Infor CEO Kevin Samuelson is looking to appeal to buyers that are seeking long-term agility from their ERP estates, in the wake of the disruption caused by the COVID-19 pandemic. He believes that Infor is well positioned to deliver on this for a couple of fundamental reasons - both because Infor is owned by behemoth Koch Industries and because of its long term investments in industry-specific solutions.
We've covered Infor's strategy for a number of years, but the key things to understand are that it has doubled down on its vertical approach in three key markets (manufacturing, distribution and healthcare), it replatformed its applications to be cloud-first, it has a strong supply chain offering thanks to its acquisition of GT Nexus, and it has invested heavily in user-centered design.
Because of this strategy, and under the leadership of previous CEO Charles Phillips, Infor ended up being fully acquired by Koch Industries in February 2020, valuing the company at $13 billion. It has been quite the turnaround story, given that just a decade ago Infor was perceived to be an aging ERP vendor with a large on-premise install base.
We got the chance this week to sit down with current CEO Kevin Samuelson, who took over from Phillips back in 2019, about how the COVID-19 pandemic has put technology projects and organizational change directly in the spotlight - and how Infor is well positioned to support customers needing to embrace agility.
Commenting on Infor's performance over the past year or so, Samuelson shed some light on how the company's cloud business is doing and the traction it's seeing in industries. He said:
We're really thrilled with the progress that's underway across a number of different fronts. Bookings last quarter in cloud, for example, were up over 50%. Our cloud business is now at over a $1 billion run rate. And as you well know, we're extremely focused in just a few markets: manufacturing, distribution and healthcare.
Manufacturing, as you would have seen in the headlines, has seen a huge amount of change in the supply chain and a lot of disruption to overall businesses. The need for agility has resulted in a lot of strong demand across our manufacturing and distribution markets. Healthcare, given the strains that they were under, was probably slower to develop, for obvious reasons. That's now changed. We've never seen as much demand as we're seeing in that market now.
In Q3 2021, Infor's bookings were up 57%, versus Q3 last year, which was the second highest bookings quarter in Infor's history. In the Americas, manufacturing grew by 44% year-over-year and healthcare grew by 35% year-over-year. Samuelson's comment that the company's cloud run rate is now over $1 billion is also noteworthy.
Changing the dynamic of ERP projects
Samuelson said that the COVID-19 pandemic and the demands it has placed on buyers has meant that Infor's industry focus is resonating well. He explained:
I think, candidly, we have products that are dedicated to industries, so the rate at which we can add industry specific functionality, and the amount of the roadmap dedicated to solving industry problems, is a huge competitive advantage because, again, when there's this dynamism, the ability to address what's most important is really, really powerful.
It's a point we've raised previously, given that some of Infor's competitors are only a couple of years into looking at how to address industry specific problems and are often relying on channel partners to offer solutions. But it's the relationship with Koch as Infor's owner that makes this even more compelling - not only because there is synergy between the industries that Koch operates in and the customers Infor serves, but because Koch is privately owned. Samuelson is very keen to highlight that this means Infor can take a long-term view of what success means for its customers. He said:
I can't emphasize enough the impact that's had on Infor and the huge advantage that it has given us. Koch has been successful across a whole bunch of different industries - from electronics to automotive, to glass, to pulp and paper - it's a pretty extraordinary story. And if you kind of get to the heart of their success, it is this notion of truly getting to a point of mutual benefit with customers. That's where sort of the magic happens. You can be very, very effective against a set of competitors that are extremely focused on what happens next quarter or next month, or even this fiscal year.
If you listen to our earning conference calls, companies talk about sales and bookings, that is sort of the finish line. By being able to think longer term, this notion of mutual benefit - not to what we sell, but how we make our customers ultimately successful - it's such a different perspective that we have the luxury of taking.
It informs how we develop products, how we can approach implementations, and how we think about customer relationships. And that's one of the reasons I believe that we're seeing the growth that we're seeing. It's that ability to think long term and be more aligned with customers over a 10 year relationship, which is likely what we're going to have, versus how do we win this feature function RFP and get a sale done?
Koch's healthy balance sheet and Infor's ability to take a long term view has even meant that the company can get creative with the deals it is making, according to Samuelson. He said:
In a lot of our manufacturing markets, it's pretty interesting when folks talk through what the changes in tariffs, what it costs, there's just a massive amount of margin pressure that's been put on their businesses, because you can only pass so much on to the consumer.
And so, in those cases, there's a sense of urgency to get things done, even if the coffers aren't as full, there's a sense of necessity. We have a huge advantage in these situations, because we can be more flexible as it relates to thinking about how to price…make it a win for the customer and a win for us in very different ways.
It's all about agility
Samuelson said that Infor is spending a lot of time in deals talking to customers about how to ‘infuse agility' into their business. He explained that most companies are now thinking beyond the end of the pandemic and are trying to understand what permanent changes have occurred.
Samuelson said that the pandemic is still ongoing and that geopolitical and economic challenges are also front of mind for buyers. He added:
You put all those together and I just think there's this need for agility, much more so than there's ever been. I think people just aren't sure how all these different factors play out. There probably hasn't been this much uncertainty around business models, at least at any point that I can remember.
And so I think there's this real focus on not trying to solve the challenges that are on our plate today, but putting ourselves in a position to be able to take on whatever comes our way and really infuse agility into the business. Because that's probably going to be the competitive edge, as everyone's learned over the last couple of years. And so the conversations are very different. Historically, it's been how do we solve problem X or problem Y? That's where I think things have changed.
In terms of how organizations should be thinking about their ERP change programmes, Samuelson had three key pieces of advice:
Move away from the RFP approach and pick a partner that will have a deep relationship with you over 10 or 20 years
Companies that are successful don't rely on just IT to make this happen, they also have extensive buy-in from the C-suite, senior management and operations teams
Move away from customizations as much as possible and instead lean into your competitive advantages
We're massively indexing our success on time to value and the quantum of value for our customers. Are we delivering the business outcomes that they underwrote to, when they ultimately decided to partner with us? That certainly will manifest itself in our financials and areas like overall growth, size of our cloud business and market share. But again, our view is that those financial metrics will be an outcome of great customer experiences.
If there are two words I'd use to describe Infor's approach over the past 10 years, they would be: cogent and strategic. The company has had a laser focus on its competitive advantage, whilst making the structural changes to modernize for a cloud-based business. Under Koch's ownership, it is taking this further by going deeper into industry, leveraging the cross-sell opportunity and thinking long term. I can't argue with that and I think those are features that will resonate well with customers. As ever, it’s the customer stories over time that will show the success of its approach.