Infor is moving swiftly to capitalize on its new momentum, banking on a whole host of partners and new products to drive further inroads into the enterprise applications market.
This comes eight years of the remaking of Infor under its CEO Charles Phillips, a transformation that resembles the Empire Strikes Back as we reported in a recent post. Now the plot thickens with more resources from its investors, namely the conglomerate Koch Industries. Founded in 1940 as a crude oil refiner, Koch is now positioning itself more as a software play than hard-earned assets like gas pipelines and paper mills.
At a time when Infor is becoming the center of attention in the Cloud market where barriers to entry are low thanks to providers like Alibaba, Amazon, Google and Microsoft, intense competition from a raft of software companies could prove to be more vicious than what Koch was accustomed to even in the boom and bust cycle of the energy sector.
Months after receiving $1.5-billion in additional investments from Koch Industries, Infor is gearing up for another round of Cloud expansion, which has already resulted in nearly $650 million in SaaS subscriptions, or 20% of its revenues for fiscal 2019 ended April 30. That’s a 267% jump from what it picked up in fiscal 2016 (9% of its revenues back then) before Koch made its initial investment of $2.5 billion in Infor in early 2017.
Koch, one of the biggest privately-held companies in the United States with 120,000 employees and over $110-billion in revenues, is investing heavily in Infor applications. In fiscal 2019, these Koch operations and their affiliates spent $33 million on Infor software, compared with $1 million in fiscal 2017.
For example, Georgia Pacific, a $20-billion paper producer acquired by Koch in 2005, is in the midst of a multi-year digital transformation initiative that covers migrating its 730 legacy systems to the Cloud and replacing them with Infor’s applications including Infor Cloud Suite Financials, Birst for advanced analytics, Coleman for artificial intelligence, M3 for maintenance management and marketing automation, d/EPM for product costing, and others for document management, data lake, etc. Many of these new applications are scheduled to go live at Georgia Pacific by August of 2020.
Similarly, Flint Hills Resources, another operating unit of Koch in the energy sector, has already signed a five-year Cloud subscription deal worth $12 million to run Infor’s Enterprise Asset Management applications and Cloud Financials Suite. Flint is putting 20 million assets from oil rigs to heavy equipment on the Infor EAM systems this summer.
The significance and urgency of these projects underscore the fact that Infor has become a strategic technology provider for Koch, similar to Georgia Pacific’s decision to shutter its data centers by turning to Amazon Web Services, also a major partner of Infor, for much of its infrastructure needs.
During a recent analyst event at its New York headquarters, Phillips downplayed the rapid succession of investments from Koch over the past two years. Currently, representatives from Koch hold five of the 11 board seats at Infor. Golden Gate Capital, the other owner, has three, with the remainder goes to Phillips, former CEO Jim Schaper, and Sanjay Poonen, COO of VMWare.
What’s abundantly clear is that Koch, along with its affiliates including Infor, are preoccupied with speed to market, accelerated business transformation and decisive execution in order to thwart competition. Infor, for one, has no time to waste after spending years putting its Cloud strategy into sharper focus as a bevy of Cloud competitors are threatening its future in key markets such as analytics, ERP, and supply chain management.
Over the past 12 months, Infor has done an admirable job winning Cloud applications customers by posting 50%+ growth to over 13,500 in the number of net new and converted accounts. What has made it possible is the signing of 2,100 partners including hundreds that have been recruited since the first quarter of fiscal 2019.
During its recent earnings call, Infor executives revealed a sharp increase in the amount of commissions paid out to these partners. Phillips said Accenture has signed up to become a SI partner as Infor is expanding its channel to drive further sales into strategic verticals like public sector, hospitality, while investing heavily in new offerings like Real Time Location Services by scaling out its AI engine Coleman.
The enlarged Infor ecosystem, covering large partners such as Avaap and CitiusTech, which together have thousands of consultants specializing in healthcare apps from Lawson and Epic, reported tremendous progress in converting accounts from versions 9 and 10 of S3 Lawson to V11 of Infor CloudSuite Financials, Supply Chain and HCM.
Allport Cargo Services, another partner, has been investing in Infor Nexus for third-party logistics companies as part of a global supply chain management network for nearly two decades. Though ACS at times competes with the Logistics Services Providers community within Infor Nexus, the network collaboration and advanced technology benefits from Infor outweigh the risks. For example, ACS relies on Infor Nexus for multiple programs and flows including origin to distribution centers and dynamic allocation, which saves time and money by directing shipments to over 900 stores with a single receipt for retailers like Party City.
These partners are also embracing the new Infor OS, its Cloud operating platform that has been instrumental in helping the vendor land bigger deals by compressing implementation and eliminating modifications, while improving user experience, security, integration and data management capabilities. Partners cite that tools from Infor OS speed their moves from Syteline to M3, while making Birst more readily available and accessible, a far cry from the limited decision support that customers were getting from aging Infor products like Lawson Business Intelligence and add-ons like Crystal reporting.
