Never heard of enterprise software giant Infor? A new $1.5 billion investment by private equity investors Koch Equity Development (KED) and Golden Gate Capital is destined to change that. It lays the ground for a potential IPO of the $3 billion-a-year revenue company that is bound to get people talking. At least, that's the hope of Infor CEO Charles Phillips, who spoke to diginomica earlier today:
Getting a more well-known brand name should help — that's probably the main thing driving it. It's not a capital issue. An IPO to provide more transparency for the market and customers would be very helpful.
An Infor IPO, which could take place as early as later this year or in 2020, would be among the largest US offerings in history, given the company's size and likely growth prospects. Phillips, who was a tech industry analyst with Wall St firm Morgan Stanley before becoming co-President of software maker Oracle in 2003, foresees plenty of investor appetite for an offering on that scale:
I think that will make it exciting. We'll be one of the largest tech IPOs on the list, certainly the largest in New York City. Investors are looking forward to that, because they really like an IPO where they can take a substantial position and hold it. Having scale brings out a new level of investors who can invest for the long term.
How Koch fueled Infor's transformation
The extra $1.5 billion announced today builds on an initial $2 billion stake invested by Koch two years ago, and earlier investments by Golden Gate and others. Those funds helped fuel the continued transformation of Infor that Phillips and his executive team had started when they first took over leadership of the company in 2010.
Their mission has been to take a portfolio of ageing on-premise enterprise applications and transform Infor into an innovative standard-bearer for cloud-native, industry-tailored business software. After investing around $2.5 billion over the past five years in product design and development, Infor is now ahead of industry competitors, believes Phillips:
We have the first full-suite ERP, including all edge products, to run at cloud scale, fully multi-tenant. With every product having the same analytics, workflow, security model and UI [user interface]. No one else has done that. It's a first for the industry.
We were betting on the industry changing in this direction. We got there first, and so far it's paying off.
Moving enterprise apps to the cloud
A full 70% of Infor's software license revenue now comes from cloud applications, and as Infor's CFO Kevin Samuelson told diginomica during its annual Inforum conference last October, 70% of that cloud revenue comes from multi-tenant instances rather than 'lift-and-shift' of older software.
Those metrics reflect the company's success in developing industry-specific ERP software tailored to vertical sectors such as healthcare, public sector and retail. While manufacturing has been slower to shift these core systems to the cloud, businesses have already moved other applications such as CRM and HR, and now they're ready to move the core functionality too, says Phillips.
There's been a sequence of cloud enablement in the industry. CRM and HR move first — they're much simpler, less mission-critical, and it's a different buyer.
Manufacturing is a more mission-critical, more complex, more customized area. That complexity took longer, but that's what we went after ...
The reason most customers have not invested is the industry features have not existed in the multi-tenant cloud. We've productized those features that existed on-premise, in the cloud. These are complex, rich features, We had to replicate them in the cloud, and we've done that.
Partnership with AWS
Other distinctive features of Infor's approach are its investment in design talent to deliver a modern user experience and its early decision to build on Amazon Web Services (AWS) rather than run its own proprietary cloud infrastructure. While other cloud vendors have since adopted a multi-cloud strategy, partnering with Microsoft and sometimes IBM and Alibaba as well as Amazon, Infor is currently sticking with AWS, says Phillips:
We're able to optimize on that platform very well. We've also got a lot of attention from AWS, and customers tend to believe it's best-in-class. We feel pretty good about our strategy that optimizes around AWS.
Phillips says that no decision has yet been taken on exactly how Infor will use the new investment, but expects it to be a mix of further acquisitions, internal development and balance sheet investments.
This is, as Phillips calls it, "an important milestone" for Infor — the final injection of investment necessary to set up the company's return to public markets having completed its ten-year transformation.
Of course there's much more of that journey still to complete, especially in prising a larger proportion of its longer-serving customers off their ageing on-premise systems. Brian Sommer discussed some of the challenges still ahead in an analysis for us a few months ago.
But as my colleague Stuart Lauchlan wrote in an email earlier today, today's news is a validation of Phillips' progress throughout his leadership at Infor: "He's taken his time, done a solid makeover and not been rushed into anything."
We'll continue to follow the next stages of this journey with interest.