Charles Phillips is not your typical American tech CEO. He is an elegant man. Gently spoken, thoughtful in his responses and his calm and measured tone is to the point and unexaggerated; a far cry from the style of some of his contemporaries. As I open the interview with a very brief introduction to ERP Today, I am surprised at how interested he is in our project. Phillips shares some words of encouragement and asks questions which demonstrate a genuine interest in our fledgling start-up. Given that Phillips and the Infor leadership will have dozens of press-calls as part of the IPO-readiness machine, it’s a great way to start the interview and sets us both at ease.
As recently as last year, Infor was still being described as one of the biggest companies you have never heard of. Despite global sponsorship deals with top golfers, basketball teams and tennis stars, Infor’s PR machine had not elevated it to the dizzy heights some of its numbers suggest it should have attained. However, the recent announcement of a second stage of significant funding from their long-time backers, Koch Industries, could catapult Infor into the big league with a mega-money IPO, potentially valuing the company at $50bn – maybe more – making Infor the biggest NYC tech IPO in history.
Established in 2002, Infor has grown, almost silently, to become the world’s third largest ERP vendor behind the mighty Oracle and SAP. And while under the stewardship of Charles Phillips, a former Oracle board executive, it has developed a vast array of products that has seen global sales push beyond $3bn. Infor boasts a customer base of 68,000 companies supported by more than 15,000 employees and nearly 2,000 partners globally.
Infor’s approach to building applications is unique – it has hundreds of product lines serving ‘micro-verticals’ with solutions optimised specifically for each business class. For example, instead of a product for the food and beverage sector, Infor offers discrete products for butchers, bakers and maybe even candlestick makers. Each product is embedded with specific insights amassed from other similar users to create a solution for everyone that is almost as personal as your fingerprint.
ERP Today discusses the changing notion of customisation in ERP platforms elsewhere, but with this unique take on vertical centricity, Infor is changing the game with a suite of applications born in the cloud that offer tried and tested processes to organisations that historically had to rely on heavy local customisations to retain their competitive advantage. Infor applications are built on a proprietary single-stack operating system which is integrated with all of the functionality across its portfolio including applications, document management, CRM, eCommerce and analytics.
Although SaaS is developing some degree of maturity it is still a very fluid sector. Most of the action is taking place in the infrastructure layer rather than in core applications. Cloud comes in many forms; public or private, SaaS, IaaS or PaaS, hybrid-cloud, single-tenant and multi-tenant – to name just a few. At the beginning, cloud was usually a single-tenant private offering where a single instance of the software and infrastructure served just one unique customer. Essentially, everyone who was on the cloud was on their own little piece of internet with no connectivity to other cloud users and no sharing of instances and environments. More recently, multi-tenant clouds have become popular with hundreds, perhaps thousands, of customers sharing the same applications, infrastructure and databases, but with each parties’ data isolated and invisible to the others.
The benefits of a multi-tenanted cloud are obvious; lower costs through economies of scale, updates rolled out across all users with virtually zero downtime and elasticity that provides a level playing field for enterprises of all sizes, being just three. Infor has led the way in the adoption of multi-tenanted architecture and Phillips sees this as a key advantage over his nearest rivals. He said: “We launched a multi-tenant strategy in 2015 and now we have all of our core solutions and cloud suites fully multi-tenanted. It’s not just one or two applications, it’s the full cloud suite and environments. This drives significant efficiencies for our customers in terms of costs, time to implement and provides monthly updates across the full spectrum of applications to all customers, at the same time.”
Despite being headquartered in New York, more than 40 percent of Infor’s business is based in Europe. The company has seen its SaaS revenue grow by 36 percent in the last year and can now boast some very impressive names as its European customers; BAE Systems, Travis Perkins and Liberty Steel have all adopted Infor’s full suite of technology and gaining traction in this sector is breaking new ground for Infor. In the past it had been seen as a mid-market player, mainly focussed on manufacturing. But today Infor has its sights set very firmly on Oracle and SAP and Phillips believes there is a significant opportunity to take market share away from the two largest players in the enterprise apps space. He said: “Companies who told us ‘no’ two years ago are now coming back to us and asking what we can do. When a SAP customer is facing a $200m upgrade for no new functionality it’s not surprising that they are looking for an alternative option.”
So how does Infor differentiate itself from its two main rivals, and how seriously do they expect to take significant market-share away from Oracle and SAP?
Very seriously, if you ask Phillips. One of the key areas of focus is on their eco-system and significant emphasis was placed on this at the recent Inspire expo. Infor’s plan is simple enough – increase its visibility with the global SIs and boost its channel sales network with new partners. Just 12 months ago Infor only had one global alliance partner, whereas now it has eight. The likes of IBM, Deloitte and Accenture are taking a keen interest in the Infor offering and it’s not so unlikely that they may start to nibble away at the lower end of a market they have so far been unable to penetrate.
