Lawson Software CEO: Proprietary software is 'like cocaine'
Give him extra credit for honesty. Lawson Software CEO Harry Debes recently gave an incredibly candid interview to ZDNet, in which he dismisses the entire Software as a Service (SaaS) phenomenon as "hype" based on just one company's middling success (Salesforce), and suggests that the real benefit to proprietary software is customer lock-in.
Oracle's Larry Ellison said roughly the same thing a few months ago to Wall Street analysts, but he wasn't nearly as blunt about it. He just said that SaaS lowers his margins ("The last thing we want to do is have a very large business that's not profitable and drags our margins down") and makes it harder for Oracle to raise prices.
Lawson's Debes, however, takes this onto an entirely new level:
Getting signed up as a SaaS customer is fast, but getting out is just as fast, whereas traditional software is like cocaine -- you're hooked. It's too difficult and expensive to switch providers once you've invested in one. If it were easier to jump ship, a lot of people would've hit the eject button on SAP a long time ago.
Wow. I'm with Shaun Connolly on this one: the candor is breathtaking.
Reading through the entire interview, it's clear that Debes' perspective is shaped by Lawson's position in the industry: it already has a big, profitable proprietary software revenue stream to protect, and SaaS (and open source, though he doesn't mention it) is a way of toppling proprietary empires, not building them.
In other words, while Lawson Software's customers might benefit from SaaS, Lawson Software won't, so why offer it? "(B)ecause all your costs are up front and your revenue is over a five-year period, the more you sell, the more you lose." It's a good point, his "cocaine" comment notwithstanding.
The problem? He has discretion over whether he will offer SaaS, but he has no control over what his competitors offer, including new entrants to the market. Many see SaaS (and open source) as a way to cut into his bloated margins and offer customers a more balanced risk proposition, namely, that vendors should be responsible for a greater share of the risk in software acquisition.
Lawson may be able to hold the line against encroachments from SaaS and open source for years, given that it (like SAP) sits in a market (ERP and the automation of business processes) where the cost of transition to new technology may be outweighed by lower software acquisition costs. But its decision not to evolve is a company decision, not an industry decision. To the extent that the industry moves to SaaS (and open source), Lawson Software may eventually lose, cocaine addiction or not.
Matt Asay brings a decade of in-the-trenches open-source business and legal experience to The Open Road, with an emphasis on emerging open-source business strategies and opportunities. Matt is vice president of business development at Alfresco, a company that develops open-source software for content management. He is a member of the CNET Blog Network and is not an employee of CNET. Disclosure. You can follow Matt on Twitter @mjasay. 
- by sinnema313 October 8, 2008 1:58 AM PDT
- Is SaaS really easier to get out of? What about your data, can you take it with you???
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