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Lawson Enforces Its Stronghold Part 2: Market Impact

Written By: Predrag Jakovljevic
Published On: May 6 2002

Announcement Summary

Lawson Software, Inc. (NASDAQ: LWSN), a provider of Web-based business applications for selected service industries, has gone past a successful IPO to continue to win new business and to corral more products for its focused offering. It is part of the elite enterprise application vendors that have seen license revenue growth and profit during these times when optimism is scarce.

Lawson reportedly serves more than 500 healthcare industry customers representing more than 4,500 facilities, including seven of the top 10 integrated delivery networks. The company also serves managed care systems, academic medical centers, hospitals, clinics, physician group practices, home healthcare, long-term care and other health services enterprises. Lawson solutions were devised to help healthcare organizations manage their business so they can focus on their patients, automate and streamline materials management for a better bottom line, and manage the challenges of labor shortages by helping healthcare organizations hire and retain the right employees.

This is Part 2 of a 2-part analysis of recent news concerning Lawson Software.
 
Part 1 detailed announcements concerning:

  • Keyola Acquisition
  • Catholic Healthcare West Contract Win
  • Computer Sciences Corporation Alliance
  • Lucent Technologies Contract Win
  • Indus Alliance
  • Lawson Q3 2002 Financials
  • Lawson Scorecard Launch

Market Impact

Lawson seems to be making all the right moves to become an enterprise applications powerhouse. Although the company has operated well for over 25 years, it has not been largely present on many analysts' and press' radar screens, for many reasons like its erstwhile privately-held nature, its absence from catering the functionality for the manufacturing sectors, and its limited worldwide presence. The situation has been rapidly changing and the company will from now on operate in a more vocal and visible manner.

Now that is it publicly traded, it is poised for reaching over $400 million revenue mark in calendar 2002. Lawson has maintained significant mind and market share in the service industries sector, and is a recognized competitive force to keep the likes of PeopleSoft, Oracle and SAP on their tiptoes. Continued focus and strong performance in less recession-sensitive sectors such as healthcare, public sector and professional services amid the overall market malaise may speak in regard to its sound business model. Another favorable factor is the fact that Lawson has been perceived as a mid-market provider, which allays the perception of complexity associated with Tier 1 solutions, but its offering is able to cater for the needs of larger organizations as well.

Lawson continues to invest significantly in R&D to deliver innovative products and initiatives, concurrently and sometimes in advance of much larger competitors. The company was one of the first to Web-enable and componentize its product (it refers to its product as being Web-addressable, with server-based application logic and data structure that can be referenced and executed via a URL), to commercially deploy Web Self-Service and role-based Self-Evident Applications (SEA) initiative, with the idea to simplify the learning curve required by users, featuring Lawson Portal (role-based Web user interfaces) and navigational tools, and to deliver a pre-packaged performance measurement product.

Furthermore, Lawson Solutions run on a broad set of the most popular platforms and databases, and it has also shown an early involvement in ASP deployment (owing to its advanced product technology and its focus on the functional areas that lend themselves well to the ASP business model). Another Lawson's landmark feature would be its integrated, all-pervading Drill Around functionality and its tight integration with Microsoft Office applications. The 'drill around' feature allows users to extend their knowledge search in a 'point-and-click' manner at every level of the application including reports for every data element within the database and it enhances the user's ability to quickly extract specific information for reporting or analysis.

The Lawson solutions for financial management, human resources (HR), professional services automation (PSA), e-procurement, distribution, enterprise performance management (EPM), and customer relationship management (CRM) have from their inception been devised to meet the unique needs of specific service industries like healthcare and public sector rather than of general manufacturing companies. Therefore, its solutions are typically more consistent with the way its target customers do business, compared to most of its ERP-generalist competitors. Rather than change their business processes to accommodate software, these customers prefer to select software that fits the way they operate because the Lawson developers will have spent significant time and the effort to understand exacting requirements of its few industries of focus -- healthcare, retail, financial services, professional services, public sector (government and education) segments of the market. With an analogy to geometry, as the volume of a 3D object equals to its base multiplied by its height, Lawson, contrary to many other players, seems to be compensating its narrow foothold with a strong vertical dimension.

Executing Sound Strategies

Lawson will seemingly continue to concentrate its internal sales efforts on its traditional vertical markets and to additionally rely on partners to address and develop a particular industry needs and thereby expand its functionality footprint as well. The alliance with Indus is a case in point. Although many ERP vendors may offer an EAM solution as an integrated module, not many of them can, inter alia, match the collaborative capabilities of Indus' InSite product. The alliance therefore combines two very strong solutions in their heartlands and offers a very strong value proposition for both Indus and Lawson customers.

