Market Impact
Although
Lawson Software, Inc. (NASDAQ: LWSN) has a long trail of success,
throughout 2002 it encountered many simultaneous challenges. Still, after initially
chalking up and experiencing hiccups, the vendor seems to be weathering the
storm and getting back on track. While it is quite difficult to compete against
the likes of SAP, PeopleSoft, and Oracle,
it is certainly not impossible, as witnessed in the past (see Lawson
Asserts Itself, Draws A Bead On Bigger Players).
In several aspects, Lawson Software could be regarded as an enterprise applications market anomaly. For one, at its peak in fiscal 2002, the company boasted annual revenues of nearly $430 million, but it still has only a slender (less than 10 percent of revenues) presence outside of its US domestic market. Further, it remains a major force in enterprise applications software, yet it does not cater the functionality to manufacturing sectors, and the vastness of its sales are thus derived from just a few service-oriented vertical markets—primarily health care and retail. Lawson Software introduced Web-based, three-tier client/server enterprise software for companies in the mid- to high-end markets (the Fortune 2000 companies). The vendor currently has over 2,000 customers, primarily in the health care, professional services, public sector, financial services and retail markets. It markets and sells its software and services solutions primarily through a direct sales force, augmented by a combination of channel partners and resellers.
Further, founded in 1975 by Bill and Richard Lawson and John Cerullo, and with headquarters in Minneapolis, MN, Lawson Software has experienced over two decades of being sort of a privately held family-run business. No fewer than twenty members of the kinfolk have been employed throughout the organization at some stage, with brothers Bill and Richard at the forefront, who still own the bulk of the company's stock, and who formerly held the titles of CEO and chairman respectively. Ownership, however, has significantly changed, with a professional management lead by the current CEO and president Jay Caughlan taking the helm when the company embarked on an initial stock market listing in 2001, which will be mentioned in more detail later.
As
a result, the focus throughout the 1980s and 1990s at Lawson was to keep a tight
control over costs and increase revenues and profitability. The turning point
for the company came in the mid-1990s when the founders began working with the
Chasm Group, a consultancy firm specializing in growth strategies
for technology firms, to define a vertical strategy. After decades of conservative
expansion and chasing almost every viable lead in the field, Lawson's growth
then leapt into the 20 percent to 40 percent range as it first honed its focus
on the health care and retail markets, and later, on providing a core set of
financial and human resources (HR) management applications to professional services
companies, which started in earnest in 2001. At the same time, the company was
able to post a long unbroken run of annual net profits.
Lawson has also made forays into the public sector (e.g., state and local governments, K-12 education institutions, public authorities, etc.) and financial service (e.g., banks and insurance providers) markets, by signing on more than 140 public sector customers in the last three years or so. To that end, Lawson serves two of the ten largest (by population) US state governments (or five of the top twenty), and four of the twenty largest city school districts in the US. Lawson's software is in use at more than 1,300 schools with combined enrollment exceeding one million students. New markets that Lawson intends to seriously tackle as well are transportation and distribution, energy and utilities, gaming and entertainment, and publishing.
Being
also peculiar on the technology front, although Lawson initially provided custom
mainframe software for Burroughs and IBM installations,
the company has continually recognized and anticipated new computing trends
by broadening its platform support and adding products for the IBM System/38
in 1981, IBM AS/400 (now IBM iSeries) in 1988,
UNIX in 1990 and Microsoft Windows NT in 1998. The company
fully embraced open systems technology in 1985 by moving all development to
a UNIX-based computer-aided software engineering (CASE) tool.
In
1993, Lawson was one of the first software application vendors to shift its
market focus by delivering client/server applications. Lawson's cross-platform,
open-database, component technology was incorporated into its flagship product,
which was formerly called the LAWSON INSIGHT II Business Management
System in the 1990s, and lawson.insight in the early
2000s. As a result, Lawson customers can operate on a number of operating systems
(such as UNIX, Windows NT, and iSeries), database systems (such as IBM
DB2, Microsoft SQL Server, and Oracle) and hardware platforms (such
as Hewlett Packard, IBM, Sun Microsystems,
and Windows/Intel). Further, customers can access the applications through various
end-user devices, including personal computers, wireless devices, and personal
digital assistants.
