I say this a lot, but Infor has been the surprise story of the cloud industry. Just a few short years ago many had written the software vendor off as a flailing relic of on-premise enterprise applications, without much skin in the game for cloud.
However, Charles Phillips and a new executive team was brought in to turn it around in 2010 and the Infor we know today is very different to the Infor we knew back then. With the benefit of being privately owned, Infor has been able to plough billions of dollars into completely redesigning and re-architecting its industry specific applications for the cloud – with a focus on its ION middleware to ensure ease of integration and all being build to its 10x design standards.
I’ve written plenty on its strategy previously, so I won’t repeat too much here, but some of the results have been impressive - with bookings in the cloud now totalling 65%+ of new bookings, with some high profile customers with names that include Whole Foods, Travis Perkins and Bank of America.
As another sign of success of this turnaround strategy, late last year Koch Industries, a manufacturing and industrial giant, made a $2 billion investment in Infor. The plan being that Koch would standardise in many areas on Infor, with Infor also leveraging learnings from Koch in its product portfolio.
Infor believes that the combination of Koch’s experience and Infor’s technology could see if taking on the likes of GE and Siemens in the ‘industrial internet’ space.
I got the chance to sit down with Infor CEO Charles Phillips this week in London, where he gave me some more insight into the plans for the investment.
Phillips said that the investment was “transformational” for Infor and one of the immediate benefits is having Koch as a customer, which is rolling out the financials and HCM applications to more than 120,000 employees. The companies also have some IoT and machine learning projects taking place.
The next thing Infor is able to do is invest further in its cloud services, improving the automation and quality of those, as well as accelerating its industry specific features.
However, one of the more interesting ripple effects of the investment is that the industry ISVs are now paying more attention to Infor because of the close work with Koch, which is a customer of many of the ISVs. Phillips said:
One thing is the power of the influence in the market. For some of these systems integrators, Koch is their fourth or fifth largest customer. So they’re all over us now. We will be announcing a lot of those relationships at Inforum, they’re forming practices around Infor. We were already getting attention, but Koch was the thing that pushed them over to start investing in dedicated practices. They can’t do Koch if they don’t do us.
We have pretty much been doing it all by ourselves. Usually we would be on the other side of a deal with SAP or Oracle, and people selected us despite that. So that will make a big difference on selections. We were in the consulting business just because we had to be, but it will be more of a partnership now.
Phillips added that Koch is happy to make investments that will deliver over a ten or fifteen year period and that it doesn’t need to see immediate results, which is also allowing Infor to focus on more white space projects. This includes work on artificial intelligence. Phillips said:
Certainly artificial intelligence, we have been working on that. We will be launching that, but doing it differently. Not just AI for AI’s sake. We want to pick specific industry use cases that make sense for us and our customers. A lot of people announce things and they sit there thinking, what should I do with AI?
It will be infused inside of our applications, the same thing we did with science and optimisation. We will bring it to you as an application enhancement. It will touch a lot of applications, but it won’t overwhelm you where you have to learn a whole new framework. We have to do it subtly to make the processes more efficient.
Phillips said that he is “realistic” about AI and acknowledges that there are restraints to adoption. He said, for example, aeroplanes have been able to fly autonomously for fifteen years, but people are only comfortable with going so fast when it comes to automation and AI. Companies shouldn’t attempt to extrapolate that forward too quickly.
Equally, Phillips added, it all depends on how AI is applied and what regulations are put in place. It is also a reality that enterprises take a long time to adopt new technologies, and AI requires strong integrations and consistent data - something that is often lacking in the enterprise. However, Phillips sees AI taking hold for low-level processes, for jobs that are labour intensive for tasks that shouldn’t require human intervention. He said:
We will do it for things that are labour intensive and what I consider drudgery, the things that people don’t like doing, like matching invoices and purchase orders together. There’s high volume of these things, where there are rooms of people that are doing nothing except to try and match this to that. That’s not value added. And those are high turnover jobs because people burn out. Let’s focus on those things, then over time you can do more.
Earlier this year, Infor also announced that it would acquire BI cloud vendor, Birst. We have been following Birst closely over the years and believe it has a compelling proposition - whereby it aims to act as a data visualisation integration layer across disparate systems to tie up a view across an entire enterprise.
Birst will operate as an independent business division of Infor’s and Infor plans to consolidate its own BI portfolio into the Birst platform. However, what’s interesting about the acquisition, is that Infor is hoping that if it owns that valuable layer of intelligence on top of these disparate systems, when companies come to replace older systems, it may make sense for them to choose Infor over SAP or Oracle. Phillips said:
A lot of customers were asking us - ‘I have SAP in this division, Infor in that division, Oracle over there, and each person wants to be the analytical tool for their stack, they don’t care about the other ones’. They want us to do it across and become the analytical layer. Birst is good at that, it does exactly that.
