Lawson Software CEO Did Not Just Say That, Did He?

I just stumbled across a PRECIOUS interview by ZDNet of Harry Debes, Lawson Software CEO, who claims:

"SaaS industry 'will collapse' in two years"

Debes is clearly not a fan of Saas or cloud-computing:
"This on-demand, SaaS phenomenon is something I've lived through three times in my career now. The first time, it was called 'service bureaux'. The second time, it was 'application service providers', and now it's called 'SaaS'. But it's pretty much the same thing, and my prediction is that it'll go the same way as the other two have gone: nowhere."

"People are stupid. History has shown it repeats itself, and people make the same mistakes."

"The success of Salesforce.com, in my opinion, has to do with their product being good, not because it's SaaS."


Debes looked closely at the SaaS model, but found issues:
"as we did the maths, we realised we could get killed. It was going to take us seven to 10 years before we made any money. That's nonsense. So we reversed our plans."

"because all your costs are up front and your revenue is over a five-year period, the more you sell, the more you lose. You don't break even till the four-and-a-half-year mark, but here's a bigger problem: there's no guarantee that that customer is still going to be yours in four years' time."


Customers find the SaaS business case straightforward, so why don't you like it:
"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."

"It isn't about locking people in. People lock themselves in....The cost of moving is too high...When the sunk costs have been fully depreciated, customers effectively run the software for free, thereafter. Whereas, if they went to Salesforce.com, it'd cost them a million a year because they're paying for ongoing licensing and maintenance."

One word comes to mind after reading this interview: Wow!


UPDATE ON SEP 30 2008:
Savio Rodrigues of InfoWorld Open Sources and IBM fame picked up on my post with his own take on Harry Debes' comments:
"Lawson's CEO refuses to give in to peer pressure"

Savio makes a good point that choosing SaaS as a model is a non-trivial business decision and should NOT be driven by peer pressure, market buzz, etc. Savio also states that "Hopefully we'll arrive at a solution to SaaS as a component of the overall software market."

I agree 100% that SaaS is a component of the overall software market (i.e. it's NOT a panacea).

My issue with Debes' comments above is how he states his case for why SaaS makes no sense for Lawson. He talks little about customers needs or value. He actually seems antagonsistic towards customers...he calls them stupid....and seems giddy at the prospect of locking them into a solution.

I get the math Savio, but unlike you...I do not extend kudos to Mr. Debes for what he said above.

Debes could have simply stated that using an expensive enterprise sales model to sell SaaS solutions is a recipe for disaster...from Lawson's perspective.

Companies like Salesforce.com and SugarCRM have a more cost effective sales model....out of necessity. If they had a fleet of enterprise sales reps, they would be out of business.

SocialPass In Action - TicketMaster Demo

Over the past few months, the Ringside Networks development team created a really cool piece of technology called SocialPass. SocialPass provides a very simple way for website owners and website developers to embed social capabilities within their existing website.

The video below provides a brief overview of SocialPass and then demonstrates how visitors to TicketMaster.com, for example, can use SocialPass to socially engage their their friends via email, Facebook, and Twitter in order to attend a concert together.

Direct link to this video on YouTube

Bottom-line: The social web offers the opportunity to directly energize the people who care most about your unique value. And encouraging these people to spread the word with their trusted friends can yield powerful results.

Social Web Power Quote: Hyundai

Eric D’Ablaing of Hyundai states:

"We need to think about giving the users
the ability to connect with one another,
which is the real interactivity of using the Web.
This will allow
brands to be the connection point
between two or more parties
and not just a connection point to the brand."

Businesses that enable their website visitors to actively engage in social activities around their content (ex. ask friends to go to a concert with them, help them decide what to buy, take advantage of a compelling "deal of the day", or share recipes and compare tastes) stand to learn a lot about who their brand advocates and superconnectors are.

The social web offers the opportunity to energize the people who care most about your unique value. Enabling [and encouraging] these people to spread the word with their trusted friends can yield powerful results.

Source of Hyundai Quote:
Measuring the Influence of SocialMedia, Digital Influence Group

Social Web Power Quotes: Hasbro and Jupiter Research

Anne Marie Kroisi of Hasbro states:

"I think it will just be a natural way for
the next generation of purchasers to
share with their peers, share product reviews,
share ideas, talk to people."

