It has been an interesting decade for Infor, having undertaken an extensive transformation journey away from on-premise ERP applications towards becoming a true SaaS company that focuses on industry verticals and micro-verticals, replatformed on AWS. We at diginomica have covered this story at length, which culminated in the success of the company attracting interest from, and then ultimately being bought by, Koch Industries (at a valuation of nearly $13 billion).
To mark its 20th year in business, Infor revealed in early 2022 that its SaaS revenue had reached an annual run rate of $1 billion, marking a significant milestone for the company’s cloud strategy. But what is next for the vendor? Having done a lot of the heavy lifting on the technology, CEO Kevin Samuelson has been very focused the past two or three years on how Infor goes to market and thinks through sales and support.
For instance, Infor recently highlighted how it is continuing to double down on its industry focus, going deeper into verticals that it has expertise in, delivering relevant functionality, process knowledge and data. Equally, the company has invested in ensuring its internal organization is restructured around these industries, so that it can ‘talk the talk’ with its customers, rather than adopting a horizontal approach to services, sales and support.
However, sitting down with Samuelson, he tells diginomica that the company’s focus is now not just on its existing install base, but targeting buyers that use ERP products from other vendors. Samuelson believes this strategy is feasible given that Infor can adopt a long-term strategy, thanks to its private ownership under Koch.
Samuelson says that much of Infor’s cloud growth in recent years has come from its large customer base and that it has had a low hanging fruit that it could pursue as its primary source of revenue generation. However, the success with these customers, coupled with references and a robust product, now means Infor can pursue expanding its remit.
We made a huge focus this year on: let's see if we can make net new wins, customers that have never done business with Infor before. Make that the primary growth driver - because that will allow us over the long term to capture the market. But it's also a good indication of the strength of the business, because you're competing on a net new basis against competitors, you don't have any leg up.
And that's been a massive change. So, in the fourth quarter our net new business was up almost 100%. And for the year it’s over 50%. It's now the majority of our bookings, which is a big positive change. We always feel like that [existing] customer base will be there, but this is the piece that should help us accelerate growth.
Samuelson acknowledges that Infor will always start in “third place” (recognizing that the likes of SAP and Oracle have a bigger presence in ERP), but adds that if Infor does get a foot in the door, then its win rates are “very high”.
Samuelson adds that Infor’s vertical focus, particularly with how it has refactored its platform and processes to take into account very niche market specificity, is helping gain momentum with these non-Infor customers. He adds:
I'll tell you something that’s been surprising. The move to multi-tenant cloud is a big endeavor. You've got to change processes, you've got to change how you work. It's a big, big move.
And interestingly enough, when we take Infor customers to the cloud, they figure, hey, Infor’s got the old product, Infor’s got the new product, this will be a snap. New customers go in knowing, whether they pick Infor or pick someone else, that this is going to be a big undertaking.
And that has helped us in the sales cycle, because the advantage of industry specificity really stands out on that front. The advantage to a lot of Infor’s technology is that it has a much more meaningful impact when you're thinking about a complete product transformation.
That's not to say, we don't do well with our customers, but it doesn't stand out as much because they just expect that. And so that's been a really nice surprise to see that really resonate deeply against core competitors. Just the depth of functionality, with the industry focus, have certainly stood out as big advantages.
Given the volatility in the B2B technology market, with a number of high profile vendors announcing swathes of layoffs and a series of earnings highlighting the tough conditions of the buyers’ market, I was keen to get Samuelson’s take on how this was impacting Infor.
Samuelson’s view is that Infor needs to continue to showcase the value of ERP transformation, but particularly in terms of how its industry specific products can deliver change for customers. He says:
I think we have the same trepidation. Everyone does, around the risks that exist today and all the various factors that have made themselves clear in the last year that are somewhat scary.
I think what we're actually seeing though, having spent the last few days with some 50 manufacturers and distributors in Europe, there's no shortage of demand. I think all the concerns around inflation, around energy costs, around Ukraine - there was a lot more pessimism three to six months ago than there is now.
