When we last wrote about Infor all the talk was around an IPO – and who doesn’t love a big IPO? I wrote bullishly about the expectation of Infor floating and becoming one of the biggest software IPOs of all time. It seemed certain that the prospect of raising a load of new cash coupled with the lure of being catapulted into the limelight would be too much for Infor (and their VC partners) to resist. Thank God it didn’t happen.
I admit I was excited by the prospect of some big news in the ERP sector but I was equally concerned that the stock market would swallow Infor up and undo much of the good work it had patiently and painstakingly been doing for the last decade.
Differentiation has become the holy grail for ERP vendors and in a world where most ‘differences’ are just a thin veneer, being privately owned rather than VC-backed or at the mercy of shareholders is a big difference. It’s hard to exaggerate how this changes the game for Infor; they are owned by Koch Industries, one of the world’s biggest conglomerates with exceptionally deep pockets and a history of long term investments rather than short term gambling; no need to inflate cloud numbers to satisfy the markets; no pressure to deliver rushed products that fail to live up to customer expectations; and the freedom and flexibility to think strategically and build for the future.
On the anniversary of his appointment as CEO, I spoke to Kevin Samuelson to ask why ‘now’ was the time for cloud – and why it was also the time for Infor?
A little over a year ago Charles Phillips, the former CEO, stepped back rather unexpectedly and without much warning Kevin Samuelson, the long-time CFO, was promoted to the top job. I’d met Kevin at Infor’s annual conference the previous year and I was quite taken with him. His calm demeanour and authentic personality fitted well with his role and he talked sensibly and intelligently about the progress Infor had made. Samuelson had been instrumental in many of Infor’s acquisitions and is credited with much of the success in identifying and integrating those businesses into the Infor family. You could say he was a great CFO. But would he make a great CEO?
Sure, his promotion seemed to make sense when the IPO was on the table – but Koch put an end to any further stock market speculation when they bought out Golden Gate Capital and assumed full control of the business in February this year. So how would Samuelson measure up and grow into his new role and how would his stewardship influence Infor’s direction of travel?
It’s obvious to say, but the CEO of any company plays a pivotal role in far more than just making the ultimate decisions; the CEO is the lifeblood of the organisation’s DNA. His or her personality, style and values pervade company culture and sets the bar in terms of what is expected, how employees conduct themselves and, more importantly, how customers are treated.
Think about a company that you find difficult to deal with or that doesn’t have a great reputation for the way it treats its customers – and then look at the character and ideology of the CEO. They say the apple never falls far from the tree and in the highly competitive, harsh, and unforgiving world of enterprise technology, Samuelson’s approach is refreshingly genuine.
I start the interview by asking Samuelson what he’s learned about himself during his first year as CEO and if the change in ownership structure has created a new direction for Infor?
“It’s been a wild ride and a baptism of fire, but honestly I’ve loved it. It’s been challenging for me personally, and I love that too.”
And how does the CEO role measure up against the CFO position?
KS “It’s way harder! As a CFO, you’re very much indexed on a financial view. You really can’t do that as a CEO and certainly not in a tech company. Obviously, I bring a financial perspective, but you have got to bring all these other perspectives to bear that are very, very important. So yes, very different.”
And are you the right man for the job? You ascended to the CEO role when Charles stepped back – how much faith do Koch have in you to lead Infor into the next phase of growth?
KS “Absolutely, I am the man for the job. The leaders of our new owner put their faith in me to run Infor. My extensive experience as CFO gives me deep insights into our strengths and challenges that will help inform our future. We have exciting times ahead as we learn from each other. Koch has a fabulous business philosophy, created by Charles Koch, called market based management (MBM), which Infor is in the process of adopting; it takes a longer-term, strategic, market-focussed approach, unhindered by short-term pressures that often diminish or destroy value, in my opinion.”
Have you found it a steep learning-curve taking on the top job? Are there things that you are having to get better at quickly?
KS There are endless areas that I feel like I could do better. I think a lot of it is just things like public speaking and things that I’m not naturally comfortable with. The CFOs tend to not do a lot of that and I have a long way to go. But, I think those areas that force you out of your comfort zone are where the best stuff happens, so I’m enjoying the pressure and pushing myself – I’m definitely getting better at it!”
Is being owned by an international conglomerate better than being publicly owned and how does the relationship with Koch affect your technology roadmap and investment decisions?