Moreover, Lawson, by adopting early XML and Java as its interfacing and programming standards and by providing appropriate connectors, should to be able to integrate with other applications systems either on the front end or on the back end so that its customers' systems can communicate smoothly with their business partners, whether via the Web, e-mail, or even fax, EDI, and spreadsheets/flat files. This, bundled with the fact that its product will run on almost any platform or database and with the recent and forthcoming product enhancements, prompts us to believe that its competitors, particularly mid-market ERP vendors, might face a tall order to match Lawson's value proposition.

Additionally, while Lawson has long provided professional services as it strives to ensure high customer satisfaction ('to get one client at a time and keep it forever'), the recent announcements of vertically focused system implementation partnerships (e.g., with CSC and Cap Gemini Ernst & Young for the healthcare industry) should additionally bode well for the company's continued market success. These partnerships might be the sign that Lawson has begun to address its system integration partnerships as strategic rather than opportunistic. Also, the partnerships with renowned middleware/EAI, infrastructure and applications management vendors (e.g., IBM, BEA Systems) will provide Lawson with readily available toolkits for making deeper functional adjustments and customizations as well as the better scalability, security and load balancing, where the company has traditionally trailed the bigger competitors.

The Competition

However, although we believe that Lawson's corporate and product strategies are sound, one should not forget about fierce competition from much larger vendors, like SAP, Oracle, PeopleSoft, and ever more from J.D. Edwards, Infinium, SoftBrands, and Microsoft Great Plains in certain industries. These vendors, while still possibly inferior regarding service industries focus (although the gaps are narrowing by the day, like in the case of potential teaming up of Infinium and McKesson to provide a strong healthcare solution), will try to influence customers purchase decisions by offering their more comprehensive horizontal product portfolios, and by touting a superior global presence and multi-national product capability, which are still the hurdles for Lawson to overcome.

This might be further aggravated by the fact that the healthcare sector is not well developed or is legislated differently in the markets outside the US, where Lawson still needs penetration badly. Moreover, less litigation-aggressive European stockholders may not fully appreciate and readily accept some of Lawson's strong products for the North American market such as its Strategic Ledger and Financial Performance Management suites. Lawson's more global competitors that have been longer in non-US markets and offer more generic/horizontal functionality are better attuned to these markets. Lawson's vertical focus is great for US healthcare or dealing with litigation-aggressive stockholders. In Europe, for example, this may not be a value proposition given their different legislation and user requirements.

User Recommendations

Evaluate Lawson if you are a mid-market and low-end Tier 1 company (with $10M-$2B in revenue) within the following service industries: Financial Services; Healthcare; Professional Services; Public Sector; and Retail organizations considering business applications (both Web-based and client/server network dependent). However, these companies will also benefit from considering competitive offerings. Conversely, you may want to check Lawson's willingness to develop on the fly a solution for your industry that is currently outside of its narrow focus but that it might target in the future (e.g., telecommunications). Lawson is willing to consider developing a product where there might be a synergistic partnership in the offing, with you benefiting with a favorably priced deal, while Lawson gets a foothold into a new industry.

Enterprises seeking a Web-based solution and out-of-box functionality that require only basic modifications or no re-engineering effort at all may benefit from evaluating Lawson's ASP offering. Since any company planning to engage in e-business will want to have at least a basic financials or HR/payroll package and will need other components of an ERP suite afterwards, the easy deployability and integration promised by Lawson is a compelling reason to consider it as part of any e-business initiative within the above industries.

Still, although Lawson is generally competitive in speed of implementation, total cost of ownership (TCO), and intuitive user interface functionality (the "Drill Around" tool for cross-applications data access, and role-based "Self-Evident Applications" on the Web), be aware of the fact that it is nonetheless an intricate product to implement with the key success factors that are applicable to all other major ERP products. These are often of a human nature. A robust, industry-focused product can help only so much without a genuine users' buy-in.

The users of its older product versions should also approach Lawson and inquire about their required impending effort to upgrade to a new product that is browser-based, provides connectivity to wireless devices, is a 100% Java-based, and with XML-enabled interfaces, as only some of new major enhancements.

This concludes Part 2 of a 2-part analysis of recent news concerning Lawson Software.
 
Part 1 detailed announcements concerning:

  • Keyola Acquisition
  • Catholic Healthcare West Contract Win
  • Computer Sciences Corporation Alliance
  • Lucent Technologies Contract Win
  • Indus Alliance
  • Lawson Q3 2002 Financials
  • Lawson Scorecard Launch

 
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