P.J.
Jakovljevic
- July
31, 2001
- Event
Summary
- Market
Impact
- User
Recommendations
Event
Summary
On June 29, Lawson Software, a provider of Internet-enabled
business applications for service industries, announced that it had signed
a definitive agreement to acquire Account4, Inc., a provider
of Web-based Professional Services Automation (PSA) software. Through
this acquisition, Lawson hopes to expand its software solution for professional
service organizations and professional service divisions. While the terms
of the deal were not disclosed, the acquisition was completed on July
16.
"This
acquisition supports Lawson's strategy to acquire businesses with technologies
and products that enhance and expand our current offerings," said Jay
Coughlan, president and CEO of Lawson Software. "This is a good strategic
fit. Account4's open, Web-based solution is compatible with our architecture,
and it addresses the critical business needs of professional service organizations
and professional service divisions, a target vertical market for us."
The
acquisition should enable Lawson to offer more automated functions to
professional service organizations, including forecasting and planning,
scheduling and assignments, skills and resource management, time and expense
reporting, project management and invoicing functions. The solution will
reportedly be available as a comprehensive and integrated product suite,
or in component parts. The acquisition coincides with the July 9 PeopleSoft
launch of PeopleSoft Accelerated Enterprise Service
Automation (ESA), the Internet-based solution designed specifically
for mid-market service organizations. Included in the fixed-price solution,
PeopleSoft Accelerated ESA includes PeopleSoft's Human Resources
Management Systems (HRMS) and PeopleSoft's Contract,
Expense, Financial, Project and Resource Management modules; implementation
services provided by PeopleSoft Consulting or PeopleSoft Consulting Alliance
Partners; and technical and end user training provided by PeopleSoft University.
The
acquisition also comes only over a week after Lawson Software, which has
remained private for more than a quarter of a century, filed to go public
against the tide of tech companies that have pulled their Initial Public
Offerings (IPOs) because of sour market conditions. The market has seen
about 120 businesses pull their IPOs since the start of the year, according
to IPO.com. According to its Securities and Exchange Commission (SEC)
filing, Lawson expects to raise $200m for general corporate purposes,
capital expenditures, debt repayment and possible acquisitions. Lehman
Brothers, JP Morgan, US Bancorp Piper Jaffray and Fidelity Capital Markets
will handle the IPO.
Lawson's
total revenues in the fiscal year ended May 31, 2000 grew to $312.9 million
from $264.5 million in 1999. In fiscal 2000 it reported a net loss of
$3.3 million, mainly because of nonrecurring charges from issuing warrants
to a technology partner and the repurchase of stock options from a former
employee. Lawson received a $40m first round of funding from TA Associates
and St. Paul Venture Capital in May. Lawson did not disclose how many
shares it plans to sell or the price range. That information will come
later in another filing. Also, a date for Lawson's debut has not been
set yet, but the company has applied for a NASDAQ listing under the symbol
"LWSN".
Market
Impact
Lawson
continues its 'arms race' with the likes of PeopleSoft. As in the case
of CRM, SCM or e-procurement opportunities, the major applications vendors
have also acted on the opportunity to encroach into the PSA space. However,
contrary to other ERP adjacent areas, the PSA market is still evolving,
with fragmented offerings and with product leaders that are not that financially
sound either. As a matter of fact, a vast majority of pure PSA vendors
are start-up weaklings.
Also,
a few recent vendor announcements in the PSA market have indicated further
morphing and expansion of the scope of PSA. Several vendors have even
tried to distance themselves from the acronym, migrating to new catchy
names (e.g., Service Process Optimization or Strategic Workforce Optimization)
that should indicate a deeper (e.g., with optimization logic similar to
SCM software that should enable allocation of people to projects based
on multiple criteria such as utilization, profit, revenue, customer satisfaction,
or employee preference) or broader (e.g., to include all business processes
linked to knowledge workers working in corporate IT departments, professional
services organizations, and/or R&D operations) framework for services
delivery.
We
believe the future will bring similar moves as well as news of other ERP
vendors tackling the PSA space. As PSA software integrates and automates
core processes related to business development, service delivery and administration
for any organization that generates revenue through billable hours, the
need for it is apparent particularly in these days of economic downturn
when all major consulting outlets are forced to justify the utilization
of every individual consultant.
In
addition to supporting organizations that generate revenue through billable
hours, PSA software also benefits corporate IT and other internal service
departments that track time for internal charge-back purposes. Recently,
there has been awareness within corporate management of a need to regard
their IT departments as if they were internal professional service organizations
that should compete with external counterparts based on service delivery,
expectation levels and cost.
A
number of ERP vendors, particularly those with strong native HR modules
and ASP offerings have already intruded the PSA space. The early adopters'
feedback has been that ERP vendors offer competitive functionality pertinent
to workforce planning, project execution and cost and revenue management,
resource scheduling and time & expense reporting, while they are not very
natively strong in, contract bidding functionality compared to pure PSA
players. Beside Lawson and PeopleSoft, we were aware of the following
vendors' endeavors in the area: SAP, Oracle, J.D. Edwards,
Epicor, Microsoft Great Plains/Solomon,
to name some.