Marketing professionals focused on consumers at retail and brand websites are beginning to understand that social influence plays a big part in both consumer brand sentiment and online [and offline] sales.

Ms. Kroisi's quote really takes shape when paired with the following statistic from Jupiter Research:

"Social network users are
3 times more likely to trust peer opinions
over advertising when making purchasing decisions"

So while acquiring website visitors via Google or Yahoo search ads is the norm today, it appears acquiring targeted visitors based on people and their relationships can be much more powerful...if done properly.

Enabling your website visitors to leverage the power of the social web directly on your website is one way to encourage people to interact with their friends around your unique content and brand.

Source of Hasbro Quote:
TNS Media Intelligence Report

Source of Jupiter Research Quote:
Measuring the Influence of SocialMedia, Digital Influence Group

Social Web Power Quote: BabyCenter

Tina Sharkey of BabyCenter states:

"A brand is not what a company says about its product.
It’s what a friend tells a friend."

Social destination sites like Facebook, MySpace, YouTube, Twitter, and FriendFeed are enabling connected consumers to shape brands...with or without official brand involvement.

Many brands are realizing they need to understand how to participate in the Groundswell, as Forrester describes it. I agree with Forrester that it is important for brands to spend time on the social destination sites and engage consumers in whatever way is appropriate.

I also believe that it is critical for brands to figure out how to make their own websites social. I am not necessarily talking about adding Forums and Blogs to the website. If that makes sense for the brands, then they should do that.

I am talking about socializing the actual web pages and content that consumers interact with directly. Facilitating friend-to-friend connections and conversations around specific website content helps consumers get valuable input from friends...which directly impacts brand value.

Source of Quote:
TNS Media Intelligence Report

Is Lehman Failure Equivalent to Katrina's Levees?

Wall Street was mauled today by the news that Lehman Brothers filed bankruptcy, Bank of America buys Merrill Lynch, and AIG stock price off 60% on financial market fears.

While I am inherently an optimistic guy, I can't help but equate Lehman to one of the first levees to break during Katrina. After the first couple of levees broke, there was a disastrous domino effect that remains fresh in people's minds today.

So, I am hopeful that the AIG levee is somehow bolstered by the Fed this week. If AIG is spared, what other AIG's are out there that we need to worry about? Hint: look at the companies heavily into Lehman and Merrill and some of the other heavily distressed financials.

If AIG falls this week, then we really may have a Katrina effect on our hands.

Red Hat Acquires Qumranet: Tactical or Strategic?

I just saw the news that Red Hat acquired Qumranet for $107M:
"The acquisition includes Qumranet's virtualization solutions, including its KVM (Kernel Virtual Machine) platform and SolidICE offering, a virtual desktop infrastructure (VDI), which together present a comprehensive virtualization platform for enterprise customers."

While the price seems a little high, this is not a surprising move since Red Hat leverages libvirt as its pluggable hypervisor layer that supports Xen, KVM, and other virtualization technologies. This move now gives Red Hat much more control over KVM, offsetting their relative lack of control over Xen, for instance.

This announcement begs the following question, however:

Is this a strategic or tactical move by Red Hat?

My initial reaction is that while virtualization is arguably a strategic capability, this move by Red Hat feels very tactical and inward-facing (i.e. garner more control over KVM). And while the SolidICE appears to be really cool desktop virtualization technology, I fear it will get lost within what has been a very confusing Red Hat desktop strategy.

OK, so if I don't consider this move strategic, then what kind of strategic move would I advise Red Hat to make?

Red Hat is strong on the server with both RHEL and JBoss/Metamatrix, but they are generally weak in management of that stack. Yes, they have Red Hat Network, JBoss Operations Network, and other technologies, but their management story is incomplete and tactical in execution.

A strategic move would be for Red Hat to acquire both Virtual Iron and Hyperic.

This would give them impressive management capabilities....across virtualization, networks, storage, middleware, databases, etc.

Would my suggestion cost Red Hat more than $107M? Of course it would. But it would establish Red Hat as a real player in the management software market in a way that complements their leadership positions in the server operating system and middleware markets.

Those are my 2 cents. I'd love to hear from you if you disagree or have other strategic suggestions for Red Hat.