Also Lawson has leapt eagerly onto the intranet and Internet bandwagon, building Web functionality into all its products ahead of most competitors. Its current 8 Series application suites feature fully Web-based user interfaces, while its historical AS/400 user base now accounts for a minor part of revenues, partly because of the early provision of the upgrade path to UNIX. Despite the above praises, the company still faces challenges of either perceived or actual inferior scalability compared to its bigger competitors, which will also be addressed later in more detail.
This
is Part Three of a five-part note.
Parts
One and Two detailed recent announcements.
Parts
Four will continue to discuss the market impact.
Part
Five will cover challenges and make user recommendations.
Strengths
To summarize, until very recently, Lawson has cruised as a leader in the mid-to-high end market for financial management, human resources (HR), professional services automation (PSA), e-procurement, and retail distribution applications by continually betting on the following few creeds of success:
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Adequately broad footprint
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Architectural astuteness
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Industry-tailored solutions
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Hosting approach
1) Adequately Broad Footprint
Lawson has espoused a comprehensive horizontal non-manufacturing oriented enterprise software suite that automates business processes, enables collaboration among participants in the processes and delivers detailed analyses of the results of the processes. Starting with integrated financial applications and then adding HR and procurement functionality, Lawson's current core business applications provide the traditional ERP platform and functionality for handling financial management, HR management, procurement, and distribution while retail operations and SPO would constitute the front-office functions. These applications, which enable organizations to execute standard business processes in each of the above areas, as well as to provide functionality specific to the industries Lawson targets, include several components in each functional area, which Lawson licenses separately or bundles together as suites designed for its targeted vertical markets.
Most
of Lawson's major horizontal product redevelopment work has either been completed
or the framework has been established throughout the 1990s. In the mid 1990s,
version 7 of the Lawson Insight Business Management System (recently renamed
into Lawson ERP suite) was released, which comprised financials,
supply chain, and procurement modules, along with integrated workflow technology.
In 1999, the company acquired Ijob of Edmond, OK, a maker of
Web-based HR software, which automates employee training and benefits tracking.
That was the first major acquisition and a harbinger of the slew of acquisitions
post IPO in the 2000s. Although the company has long sold an HR product in the
US, European users had to wait till the end of the 1990s for a fully integrated
module within the product release 8.0, while the Canadian payroll capability
happened in 2001. The other hole in an otherwise fully-fledged ERP offering,
a manufacturing module, has never been on the agenda. Although the company has
built links to other systems, it currently has no major partner in the field
and concedes that it has deliberately stayed away from many manufacturing-led
deals.
Lawson Financials Suite
As
a prominent example of the core suite's component, Lawson Financials
Suite aims at giving customers the ability to create and track financial
and accounting data across multiple companies, languages, currencies, and books
of accounts. These applications provide broad analytical capabilities and integrate
the customers' financial management processes with other Lawson core business
applications. The financials applications are comprised of several principal
components, including the following:
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General Ledger
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Project and Activity Accounting, including Billing and Revenue Management
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Lawson Budgeting & Planning
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Enterprise Consolidations
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Asset Management
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Lease Management
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Grant Management
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Multi-Book Ledger
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Average Daily Balance
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Accounts Payable
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Payables Management (it extends the functionality of the Accounts Payable
application for high volume invoice matching, as purchase orders and receipts
can be matched to invoices for Lawson and non-Lawson applications, and it
is integrated with Lawson Procurement,
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Accounts Receivable
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Encumbrance Accounting (it provides a rule-based budget allocation solution,
enabling an organization to evaluate real time budget information prior to
making spending decisions)
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Cash and Treasury Management (the module is provided through the relationship
with XRT)
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Financial Reporting Self-Service
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Strategic Ledger (it captures data that would not typically be maintained
in an organization's general ledger to measure profitability and business
performance in multidimensional detail)
Thus, the product exhibits many features that would either be key differentiators or at least could give the bigger tier 1 offerings a run for their money. These would be the Strategic Ledger module, the ability to segment chart of accounts, the Attributes Matrix, an unlimited hierarchy of accounts, integration with Smart Notification, Enterprise Knowledge Management, the Enterprise Performance Management suite, and the connection to desktop programs and to the Enterprise Reporting module.
