CRM Gone Wild

Software CEO's are Cocaine Dealers?

According to Lawson Software CEO, Harry Debes, people are stupid, on-premise software is like cocaine and the software as a service (SAAS) industry will be dead in two years. In a much hyped August 2008 interview with ZDNet Asia, the never before recognized but now famous CEO of Enterprise Resource Planning (ERP) software systems clearly demonstrates why the old guard guard of ERP software makers were blinded by the SaaS market disruption and why the ERP software industry is overdue for a new breed of customer-focused business applications.

Questions along with Harry Debes comments included the following:

Q: All the other big players are finally going on-demand. Is cloud computing the next big thing?
A: This on-demand, SaaS phenomenon is something I’ve lived through three times in my career now. The first time, it was called ’service bureaus’. 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. SaaS is not God’s gift to the software industry or customer community. just has average to below-average profitability. People will realize the hype about SaaS companies has been overblown within the next two years. One day will not deliver its growth projections, and its stock price will tumble in a big hurry. Then, the rest of the SaaS industry will collapse.

Q: Won’t people avoid the prior mistakes of SaaS incarnations?
A: People are stupid. History has shown it repeats itself, and people make the same mistakes.

Q: But what about your competitors finally offering SaaS models?
A: Larry Ellison (CEO of Oracle) has the same perspective as I do. He accidentally funded the CRM product and NetSuite. He didn’t really mean to. They’ve had small successes but, overall, they’ve been spectacularly unsuccessful. And SAP’s Business ByDesign is a disaster. SAP said it would have 10,000 customers [for SaaS Business ByDesign] within a couple of years. And yet they have less than 100 today, after all that hype and marketing. We use, and I like it. But I would’ve bought the product even if it was not SaaS.

Q: Theoretically, the business case for SaaS seems fairly straightforward.
A: Yes, but 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. 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.

Well there you have it. Traditional software is like cocaine —buy it and you’re hooked.

Harry Debes, Lawson CEO
Say No To CEO's on Drugs

Normally I ignore the self righteousness ramblings of an executive no matter how clueless or comical. However, the Debes' comments underscore why a new breed of business software providers has seemingly emerged from nowhere, gained global market share and may be poised to seriously threaten several of the largest business software manufacturers in the world. During these last few years while entrenched enterprise software publishers Oracle, SAP, Microsoft and Lawson have cast doubt, injected FUD and mocked the software as a service (SaaS) uprising with ridicule, has become the highest growth application provider in the world, NetSuite has reached the public markets and yesterday's start-up SaaS ERP companies such as Intacct and Aplicor have each acquired hundreds of customers around the world - all while Lawson's stock has lost about half its value since the release of SaaS business software systems. Beyond casting himself in the role of a cocaine dealer, Debes' remarks clearly show a material lack of customer understanding, a blinding self absorbed righteousness, an il-advised defensive posture and the effects of a bury your head in the sand approach to business survival.

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