At Infor's annual user conference in New Orleans a couple of months ago, I noted that both analysts and journalists weren't really sure how to take the decision, with many putting questions to Infor's executive team about the motivation. Dennis also ran a piece about whether the strategy should receive a pass or fail, noting that Amazon may well be handing data over to government agencies and that although Amazon has regularly lowered prices in recent years, this doesn't mean that it won't raise them in the future - in turn raising prices for Infor and its customers.
As Dennis notes:
Amazon has been trading 20 years and to date has barely shown a profit for the amount of capital it has raised. Instead, it leverages excess cashflow to continue building out facilities while trying to keep as close to break even as possible. That is a defensible strategy provided the stock price remains on an upwards trajectory. If that changes then things become difficult very quickly.
Without wishing to get into the various economic arguments around Amazon, (that’s for another time) I find it difficult to believe that Phillips does not have a Plan B if Amazon’s lights are suddenly dimmed. To my knowledge, no-one has asked that question yet with SaaS revenue declared at what looks like a conservative $100 million per annum run rate and a ‘cloud-first’ approach to future sales, then it is only fair to ask how Infor will maintain control over its cloud infrastructure.
Speaking of control – most commentators believe Amazon will end up dominating the cloud infrastructure market. Google and Microsoft might have something to say about that but what happens if Amazon decides to unilaterally increase prices? What does that do to Infor’s model? At the very least, it begs another question. To what extent has Infor locked in cost for the benefit of its customers? That’s another handy question on the RFP to which I haven’t yet seen an answer.
The debate has rumbled along since and was reignited again this week when diginomica got the chance to sit down with NetSuite CEO Zach Nelson, who in true Nelson style, had some select criticisms for the Infor executive team. Nelson commented that he doesn't believe that Charles Phillips fully understands what it is to be a true cloud company. He said:
[Their strategy] is very different and different from everyone else – no successful cloud company has built their application on AWS. I think that speaks for itself. It's not naïve in the sense that AWS can't do it, it's naïve in the sense that when you deliver an application like NetSuite you need to control every layer in the stack. From a service standpoint, if AWS goes down, what's the first set of servers they're going to bring up? I don't think they're Infor's. It might be Netflix. That's a problem.
Secondly, ultimately you want to cost reduce your delivery and if you don't control everything down to the hardware, how do you cost reduce it? That's why most successful SaaS companies have run their own infrastructure. In fact many of the companies that started on AWS have moved off. I think it represents not a real solid understanding of what it takes to be successful and building complex, native cloud applications.
Dennis and Nelson's points reflect most of the rhetoric I've heard in the industry in recent months – and as the saying goes, there's often no smoke without fire. However, I thought it only fair to put the points directly to Infor.
With some of the senior executive team in London this week, kicking off the European leg of an Infor conference tour, the perfect opportunity presented itself. I got the chance to sit down with Duncan Angove and Stephan Scholl to discuss the issues, and the arguments put forward make a strong case for the AWS decision.
Bear with me on the heavy amount of quoting of Angove and Scholl, but I think almost all of their points are significant and worth highlighting. On the issue of pricing, Angove thought Nelson's argument that SaaS vendors need to control all layers of the stack in order to control pricing wasn't fair, given that Amazon has scale that outstrips pretty much everyone else.
It's a ludicrous proposition. Here's the thing, it's a scale game. Amazon has got 5 times more storage and compute capacity than the next fourteen guys combined. They seem to reduce their price every week. The investments they are making in automation at the infrastructure level are going to way outstrip something that little old NetSuite can do on its own. To compare it on purchasing power or economics is ludicrous. NetSuite is never going to be able to invest in the type of data centre architecture and skill sets that Amazon has.
Any dimension that you look at, whether it is scaling, or it's security, or failover and auto-start up, there's no way. Amazon shipped 286 new cloud services just in the last year. It's like comparing someone that builds jumbo jets to someone that tries to do it on their own as a hobby. It's so ludicrous.
And by the way, because we are not having to make those investments, we are able to invest in the application tier. It's such old thinking. He [Nelson] started 15 years ago, he's got no choice, he's got to double down on where he is.
Angove and Scholl said that one of the main reasons that Infor opted to go with Amazon is that there is no way that Infor, even as a privately held company
that doesn't have to answer to shareholders, could make the level of investments in infrastructure that AWS has. Scholl also noted that because Infor is using Amazon, which relies heavily on open source and the interoperability of systems, Infor is able to take advantage of the latest and greatest tech available to customers. It isn't tied into using Oracle databases, for instance. Angove said:
Have you met these Amazon guys? Lights dim when they come in the room. Honestly, the horse power of the individuals and the investment in innovation is unbelievable. And we just tap into all that investment because we standardise on it. We get to tap into hundreds of millions of dollars worth of investment that they're making that just gets added to our R&D line. The reason that they're able to reduce the cost all the time is because they're constantly introducing innovation into their data centre.
