Lawson Brings EMEA EAM App to the U.S.

Published: January 16, 2007

by Alex Woodie

Lawson Software along with its partner Deloitte Consulting, recently introduced to the United States market an OS/400-based enterprise asset management (EAM) solution that had been sold in Europe and Asia for years. In other news, Lawson reported a net loss in the second quarter, and hopefully has taken the last of the lumps associated with the Intentia merger.

Lawson's EAM solution was previously only sold in Europe. Now that the United States is gaining a stiffer regulatory climate, which has been the norm in Europe for years, Lawson decided to unhook EAM from the Europe, Middle East, and Asia (EMEA) region and decided to start selling it in the U.S.

In today's age, businesses can ill-afford not to tightly manage its business assets, particularly when tens of millions of dollars have been invested into them. In the past, a business may have been able to get away with a simple paper-based process for ensuring a fleet of semi trucks is maintained according to certain standards, for example. Now, industry consolidation and regulatory compliance are driving companies and utilities to streamline and automate this part of their business.

Lawson's EAM offering runs on the System i and integrates with other ERP systems. It's comprised of a set of applications designed to help users get the most value from their assets. Whether that means getting the maximum number of years out of a particular piece of equipment for long-term savings, or squeezing the most short-term use into the product's life to maximize its performance and revenue potential, the EAM offering is designed to help meet those goals.

The pieces that make up Lawson's EAM suite include: Asset and Component Control, which centralizes complex asset and component information and boosts its traceability; Preventive Maintenance, which helps customers "strike a balance" between maximum asset reliability and low maintenance costs, and sets a schedule for things like inspections and lubrication checks; Work Order Processing, which generates work order requests, either from predefined services or user input, and then turns them into real work orders; and Diagnostics Management, which helps customers create and monitor maintenance strategies, including cost-of-prevention versus cost-of-failure analysis.

Lawson will work with its longtime partner, Deloitte Consulting of New York City, to implement the new i5/OS-based EAM solution at U.S. businesses. The companies will focus on companies in the energy and transportation industries that rely heavily on physical assets, such as trucks, to stay in business. Deloitte has years of experience implementing Lawson applications, and has even created something it calls the "Enterprise Value Map for Lawson" to help it match customer needs with Lawson application capabilities.

The global market for EAM products is growing, according to ARC Advisory Group. In December 2005, the IT analyst group published a study that found the global market for EAM software will grow from $2.2 billion to $2.8 billion by 2010. The big factors driving this growth include security requirements, regulatory compliance, and aging assets, according to Houghton Leroy, ARC's EAM research director. "In the North American market, companies expect increased support and customer service. The Lawson and Deloitte alliance in the U.S. can help deliver the consulting and product expertise required to meet those expectations," he says.

A Lawson official could not be reached for comment before this issue of Four Hundred Stuff went to press.

Q2 Results

In other news, Lawson announced its financial results for the second quarter of fiscal year 2007, which ended November 30. The results were a mixed bag, and reflect the difficulties and changes that were put in place to reconcile the different accounting methods used by Lawson and Intentia.

Lawson reported revenues of $184.5 million on a GAAP (generally accepted accounting principles) basis, a 107 percent increase from the same period a year earlier. The increase in revenues is primarily attributable to the "consolidation of revenues" of the former Intentia, says Lawson. Not included are $3.9 million in deferred maintenance and service revenue that Lawson had to write down under the purchase accounting method it used to acquire Intentia.

The Intentia acquisition also affected last quarter's profits. Lawson reported a GAAP net loss of $3.5 million for the period, compared to net income of $6.6 million a year ago. Lawson attributes the lowered numbers to the "consolidation of the former Intentia's costs and operating expenses," as well as a "significant" increase in the tax rate (effectively 58 percent, on a non-GAAP basis, the company says). These numbers also reflect $10.4 million for amortization of acquired intangible assets and other charges related to the acquisition, and the inclusion of $1.6 million of stock-based compensation, which the company must report as a cost following its adoption of the FAS 123 accounting method it's now using.

Harry Debes, Lawson's president and chief executive officer, remained optimistic. "We've made good progress in our first two quarters following our combination with Intentia," he says. Specifically, Debes cited success in cross-selling products, sales of Lawson M3 (formerly Movex), high customer satisfaction and retention rates, healthy maintenance and consulting revenues, and a growing pipeline.

However, Lawson's license revenue is not where it should be, Debes says. "As a result, we are recalibrating our guidance for the second half of our fiscal year. It's also important to note that our deferred license balance is increasing, which will be a net benefit to license revenue in future quarters.

Lawson is now predicting third quarter revenues to come in at $181 million to $189 million on a GAAP basis ($183 million to $191 million on a non-GAAP basis). For the fiscal year, Lawson expects to bring in between $713 million and $733 million (or $725 million to $745 million on a non-GAAP basis).

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