We will take on that task and be your enterprise layer across anybody’s apps. And maybe over time you replace some of the other underlying systems. That’s our thesis, we hope that happens over time, but even if it doesn’t, we still think it’s a valuable function to be adding that insight. And over time as we add more AI and intelligence, we will inject it at that layer.
Infor has had a strong play in retail in recent years and, as mentioned earlier, has been winning big name customers such as Whole Foods. The recent announcement that Whole Foods is now being acquired by Amazon is interesting for Infor, given that Infor runs its cloud architecture on Amazon Web Services. There’s an interesting cross-section of opportunity, as a result, between Whole Foods, Amazon and Infor.
Everybody was calling. I’ve talked to both companies already. We will just have to figure it out, because there’s a scenario where that could be very good for us. We want to validate that first before we say anything.
However, one area that Infor believes it could play a strong roll is creating a solution for ‘turnkey retail’. Phillips believes that the retail landscape is changing rapidly and that retailers can’t compete with the scale of Amazon, which creates an opportunity for a software vendor to provide an end-to-end service for retailers. Phillips explained:
I also think this Amazon thing accelerates one of the concepts we were thinking about. We had this concept of pop-up retail, which means that if we could make the fulfilment turnkey - where we connect the fulfilment economy to the engagement economy (the front end), we could basically do an outsourced, turnkey fulfilment system.
So if you want to get into retail and you have a brand, don’t worry about it - name your three cities, everything else, the replenishment, the merchandising, the assortment planning, the shipment, the distribution, we could make happen for you. I think retailers will be like restaurants, where they come and go. It depends on who’s hot, where demand is.
There will be a few big ones, but in the US they’re reducing space dramatically - they’re selling off space - so that space will be used for temporary retailers. We can give you the back-end systems that a Walmart would have, but for a small or temporary retailer.
And on the changing nature of retail versus the scale of Amazon, Phillips added:
Retailers probably shouldn’t be in that business, they’re really trying to be supply chain companies - they have duplicate transportation routes, duplicate warehouses and distribution centres, and none of them have the scale of Amazon. The way you get the scale of Amazon is that you aggregate that together, outsource that, get that scale, get your costs down, because Amazon has that already. With hundreds of them trying to do it, it doesn’t seem to work.
A government opportunity
The Amazon relationship has also provided Infor with a new opportunity within the Federal government in the US. Amazon’s GovCloud provides a certified cloud environment for federal customers and Infor is now working to get its applications certified against the government mandated FedRAMP requirements, so that it can sell into the public sector.
Phillips sees demand and opportunity there, given the lack of innovation that has taken place over many recent decades. He said:
Federal, at least in the US, they’re ready to move to the cloud. They are also concerned about cyber security, so they’re looking for ways to solve that, and machine learning can play a part there. We have the compliance systems, but they’re rules driven, and they should be more machine learning driven. That’s an area where AI can add some value. And I think they recognise they have very old systems and they want to leapfrog.
They made it more difficult, because they have this thing called FedRAMP, where they put these certifications in place, which are very difficult to comply to, but once you do that, you can sell to the federal government. I think it’s going to be a differentiator for us, because a lot of smaller companies can’t afford to do it. Once you get that, there’s all this demand, so we’ve just started to certify our applications against that standard. We are running on GovCloud, which has these strict certifications already built in, so that’s why we are able to get there faster.
Given that Infor has now reached a certain level of maturity with regards to its strategy, and that it is winning big name clients in the cloud, I was keen to find out from Phillips what he had planned for the company in the future. What structural reforms would be needed down the line to stay relevant? Interestingly, Phillips said that he sees the company beginning to completely rethink the nature of ERP. He said:
These applications were built around the concept of automating transactions. And those transactions came from forms, paper forms, manual processes. The whole concept behind how ERP is built, is still really that. So if you step back and rethink, you should be eliminating forms, anticipating transactions - you get the same result in terms of the settlement of that transaction, but there shouldn’t be a human involved.
That’s a whole redesign and rethinking of how these systems work. We have some ideas of how to do that, so that’s where we are going next. So we spent the first few years making them more usable and look better, but actually I should be reducing them.
However, Phillips also believes that the main risk that lies ahead for the company is the confidence from buyers, which may be impacted by the turbulent political environment. He said:
It’s more geopolitical, if people stop investing for some reason, if they’re worried about political risk, terrorism, lots of things make people nervous. There’s a certain kind of economic psychology that you need to be positive for the software industry. We need the confidence to be there. So I’m more worried about that, with all the craziness that’s going on.
Infor is one to watch. The ground work has been laid. The investment from Koch is incredibly promising. Phillips has proven he can execute on plans. And most importantly, Infor has adopted a culture of change that will serve it well.