We at diginomica have been covering Infor’s rather impressive turnaround for many years now. The once on-premise, ageing ERP vendor is now a thriving cloud business that has received a multi-billion dollar investment from Koch Industries - and has a new customer list that would make some of its competitors weep.
The key to its success largely hinged on bringing on-board a leadership team that understood what was required from future digital business models. The strategy is cogent and CEO Charles Phillips had the foresight to invest in areas such as UX, data science, skills, verticals, and also partnering with AWS. You can read a more detailed brief of the company’s strategy here.
However, this strategy is now maturing, with 65% of Infor’s licensing revenue now in the cloud (SaaS). The licence part of Infor’s total revenue has doubled in the past seven years. Its investment from Koch Industries, which was to the tune of over $2 billion, for a 70% stake in the business (although the management still controls the board and the direction of the company) - means that Infor is now accelerating its current strategy, whilst also co-developing with Koch to finesse future implementations with customers and also target new areas of investment.
I got the chance to sit down with Infor President Stephan Scholl in London recently, where he explained that Infor is now focused on using its recently announced AI platform, Coleman, to ‘rethink ERP’, to ensure outcomes for customers are realised, and to continue to invest to target those future $Billion in revenue.
I’ve discussed the Koch investment with Scholl before, but given that over a year has passed since the announcement was made, we’ve got a clearer idea of what this now means for Infor and its customer base.
Scholl said that two areas that Koch is specifically co-innovating with Infor on are logistics (huge area of potential future revenue for Infor) and implementing cloud software at scale. Scholl said:
They’re one of the biggest logistics companies in the world, if you take away all of the branding of what they do, they do logistics. Freight, trains, they have one of the biggest trucking fleets in the world. As you and I both know, this logistics game that’s going on, with digital, no company has figured it out in software. We are doing co-development with them. If you can solve logistics for Koch, you can solve it for any other major logistics company.
Then there is the incredible global HR implementation. We signed a replacement of Oracle and SAP, a global HR transformation. Think about what that does for us. Think about what a $115 billion company standardising an entire organisation on HCM does for Infor? Financial is the same thing - we’re replacing our major competitors and implementing Infor. We are five or six months in - we are past design, we are doing configuration. In 18 months we will have a live proof point.
However, perhaps as equally important, is the mindset that co-founder and CEO of Koch Industries, Charles Koch, brings to the table. Scholl explained:
Then there’s the investor view. Think about what Charles Koch has done - a $40 million business to $115 billion - and his thesis is you reinvest 90% of the cash you make into the business. Where have you heard that? It’s a rarity in business. So that mindset is impacting us on thinking bigger and going bigger. There’s always a ‘B’ behind that - billions.
Coleman and an eye on execution
Earlier this year Infor announced the launch of its new Artificial Intelligence (AI) platform – called Coleman, in honour of physicist and mathematician Katherine Coleman Johnson, who overcame the obstacles of segregation to become an essential figure in the United States Space Program.
Infor has long invested in data science, with its dedicated Dynamic Science Lab team at MIT, but with the launch of Coleman, the executive team is claiming that it will be looking to ‘rethink ERP’ where it can – taking advantage of ION (Infor’s API/middleware, ensuring data flows through all apps to Coleman), machine learning frameworks, and by more closely integrating the apps with GT Nexus (Infor’s commerce network).
It’s the building blocks that make this an interesting proposition. For instance, the ION architecture allows data to flow freely between applications and the supply chain, which can then be stored and called on by Coleman, then surfaced to users, who may use conversational UIs to interact with it, or simply be presented with the information as and when they need it. Add the supply chain to this, where Coleman is able to use third party data within the existing application to make more accurate predictions and recommendations, and things get pretty interesting.
For example, what would be possible for a retailer that could have an intelligent system that knew about HCM, CRM, ERP and the supply chain all in one place? It doesn’t take a great deal to imagine what could be possible in terms of personalisation, inventory, staff management, etc.
Scholl was keen to highlight the future potential of Coleman with Infor’s cloud customers - reiterating the point that this isn’t just simply about transactions anymore, this is about rethinking the way business is done with an all encompassing, intelligent cloud platform. Scholl explained:
If you have a seven step sales order process, and it’s the same seven steps, why can’t be automated? That gets you away from just having people to be online and now using a system to do order processing - why don’t you deal with the exception reporting? Exception reporting is 10% of the volume. That frees up more time to be more professional about cost cutting.
I look at companies like Hertz, that IoT system, the day to day activity of the paper and process of you getting out of an airport and getting into that car - the maintenance of that car and what happens to that. That’s way beyond a transaction machine. Look at what we are doing for Hertz, they’re being attacked by Uber and Amazon, and now you saw Volvo saying they’re going to supply all the cars for the Uber drivers, there’s a revolution happening.
These guys own 800,000 cars in 10,000 centres. We are at the heartbeat of rising above: did I pay my bill right? The transaction, making the order, etc. We are now all about the experience that person is going to have of getting that car at the right service level at the right location. The relationship Hertz is going to have with the customer, is way beyond ERP.
It’s this thinking that could well be playing into the securing of many new deals with customers that Infor’s competitors are likely to be envious of. These include big, global names such as Travis Perkins, Bank of America, Arcadia Group, DSW, Hertz, etc. Scholl believes that Infor has been able to clinch these deals - which often mean ripping out many of their big-name competitors - because of its focus on outcomes. He said:
It's about outcomes. I want make sure our customers sit with you and say, “I’ve transformed my business”. When Fullers beer stands up and says, “We’ve completely automated our entire process and my pub owners are happier because I’m servicing them better with the right beer at the right time”, that’s what I want. I’m always one eye on vision and one eye on execution.
Because, no one has done this - no SAP, no Oracle, no Microsoft, no IBM - nobody has been able to drive that scale of transformation at that rapid pace, for companies of those size we are dealing with.
On a slightly drier note, although one that is likely to be important to Infor continuing to scale up its cloud licensing revenue - is getting its channel partners to adapt to the way it is now doing business. This has been somewhat helped by the Koch investment, which has caught the attention of the larger ISVs. However, there are many smaller channel partners that are going through this digital transformation themselves - which, as we know, often means some financial pain in the short-term as they switch to recurring revenues.
However, Scholl believes that its channel business is slowly beginning to see the benefits of a cloud-based revenue model. He said:
It’s a bit of push and pull. We receive a tonne of traditional, perpetual business from our global channel business. Our channel business globally is small to medium business, we do business in Vietnam, we do dry cleaners in Singapore. We do tonnes of $10,000-$20,000 transactions. What you see happening, this whole digital conversation, is channel partners coming to us and saying, “Hey, these really smaller companies want to play in the digital playbook”. And to do that, to touch any of the BI pieces, if you really want to do any of the network pieces, you have to do that in the cloud.
So it’s our channel partners starting to see bigger deals. They weren’t typically big deals or multi-product deals. Now they’re seeing seven figure transactions in our channel, which we hadn’t seen in a long time. Channel guys are realising there is a lot of money here. As a percentage of our business, it’s still a small part of our business, but growing at triple digit rates. You’re seeing a huge shift in channel, earlier than our thought.
As Scholl says, execution is key. But I continue to be impressed by how Infor is able to deliver on its vision. And how do we know this? Because it continues to deliver big-name customers that sign up to that vision. That’s not always the case with some of the other vendors it is competing with in the market.