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Predict and Prepare sponsored by Workday 12/16

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The Bill Kutik Radio Show® #110, 8/12
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Adventures of Bloom & Wallace

a work in progress

Lawson Software — A Very Sad Ending

Lars Lawson — The Symbol Of All Things Lawson

I first wrote about the HRM enterprise software “Snowdons of Yesteryear” (with apologies to Joseph Heller for this misuse of his famous phrase, “where are the Snowdons of yesteryear” in Catch-22) in the earliest days of this blog (so 11/2009).  In that original post, I reflected on the last great generation of HRM enterprise software, a mainframe generation that peaked in the mid-1980’s.  It’s a generation of market leaders that most of my younger colleagues (and that now includes almost all of my colleagues) have never encountered because they were wiped off the charts by SAP R/3, Oracle EBS, PeopleSoft, Lawson, Ultimate, and a huge burst of various niche HRM applications when the industry shifted from mainframe to client server in the late 80’s/early to mid-90’s.  But it’s worth noting that many companies are still running on these 1st generation HRM packages and are being supported by their 3rd, 4th, 5th or later owners, collecting those maintenance fees and trying (in some cases succeeding) to provide some level of functional and technical enhancements — until they turn out the lights!

Then, late last year (12/2010), I wrote again on this subject, but this time I was describing how much of today’s most widely implemented, client server converted (not re-imagined and rebuilt) to Web-based, HRM enterprise software was itself about to become yesterday’s news.  This post is worth a re-read, not only because it’s a pretty good short history of HR technology but also because it makes a number of observations about what’s to come and names names.  One company mentioned in that post, Spectrum, has already disappeared into Epicor, which has plans to bring Spectrum up to the standard of Epicor’s own technology.  This is a far cry from SaaS InFullBloom, but it could give Spectrum customers a path forward.  Or at least it could have done until it was announced that Apax Partners, a private equity firm, is buying Epicor, folding it into something else, and doing who knows what with any investment plans for Spectrum.   

But most important for this current post is that I wrote in the earlier one, although I had already tweeted this point a few times, that I believed strongly that Mr. Debes’ (Lawson’s CEO) wrong-headed stand against true SaaS was a major detriment to his firm’s having an independent future.   And now it’s all coming home to roost.  Lawson will likely be acquired by the only offerer-to-date, Infor, known in many circles as a (but by no means the only) ERP graveyard.  This is where old software goes to die, to be milked for its installed base’s maintenance revenues with only modest, ongoing upgrades, doing just enough to retain that installed base.  I could be very wrong, and I surely hope I am.  Perhaps Infor is cooking up the next generation of ERP in their labs, thus providing Lawson customers with more than just a way forward.  But thus far I haven’t been able to find any concrete evidence of this or even any such speculation.  There’s been a ton of commentary on Infor’s offer (see below for a list of some relevant items), but my own take is that this is a done deal.  There’s always the chance of another offer, and IBM would be an obvious choice if they wanted to be in the ERP business given their long-standing relationship with Lawson.  But there just aren’t any signals from IBM that they’re interested in having an ERP on offer, let alone one that’s needs considerable investment.  

My heart goes out to the HCM product team at Lawson, to folks who have done a very good job under tough circumstances, folks who could have innovated a lot more aggressively if they hadn’t been up against Mr. Debes’ misunderstanding of the generational shift to true SaaS.  Their acquisition of Enwisen was a very smart move, but I have to wonder if Infor will value and be able to retain the subject matter experts who are critical to the maintenance and use of Enwisen’s personalized content.  My heart also goes out to Lawson’s customers who, not unlike PeopleSoft’s customers before its acquisition by Oracle in 2005, signed up for the long haul with a known leadership team and then found themselves with new owners whose modus operandi was quite different.  Oracle has put out two major releases — 9.0 and 9.1 — for PeopleSoft in the 5-6 years since they acquired that company, and 9.2 is discussed for 2012, but there sure as hell won’t be a 10.x.  If Lawson disappears into Infor, I fear that its very competitive (in their target market) HCM products will suffer a fate to that of PeopleSoft, getting periodic  functional enhancements (but not at true SaaS speed, which is increasingly important in today’s high speed environment) but not the level of investment that’s needed to innovate architecturally, re-imagine HRM, or to be a leader in some of the newer HR technology capabilities.