Lawson Human Resources Suite
Further,
Lawson Human Resources Suite is integrated with the financials
applications to automatically update the financial reporting functions for changes
in employment and payroll. The HR applications are comprised of several principal
components, including the following:
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Benefits Administration
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Payroll
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Absence Management
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Personnel Administration (it tracks workforce data including current employees,
open positions and job history, education, and other employee information;
administers employee training, orientation, and re-certification programs;
and manages employee health and safety records for compliance with health
and safety policies)
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Workforce Analytics
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Employee and Manager Self-Service
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e-Recruiting
Like its financial management counterpart, the product exhibits many features that would either be key differentiators or at least could give the bigger Tier 1 offerings a decent challenge, particularly the Workforce Analytics, E-Recruiting, Career Management modules and a strong transaction processing system.
Supply Chain Management
While
Lawson does not have a full-fledged supply chain management (SCM) offering in
terms of planning and execution part and parcel modules, it features strong
requisitions and procurement capabilities for its industries of focus. Through
the Armature and Numbercraft acquisitions
(For details see Part Two),
the vendor has further bolstered the merchandizing part of the equations that
matches the leading retail point solutions, and that traditional ERP vendors
that are targeting the retail sector are yet to deliver. Procurement is also
Lawson's lead product for the health care industry, which relies on Lawson to
help manage shrinking margins. Lawson delivers pre-built integration to more
than forty health care vendors and the ability to easily integrate with additional
suppliers. With the Apexion acquisition, Lawson should now even be able to track
the flow of materials into the operating room.
Thus,
Lawson Procurement Suite aims at automating and streamlining
the operational and administrative procurement process, promote adherence to
purchasing policies, assist businesses in negotiating pricing for supplies,
lower materials and services costs, and improve inventory practices. These applications
are comprised of several principal components, including the following:
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Requisitions
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Purchase Order
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Inventory Control (with a support for use of wireless handheld devices for
data collection)
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Requisitions Self-Service
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Vendor Self-Service
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Vendor Portal
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e-Procurement (it provides purchasing management services with automated requisitioning,
approval, receiving, reconciliation, invoice payment, and posting to a user's
general ledger, while integrating with Web-based exchanges, suppliers, and
manufacturers)
Lawson's solutions also facilitate collaboration among customers, partners, suppliers, and employees. As an example, within its e-Procurement module, workflow and business processes can include outside suppliers and business entities for different steps in order approval. The application is Web deployable, making the functionality remotely accessible.
Lawson
Distribution Suite provides sell-side order management, warehouse fulfillment,
customer invoicing, and accounts receivable in an integrated solution. The distribution
applications are comprised of several principal components, including the following:
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Order Entry
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Work Order (it manages the fulfillment of orders that require assembly, providing
scheduling, order component, and cost adjustment capabilities)
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Warehouse Management
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Sales Analysis
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Billing, Franchise Management (it is an integrated franchiser-to-franchisee
solution that manages contracts, loans and royalties for the franchisees)
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Customer Self-Service
Lawson Retail Operations Suite
Last but not least, Lawson Retail Operations Suite solutions are built for high-volume retail enterprises and encompass a range of activities, including the management of item information, category planning and review, assortment, pricing, promotions, warehouse replenishment, multi-channel ordering, store replenishment, forecasting and order determination. The principal components of the retail operations applications include the following:
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Merchandising—assists category managers in the management, definition, planning,
promotions, pricing and reviewing of product categories.
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Lawson Library—serves as a data management hub for all of a retail customer's
systems, including back office, merchandising, warehouse replenishment, distribution
and even non-Lawson applications.
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Supply Chain—provides an automated system for warehouse management and replenishment,
as well as centralized control of multi-channel ordering.
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Store Operations—extends the Lawson Supply Chain to each of a customer's retail
location and contains a number of components to simplify and automate forecasting,
replenishment, inventory control and analysis.
In addition, Lawson provides an underlying integrated platform that enables proactive notifications, transaction subscriptions, "In Context" knowledge management (KM) and collaboration, random sampling and transaction monitoring, and automated workflow and approvals. This is in tune with Lawson's recently minted mission statement of "focusing on services organizations and delivering deep vertical functionality, so that customers can achieve workforce optimization resulting in superior service to their customers and in competitive advantage."
Lawson
believes a key concept for workforce centric organizations and a new way to
do business with and amongst your employees, customers, and vendors lies in:
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Contextual collaboration (i.e., discussion and knowledge are centered around
business points, and integrated and designed for most effective use and leverage,
while comprehensive knowledge of business point is constantly maintained)
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Knowledge capture and leverage (i.e., the users should capture structured
and unstructured data as a natural part of doing their work, while the system
should provide secured sharing of knowledge to ensure a continuum of service,
and both actions will increase the organization's "IQ" by evolving the knowledge
rather than re-creating it)
-
Both structured and unstructured data are captured (i.e., the system collects
documents, e-mails, transactions, multimedia files, etc. It then maintains
a highly searchable repository for quick and fast access to information and
automatically tags all documents for future keyword searches).