Infor OS As A Differentiator
Infor senior vice president Massimo Capoccia said the thrust of its cloud strategy has come a long way – evolving from Mongoose for rapid application development to ION for applications integration and Ming.le for collaboration and finally Infor OS, which now delivers a shared-service platform for connecting multiple Cloud apps and infrastructure layers like AWS. Recently, Infor OS has been turned into an independent business unit in charge of supporting both Infor and non-Infor customers that are in need of a common platform to accelerate their cloud migration.
Capoccia attributes recent wins including State of Idaho, Refrigeration Supply Distributors, Southern Company and Penn State Hershey Medical Center to Infor OS as the key differentiator for such tasks as Cloud enablement, API integration and best practices interoperability in healthcare, public sector and other target industries.
Infor OS is facilitating next-generation capabilities such as robotic process automation with use of artificial intelligence and predictive analytics from its Coleman AI engine for continuous auditing and monitoring, which augments its Governance, Risk and Compliance offerings, another new product borne out of the Infor OS platform. Additionally, Infor OS is capable of multi-tenant delivery of performance management through its dEPM product for integrated planning, self-service bots for industry-specific functions like processing large volume of POs and invoices, as well as localization, mobility and third-party apps support and services.
In other words, Infor OS is emerging as the vendor’s competitive advantage over other enterprise applications providers seeking to do the same after embarking on numerous acquisitions, strategy and management shifts.
During the two-day event, Infor executives emphasized other key attributes that distinguished the vendor from a pack of its nearest competitors, many of which are equally well-funded and demonstrating explosive growth.
Not to be outdone, Infor’s 2017 acquisition of Birst for analytics has resulted in 67% jump in R&D staff, tripling of customer growth and 53% of revenue increases. Infor Birst, a building block for its customers’ data modernization strategy, is now among the top three Cloud applications at the vendor. Similar to other Infor’s product initiatives, the latest release Birst 7 sports machine learning algorithms from Coleman – its AI engine – to drive better insights for users across the enterprise capable of running data preparation work for centralized and decentralized teams as well as in self-service mode.
In HR, Infor’s HCM strategy has evolved through the years after decades of serving and sustaining hundreds of Infinium customers, mostly in the hospitality vertical. The Lawson acquisition in 2011 strengthened Infor’s positioning in Core HR applications, especially in healthcare and public sector. The 2014 purchase of PeopleAnswers provided Infor with a trove of HR assessment tools that formed the basis of its talent science offerings. Infor said 18 million people were tested in 2018 using these assessment tools. The vendor expects the beta release of its Cloud payroll product later this year to drive considerable upgrade and migration activities, especially among the 800 legacy payroll customers running Lawson and Infinium. In total, Infor has an installed base of 5,000 HCM customers.
Wyndham Destinations, a vacation ownership and exchange company with 25,000 employees, concluded that after four years of running Infor’s talent science products including pre-employment assessment for nearly 13,000 candidates in 2018, it saw improved productivity and reduced turnover from new salespeople that perform better and generate higher sales within six months on their jobs than unassessed hires.
The event also highlighted Infor’s successes in key verticals like aerospace and defense, which has benefited from the vendor’s achieving FedRAMP authorization in 2018 and ITAR compliance, prerequisites for Infor to gain a stronghold in the federal marketplace. Elsewhere, Infor showcased a growing number of customers in retail (now topping 1,700 retailers) as well as enhancements in product lifecycle management (multitenant price management to come later this year). In addition to its standard AWS support, Infor is taking some of its retail customers live on Google Cloud and Microsoft Azure, a move that should address concerns of some retailers not wanting to run their Infor apps on AWS.
Finally, Infor dares to be different by zeroing in on the design of its applications. Infor Hook and Loop, its creative arm, has reshaped 80% of 200+ products from Infor, driving better usability across their many landing pages, forms and mobility look and feel since 2012. More recently, Infor Hook and Loop has expanded its New York base into new design centers in Poland and the Philippines.
In the multi-industry enterprise applications market, Infor holds a slim lead over its closest competitors including Constellation Software, Intuit, Microsoft, Roper, Sage, and Workday – with each securing between $2 billion and $3 billion in revenues mostly from their ERP products, as shown in the following table. The $40-billion Oracle and the $28-billion SAP are at least three times the size of Infor in enterprise applications revenues.