There’s an important lesson here, and one that all HR leaders and their organizational peers should heed.  If your HRM business applications vendors aren’t pushing themselves and you every day to seize that next generation of technology — to seize SaaS InFullBloom right now  — then they may well be destined for tomorrow’s software graveyards.  Even if they’re doing a great job of bringing you the functionality you ask for and want today, if your HRM software vendors aren’t operating at true SaaS speed, moving their products quickly to true SaaS(which is table stakes in 2011), they may well lose momentum, and that’s the kiss of death for a publicly traded or investor-financed company in a market that values momentum above most everything else.   With the big Mo, they and their customers are at serious risk of becoming the next Lawson.  I hate that this proud company, with an important legacy of industry focus, strong HCM products, and management integrity, may well disappear into Infor — a very sad ending indeed.

For more on this story from my twitterstream (and you thought I didn’t archive these for later search/reuse?):    

  1. Will layoffs at Lawson affect HCM products? Your thoughts? 5:31 AM May 19th 2009 — this in response to the announcement that Lawson was doing major layoffs.  These did help to reduce their cost structure and improve, in the short term, their financials, but it did nothing to address their primary challenges around innovation.
  2. RT @dealarchitect Netsuite Cash for Clunkers http://tinyurl.com/l2kl2y Lawson’s bid to keep making clunkers http://tinyurl.com/kvrg6v 6:47 PM Aug 19th 2009 — and please do read Vinnie’s early blog post on Mr. Debes’ (Lawson’s CEO) wrong headedness re: true SaaS.
  3. Jeff Comport, after many years with Gartner, returns to his roots as SVP Product Mgmt across all products at Lawson. Go Jeff! 4:08 PM Nov 1st 2009 — this when Jeff Comport, whose last software vendor gig was with the first generation of Snowdons, then Integral systems, before doing a very long run at Gartner before getting caught up in Gartner’s layoffs.  Frankly, I thought Jeff wouldn’t have taken this position unless he had full authority to re-architect Lawson’s S3 line, but I was sadly mistaken.
  4. @paulhamerman Any sign that Lawson sees their refusal to entertain true SaaS as a contributing factor? 3:21 PM Jan 25th  2010 — this in response to Lawson’s disappointing financial results.
  5. Another article on Lawson Amazon cloud: http://www.crn.com/software/224201218 > Is there any BFD here? 5:07 PM Apr 5th 2010 — this in response to Lawson’s “cloud” announcement, which was really about hosting their single tenant existing software on Amazon’s EC2, which Lawson was trying to pass off as their approach to the “cloud,” which Jeff Comport was redefining as really only about virtualization and elasticity.
  6.  @paulhamerman #Lawson quarterly update shows company is reasonably profitable and fiscally sound. Innovation agenda not evident, hope to learn more at CUE 12:55 PM Apr 16th 2010 — this is just one of many public notes about the lack of an innovation agenda at a time when their ERP/HCM competitors were focusing heavily on innovation, to include SAP’s Business ByDesign next generation offering (which is coming into its own in 2011), Oracle’s Fusion Apps (also likely to emerge during 2011, but there’s been little news on this of late), Workday (with its entirely new architecture, very capable leadership team, and agressive build-out), and many of the talent management suite vendors.
  7. Why hasn’t anyone been talking about Carl Icahn’s taking a major stake in Lawson. This guy doesn’t wait for mgmt to deliver value! 7:31 AM May 26th 2010 — at the very first hint of Carl Icahn’s buying shares in Lawson, the die were cast, at least in my mind.  With no true SaaS/next gen strategy, a poorly integrated acquisition with Intentia, shares that simply weren’t getting the kinds of multiples that other HCM vendors, e.g. SuccessFactors and Taleo (we can’t even mention Cornerstone OnDemand at that point in time), and even their flagship and well-respected HCM products not being able to deliver innovation at the needed time-to-market because they lacked a true SaaS offering, I believed that there was no way Carl was going to see the return he expects without selling off Lawson — and said so, as did others.
  8. Heads up Lawson customers. Icahn buys in. RT @mfauscette Lawson To Cut 150-200 Jobs; Davenport Downgrades http://tinyurl.com/38ybj68 3:25 PM May 28th 2010
  9. dbmoore  #EnSW #Lawson Software To Cut 150-200 Jobs; Davenport Downgrades: Johnstone says the company could fetch $12-$13 a… http://dlvr.it/1Hnx1 10:15 AM May 29th 2010 — another layoff (which isn’t usually a sign of heavy investment in innovation), financial analyst downgrades, and hints of a sale?

