A week after its first European user conference in Amsterdam last month, ERP vendor Unit4 surprised with the unexpected announcement that Jose Duarte was no longer CEO. His replacement, Stephan Sieber, spoke exclusively to diginomica yesterday in his first media interview since stepping into the role.
Duarte had joined Unit4 in June 2013 to lead its transformation under private equity ownership and served less than three years. But the change at the top doesn’t herald any significant shift in strategy, as Sieber had been in charge of strategy since his recruitment from SAP in June 2014 as part of the new management team appointed by Duarte. It’s going to be business as usual, says Sieber:
In a company moving as fast as we are, there are constant changes and fine-tuning. But the fact the board has asked me to step up as successor shows we still believe the strategy we have worked out is the right one.
Acquisitions now likely
That’s not to say there won’t be changes under his watch. More acquisitions are likely, now that the business has come through a year in which it has consolidated products under the Unit4 branding and centralized many of its internal operations, he says.
My primary reason for acquisition is innovation and growth. In order to do that we had to set the operating model of the company right first.
Past acquisitions by Unit4 had been driven by cost synergies and economies of scale, he explains, which meant there had been less emphasis on integrating products post-merger. Last year’s acquisition of US education software vendor Three Rivers gave the company an opportunity to test a new approach that’s more focused on growth, he says.
If we want to build a fast-paced, acquisition-driven software vendor you have to approach post-merger integration in a different way.
We’ve made the company fit to be a platform for growth.
Growth will come from a mix of new customer wins and upgrades from existing customers, he says.
You don’t get that growth unless people come on board from your installed base, but there are always net new customers that you can win. We see new logos coming on board.
The new management team has focused the company on industries where it sees people as the most significant asset — professional services, education, not-for-profit and public services. This is helping Unit4 to win new customers, believes Sieber.
I think we have a differentiating aspect in these people-intensive industries that resonates very well. I’m happy to see the churn rate in the ERP market growing because it means the opportunity is growing.
We see a rise in net-new wins quarter after quarter.
We clearly outperform the market in terms of growth and that means we’re winning market share.
Like other established enterprise software vendors, Unit4 recently stepped up its cloud rhetoric, launching the first cloud-first version of its flagship Business World ERP suite at last month’s conference. With new functionality, an improved user experience and more deployment flexibility, it’s designed to offer customers a “landing strip into the cloud,” says Sieber.
We need to make sure the landing strip target is an attractive release … There is a compelling proposition for people to do the investment and migrate.
But customers will move at their own pace, he believes.
Our ‘Cloud at your speed’ philosophy gives customers the ability to move into the cloud at a pace that fits their strategy and priorities — probably also the limitations they have. Some regions, some industries, some countries have rational or emotional barriers to the move to the cloud. We want to give them the ability to move at the speed at which they are able to digest it.
Not all of Unit4’s brands will go to the cloud, and in those cases the company will help customers migrate to alternatives, he adds.
Some brands we offer migration scenarios. Some financial management systems that we have a small amount of customers on, we’re actively approaching those customers talking about migration scenarios. We’ll provide transparency about when we plan sunsetting for the product and not present them with a fait accompli on short notice.
The group’s longstanding Coda product, which was rebranded last year as Unit4 Financials, is not one of those products, he makes clear when we ask about its future.
It is clearly part of the portfolio of the company where we are continuing to invest.
Although the move to a new platform is often a juncture where enteprises consider what other vendors have to offer, Sieber tells us there’s no sign of customers disappearing.
Our attrition is absolutely in line with expectations. We’re not losing customers.
Everyone in the industry has some level of attrition. It predominantly happens because businesses go out of business, merge or get acquired. We have a neutral net balance from acquisition projects. We see incremental growth.
North America noise
I was joined on the call by US analyst Brian Sommer, who wanted to know why Unit4 hasn’t been more aggressive in its marketing in North America. Sieber says the company will soon make more noise about its successes in that market.
We wanted to make sure this company is ready to deliver before we make the ‘ra-ra’.
We win and compete against established players more often than ever before. We will get a high brand recognition by collecting proof points and showing we can deliver on our promises.
We doubled our bookings in North America in Q1 this year compared to Q1 last year — a bit more than 100% growth. On a fairly decent sized business, I’m confident we’re growing massively compared to our competitors.
Will it be enough to please Unit4’s private equity owners, we wondered? Despite the recent change at the top, Sieber appears confident the strategy is on track.
We have a team here at Unit4 who decided two years ago that we would take this company to the next level. Our strategy would not look different if we had another shareholder.
Being private gives us an opportunity to make the transition. If you deal with an educated shareholder who understands the market, that gives us a lot of opportunity.
I’ll leave the detailed analysis to Brian Sommer, but overall the message from Sieber seems to be ‘steady as she goes’. It shows confidence, but is it also complacency? While there has been a lot of change in the past three years, Unit4 often gives the impression of being too calm for its own good. A bit more sense of urgency wouldn’t go amiss.
Image credit - Featured image of flags and Stephan Sieber headshot both courtesy of Unit4
Disclosure - At time of writing, Unit4 and SAP are diginomica premier partners.