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.