Lawson Enterprise Performance Management (EPM)
With
an important note that Lawson Budgeting & Planning should represent a very significant
addition to this suite when it is released, the current Lawson Enterprise
Performance Management (EPM) suite tracks over 200 pre-configured business
metrics, including industry-specific metrics that enable users to view and analyze
key operational performance measurements and use graphical, user interfaces
to navigate through relevant information stored in the customer's transactional
system. As described above, Lawson EPM aims at enabling advanced financial and
operational reporting, event driven notifications, transaction monitoring and
random sampling, and proactive business intelligence (BI). It is a suite of
role-based, pre-built reporting options and analytical tools to report, analyze,
and examine key metrics from both Lawson and non-Lawson sources.
This
is the evolution of what Lawson offered in the 1990s as former Value
Management Solutions products including the Analytic Suite
and Financial Performance Management. These value-adding solutions
brought together real-time financial and non-financial metrics into a picture
of organizational performance. The Analytic Suite was integrated into an Enterprise
Analytic Warehouse, which gave key decision-makers visibility of the
business and financial processes. The former Performance Indicator Suite
would anticipate the most commonly asked business questions for each targeted
executive role, then uses online analytical processing (OLAP) and algorithms
to provide the answers and pre-populate the role-based data marts.
Key products of today's Lawson EPM suite, some of which have already been mentioned earlier, include:
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Workforce Analytics
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Strategic Ledger
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Enterprise Reporting (leveraging both Lawson Reports and Crystal Decisions'
Crystal Reports and Crystal Enterprise report creating and distribution capabilities)
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Scorecard—it uses OLAP to provide analytical vertical and business process
performance measurements, and customized tools for company-wide balanced scorecard
initiatives, allowing collaboration among employees that are viewing and analyzing
the same data. Lawson Scorecard provides context to analysis by combining
key metrics with relevant information from any other source. Visual signals
such as traffic lighting, graphs, and key performance indicators (KPIs) help
managers identify and take action on emerging issues and exceptions.
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Data Marts—a full set of pre-packaged performance measures for Lawson Financials,
Human Resources, Procurement, and Distribution suites, leveraging both Hyperion
Essbase and Microsoft OLAP servers.
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Analytic Architect—features predefined dimensions to create subject-specific
data marts from relevant financial, transactional and operational data from
employees, customers, internal processes and financial systems, which eliminate
the need to define and program custom data marts.
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Smart Notification—monitors data, filters out noise and delivers important
information to users, which allows them to act quickly and intelligently to
optimize organizational performance. In April 2002, Lawson acquired Keyola,
a small Florida-based company, whose main product was Smart Notification,
a BI-like tool that pushes information to users based on preconfigured rules.
Initially sold as a stand-alone product, Smart Notification has meanwhile
become integrated as a standard feature in all Lawson products. It enhances
the capabilities of Lawson's applications to automatically deliver event-driven
notifications across an organization's enterprise and instantly push key information
to the right people.
Lawson
Smart Notification, the configurable, collaborative solution delivers
information that is user defined and can be received via personal digital assistant
(PDA), e-mail, voice, text messages and wireless devices. Smart Notification
should empower users by automatically sending them information important to
their work, and by letting users define what information they want and how they
want it delivered. Like an instant manager product, it offers rich content and
actionable information to help Lawson's customers make better decisions faster.
Its strength is in more than just pushing a simple line item and without the
ability to query and report on that information. Rather, Smart Notification
enables users to launch an application from an e-mail by providing a hyperlink
to an OLAP cube and ability to use real time data. While most BI tools make
several queries to a pre-staged data source to obtain information for the requested
report, despite the data often being more than a week old. Once the report is
in hand, the user still has to sift through it to glean anything significant
such as a large drop in sales. Even then additional reports need to be run in
order to discover which product line is responsible. Conversely, Smart Notification
is designed to get to this last stage in one click.
This
concludes Part Three of a five-part note.
Parts
One and Two detailed recent announcements.
Parts
Four will continue to discuss the market impact.
Part
Five will cover challenges and make user recommendations.