Another key area for Infor is its ability to stay ahead of the curve in such a rapidly changing landscape, and Phillips is keen to point out where Infor is leading against its competitors. “They’re talking about experience, but we started that conversation eight years ago with the first integrated design agency building our experiences. They are talking about cloud, but we built our applications for the cloud rather than retooling on-premise apps. We made a decision not to get into the infrastructure business which means that all of our focus and budget is spent enriching our applications. Every dollar Infor spends in R&D is focussed on our cloud-native applications, whereas our competitors are having to spend on reinventing their proposition, and their database and infrastructure businesses. Infor leverages Amazon’s huge investment in infrastructure services while our competitors are effectively competing against that. We’re very happy with every dollar Oracle spends on infrastructure.”
Infor’s long-term strategy is centred around making people and enterprises more productive. Phillips points out that while technology has advanced significantly over the last 15 years, productivity has stagnated at just eight percent.
“We all have super-computers in our hands with smart phones, and yet most people are not significantly more productive than they were ten years ago. Through the data that we hold in our data lake, which takes information from all pillars of commerce including sales, production, HR and logistics, we can draw insights that help to drive productivity.
“We have about 100 million users of our applications and that gives us a lot of information to work with. How we work is changing, and it’s changing faster now than ever before with technology and automation driving efficiencies. But you have to look at the total picture to see how to improve people’s individual productivity. With the insights we get from all the user data we know how productive they are, we know who needs training and we know how to connect the data to improve productivity. The Infor Business Graph, which sits inside all of our applications, helps us to connect people with assets, production schedules, opportunities and sales. Historically, all of these areas were built in silos – they didn’t talk to each other and share information. Now we can analyse this connected data and answer questions like; which shift is the going to create the highest quality products? And, which production line is likely to break down?”
A significant amount of this data comes from Infor Nexus, a trading platform that connects an entire supply cycle and includes more than 65,000 trading partners. Combined, these enterprises generate more than $1tn in trade and the system processes in excess of $50bn of transactions. That’s a lot of data, and the combined weight of that commerce is being analysed by the Coleman AI platform to derive meaningful insights and competitive advantages. Phillips said: “Companies are collaborating far more now than they ever used to and supply chains are getting bigger as more enterprises become specialised and products and services become commoditised. If you look at automotive as an example, the big enterprise at the end of the chain may have had rubber trees to produce raw material for tyres or a steel factory for metal production, but now they aren’t making tyres and steel, they are buying it in. This creates more tiers in the supply chain and more complexity. More decisions are having to be made, not less, and the combined data from all our companies on the Nexus platform helps optimise those decisions.”
Infor going public
An IPO is a very public statement of intent. Infor is already a cash rich business with substantial private backers so the motivation for going public will not be simply to raise new capital. Koch Industries have invested significantly in Infor over the last five years – they are also a long-time customer, so they have two big interests in making the corporate strategy and product development stack up.
So, Infor has had the capital to grow, acquire, experiment and develop without the market pressures of a public listing. I ask Philips how far does $1.5bn go? And he laughs (a little) saying, “quite far”. But he also points out that this is the second cash injection by Koch, taking their total investment in the last three years to a staggering $4bn. As far as private equity investments go, those are big numbers and any modesty over the likelihood of an IPO should be dismissed – investors don’t spend $4bn unless they know where and when their return is coming from. The most recent investment of £1.5bn ranks in the top 10 all-time private equity deals into a tech firm. The first round of £2.5bn was the third largest in history.
I asked Phillips how the money will be spent, and he has a simple answer: “Customers first. Everything we do is focussed on our products and our customers and a significant amount of the new investment will go towards enhancing our portfolio of products. We have invested heavily over the last five years in making our applications fit for purpose and now we have a strong baseline we can focus more investment on enriching the experience and functionality of our products.”
I asked Phillips about the timing for an IPO and he gives me a fairly standard line saying “when market conditions are right”. He highlights the likelihood of several other big IPOs that have most of Wall Street in a frenzy, and says; “the market will only tolerate so much, so we have to get our timing right – it could be sooner or it could be later – there are several factors to consider but ultimately we will consider an IPO when the time is right for us, not just when we think the market wants it.”
Whether Infor gets its IPO away this year or not is debatable. I suspect there will be an announcement before the end of the year with an offering lined up for the first half of 2020. How will a public listing change Infor? Well not as much as you might think. Infor already has publicly traded bonds and reports to the SEC meaning its accounting practices won’t change much. Infor is very cash rich so the new money raised will be useful, but lack of funding is not something that’s holding
Infor back. And, Infor’s customers won’t notice much difference either – so who will? The other big ERP vendors and lots more fortune 500 companies,
Infor hopes. As I said at the start of this editorial, an Infor IPO is as much about making a statement as it is about raising funds. A successful IPO, which could value the business at $50bn, would set down a very clear marker.