KS “Being private has helped Infor to invest in areas where we absolutely believe it is right to, and retain our focus on industry vertical applications, hosted in the multi-tenant cloud, with a beautiful UX. Becoming a Koch subsidiary has consolidated our strategy, facilitated continuity and allowed us to take a long-term view of what is required to succeed. Customers consider that long view and financial stability a plus.”
Where would you say Infor fits into the global eco-system of enterprise technology vendors?
KS “We have a clear and dedicated focus on customer success and outcomes. That means directly measurable financial outcomes, ROI and value-added operational improvements.
In delivering this, a lot of our focus has been on getting customers live and productive faster. We’ve invested significantly in training our teams and implementing our 60:30:10 framework, where 60 percent of the software capabilities a customer needs come out-of-the-box, 30 percent involves minor configurations, and the remaining 10 percent is what each individual customer needs to be different and give them a competitive advantage.
“As proof of our success with this approach, the number of our customers that are live, referenceable, and happy has really gone through the roof.”
How do you differentiate your technology, solutions and architecture from the other leading vendors?
KS “Our solutions are purpose-built for specific industries with last-mile functionality. We understand the nuances of each industry we serve, and we develop our applications into complete, fully integrated suites to match them. Our leading competitors are generalists.
“I think few would argue with the fact that the business software industry doesn’t have the greatest reputation. Customers are concerned about long implementations and achieving ROI with expensive product investments. We believe customers should expect and receive better outcomes. Speed and agility are in our DNA. We strive for rapid implementations so our customers can achieve faster time to value.
“I think there’s a huge opportunity for the company that can deliver both the best technology and the best customer outcomes. For me, success is about having an extraordinarily high level of customer satisfaction. If we can delight customers and deliver value, everything else falls into place. If we can get customers in our industry happy — which has always been a challenge — that puts Infor in a very unique position.”
How do you see the market evolving post-COVID and what impact has COVID had on your own technology roadmap decisions?
KS “When this all started, we didn’t know how or if we would be able to implement software completely remotely, but it is working so much better than any of us anticipated. Implementations have gone extremely smoothly with dozens and dozens of go-lives over the past few months. Even though these are very difficult times, it’s clear that investing in, and improving operations remains a priority for companies across industries. In fact, we just had our second-best bookings quarter in history, thanks to a huge number of cloud software conversions.
“The longer-term impact, without question, is that COVID is accelerating the shift to cloud. With everyone suddenly having to work remotely, managing on-premise systems has become even more challenging. And the criticality of these systems has become more important. So companies are looking at options to get to the cloud more quickly. And we are rapidly evolving our methods to implement remotely, smoothly, and successfully.”
PARTNERS, ECO-SYSTEM AND DELIVERY
You mentioned your 60:30:10 methodology but is that really something new?
KS “What that means is, as you know, 60 per cent of the implementation should be done the minute you turn the system on. The functionality is in the software already and it’s literally just taking our existing software and choosing what to turn on or what to turn off. So it’s quite unique because in order to do that, you do have to have all those industry specific functions built into the software itself. You can’t take a horizontal application and put it into a hospital and an auto manufacturer, and expect it to work right out of the box to cover 90 percent of what’s required.
“So that is quite unique, and like I said, I don’t know that other vendors spend as much time thinking about the implementation, but they’re much more reliant on partners.
Do you think that Infor is going to change its delivery model to be more focussed on partners in the future?
KS “For sure, 100 percent. We’ve made massive inroads into some of the bigger GSIs, the likes of Accenture, Deloitte and Grant Thornton. We really have made that a big focus. I think our view for customers is; if you want a single throat to choke – good news, we have an option with our services team. If you’re working on a bigger project with an SI, good news, we’ve got big teams trained. And again, we’re taking that same methodology and working with them on that. So if you choose a partner, it will also be a quick implementation that de-risks the notion of moving to new technology.
“And then as well, we also have a very large and thriving channel partner community at the SMB portion of the market, and so they continue to do well. They’re continuing to move away from on-premise and onto cloud software and we want to continue to cultivate that as well.”
You said earlier that the number of customers that you’ve got live and are referenceable have really gone through the roof recently. What does ‘gone through the roof’ mean in terms of numbers?
