Unit4 intensified its vertical strategy with an acquisition of a higher-education ERP application vendor, while cozying up with Microsoft to better leverage its Azure platform to improve Cloud product delivery.
Speaking to industry analysts in London, Unit4 CEO Jose Duarte considered both moves key enablers to help it double its size to become a €1-billion ERP applications vendor by 2018, up from €523 million in 2014.
Additionally, continuous product innovation – led by its new People Platform – will also boost growth, coupled with an expanded sales force(a 25% increase in number of North America salespeople alone) and stepped-up efforts in six key verticals – professional services, public sector, education, real-estate, wholesale distribution and not-for-profit organizations – to increase wallet shares among its 30,000-plus midmarket customers.
After being taken private by private-equity firm Advent International in early 2014, Unit4 has reorganized its operations across different regions – marketing and product management functions for example have been consolidated at the headquarters level, while research and development has been realigned around engineering hubs in Wroclaw, Poland; and Granada, Spain. Since 2014, almost the entire team of Unit4 senior executives have been replaced with new faces coming from SAP, Software AG, Microsoft and others.
There are serious ramifications with the new approach of putting country offices in charge of sales only – rather than burdening them with other functions. Over the past year these functions have been streamlined – along with the appointments of new country heads – in order to create a unified identity, while maximizing best practices and templates that can be replicated around the world. At the product level, applications like travel and expense management, absence management and fraud detection for financial irregularity, which used to be limited to a handful countries, are now being rolled out globally.
Unit4’s latest acquisition of Three Rivers Systems added 55 employees (adding to the already 4,000 in total headcount) and 200 customers (now reaching an installed base of over 30,000 including 1000 in education). Based in Ellisville, MO, Three Rivers offers a suite of student management systems as well as ERP applications for grants management and constituent management. Following its success in the higher education ERP market with wins among mid-sized universities and community colleges, Three Rivers will serve as the template for similar products for the non-profit vertical, paving the way for a more horizontal CRM offering.
Duarte said Unit4 will continue making similar purchases to bullet-proof its vertical strategy, while disavowing the previous opportunistic acquisition strategy just to maintain shares in certain countries.
Another source of innovation will come from the People Platform, built on a common (Elastic) foundation designed to easily extend to different Unit4 software modules, reports and workflows. That in turn serves as the flexible information vehicle for adapting to changing data structures in order to handle end to end functional requirements from project management to expense control, and from budgeting to requisitioning.
A second layer of the People Platform – Smart Context – serves as another key differentiator and has the purpose of contextualizing information based on social conversations, real-time communications and even predictive analytics, all of which contribute to free users up from administrative burdens and help them to work smarter irrespective of the digital device they use to get the job done.
That’s where self-driving ERP comes in, a concept that Unit4 is promoting as the linchpin of its product strategy by making possible process automation for eliminating manual tasks and erroneous data entries, purpose-built collaboration, predictive analytics for identifying problems before hand, and intelligent recommendations for problem solving.
Cloud Your Way
What it boils down to is a vendor transforming itself from a primarily on-premise applications provider to an on-demand player under the umbrella Cloud Your Way – meaning that Unit4 can accommodate whatever delivery mode its customers prefer when it comes to data residency and security.
The alliance with Microsoft suggested that Unit4 is planning to offload a lot of heavy lifting to the Azure Cloud platform, while reducing its reliance on Amazon Web Services, which has provided hosting support to Unit4 since 2013. Unit4 expects a Cloud version of Three Rivers for the education vertical will be available in the second half of 2015, again running on the Azure platform. Despite that, FinancialForce, its joint-venture with Salesforce.com, will see no changes in its use of the Salesforce1 Cloud platform.
Unit4 is also strengthening ties with a host of partners including BearingPoint for systems integration support. In addition Unit4 is laying the groundwork for a diversified services portfolio by signing business process outsourcing partners and beefing up domain expertise for shared services engagements. All these initiatives could result in a comprehensive ecosystem capable of generating more than €1-billion in total revenues over the next three years.
The high hopes that Unit4 will double in size by 2018 stem from three assumptions:
1. Unit4’s main business of selling on-premise applications – about less than half of its total revenues – remains resilient and there are cases where some of its customers actually prefer on-premise applications over Cloud delivery for process control and security concerns.
2. Its Cloud applications have been growing at a rapid clip with SaaS bookings clocking in a 72% jump in 2014. The switch to Azure, which entails generous market-development incentives from Microsoft, is expected to help drive more Cloud adoptions among those that favor on-demand delivery because of ease of adoption and lower total cost of ownership. The prevailing trend at Unit4 is that more orders are Cloud-based than those from on-premise license sales.
3. Unit4 expects its focus on the six people-centric verticals like professional services and government engenders not just distinct attributes, but also a plethora of variables like productivity optimization and skills and project matching that beckon more innovation and up-sell opportunities for everything from talent management to predictive analytics. Such variables present formidable barriers to entry for rivals that only pay lip service to industry-specific capabilities.
For much of its 35-year history, Unit4 has counted on core markets like the Benelux region, which contributes to one-third of its revenues, as well as support from a loyal base of professional services customers such as consulting firms and housing associations. There has never been a lack of focus from Unit4, but rather an overlapping product and marketing initiatives under a somewhat decentralized corporate structure that has hindered its ability to cement its reputation as best-in-class ERP applications vendor for those verticals.
Now the focus has been restored, largely fueled by considerable investments from its new owner, as well as a mix of fresh faces and a scalable Cloud platform. Coincidentally, the hashtag for the analyst event was #Unit4InFocus. The challenge is for the ERP applications vendor to live up to that billing.
The remaining question is how it can drive sustainable growth across its typical accounts and uncharted territories, all clamoring for new ways of leveraging vast amounts of data in order to stay relevant in the modern era. Self-driving or not, Unit4’s approach is worth looking at since it matters a great deal to services industries that are under tremendous pressure to harness and coordinate different moving parts, human elements and business processes effectively in the midst of their own digital transformation.