How to stop "runaway" ERP projects
Interview: Harry Debes, CEO, Lawson Software on the future for ERP
Big complicated and expensive enterprise resource planning (ERP) systems can still cause headaches for many companies, admits Harry Debes, CEO of Lawson Software.
Lawson isn't a familiar brand in the corporate IT world, especially in the UK and Europe, but the company is one of the ERP vendors behind the big two of Oracle and SAP and it competes with the likes of Infor.
"As much as I'd like to tell you all of our competitors' projects are bad that's not true. SAP has thousands of happy customers, as does Oracle. What makes it complicated is that sometimes the cost of implementation becomes a runaway project. The question is whether you have a proper scope, proper expectation and proper project management," says Debes.
He claims his company has eliminated much of this implementation risk by creating templates for specific vertical industries on a ratio of $1 of implementation cost to $1 of software - even offering fixed pricing for some projects.
"If you're a manufacturer of shoes, we have a shoe template. We've done dozens of shoe implementations. We know the choices customers have made and also the best practices for what you should do and that way we can save 30-50 per cent of the traditional implementation cost," he says.
Fashion and retailing is one of the vertical sectors Lawson is strong in and the industry's supply chain is becoming increasingly extended by globalisation, and, not surprisingly, China is a hotspot for clothes manufacturing.
"In China we have over 250 fashion manufacturers as clients. This shirt I'm wearing is sold in the US by Brooks Brothers but it's not manufactured by Brookes Brothers. They outsource it to a company called TAL Apparel based in Hong Kong with operations in six different countries, all of which use the Lawson M3 manufacturing product. One in every seven dress shirts sold in America is made by TAL," he says.
One issue facing all ERP companies is the software as a service (SaaS), or on-demand, model pioneered in other areas by the likes of Salesforce.com. SAP has resisted a move away from its traditional perpetual licensing model until very recently with the launch of its Business ByDesign (formerly known as A1S) on-demand suite of applications.
Debes maintains Lawson is "agnostic" on SaaS. However, he questions whether the model will work beyond simple salesforce automation tools for more complex enterprise applications because the SaaS model is all about standard software with no modifications or customisations and everyone running the same version.
"That's where it starts to break down because many times companies identify themselves by some unique business processes or some unique way they do pricing or purchasing or manage their inventory. I've been doing ERP software for 30 years and I know every time I meet a new customer they go 'we would like to go as standard as possible' and then they go 'but in this area here this is the base on which our business was founded and it is our competitive differentiator so we need the software to do this unique thing," he says.
He admits SAP may have some success with its SaaS products at the very low end of the small business market but says "time will tell" whether there will be a big shift.
"We're not trying to lead a crusade that says you must be a perpetual licence customer. We don't pretend to know the answers to all these things. While there are a handful of companies that have had some success with SaaS the world has not suddenly shifted. Right now the only SaaS apps you can point to that have had any success are, number one, salesforce automation and, number two, a few human resources apps."
Lawson itself uses Salesforce.com but Debes says that company's success is largely on the back of the relentless promotion of SaaS by its "colourful" CEO Marc Benioff.
"What does it [Salesforce.com] do? It sorts and reports, that's all. There are no algorithms in there. It adds up a column of numbers and gives you a report back. It's a fancy reporting mechanism but it doesn't do sophisticated mathematical algorithms, it doesn't interact with many clients simultaneously. I've asked Marc Benioff many times 'you're such a big advocate of this model, why don't you develop other applications?' He says 'it's not that simple'. He's proving my point," says Debes.
One of the key items on Lawson's own roadmap is the Landmark project, which has been in development for the past five years. Essentially Landmark is a development tool that allows non-technical people who use an ERP system to easily build Java-based applications for their particular field of expertise by feeding in a set of parameters and requirements.
Debes says it is similar to what used to be called object-oriented programming and is based on a model called "pattern languages theory", which is about creating a library of repeatable patterns.
"We've found that the number of lines of code it generates as well is reduced to one-twentieth, five per cent, of the comparable, traditional Java code handcrafted by humans. If it requires less code it is much more efficient, therefore it runs faster. Secondly, it has far fewer errors," he says.
Landmark has just made it out of the labs and is being used by Lawson's own services people, and Debes says it should be available to customers in about a year.
Debes is cool on the subject of acquisitions. Although he says Lawson is now ready to start looking around again after completing and integrating the Intentia buy 18 months ago, he is critical of rival Infor's acquisition spree.
"Infor is right now suffering from indigestion from all of these acquisitions they've made. They're spending much of their time internally focused on their own business and their own customers. I've been in the consolidation game. You can't keep all those 32 products moving forward and investing in them all. There has to be some rationalisation. Once there is, for those customers that means their balls are up in the air," he says.
As to the future for Lawson, Debes points to the fact in his two years at the helm there is now $500m in cash and the company's share price has doubled.
"What we've done is turn the business around and eliminate that doubt. We've generated a whole pile of cash and 45 per cent of our licence revenue is from new accounts," he says.