KS “If you think about our evolution, we spent about $4bn modernising those core suites that were released just a couple of years ago. We now have 15,000 customers on those core suites. We have many more in the cloud, in almost a billion dollar cloud business. It takes a while when you launch a new product for it to sell and people to go live and then to get excited. The good news is we’ve crossed that chasm, and now we have lots and lots of references, folks who are in a multi-tenant SaaS world and they can see the value that’s being driven, but it takes some time to get there….we’re well into that which is great.”
Are those customers converted from your install base that are now in cloud suites, or are you actually going out and winning net new customers?
KS “It’s interesting; it’s about a third, a third, a third. So about a third of our customers are brand new to Infor that are buying our cloud products. About a third are moving from an on-premise product to a cloud product and about a third are what we would call a cross sell – so maybe they have asset management, they have supply chain and then we’re bringing in an ERP or other product to cross sell to them.”
It used to be said that Infor was the biggest technology firm you’d never heard of, is that still true today? Do you need to do more to elevate the brand and why don’t we see the same level of customer references that the other vendors are so keen to showcase?
KS “It’s true that our brand is not as well known as others. Traditionally, we put our last dollar into R&D rather than advertising and that’s still true going forward. We would prefer to have a reputation for delivering on our customers’ desired business outcomes rather than just shouting hollowly from the rooftops.
“As for customer references, we have a critical mass of customers that have migrated recently to the multi-tenant cloud. They shared their value-generating customer experiences at our Inforum online customer conference last month and the content is available online for anyone to catch up on.”
You said earlier that ‘our leading competitors are generalists,’ – what do you think causes a customer to go for a generalist when they could choose Infor, but don’t?
KS “Honestly, Paul, I would say our brand is our number one issue. It’s fairly rare that when we go through demo cycles, and people can see and experience the product, talk to customers who are live, that they don’t get pretty excited about what we can offer.
“But when you get to the boardroom or when folks are at the beginning… these systems are so critical to customers, and because we have a little bit less renown in the market, folks may be more comfortable betting on someone that’s been around for a long time. So that’s something that we need to do better, but I think my general view is the more success we have with customers, the more that’ll fix itself. Doubling down on great customer outcomes will build a brand better than TV ads.”
So what’s the plan to elevate the brand? From where we are sitting that seems to be the final piece of the jigsaw that Infor needs to focus on if it’s going to deliver on its promise.
KS “We’ve just hired a phenomenal CMO – Amanda Jobbins – and we’re very excited to have her join us. When we were pouring billions into R&D and building new products, it didn’t feel like it made a lot of sense to lean heavily into marketing. I think now that those products are in the market and we’ve got lots of references it feels like now is the time to start really building our name and our brand.”
INSTALL BASE AND ROAD TO 2025
All ERP vendors are trying to transition their on-premise customers to SaaS and subscription billing. It’s a slow process for most vendors but why is the Infor install base moving at such a pedestrian pace when Infor itself has bet so big on cloud?
KS “Infor’s cloud subscription revenues continue to climb. SaaS revenues were up 11.8 percent to $179.4m, compared to $160.5m in Q2 2019. SaaS revenues now make up more than 75 percent of our software subscriptions and license revenues.
“Interestingly the fastest-growing area in the cloud for us is manufacturing ERP. It has grown over 100 percent year on year, for almost the past year. It is the largest segment of our business; half of the company is manufacturing focussed.”
Are you satisfied with the progress you’ve made in terms of converting your install base to SaaS?
KS “We’re never satisfied but we are making good progress. It took a long time for companies to get comfortable going to the cloud for these core operational systems but I feel like we’re at a point at where we’re going to see customers move more and more quickly, like they have in other markets to the cloud.
“We may need to develop our thinking when it comes to our hybrid offering and establish an effective plan to support our on-premise customers and their cloud journeys in the best way.”
But there’s still a lot of customers on legacy apps and Infor has made a big play out of not forcing customers to move. If they move slowly, how long can you really sustain supporting a relatively small number of customers that probably aren’t massively revenue generating?
KS “I guess we can think about this in a couple of different ways. One, because we’re private, we’re extremely well capitalised. I think we bring a different perspective on customers to bear than the rest of the industry. We really do think about what is the value of a customer over their entire lifespan, which in our world can be decades. And so when you think about things differently, you can get comfortable giving up some near term gain for the benefit of a long term relationship.
“We’ve never forced a customer to migrate. I know others have, but that’s just something we’ve never said, ‘We’re going to shut this down,’ or ‘you have to move by a certain date.’ Our view is by doing that we’re likely to push customers somewhere else.”
