product offering.
What about IBM?
A number of people have suggested Lawson as a potential acquisition for IBM. I don’t think so, given that IBM has publicly stated that it has no interest in the application market. And, honestly, what value is Lawson to IBM anyway? It’s not like Lawson really owns a market, has any leading-edge technology advantage, or could get IBM into accounts they don’t already have. When IBM swallowed PwC’s consulting practice, they became a service delivery organization–why would they want to limit themselves to one application?
So, what’s the upshot of the Oracle deal on Lawson? Well, it depends on whether or not Oracle can persuade the PeopleSoft clients to stick around. If Oracle does indeed kill off the PeopleSoft brand (even though they’ve promised support through 2013), it forces those clients to migrate to Oracle’s applications or make the switch a different ERP.
How is Lawson responding to this? By preemptively targeting the Peoplesoft base—specifically the iSeries (call them “legacy J.D.Edwards”) clients (see http://phx.corporate-ir.net/phoenix.zhtml?c=129966&p=irol-newsArticle&ID=663228). How many of these clients can Lawson convert? Your guess is as good as mine. But Oracle is obviously going to try to retain them. Microsoft and SAP are also vying for them (SAP is offering them a discount based on 75% of their original purchase), so I wouldn’t count on too many becoming Lawson clients.
But the good news is that, regardless of the outcome, existing Lawson iSeries clients win as well. As part of its pitch, Lawson has announced the availability of the 8.1 applications on iSeries by the end of the year (see http://phx.corporate-ir.net/phoenix.zhtml?c=129966&p=irol-newsArticle&ID=663073). Yup, you heard that correct—the long-promised version parity is about to become a reality for the iSeries clients!
Look to CUE for Clues
This year’s CUE could be a make-or-break opportunity for Lawson; it’s a total failure unless Lawson shows us it can compete:
- Lawson has continued to say is that taking PeopleSoft out of the game will be better for Lawson. They’ve claimed that PeopleSoft was their #1 competitor, and Oracle their #2. Well, who’s that competitor now? Sounds like a much bigger #1! Will the theme be “Welcome all you PeopleSoft converts, here’s what we have to offer…”?
- Is the promise of “8.1 for iSeries” close to reality, or is it just vaporware? If Lawson doesn’t demonstrate at least something for the iSeries, I’d be very wary.
- Lawson should be ready to unveil plenty of new technology streaming out of their offshore development interests. I’m expecting new technology; because after all, that was the point, right? What new technologies and products can be presented to woo the PeopleSoft customer?
- Lawson’s annual business has traditionally been reflected at CUE. The great shows of the ‘90s heydays are over. Each year there have been fewer and fewer vendor booths and less and less interest. Take a hard look at the vendor participation. What would you expect to see?
- What kind of show can we expect with all the staff reductions? Will there be fewer presentations or just larger rooms? Will it be the usual vendor love-fest, or rather a fustigation of Lawson?
We’re definitely at another fork in the Lawson road. Is Lawson blazing yet another new trail? Or is this the beginning of the end for Lawson?