While
Lawson and PeopleSoft have the advantage of an early market entry and
recent PSA product enhancements both in-house and through acquisitions
and alliances, they will still face tough competition from a number of
the native PSA players like Niku Corporation, Evolve,
Novient, Portera and Business Engine that
have already created market visibility. The scenario is somewhat similar
to the CRM, SCM or e-procurement markets: pure PSA players will emphasize
their relevant product completeness and depth with the appropriate price
tag, their expertise in handling unstructured data, and will spread the
FUD (Fear, Uncertainty, and Doubt) about immature ERP/PSA offerings and
the danger of buying irrelevant modules in an ERP/PSA bundle. On the other
hand, ERP vendors will try to sell their holistic, back-office integrated
paradigm, which does not require any applications interfacing or integrating.
PeopleSoft
and Lawson seem to have realized that merely extending their Web-enabled
self-service HR applications as PSA would not suffice. To that end, in
addition to recently beefing up its product offerings through internal
R&D, acquisitions and product alliances (see PeopleSoft:
Giving Fervent Hope To The Market And Jitters To The Competition)
PeopleSoft and eRoom Technology Inc. have recently
teamed up to integrate PeopleSoft Enterprise Service Automation (ESA)
with the eRoom Digital Workplace platform, creating a collaborative workplace
for service organizations. eRoom's Digital Workplace extends the functionality
of PeopleSoft ESA by providing a central online meeting place and repository
for project information, including proposals, project plans, milestones
and budgets.
The
eRoom solution enables employees, customers, suppliers and partners to
share ideas, review schedules and assignments, resolve issues and make
real-time decisions. That should render PeopleSoft ESA rather competitive,
although it has already experienced impressive growth in the first six
months it was on the market. Since general availability of PeopleSoft
ESA in September 2000, more than 75 customers have reportedly licensed
the ESA solution. PeopleSoft claims to have increased its ESA customer
base by 200% with more than 23% of those customers listed among the Fortune
250.
By
gobbling up the PSA expert vendor and embedding it into it product suite,
Lawson might have its true counter value proposition some time in the
future. The addition of Account4 should provide current and potential
customers the facility to fine-tune their service delivery process. The
move might also illustrate Lawson's need of going public now. The reasons
for doing it during current IPO-adverse times might indicate the need
for more capital and the management's confidence in its business model.
While being privately held and independent of Wall Street volatility has
allowed the company to direct its investments for development of its desired
core competencies, going public is necessary in order to keep up with
huge R&D investments its bigger competitors can garner without the need
to turn to confidence depleted venture capitalists and also in order to
retain the workforce by offering them the stock options.
User
Recommendations
Professional service organizations and organizations with hefty IT staff
are advised to familiarize themselves with the offerings of all relevant
players. While the clear-cut PSA functionality scope is still a moving
target, one should look for the following common functions: business development,
opportunity management, qualification management, resource scheduling,
time and expense reporting, delivery management, knowledge management,
and analytics/business intelligence. From the technical standpoint, the
solution should be flexible enough to accommodate both mobile and stationed
users; in addition to this, both groups will typically be divided into
users who need access to the bulk of the application, and those who enter
more narrowly defined data. At this stage, there are only a handful of
vertical solutions and ready-made interfaces to third-party systems like
airlines, hotels, and credit card companies.
Although
this is an evolving area with not much implementation experience accumulated
so far, users should be aware of similarities and differences between
PSA and ERP. PSA products are much smaller and simpler in scope than their
ERP equivalents. Also, most PSA systems lack a built-in suite of development
tools; therefore we expect much less room for complex customizations with
source code change. However, the flexibility to tailor the system on the
fly without code change ramifications remains crucial. Moreover, the "legacy
systems" that PSA replaces often either do not exist or are manual practices;
therefore we expect minimal data conversion. All the afore-mentioned suggests
that PSA implementations should be much shorter and generally less traumatic
than ERP.
On
the other hand, professional service organizations tend to have an unstructured
work style that would challenge any organized approach to project management.
Professional service managers can typically commit much less time than
their counterparts in manufacturing. These managers are the people who
would be "key users" on an ERP implementation, who would attend frequent
working sessions in a project war room, and in many cases even work full-time
on the implementation.
In
PSA implementations, client managers will likely serve only as sources
of information and validation, but not as full-time team members. Therefore
we anticipate PSA projects should have more of a turnkey approach. To
that end, look for exceptionally strong reporting capabilities and end-user
training within the product offerings.
Existing
Lawson customers should evaluate the Account4 platform as a way to add
value to their existing PSA applications bearing in mind the impending
integration effort now or waiting for generally available integrated solution
by Lawson. Professional service companies considering new solutions PSA
should place Lawson on their list. These companies should consider the
added functionality from this acquisition for an addition to their requirements
list. Some professional service companies might find this combination
as one holding significant value in terms of both cost savings and increased
efficiency. Additionally, enterprises 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.
More
comprehensive recommendations for both current and potential Lawson users
can be found in Lawson
Software Expands Vertically As Well and Lawson
Software: Self-Evidently Thriving on Innovations.