It is the very model of a mature market. Three-quarters of all revenue in the enterprise resource planning software market goes to the top five vendors, according to a much cited statistic from analyst group AMR Research.
And as the market consolidates the pressure to acquire or be acquired is felt by all. Infor’s acquisition of SSA Global in May 2006 was the latest seismic shift at the top end of this market. The combination of the two companies has produced the third largest ERP player after SAP and Oracle.
But while the decision to merge US-based Lawson Software with Sweden-headquartered ERP provider Intentia in 2005 might appear to be part of the same trend, Harry Debes, CEO and chairman of the joint company – which stuck with the Lawson name – insists that it was done not to stave off acquisition, but to stay in the action.
“There was all this activity going on in the market place, with new acquisitions and new technology, and we needed to make sure we were part of it,” says Debes. “But we were never likely to be acquired by a larger player.”
Harry Debes, Lawson
Lawson has, of course, already appeared on Oracle’s list of companies that it considered buying, before its PeopleSoft deal went through. But there was no real chance of this going ahead, says Debes. Oracle operates on different platforms, there is functionality overlap, he insists. “Besides, Oracle needs companies like us around to prove they’re not a monopoly.”
Unsurprisingly, Debes is critical of his rival Infor’s strategy of leveraging debt to accumulate a mixed bag of business applications providers. “I was surprised when I heard how much they had borrowed in order to pay for the SSA acquisition,” he says. “Now they’ve got $4 billion worth of debt, on revenues of $2 billion. The first thing customers are going to ask their sales people is ‘How are you going to stay in business for more than five minutes?’.”
Debes contrasts this high-risk, all consuming approach to Lawson’s current strategy – ‘simpler is better’. The company’s new motto means focussing on the upper mid-market and on vertical markets in which it has experience, such as fashion and apparel.
This experience lets Lawson make it easier for companies to defect from their current ERP providers, says chief product officer Dean Hager. “Because we know the customisation that businesses in certain markets need, we can conduct 40% of the implementation in our labs.”
The attitude applies to technology: ‘simpler is better’ means Lawson has two product platforms, (M3 for manufacturing and S3 for services companies), compared with Infor’s 42.
It also means not pushing customers to update their infrastructure faster than they want to.
On service-oriented architecture, Hager is sanguine. “SOA is a technology looking for a solution,” he says. “The system integrators seem to be arguing that just because it is now possible to make all software into reusable, interoperable units, then companies should be spending billions of dollars doing so.”
So if simplicity is the maxim, how will the Lawson/Intentia grouping ensure it is worth more than the sum of its parts? Debes says that a key cross-sell opportunity is Lawson’s business intelligence software, which applies to both S3 and M3 lines. By offering BI that is built into business processes, the company expects to sell its BI application to 80% of new customers.
“Business intelligence is one of those areas of technology which suite vendors like ourselves neglected for a while, so clever people inside those vendors set up add-on solutions companies of their own and sell to the same customers.”
“But once they establish a market, the suite vendors come back and take over the market. CRM has completed that cycle, and BI is about to complete. The days of the best-of-breed BI vendors are numbered.”