Lawson Software’s CRM and ASP Moves - Wise, Bold, Injudicious, Enforced, or Something Else?

Event Summary

On April 10, Siebel Systems, Inc., the world's leading supplier of CRM software, and Lawson Software, the supplier of Internet-enabled enterprise applications, announced a global distribution agreement in which Lawson will integrate and sell its new line of enterprise applications with Siebel's comprehensive suite of eBusiness applications for sales, marketing, and customer service.

Lawson's worldwide sales force will sell this complete family of eBusiness solutions and eServices along with industry-specific technical training, consulting and support to both mid-sized firms and large enterprises. The combined product suite, marketed as a component of 'lawson.insight' product suite, will be available in the second quarter of 2000. Both Siebel and Lawson are committed to ensure the success of every customer implementation.

Siebel eBusiness Applications integrated with lawson.insight's Self-Evident Applications and transaction engines will become a primary Lawson product line comprising sales, marketing, and customer service, as well as enterprise functions. This combined solution will let Lawson customers move from a process-centric to customer-centric focus and gain insight into every aspect of their business across all channels - a compelling advantage in the highly competitive "new economy."

USinternetworking Inc., a leading application service provider (ASP) that currently provides an integrated Siebel and Lawson application solution via the Internet, believes users will welcome the combined solution. "USinternetworking manages both lawson.insight and Siebel eBusiness Applications, and the demand we see for both companies' software applications indicates that this integrated solution will have strong appeal to a significant group of clients worldwide," said Christopher R. McCleary, chairman and CEO, USinternetworking.

By partnering with Lawson, Siebel Systems gains full integration with a leading provider of enterprise applications comprising financial services, human resources, procurement, distribution, and analytics. The companies' combined resources will let Lawson quickly deliver a comprehensive solution that satisfies the needs of more than 3,000 Lawson customers worldwide, in fast growing industry sectors such as healthcare, retail, and professional services. Ongoing development efforts will be conducted by the partners to support customers of the lawson.insight joint solution.

Earlier in March, at its user group conference in San Diego, Lawson Software unveiled plans to re-brand its products and make them available from third-party Application Service Providers (ASPs). Lawson will re-brand its traditional suites as e-business engines, Self-Evident Applications (SEAs), and extensions under the name 'lawson.insight'.

Lawson will roll out a web-based interface for its enterprise software called eConsul, and its ERP packages will be hosted by ASPs including USinternetworking Inc., Annapolis, Md. The move will give Lawson's channel partners new opportunities in a variety of vertical industries that will need customized solutions. The company has already started training channel partners to take advantage of new software models.

Market Impact

The first part of the news is not a shocking surprise. We already expressed our concerns regarding Lawson's original decision to deliver an internally developed CRM solution (See TEC's note from February 18 "Lawson Software: Self-Evidently Thriving on Innovations"), as the task has proven to be a tall order even for its bigger and stronger competitors.

Somewhat intriguing is, however, the fact that only now has Lawson's management conceded the initial error in judgment and drifted from its original CRM strategy. It announced last fall that it was developing a sales force automation tool as the first component of a planned CRM product line. The sales application was scheduled for beta-testing this spring and shipment in the summer. The solution was even demonstrated at IEC Exposition in New York at the beginning of March. Unfortunately, the company belatedly realized it would take too long to build the CRM suite internally. The sales automation package apparently addressed only one-fifth of the functionality needed to match an existing suite such as Siebel's. Therefore this sudden change of plan in style of "if you cannot beat them, join them".

To err is human. The time and resources have indeed been wasted, but the damage is a far cry from bring irreparable. Lawson is not the only business applications vendor that has signed a reseller deal with Siebel. Siebel holds a reputation of a 'partnership-friendly' vendor given the fact that it partners with a myriad of other vendors. J.D. Edwards & Co. has resold Siebel's sales automation software since last spring and in February said it would also start marketing the rest of Siebel's CRM packages. Great Plains has even claimed the completion of the first phase of integrating Siebel within its eEnterprise product.

