Infor rides the retail wave - sees network effects, the sharing economy and AI as game changers

Infor branched into retail as one of its core industry focuses just a short few years ago. In that time, it has signed the likes of Whole Foods, Arcadia Group, Nordstrom, DSW and Nike to its next-generation, cloud-based solutions. There are other big names on the way.

Why are retailers flocking to a vendor that has been in the game for a relatively short amount of time? We got the chance to sit down with Infor Retail SVP Corey Tollefson, who told us that within 90 days of launching the retail division, without having written a single line of code, the company had signed 6 new customers worth $150 million in bookings.

Why? Tollefson said:

The reason why I'm telling you that is because the market is craving a number 2, right? Actually, I won't say number 2. They're craving an alternative.

Tollefson said that for years companies have relied upon the likes of SAP and Oracle to fulfil their needs for retail solutions. However, he said that these companies - which he described as “great companies” - haven’t kept pace with the changing retail market. He added that he doesn’t even see them as competition anymore, and is rather looking at the start-ups and retailers themselves.

Yeah, so we're not really worried about the Oracles and SAPs. We're worried about the start-ups that haven't come out yet. The successful retail companies are the ones that become more like tech providers, more like tech companies.

And that's where we see the competition. In fact, our number one competitor is build - it's some retailer building something or working with a startup. We're not complacent, we're constantly reinventing ourselves. Sometimes we reinvent ourselves too much, but I'm not really worried about getting complacent.

Infor’s strategy has changed dramatically in recent years. It consists of creating industry specific cloud ‘suites’ (retail being one) that run on Amazon AWS and are designed so that customers don’t have to build in their own customisations. This differs from other generic cloud providers that offer the likes of ERP or CRM, and are now beginning to think about how to verticalize their offering.

These cloud suites are what Infor calls its 10x applications, which are basically released according to a set of standards – in that they are mobile optimised, make use of the company’s social capabilities (ming.le), adhere to the Hook & Loop SoHo design standards, are built around ION (its middleware), have data science built into the application and operate in the cloud.

Infor has turned around its fortunes and 65% of Infor’s licensing revenue now in the cloud (SaaS). It also received a whopping $2 billion investment from Koch Industries, which was hailed as a sign of its success.

A turbulent market

It will not come as a surprise to anyone that the retail market has experienced a huge amount of disruption in recent years, caused in large part by the rise in popularity of Amazon. Stores are going out of business and retailers are scrambling to figure out how they can compete with the online giants, whilst managing their legacy investments.

One noteworthy turn of events, was Amazon’s recent acquisition of Whole Foods, which is an Infor customer. Infor runs its systems on Amazon too, meaning there is an interesting ménage à trois at play. I asked Tollefson what this meant for Infor, specifically its relationship with Whole Foods. He said that the detail was still being worked out and more information would be available by the early summer, but noted that he expects more integration between Amazon and Whole Foods. Tollefson said:

On the Whole Foods front, yeah, it's very complicated. I know we're on the record here, and I just want to be careful about this, but we're still flushing through what this means because [although] there's a distinct wall between Amazon and Whole Foods today, we know over time that that's going to start to go away.

I mean, Whole Foods is already offering home delivery within 2 hours for all Prime Members. So we know that there's going to be more integration there.

The future of retail for Infor

During our discussion, Tollefson noted three core areas where he sees retail developing and where he believes Infor can play a role. These are through the use of network effects, AI and the sharing economy.

On network effects, this plays into Infor’s $675 million acquisition of global trade and supply chain management platform, GT Nexus, back in 2015. GT Nexus consolidates suppliers on to a single platform, enabling buyers to streamline their procurement processes. Tollefson explained:

If you’re Uber, or an application company that was creating a platform like that, how would they do it? They would make sure there are network effects. So we made an acquisition of GT Nexus in 2015. And it was key to us because for retail, all of our development spend has been trying our applications on top of, or building our applications on top of the network.

So for an example, if you bought, an SAP or Oracle solution, you would have a lot of integrations, via EDI or any of those sort of bureaus to communicate purchase orders between the retailer and the manufacturer. With our system, we've built the purchase order management on top of the network. Meaning there's real time information.