For more on this story from others (and please send me your stories if you’d like me to add them here):   

In the spirit of full disclosure, much of my work is with software vendors, and I’ve had a hand in many next generation products beginning way back with that first generation of mainframe HRMS’ and continuing up to today’s stealth projects whose results won’t be seen for another year or more.  Lawson has not been a client, but I have had a long-standing and valued relationship with their HCM product team.

12 comments to Lawson Software — A Very Sad Ending

  • […] equity-funded (so Golden Gate Capital) acquisition of Lawson by Infor 7/2011 that I wrote about here; SumTotal, owned by Vista Equity Partners, beefs up with acquisitions of Accero (already owned by […]

  • […] equity-funded (so Golden Gate Capital) acquisition of Lawson by Infor 7/2011 that I wrote about here;  SumTotal, owned by Vista Equity Partners, beefs up with acquisitions of Accero (already owned by […]

  • Michelle

    As always, yours is the first voice of analysis I turn to when I see news like this. I wasn’t previously familiar with Infor so thank you for the thoughtful posting. I agree with you that it is a sad moment for Lawson and its customers, although Debe’s stance against SaaS was always questionable and seemed to ignorantly buck the way the rest of the market was moving. I did see your note on Twitter that this is not the last of M&A activity you expect. Thoughts on who we should all be watching for?

  • My opinion, rather than a very sad ending, it’s a very happy ending.

    To fund “the level of investment that’s needed to innovate architecturally”, requires very attractive profits, or stellar growth. Lawson was at 12 pct, on low growth. Infor has the bulk revenues to build or buy the genuine R&D required to do SaaS correctly.

    I believe this will boil down to who can provision customizations in a SaaS architecture.

  • How many HR products does Infor already have? At least a couple, right? We never saw them in deals though…

  • […] of this or even any such speculation. There’s been a ton of commentary on Infor’s offer (see the longer version of this at In Full Bloom for a list of some relevant items), but my own take is that this is a done […]

  • Andy G.

    Very insightful post Naomi. Just some tangential commentary – not on Lawson specifically but on the SaaS space. I think the jury is still out as to whether the SaaS delivery model can be profitable to the vendors – despite the wildly inflated stock prices of many of these vendors. While the hype around SaaS is definitely there, the road to profitability is certainly longer within this model. We have vendors like SuccessFactors that have been in business for over 10 years that are not yet profitable. Taleo has been in business for even longer and barely earns a profit. Workday is doing great things but is not yet profitable. Salesforce.com is the vendor everyone holds up as a model for successful SaaS yet their margins are razor thin and their growth appears to be slowing. While I think technically the SaaS delivery model is a sound one, it seems to me that vendors have not figured out how to create a business model that is profitable around SaaS – at least not yet.