The partnership between Siebel and Lawson could be very interesting, as both have exciting products and technologies. Siebel will gain access to Lawson's large customer base within specific industries that have not yet been made aware of Siebel's capabilities and products. Lawson, on the other hand, is betting on the notion that one cannot go wrong in selling Siebel's products. The existence of common ASP partners like Usinternetworking is also beneficial.

Yet, one should never expect a flawless and quick integration effort. One issue will be the user interface mix of a future product suite - the 'same look-and-feel', that Lawson has been able to proudly exhibit in the past will be impaired to a degree. Siebel's interface, while indisputably intuitive and compelling, is by no means so 'self-evident' like Lawson's that extensive training is not needed. Another thing to bear in mind is the lack of Siebel's vertical focus within some of the industries that are Lawson's stronghold, e.g., healthcare and professional services.

As for Lawson's decision to somewhat downplay its traditional client/server business model, we believe there are a number of reasons to support it.

The first is the growing market awareness of the cost ramifications of implementing and maintaining the traditional client/server architecture of the past.

The second reason is the Internet enablement and compelling user interface of Lawson's applications. Lawson has never been a staunch proponent of fat-client technology. On the contrary, it has long been promoting its Self-Evident Applications (SEA) initiative, with the idea to tremendously simplify the learning curve required by users. The need for this becomes more obvious with the increase of number of internal and external users that use the product on a self-service basis.

The third reason is Lawson's initial success in its ASP quest. It claims to have seven hosting partners, with a several dozens customers worldwide.

While we believe that Lawson is making a brave move, we also think it is one of the few ERP companies that can afford to make such a differentiating move. Lawson's main customer base is within the healthcare, financial, and professional services space, and sells mainly to smaller firms that are generally more attracted to the notion of turning over their applications to someone else to run, while they focus solely on their core competencies. Moreover, Lawson's software consists mainly of financial, procurement, and human resource transaction systems, the ERP components that customers are generally more eager to outsource.

Lawson, however, may feel a pinch in the immediate future should it decide to deliver its product only in the ASP mode. While CIOs make outsourcing software a serious consideration for any future IT plans, few are willing to jump on the bandwagon just yet. Also, customers like to be given a choice, and some may not appreciate having only one option, particularly while the market is in its nascent stage. Therefore we have got Lawson's assurances that it will continue to deliver its products in the traditional mode too for the foreseeable future.

As a relevant example, while Infinium Software, a vendor with similar product offerings and customer base to Lawson, has been forking out an enormous amount of resources in its own ASP operation, it is not giving up on its conventional service execution model as yet.

We believe that the idea of buying software services "across the wire" instead of in-house implementations will not become the most common model for at least 36 months. Notwithstanding, Lawson's early entry strategy may play well into this adoption phase on the condition it can weather the interim period.

User Recommendations

We generally recommend including Lawson in a long list of an enterprise application selection to mid-market and low end tier 1 companies (with $100M-$2B in revenue), based on a very deep understanding of customers' needs within the following industries: Financial Services; Healthcare; Professional Services; Public Sector; Retail; Wholesale Distribution; and Publishing.

Organizations seeking a Web-based solution and out-of-box functionality with little or no re-engineering effort may benefit from evaluating Lawson's ASP offering. Support, connectivity, ease of use, security, acceptance, and scalability are only a few regular considerations.

While the current Lawson's users of its traditional client/server product should not be anxious about the future product support, they may benefit from informing themselves what would the ramifications of switching or not to the ASP mode be.

Companies with a substantial manufacturing activity (for which Lawson does not offer a native solution) and companies with more intricate business processes may want to inquire how Lawson would deal with the issues of customizations and 3rd-party products bundling in an ASP setup.

As for the new added CRM functionality through the partnership with Siebel, users are advised to ask for firm assurances on the availability and future upgrades timeframes, and more detailed scope of combined product functionality. Also, make sure that Lawson offers a single contract and help desk for all disparate components of its product offerings.

Editor's Note:
This article has been modified from it's original form since the original publication date.

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