Gang Of Seven Aim To Dominate ERP Market
|Vendor||Number of Customers||Number of Employees||Revenues||Cloud as a percent of revenues*||R&D as a percent of revenues||Brands|
|Infor||68,000||17,400||$3.2B for FY19||20%||15.7%||Infor Cloud Suite|
|Constellation Software||125,000||16,000||$3.1B for FY18||3%||13.7%||Harris, Jonas, Perseus, TSS, Vela, and Volaris operating units|
|Intuit||5 million*||8,900||$3B for FY18*||39%||19.8%||QuickBooks Online|
|Workday||7,000||10,500||$2.8B for FY19||85%||42.9%||Workday Financials, Workday HCM, Adaptive Insights|
|Microsoft||200,000**||131,000||$2.5B for FY18**||8%||13%**||Dynamics 365 FO, BC|
|Sage||3 million||13,660||$2.3B for FY18||15%***||10.4%||Sage Business Cloud|
|Roper||40,000||15,611||$2.2B for FY18****||10%||NA||Aderant, ConstructConnect, Deltek, Foundry, and Powerplan|
|Cloud as a percent of revenues refers to enterprise applications revenues delivered via the cloud.|
|*Intuit’s customers include QuickBooks Online and Desktop subscribers|
|*Intuit’s revenues cover only Small Business and Self-Employed Group|
|**Microsoft customers cover Dynamics 365 FO, BC and Dynamics ERP customers from AX, GP, NAV, SL products.|
|**Microsoft revenues cover Dynamics 365 FO, BC and Dynamics ERP products including AX, GP, NAV, SL products.|
|**Microsoft’s R&D as a percentage of company total revenues.|
|***Sage’s Cloud revenues cover Cloud connected ARR|
|****Roper’s revenues cover only Roper Technology|
Source: Apps Run The World, July 2019
Among the Gang of Seven, both Intuit and Sage have had a new CEO over the past year and they remain dependent on the small business market, despite their efforts to gain ground in the midmarket where Infor is entrenched.
Microsoft is breathing new life into its aging ERP products AX, GP, NAV and SL with Dynamics 365 FO for Finance & Operations and BC for Business Central, which have been on the market for more than a year. It will take years before the Microsoft channel can successfully migrate nearly 200,000 of these Dynamics ERP customers to the cloud. Our estimate is that D365FO and D365BC have a combined list of about 2,500 customers with more than half on Azure, compared with over 13,500 Cloud customers at Infor.
Like Infor, Workday has thousands of Cloud customers – mostly for its HCM applications. Its August 2018 acquisition of Adaptive Insights added at least 4,000 customers for Cloud-based enterprise performance management. While Workday is duking it out with Infor in midmarket ERP with its EPM and financial management applications, the latter can find solace in its ability to eke out a profit consistently since Phillips became CEO in 2011 (the latest being $142 million in net income for its fiscal 2019). Like most Cloud vendors, Workday has never made any money since it was founded in 2005 as it spends lavishly on sales and marketing and R&D. Product development expenses as a percentage of Workday’s revenues more than double what other vendors spend on R&D. Since 2010, Infor has posted $3 billion in aggregated EBITA profit, compared with a cumulative loss of $2.1 billion at Workday during the same period.
Roper is getting close to the size of Infor after spending more than $6 billion in recent years acquiring Aderant, ConstructConnect, Deltek, Foundry, and Powerplan to stitch together a diverse applications portfolio for professional services verticals – mostly design and legal firms and engineering, construction and government contractors. Despite such heavy investments, less than one third of Roper’s revenues in its latest quarter came from its recently acquired applications products, most of which are on-premise apps. Now with the backing of Koch Industries and its Cloud first approach, Infor is likely to have an easier time pitching its Cloud value propositions to asset-intensive customers than Roper, which is still formulating a group-wide Cloud strategy.
Constellation Software is a different story. The Toronto-based vendor took the same pages from Infor’s playbook when it embarked on its vertical industry push by acquiring hundreds of software companies over the past decade. As the above table shows, Constellation Software now surpasses Infor in customer count and it’s on track to post nearly $4 billion in revenues in 2019, five times its sales of $773 million in 2011. You can read more about Constellation Software here.
While Constellation Software has more than offset its anemic organic growth by firing up its acquisition engine on all cylinders, Infor has shown its ability to extract higher revenues from existing customers and acquiring new ones, judging from its cloud momentum.
Beyond the Gang of Seven, Infor faces an onslaught of hundreds of Cloud heavyweights and startups. For example, a number of Infor customers at the event reiterated their dependency on Salesforce for Customer Relationship Management, a market that has proved to be challenging for Infor despite buying Saleslogix in 2014. The pending acquisition of Tableau by Salesforce could make it more difficult for Infor to cross-sell Birst into those Salesforce accounts. Similarly, supply chain customers of Infor Nexus continue to turn to best-of-breed Cloud applications providers like Flexport (used by Georgia Pacific), Freightos and Shyp in areas like shipping data aggregation.
Suffice it to say that Infor – after years of refining its Cloud strategy with the help of AWS and its partners and investors like Koch – now has a target on its back. Instead of zeroing in on its nemesis SAP, Oracle CEO Mark Hurd has repeatedly attributed its Cloud successes to winning customers of Infinium and Lawson over in his public remarks and earnings call scripts.
Infor can only find solace in the fact that its successes have yielded as many quick followers as there are satisfied customers and partners and that’s a new twist that Infor executives could find it both encouraging and disconcerting at the same time.
List of Infor Customers
Source: Apps Run The World, July 2019