    • Naomi Bloom

      Andy, All good points. Financial analysis isn’t my strongest suit, but Ultimate is public and profitable as best I can tell, and ADP is arguably the largest and longest-running multi-tenant SaaS story (putting aside any of their services businesses). Lisa Rowan has made some very good points over on the LinkedIn HR Technology Conference group discussion of this post, and I would welcome your further comments here or there. My own view is that a lot of the software that’s multi-tenant SaaS still doesn’t have all the underlying architectural features needed to achieve the best possible business outcomes, for the vendor or for their clients. On this topic, you may want to read some of my other posts on “Preferred Architectural Behaviors” to include http://infullbloom.us/?p=1557

    • @ Andy – most SaaS vendors have either small or no profit largely because of the purposeful upfront investment in their infrastructure and/or significant sales & marketing expenses. Nearly any SaaS vendor can get to profitability by simply shutting down the growth engine. They can shift greater than 80% of revenue to pure profit for the duration of existing contracts. But more importantly since most are venture-backed entities profitability isn’t the primary business driver. CEOs make conscientious decisions to forgo profits in favor of growth.

      Sadly, often times the goal of a SaaS business is not to achieve profitability but rather achieve the steepest growth trajectory possible. Venture Capitalists are rarely concerned about profitability, and instead fixated on the “multiples” – the value of the company as a multiple of revenue. Some of the most highly valued SaaS vendors are valued at 15-20x revenues, and have no real history of profitability. Profitability comes more into focus after organizations shift from VC-backed to the public markets.

      This isn’t limited to the HCM software market, but nearly all venture-backed software companies.

  • Pete

    I work closely with Infor, and this post is about the most ill-informed commentary on the company I have ever read. You really need to do some research before making claims like this. Infor does a good job retaining product and support people of acquired companies, and has delivered innovation to customers, including in the SAAS arena– Infor has multiple pure-SAAS offerings in categories including ERP.

    Take a look at MAPICS, a “graveyard” product if there ever was one. But it isn’t. New license revenue for that product is growing, customers are upgrading, and Infor has made major investments in improving both front and back end technologies. Infor has innovated on licensing as well, making it easy and cost effective to get up to date, via the FLEX program.

    Also, take a look at Infor’s latest press release. New CEO, new management team, and a commitment to hiring hundreds of USA-based developers. Infor is a product-focused company, nothing at all like your post suggests.

    I don’t know anything about the Lawson deal, or where the company will end up. But Infor offers a good home for strong, niche vendors.

    • Naomi Bloom

      Pete, I appreciate your feedback and very much hope that you are absolutely correct about Infor. I’m very aware of their new leadership and sincerely hope that they will bring next generation architectures to the many products in their portfolio. That would serve their current customers even better as well as the customers of Lawson should Infor become Lawson’s new home. I’ll look forward to your further insights on this subject and would welcome you to post these same thoughts and more on the discussion about this post that’s going on here http://www.linkedin.com/groupItem?view=&gid=1772602&type=member&item=49886153&qid=4cf13a1a-a1f2-46ae-8ab7-147b697fb7a9&goback=%2Egmp_1772602 in the LinkedIn Group for the HR Technology Conference. I may be wrong on this point, but I think you’ll have to post to the LinkedIn group with your full identity.

      • Pete

        Naomi, as I disclosed up front– I’m affiliated with Infor. I generally have no problem speaking under my full identity, but since I’m not a spokesperson for the company, I’d rather not jump on a discussion thread about Lawson. While I don’t have any insight into that deal, nor do I know much about the HCM space, it is a pending acquisition, so inappropriate for me to participate.

        I commented here just to share some general observations about my experience with Infor, and encourage you to do some research. You’re a high profile “voice” as your bio says, so please take some time to test your assumptions. I’m sure Infor’s marketing department would be happy to talk to you about it, or better, talk to some of their customers.

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