I get that, and that plays into something that you said earlier about the market based management ideals of Koch as a whole but I’m wondering if ‘slow and steady wins the race’ is the right tactic for a technology company operating in a very agile and dynamic marketplace?
KS “I don’t think they’re mutually exclusive at all. I think having a long term view means staying close to your customer after the sale and them giving you as many ideas that you’re giving them, or having a mutually beneficial relationship. I actually think the opposite is true. I think when you have a short term view, you’re less likely to be there arm in arm with your customer to bring that agility. And so we’re constantly co-innovating with customers, obviously a ton of changes occurring in the market. That’s opportunity for us. And so by having great customer relationships and staying close and having that long term view, we get insights that I think would be hard to get if we didn’t have that perspective.”
Where will Infor and its customer base be by 2025?
KS “In the multi-tenant industry cloud — with most of our customers. We have great momentum and are all incredibly excited about the successes we are seeing. I don’t think there’s any need for radical change in direction or to do anything materially different. We will stay focussed on customer outcomes.
“We are categorically not going to take the aggressive approach adopted by other vendors, trying to force their on-premise customer base into cloud adoption. Infor is more carrot than stick. We want to keep our customers for the long haul.”
“I feel lucky to be positioned where we are and think it’ll be a pretty interesting few years as the transition occurs. We’ll continue to over invest in R&D – I think if you look at R&D as a percent of sales for us, it’s much higher than probably anyone else in the industry.
“So I think it’s doubling down on what we’re doing, but boy, I don’t see why we couldn’t be twice the size we are by 2025. I think it’s going to be a pretty exciting few years.”
Infor has always been quite careful to only fish in the ponds where you know you’re going to be successful. Will we see Infor broadening out into new verticals?
KS “We’re extremely disciplined. We haven’t really entered a new major market in a long time. For us to do that would be a major strategic move and we’d have to have confidence that we would have the scale, the bandwidth, and the investment dollars to be a leader – and that industry specificity in the products and the people.”
When a company buys your products and services what is the commitment you make to them?
KS “We pledge to be a trusted partner that will work closely with them — from implementation and training through development of new capabilities and ongoing support— to ensure they gain operational advantages with our solutions. We are committed to helping each customer achieve whatever their business goals are, by delivering agility, rapid ROI and continuous innovation, all with a smooth, responsive customer experience. We measure our success by our customers’ success.”
What are you most proud of about Infor?
KS “There are so many things, but most of all, the fact that we are taking all this amazing technology that we’ve built over the past decade, and on which we’ve invested $4bn in R&D and cloud enabled the most industry leading cloud applications, and seeing customers derive massive business improvements and develop new revenue models as a result. That’s why we are in this.”
Infor has been a sleeping giant for too long and the combination of its new ownership coupled with an adroit CEO and the last-mile functionality in its products creates the type of differentiation that all vendors strive for.
Infor’s two biggest challenges are with its brand and the depth of its partner eco-system. If it really is to double in five years – which is a distinct possibility – significant effort and resources will need to be ploughed into its marketing to elevate the brand and get on boardroom radars. Allied to that, developing a deep partner eco-system with the skills to sell and implement their technology is a must. After all, who do you think sells most Oracle and SAP solutions – not the vendor, it’s the consultancies and partners that often have long standing relationships with enterprises that do most of their bidding. If Infor wants to eat at the same table as the biggest ERP vendors it will have to develop and incentivise the same kind of network that its main rivals have.
One thing that Infor doesn’t have to worry about is its products; as Samuelson said, they do pretty well when they get in front of a customer. Its unique approach to developing micro-vertical functionality is another key divergence from the typical ERP offering. Under the skin, it’s architecture of a multi-tenancy cloud underpinned by long term partner, AWS, provides a true-cloud experience backed by the power and capability of the leading public cloud. The Infor OS platform offers exceptional extensibility which allows easy integrations and development opportunities while Coleman AI and Birst Analytics square the circle to deliver insights and optimisations.
Above all else, Infor’s ace in the hole is Samuelson himself. Being slightly uncomfortable with the limelight is a testament to his character. Learning on the job and recognising areas that need improvement – and being able to admit it – demonstrates an unpretentious and considerate nature that will pay back in the long run. And, being an authentic and approachable human being sets the tone for the culture of a company that I predict will be the one to watch over the next few years.