Infor hits $1 billion in SaaS revenue - what’s next for the ERP vendor?

Derek du Preez Profile picture for user ddpreez April 11, 2022 Audio mode
Summary:
As Infor celebrates 20 years of business, the company hit a significant milestone in its transition to becoming a leader in cloud-based, industry-specific ERP.

An image of the Infor executive team at Inforum
(Image sourced via Inforum website)

This year Infor is celebrating 20 years in the enterprise software industry. The past decade or so of that time has been spent going through a massive transformation strategy to become a cloud-first organization, one that specializes in industry verticals and micro-verticals. 

With this in mind, it will no doubt be viewed that a significant milestone has been reached, with the company announcing that in its 20th year of business it has also hit an annual run rate of $1 billion in SaaS revenue. 

Infor is a privately held company, under the ownership of Koch Industries, so there is no obligation for it to publicly declare its earnings - but in a press and analyst briefing this month, it appears that the leadership team want to signal to the market that it is experiencing significant cloud growth and its turnaround strategy is working. 

diginomica has long covered Infor’s cloud strategy, where we’ve consistently been impressed by its long-term thinking and its approach to user-centered design. In recent months we’ve noted how the company is taking this further by aiming to deliver quicker value to customers, by drilling down into out of the box functionality for specific micro-verticals, and by using complementary partnerships to further extend its reach in areas such as supply chain. 

During the analyst briefing this month, Infor CEO Kevin Samuelson continued to emphasise the company’s long-term view of the market, where he believes that by not having to worry too much about quarterly bookings, it can think strategically about delivering value to customers over years, rather than months. 

This new era for Infor will form a number of components. For instance, the company 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, Infor itself 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. 

Infor is also aiming to be as open as possible, ensuring that customers have control over their own ecosystems, and investing heavily in its customer support capabilities. 

Samuelson was also keen to highlight that the ERP market is still undergoing fundamental changes, where he believes Infor is now in a good position to seek out buyers that are looking for long-term partners in the cloud. He said: 

This is an extraordinary time in the ERP market. Number one, we're going through a huge cloud transition. And unlike in other areas of software that have largely gone through that transition, we're in the extreme early innings. Very few companies have made the move to the cloud, and many of them over the next few months and years will be making that decision. 

And therefore this is an opportunity for changes in leadership and disruption. And if we look at other areas where technology has changed and transformed, usually the leadership changes, and some companies that maybe weren't as big or successful in the earlier technologies, can shake up the market and become true leaders. And we hope that that is us.

Infor’s focus for the next decade

Samuelson said that it’s important to note the context for how ERP buying decisions are made - mostly highlighting that relationships between ERP vendors and customers typically last for more than 10 years. This is significant because customers want their vendor of choice to have a long-term view of what success and innovation looks like, said Samuelson. 

This plays right into Infor’s wheelhouse, as the company has repeatedly highlighted that its ownership under Koch Industries means that it has a significant balance sheet and can make decisions that benefit the company (and its customers) over the long-term. Rather than viewing ‘success’ as signing X-number of bookings in a given quarter. 

With this in mind, Samuelson said that Infor can define itself differently from the market in three different ways over the coming years. Firstly, by its “true dedication to industry”. He explained: 

You hear this a lot now it's become in vogue, it seems like over the last couple of years if you’re in enterprise software, you declare that you're industry specific. But I think this is a way that we are truly differentiated and we've doubled down on this over the last 18 to 24 months. 

And let me tell you what I mean by that. First, as hopefully you know, we are the only company that has multi-tenant ERP systems that are purpose built just for industry markets. So we have an ERP system that is purpose built just for discrete manufacturing industries, primarily automotive, aerospace and defence, and industrial manufacturing. A system that's just built for process industries and distribution, like food and beverage. And one that's built specifically for healthcare. That's quite different than the alternatives in the market,

The alternatives in the market build the one system and then try to deploy it across many industries. Not only does that mean that the system is less perfect out of the box, but then it means that innovation has to be widely distributed over time. 

And so from an industry specificity perspective, as it relates to product, this is quite different. But as I mentioned, we've taken this even further and really doubled down on this idea over the last few months. From an organizational perspective we've organized completely around industries - from general managers to services to sales to R&D. Everyone in our organisation now lives and breathes within a single specific industry. 

And so they know not just our products, but they also learn and become more conversant in this specific industry to understand what's required to be successful. So when we say we're all in, in an industry, it’s product, it’s people, it’s strategy. We're only focused on a few, so I think that's quite unique, and it colours everything that we do

Secondly, Infor is focusing heavily on making it easier for its customers to deploy and operate its ERP software in the cloud. This means building a system with tight integrations across the Infor portfolio, but also being open to integrating with other popular SaaS providers, so that customers have choice over their ecosystem. Samuelson said: 

We also have taken the time to think about what are the real challenges that customers face when deploying and benefiting from software, when they adopt ERP products?

It shows up in many ways, all of the integrations, of our products together. Rather than some alternatives in the market saying, we've got an ERP system, and we've got a CRM system, and you buy all those from them, but they're all different and have to be integrated. We've done all that - our systems already work together immediately out of the box. 

But they're also extremely open. So we have a CRM system. But we know that Salesforce is the system that is most common in the market. We want to be open to any alternatives that allow our customers to be successful. And so we build the integrations to those such that customers can have an open ecosystem, whether they're using our products or someone else's.

Finally, the third pillar that Infor is focusing on is increased specificity within industries, in order to deliver value quickly for customers. Samuelson said that Infor has a competitive advantage in this area because Infor’s expertise in specific verticals means that it understands the processes and the data better than its competitors. He said: 

We're doing some interesting innovation within our products to make the deployment and consumption of them much easier. Rather than just saying we're industry specific, because we have a product for discrete manufacturing, we've actually then come out with an automotive configuration. And then not just automotive, one that could be, for example, a part supplier versus an OEM. 

We've taken the best configurations that exist amongst our customers with feedback from our solution consultants, our services folks, such that our products should then be at the beginning of deployment with the best use cases in mind  - with a view towards being able to work quickly and get the value much more rapidly.

My take

Infor’s transparency on its SaaS figures is welcome and the $1 billion run rate for its cloud products certainly feels like a significant milestone in the company’s journey to becoming a ‘cloud leader in ERP’. Whilst the past decade has been about Infor structurally changing its approach to tackling the ERP market - getting the organization and its products in a good place - it now appears that the focus is on delivery for customers. Delivery in terms of products that have deep functionality for customers in certain industries, but also getting the benefits to them quickly. 

It’s worth highlighting a final quote from Samuelson, which summarizes the company’s position at present, thinking about its long-term approach to success. He said: 

We're trying to move the bar and think about success as when our customers are achieving their business benefits and not celebrating anything up until we get to that point 

We have the luxury of being in an ownership position…[where we aren’t held] hostage to 90 day cycles or the whims of public markets. We have the ability to make those longer term bets…and we think that gives us a unique advantage to innovate and do things differently with customers - that results in a very different outcome than the market.

As ever, the proof is in the pudding, and we will continue to speak to Infor customers about how this strategy and thinking is playing out for them on the ground. But at a top level view, it’s a compelling pitch. 

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