In August 2008, my pal Vinnie Mirchandani heaped faint praise on Harry Debes, Lawson CEO for saying that the SaaS market will 'collapse in two years:'
Investors may not be thrilled with the SaaS business model. But more customers are liking it, and that's who Harry - and Larry [Ellison] - should be listening to.
Seventeen months on and Lawson now has saas..err..cloud religion. In a press release earlier today, the company said: "...starting in May 2010 it will offer its core Lawson Enterprise Management Systems and Lawson Talent Management suite powered by the Amazon Elastic Compute Cloud (Amazon EC2) infrastructure. The products will be included in the Lawson External Cloud Services offering, which is part of the company’s new Lawson Cloud Services portfolio."
The company positions the offering as representing:
- Flexible computing capacity
- Complete off-premise management
- Includes subscription pricing for cloud services offerings
- New way to test software before buying
First things first – this is a giant step forward for a vendor whose CEO was predicting the SaaS market would be collapsing about now.
But as I told my former Gartner colleague, Jeff Comport who is now SVP of Product Management at Lawson, this basically acknowledges ERP compute and storage cost is overpriced. It does not tackle Lawson’s license, annual maintenance cost, the cost of application (and database and other components) management, upgrade and other common ERP costs. And while Amazon costs can be elastic (depending on how Lawson will pass them through), the cost of amortizing the Lawson license, the annual Lawson maintenance, AM staff (or outsourcing arrangements) and upgrades have remained stubbornly fixed over the years.
In other words, this is a good move but it is far from enough. Again picking from Vinnie's post:
To which Jeff’s response was those costs are not ready to be commoditized. Most of Lawson’s customers are not ready to move to the scale of shared services SaaS vendors are leveraging.
Prior to revewing the story I had a quick Tweet conversation with Advocates colleague Ray Wang saying this is about pricing, pricing, pricing. To which he quipped: "waiting, waiting, waiting." There could be a tad more to this than either Vinnie or Ray think. While they pick up on price, using cloud services is much more than swapping one price book for another.
Earlier in the day I picked up a worrying report from Randy Bias about Amazon's secrecy over its SAS70 compliance:
Until there is a security standard for running a cloud then SAS70 audits with unpublished controls and control objectives like the recent AMZN announcement are simply smoke and mirrors. They provide little or no real assurance to the average consumer of the AWS public cloud and serve only to provide a false sense of security.
UPDATE: @wpauley says he has a copy of the AWS controls, but I haven’t seen them yet. When I get a copy I will post them. UPDATE2: Apparently @wpauley was a special case. AWS is keeping the controls under wraps. If you have a copy send them to me anonymously and I will get them posted.
AWS has a publicly available summary of the controls and a more in-depth document that will only be shared under NDA. I have seen both and the list of controls seemed quite good but I do think it would be better if all of this stuff could be shared openly.
Vinnie and I have discussed this in the past. In both our experiences, customers may ask for SAS 70 Type II compliance but they rarely look at what this means, even more rarely check the documents or ask to see the audit reports. Anyone considering using Amazon should look at this carefully because Amazon makes no general warranty about its services and its terms of service are littered with disclaimers. Non-US customers will also have to consider how this apparently attractive offering might impact legal liabilities in their own country.
Those concerns aside, like Vinnie I congratulate the company for making this move. It is part of a trend I am seeing articulated in different ways by different on-prem vendors as they try figure out how to catch the cloud trend before other, more nimble vendors come and take their markets.
UPDATE: Just as I pressed the go button, colleague Frank Scavo chimed in:
...nothing in Lawson's announcement today has anything to do with software-as-a-service. It is simply the same Lawson software, deployed as a single instance, in Amazon's cloud. Every patch or regulatory update that's needed has to be applied to each customer separately--either by the customer or by Lawson. Customers still need to go through periodic version upgrades. The cost savings are only those reflected in the lower cost of the infrastructure (the smallest element of ERP TCO)--and even that will depend on how much of those savings Lawson keeps for itself, as opposed to passing on to the customer...
I'm not convinced. The overhead and expense, even with Lawson's new offering on Amazon's cloud, will be far above what SaaS providers experience. True multi-tenant SaaS providers, such as Salesforce.com and NetSuite, make changes once, and the entire customer base experiences them instantly. This is especially a benefit to users of HRM and financial management systems (two of Lawson's horizontal sweet spots), where regulatory changes are not optional.
Frank's post contains much more detail on the announcement itself. Well worth the read...