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Lawson Software announces layoffs; looks to move jobs to India
Lawson Software, one of the biggest employers in downtown St. Paul, has laid off five percent of its workforce. Lawson says the layoffs are mostly the result of business reorganization, as the company shifts to focus on particular areas where software development is most in demand. But there may be layoffs in store. Lawson also says over the next two years it plans to join the growing number of software companies moving jobs to India.

St. Paul, Minn. — Lawson Software has about 800 employees at its headquarters in downtown St. Paul. Most of the 80 layoffs will come from this office.

Lawson develops software for various service-oriented businesses, to help manage operations like human resources, accounting, and product inventories. Company spokesman Terry Blake says Lawson is restructuring to focus on the most promising industries.

"Health care, retail, and the public sector are the growth areas that Lawson has identified," Blake said. "So we are shifting resources, we are making investments in these areas. At the same time, we are reducing areas within our operation."

The areas of the company where Lawson is cutting back include field sales and research and development.

Loss of competitiveness would lead to even greater job losses. So I'm hopeful this is short term pain for longer term gain.
- Kate Rubin, President of Minnesota High Technology Association

Lawson has shared in the hard times for software companies across the country in recent years. One year ago Lawson laid off 12 percent of its workforce, including more than 100 people in St. Paul. Although business picked up this spring, the past fiscal year left Lawson with a $3.8 million loss.

In a message to employees, President Jay Coughlin said employees laid off will receive a severance package, extended benefits, and career placement help.

In the same note, Coughlin said the restructuring includes a "strategic, long-term investment in offshore development in India." Lawson plans to move an undetermined number of jobs to India over the next two years. Blake says Lawson is still selecting a company there that might take over some software maintenance and product support jobs.

"Overall the software industry has moved to using global resources for development. For example, our peer-group, consisting of Oracle, PeopleSoft, and others do in fact use offshore development. And so Lawson, to be competitive, is looking at using global resources for its development, shifting some of our non-strategic development off-shore and focusing our resources here on strategic development opportunities."

While U.S. manufacturers have been established in places like India, the Philippines, and the former Eastern Bloc for years, analyst Tad Piper of Piper Jaffray says software companies are just beginning to discover their potential. India is attractive because it combines a large number of educated, fluent English-speakers with a per-capita income of about $2,500 dollars a year.

"When it comes down to generating lines of code, I think cost is definitely an issue," Piper says. "I think (when you can pay) on an hourly basis, there are some cost advantages to places like India."

Kate Rubin is president of the Minnesota High Technology Association.

"There are lots of people who look at this whole offshore activity and say, 'Hey, we should enact laws that make it more difficult.' But that's a strategy that can really backfire," Rubin says.

"Obviously we'd prefer not to see it happen. It's never good when Minnesota or American workers lose their jobs. At the same time it's important that Minnesota businesses like Lawson stay competitive. And loss of competitiveness would lead to even greater job losses. So I'm hopeful this is short term pain for longer term gain."

One software developer who was laid off said there had been rumors about outsourcing but many developers were "broadsided" by the announcement. They face a job market for high tech workers that continues to slump.

An economic development official with the city of St. Paul says Lawson has no formal obligation to keep jobs here, even though the city spent about $100 million in the late '90s to develop the Lawson Office Tower complex. Lawson does, however, have an obligation to pay rent until the end of its 15-year lease -- no matter how many people actually work in the building.

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