Going down into what Oracle, SAP, NetSuite do – they all have to protect their investments and charge out for their infrastructure and their speeds and feeds and pipes and database and hardware. We don't have that hangup, so if IBM comes out with the next magical thing that doubles down on HANA from SAP, and if HANA is great, we will certify on HANA. We are an applications company that will work on the next big thing.
What is our knitting? What are we good at? And what is the real gold when you think of process flows? It's the application layer. Is it really important that you own infrastructure? If that's what NetSuite is going to say, it's counter intuitive.
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Scholl also wanted to address the issue of an outage, claiming that Infor has a deep partnership with AWS and the idea that it would prioritise Netflix over Infor, isn't accurate. He also said that if companies want to tap into a SaaS vendor that not only has full suites running in the cloud, but on a global footprint, Infor and AWS are the right decision. He said:
If there was a major outage and something happened to everybody, including NetSuite, they don't have the size and scale. They don't have the horsepower. I don't want to be disrespectful, but they just don't have the size and scale and money to throw at infrastructure speeds and feeds, and scalability and performance. It really is a David versus a Goliath and the David is being relegated to point solutions, rather than what we are trying to do. We are solving a lot bigger problems.
I mean the whole China game – a lot of UK customers are doing business in Poland, in China, United States, to think that leveraging NetSuite versus an Amazon in terms of doing business in those regions, it's off the charts in terms of comparing the security framework and localisation requirements.
Finally, one other point I personally wanted to clarify with Angove and Scholl was to understand to what extent their applications had been invested in and refactored to be true cloud, software-as-a-service apps. Or whether they had been lifted and shifted to AWS and given a nice new UI. Whenever I write a story about Infor, or raise a discussion about Infor with competitors, this issue is raised time and time again with many claiming that that the company's software is not actually true SaaS and that all of the old problems have just been forklifted to Amazon.
However, when I asked Angove and Scholl, they were adamant that Infor's cloud software has been completely reengineered to stand alongside the best SaaS vendors out there – in fact, Scholl said that given Infor was late to the game, its investments in cloud tech mean that its software uses the best and newest cloud technologies and capabilities on the market. Angove said:
There has been tens of millions of dollars of investment, if not hundreds of millions of dollars. And that's why we sat down with our board before the fiscal year and said here are the investments we need to make. We wanted to be a true cloud architected company, we didn't just want to do cloud washing and take an on-premise app and stick it in the cloud. So it's been a long investment.
The Infor Lab investment, that's a massive investment in dev/ops and cloud operations and security. Making sure applications are multi-tenant, do scaling, have configurability in it, and write secure code – so millions of dollars have been invested in the applications to run in an efficient, effective and highly automated way.
We can now spin up those environments in less than thirty minutes – this could be an application suite that has twelve applications in it. We can have a single DBA spinning hundreds of environments. That was never possible before and that's all possible because of the automation. You're down at the code level, every line of code now has a dev/ops lens on it.
And think about what we have done as a company, Infor CloudSuite for Aerospace and Defence is a per user pricing that includes all those products. For us to go here's a price per user, here's our CloudSuite, it includes all those products that come with it. You can imagine for us to architect it right, to provision it properly and implement it for a customer, we have to do be doing something right.
I would argue that our technology is newer [compared to NetSuite and Salesforce]. NetSuite is a cloud company that is using older technology and architecture than we are.
This was a very interesting conversation for me – mostly because Angove and Scholl were so passionate about the Infor strategy and product line. Although both swayed into a bit of competition bashing, as was expected, they mostly spent their time with me explaining how and why Infor has made the decisions it has.
And although I think there are a couple of issues that I'm still less convinced about – namely that Infor can do nothing about AWS handing over data togovernment agencies and that I'm not entirely convinced Infor would take priority over Netflix during an outage – I completely get why they don't want to run their own infrastructure.
In fact, the way I see it, cloud vendors constantly tell us and customers that the reason to go cloud is that they will benefit from the latest updates and technologies, and that running your own kit doesn't give you a competitive advantage in an internet age. Focus on what gives you value, that's what cloud is all about. Isn't Infor buying into this philosophy itself by going with AWS? And aren't the other cloud vendors out there somewhat contradicting themselves by not taking advantage of Amazon, when it is providing a service at a price that they themselves will never be able to match? There's something to be said for just focusing on the software.