We're all quite nervous, but we're not seeing weakness - if anything I would say there is more optimism than there has been. We'll see how that plays out.
Talking specifically about ERP, he adds:
I think the good news about ERP is, especially what we do, which is very deep in the operations of companies, the through line to return is very clear…the actual impact on costs and revenue.
This is because we're so essential to those key processes and customer relationships for our customers, that's not generally been a big issue. To some degree, having all that contraction [in the market] and more of a focus on actual returns, is good for a company like Infor, that's in those core processes.
Long term customer success
However, Infor isn’t sitting on its laurels and assuming that its product will take it all the way - it is also thinking through how it can change its model for sales, delivery and support. In an industry that has at times talked up customer success, whilst largely being focused on getting deals across the line, Samuelson again argues that being private can help it on this front. He says:
I still think the area that we're focused on will always continue to be product - we're a product company, nothing else matters more than product. That's a consistent theme.
But I think how we deploy and support customers is another area of huge innovation. Everyone in the industry has done it the same way for a long time. Customers are generally not particularly happy with how their software companies implement and provide support.
And so we've made a lot of investments, and we'll continue to do so, around that entire customer journey. Understanding how the products are being used, or when there's an issue, being able to know what's happening before the customer even does…
For example, forget about your sales or support, here's one person at Infor that just handles everything.
This is a big opportunity in our mind. And because we're private, we can think long term. We’re not obsessed with how much we sell in any given quarter, which is what drives the industry. We believe that gives us a pretty unique perspective and the capability to do something different. The last few years have really opened our eyes to what's possible and now we just need to go execute.
Much of Infor’s thinking in this area has developed through better understanding its customers, Samuelson says. He adds:
We win when customers win. And this is a theme that we've talked about a lot - in an industry where the absolute focus is on selling, which happens to be the starting line for the customer, our view is that if we focus on aligning interests, and winning when customers win, that is the biggest determinant.
We've gotten a lot more sophisticated with customer sentiment, understanding customer issues, we look a lot more at references, because our perspective is that this is where the long term growth comes from.
If we do those things right, market share will follow. That is, again, a little bit different than I think the industry typically thinks, which is how much we sell this quarter, or in the next quarter. That’s the luxury of being owned by an owner that really truly believes that being long term focused is a competitive advantage.
The right side of the equation
Despite Infor’s progress and success in navigating to a cloud-based revenue model, Samuelson is aware that change in the market can happen quickly and that the advancements in AI, data and predictive analytics are advancing rapidly. This is what the Infor CEO is identifying as the vendor’s major risk, which ultimately brings the strategy back to product. He says:
We’re in a pretty interesting time with technology, where I think what's happening in data and big data continues to evolve. And we're all seeing all the incredible evolution in what's possible with predictive products.
We're very, very focused on applications and how those worlds come together. What we’re ultimately getting at is: what is the end-state relationship between data and products? So I think that's both our risk and opportunity. We've got extraordinary know-how on industry processes.
And so how do we make sure that that is complemented by all these other possible innovations and that our customers can take advantage of that?
I think that's both a risk and an opportunity. Just like every major kind of evolution in technology, there tends to be a completely new set of winners once you come out on the other side. And that's what keeps us up at night, making sure we're on the right side of that equation.
Infor’s strategy has always benefited from knowing where its strengths lie - over the past few years this has been doubling down on the verticals its strongest in, focusing in on design principles that support the end user, utilizing AWS’ cloud platform to support its goals, strong leadership, and taking a long-term view of the market. Those same principles seem to apply today, with Samuelson sticking to the view that product and customer success will align to deliver success. That being said, the market is changing and the buyers’ willingness to upgrade an ERP (when alternative modernization technologies exist) is being tested. There’s a lot of choice about which projects to pursue, and customers, in my mind, are opting for those that deliver value quickly. It’s an area we will be watching closely in 2023, to see how those buying decisions play out.