Unit4 Unloads, Recharges, And Reboots Itself For Midmarket ERP Customers

Vendor Roadtests ERPx, While Coming Full Circle To Focus on Professional Services, Governments, and Nonprofits

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After slimming down by disposing nine businesses and repositioning itself under a new owner, Unit4 has come full circle to focus on its core ERP offerings for strategic verticals while rebooting its operations from the ground up to become the leading ERP vendor for midmarket organizations around the world.

Morgan Siegler of TA Associates(left) and CEO Mike Ettling at Unit4 Analyst Event in Boston
Caption Morgan Siegler of TA Associates(left) and CEO Mike Ettling at Unit4 Analyst Event in Boston

At its recent Experience4U virtual conference and an analyst event held concurrently in Boston, Unit4 executives spelled out its vision of reaffirming its midmarket ERP base in key verticals like professional services, government and not-for-profit organizations now representing 75% of its 2021 revenue of about $400 million, up 7% from 2020. That pales its historic run rate of $700 million prior to its divestitures. Mike Ettling, CEO of Unit4, said it aims to restore growth both organically and acquisitions with a goal of reaching at least $650 million in annual recurring revenue by 2025. Currently, half of its ARR is derived from its Cloud products.

The overarching goal is to accelerate the migration and upgrade of its 3,000 ERP customers – with 80% of them already on version 7 – to its ERPx Cloud services, in addition to teeing up its expansion plans in the United States, Germany and other key markets where its people experience messaging aims to resonate.

The trajectory of Unit4 is similar to that of a host of entrenched ERP vendors seeking to better differentiate themselves through a series of mergers, acquisitions, and divestitures to expand and recalibrate, coupled with a round or two of ownership changes. Infor, for example, grew its Cloud business significantly under the new ownership of Koch Industries and in July 2021 it decided to spin off its Enterprise Asset Management operations to Hexagon in order to focus on its Cloud ERP products.

Meanwhile, both midmarket favorites Epicor and QAD went through recent ownership changes with the former now part of CD&R and the latter was taken private by Thoma Bravo. These changes serve as a prelude to a reconfigured ERP competitive landscape over the next five to seven years with legacy system replacements projecting to skyrocket in the post-pandemic era as companies big and small now consider going digital one of their top priorities.

The latest reincarnation of Unit4 harkens back to the days when Chris Ouwinga founded the company in the Netherlands in 1980 by selling accounting systems to professional services companies, merging it in 2000 with Agresso which was already the leading ERP vendor in the Scandinavian countries especially among state and local government agencies.

Following its 2013 sale to Advent, Unit4 went through a series of management changes as it picked up software assets in adjacent markets like higher education, financial performance and planning as well as CRM. Then came the 2019 appointment of Ettling, a former SAP SuccessFactors and NGA executive, who wasted no time to get it back on track by selling off businesses like Siebel implementations and AS/400 support that were not core to its ERP offerings.

The pandemic prompted more soul-searching for Ettling, who opted for hunkering down with no contingency plans and no layoffs while sticking to its original budget for much of 2020. Its education business of selling Student Information Systems – acquired through Three Rivers – went into a tailspin because schools were preoccupied with online learning and not much else on online ERP, but that only reinforced Ettling’s desire to write a new chapter in the 41-year history of Unit4. The 2021 sale of Unit4 to TA Associates and other investors for more than $2 billion crystallized the new beginning.

TA Associates, a savvy PE house that has invested in ERP vendors like Lawson, IFS, Aptean, and other vertical-software and Cloud outfits is no stranger to unlocking intrinsic value from someone like Unit4 because of its loyal following among professional services companies in Europe where indigenous technology providers like Unit4 often outflank multinationals like SAP or Microsoft because of their domain expertise and local understanding.

Morgan Siegler, co-head of TA’s Europe Technology Group, said that kind of stickiness is hard to displace in the short run – not until some of these organizations are willing to fully embrace in five years or longer after sorting out such issues as data sovereignty, security concerns and always-on availability.

The pattern of a well-honed software portfolio by someone like TA as well as the measured approach among thousands of its customers to innovate is the kind of window of opportunity for Ettling and his new team – dozens of new hires including 33 in Customer Success alone within the past year – are craving for as they sketch out a plan to overhaul Unit4 without overloading it in the past when it was trying to be all things ERP or enterprise software and services to all buyers.

The results so far are encouraging:

ERPx, its Cloud-based ERP system running on top of Microsoft Azure, has secured 68 customers and it aims to have more than 100 by end of 2021.

About 80% of its 2,500 ERP customers are already on version 7 or above, providing them with an easy path to adopt ERPx and other interfaces and integrations to run hybrid Cloud or public cloud if they choose.

Its Customer Success program has grown to a team of 45 at Unit4 from 12 and it is embarking on a series of programs to track and measure customer lifecycle and engagement.

In October 2021, it acquired Compright for Compensation Planning to shore up its HCM applications for professional services organizations, building on a strategy that also emphasizes project staffing and skills development through learning and performance management.

Other acquisition candidates include those in procurement and expense management for state and local government, complementary solutions to ERPx for construction and not-for-profit customers.

While Unit4’s latest release remains a work in progress with most ERPx go-lives probably will not happen until next year in the first road test for the new product, it’s also racing against time because of stiff competition in a crowded field with Oracle, SAP and Trimble(Viewpoint in construction) on the high end; Mavenlink, Sage and Salesforce Ecosystem including FinancialForce and Kimble in the middle, and a smattering of others in the low end dominated by Intuit in the US and Visma in Western Europe.

Another factor to consider is the travails of Unit4 underscore the fact that the company’s mission to expand beyond its European base has met with mixed results having received financial support from well-heeled investors like Advent. Now comes the hard part with a mix of a new diet(eschewing hot dog stands as Ettling refers to its divestitures) and hands-on playbook from a different investor that has no shortage of software vendor best practices, not to mention the high bar of competing for attention and support among at least 39 other software companies owned by TA.

Unit4 now finds itself in one of the most demanding 4×4 rallies in its long history – with a souped-up engine from TA(revving up to bankroll more than 100 deals on behalf of Unit4 and others in the near future), a slate of incoming employees helping redefine its culture, in addition to a new ERP product line and a brand that still needs to find its footing especially in markets like the US and Germany where Unit4 lacks in representation both in market and mind shares.

As with its way to tackle the pandemic by putting two and two together with conviction rather than empty slogans like war room, Ettling prefers the Dutch ingenuity of warding off incoming flood with dikes, barriers and pumps – a feat that has succeeded largely through world-class engineering, practice and collaboration across ecosystem partners, something that Unit4 is eager to replicate.

You can read more on the evolution of Unit 4 by checking our coverage here:

List of Unit4 ERP Customers

CustomerIndustryEmpl.RevenueCountryVendorNew Product
AmericaresNon Profit400$990.0MUnited StatesUNIT4Unit4 ERPx
Birmingham Metropolitan CollegeEducation1800$400.0MUnited KingdomUNIT4Unit4 ERPx
Durham Catholic District School BoardEducation4000$390.0MCanadaUNIT4Unit4 ERPx
IDinsightNon Profit200$22.0MUnited StatesUNIT4Unit4 ERPx
Lunar BankBanking and Financial Services400$50.0MDenmarkUNIT4Unit4 ERPx
North Sea PortTransportation200$50.0MNetherlandsUNIT4Unit4 ERPx
Simcoe Muskoka Catholic District School BoardEducation3000$320.0MCanadaUNIT4Unit4 ERPx
Aberdeen AirportProfessional Services85$15.0MUnited KingdomUNIT4Unit4 Business World
Agriculture and Horticulture Development Board separate websiteGovernment469$73.0MUnited KingdomUNIT4Unit4 Business World
Aqualisa Products LimitedRetail300$40.0MUnited KingdomUNIT4Unit4 Business World
Armand ThieryRetail3000$5.00BFranceUNIT4Unit4 Business World
Bath and North East Somerset CouncilGovernment1500$307.0MUnited KingdomUNIT4Unit4 Business World
Bedford Borough CouncilGovernment1826$438.0MUnited KingdomUNIT4Unit4 Business World
Blaby District CouncilGovernment293$16.0MUnited KingdomUNIT4Unit4 Business World
Borough Council of WellingboroughGovernment193$24.0MUnited KingdomUNIT4Unit4 Business World
Bracknell Forest CouncilGovernment4000$876.0MUnited KingdomUNIT4Unit4 Business World
Canadian Diabetes AssociationNon Profit800$170.0MCanadaUNIT4Unit4 Business World
Centre for Environment, Fisheries and Aquaculture ScienceGovernment612$35.0MUnited KingdomUNIT4Unit4 Business World
Charnwood Borough CouncilGovernment530$75.0MUnited KingdomUNIT4Unit4 Business World
Cheltenham Borough CouncilGovernment214$19.0MUnited KingdomUNIT4Unit4 Business World
Chesterfield Borough CouncilGovernment897$200.0MUnited KingdomUNIT4Unit4 Business World
Craven District CouncilGovernment250$30.0MUnited KingdomUNIT4Unit4 Business World
Dublin City UniversityEducation1800$295.0MIrelandUNIT4Unit4 Business World
Eastside Terrace Apartments, managed by King County Housing AuthorityConstruction and Real Estate100$10.0MUnited StatesUNIT4Unit4 Business World
Fjord1 ASTransportation1100$390.0MNorwayUNIT4Unit4 Business World
Háskólinn í ReykjavíkEducation460$611.0MIcelandUNIT4Unit4 Business World
Metro VancouverGovernment1500$600.0MCanadaUNIT4Unit4 Business World
Schibsted ASAMedia7500$1.79BNorwayUNIT4Unit4 Business World
Shropshire CouncilGovernment6500$739.0MUnited KingdomUNIT4Unit4 Business World
Slough Borough CouncilGovernment1200$161.0MUnited KingdomUNIT4Unit4 Business World
SODIAAL groupManufacturing9100$5.59BFranceUNIT4Unit4 Business World
Study GroupEducation364$112.0MAustraliaUNIT4Unit4 Business World
University of WaterlooEducation7050$1.09BCanadaUNIT4Unit4 Business World
West Suffolk CouncilGovernment700$150.0MUnited KingdomUNIT4Unit4 Business World

Source: Apps Run The World, November 2021