There’s roughly between 10 and 12 changes in a purchase order at any given time, and it's manual EDI, it's email to your vendors. What GT Nexus, our commerce network, does is if you make a change to your order, it's in real time and not just to your supplier, but your supplier's supplier, and your supplier's supplier's supplier.

And they want to be on this network, because A) They see the viability across the entire supply chain, and B) They get paid quicker and more accurately. So it's visibility, but it's also a logistics network. Most of the suppliers join because they want to be part of getting paid promptly.

Tollefson added that it’s a “carrot” for suppliers, because if you want to be paid promptly by your vendor, then you will typically join the network. He added that once one retailer joins, others follow suit. He said:

Then the other thing is that the first company to be on it was Nike. And then all of a sudden, Adidas. And then Puma, all of a sudden. The whole industry consolidated around the concept, and it crossed those three brands in particular, like 80% of their suppliers are on the network.

So what we're doing now is we're taking that into other industries. We haven't announced it yet, but there's a grocer in the U.S. that we're close to putting on the network. We think once the grocery industry starts getting on the network, it's going to be game changing as well.

The future is AI

Back in July last year, Infor launched its 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.

Tollefson said that for retail, machine learning and AI is going to be “the key to everything”. He said that AI will be the new user experience, it will create a headless experience led by AI and that AI will “drive so many customer relationships”. Tollefson explained:

For example, if there is a shop on Regent Street that I like to shop at, they have intelligence on me, they can leverage software to make informed actions to me. They can proactively reach out to you, saying, "We just got this, it fits you, it’s ready".

They already have your measurements, and they can say - this is my promotion and this is my offer to you. This is the price point I can offer you based upon the fact that I know this is how much you've spent with me, and I can treat you differently.

I think one-to-one relationships between retailers and the consumers or shoppers are going to get better. I don't view Amazon as the be-all and end-all. I view Amazon as potentially a catalyst to make retailers clean up their act.

Tollefson said that for years people have been walking into retailers and that it has been an anonymous transaction - but that mindset will disappear and people will shop based on where they believe they are best understood. Retailers that create a personal experience will win.

However, Tollefson added that it’s likely to be new retailers that emerge that are the winners here, as the traditional players have too much legacy. He said:

It’s not going to be a retailer pure play, it's going to be a brand that wants to create their own image, and they create their own retail stores, that already have machine learning, and they already have those next generation capabilities. Earlier you asked me about the Oracles and SAP's, why I'm not worried about them? It's because they come with their own legacy baggage, where I don't feel like they're ever going to catch up. It's going to take them a long time to catch up.

It's the same way with retailers that have been around since the 90's and the 2000's, they've got legacy baggage. You know, I was with a retailer this week in New York, they have this statistic that's going to blow your mind. You would think that a hundred billion dollar retailer would have consolidation of power. I mean, a single item master, a single information around that item that they could then use as negotiating power with their vendors, right? They don't. They have 2,800 item masters. 2,800! They have 2,800 stores. So each store acts as their own company. Literally, there's no consolidation. There's no perpetual inventory.

The sharing economy

Finally, Tollefson pointed to the sharing - or gig - economy as an area that is yet to have an impact on retail. However, he believes that this impact could be significant. Tollefson said that he believes that the sharing economy will “infiltrate the retail community” in order to enable more convenient service. He explained:

Okay, so if you place an order on Uber Eats, right now I believe the functionality is it can only go one-to-one. A relationship to the restaurant and then to here. There's no reason in the future why you can't say, 'I want you to pick up my food from this restaurant, I want you to go feed my dog, I want you to go pick up my clothes from somewhere.' You give it orders and it consolidates those orders and brings it to us. The same concept exists for online - if you want to buy something from Crate & Barrel, DSW, et cetera, we can consolidate those orders.

So if I place an order for shoes from DSW and furniture from Crate & Barrel. There are ways in which the order from Crate & Barrel could be fulfilled off by my order from DSW. The consolidation that Amazon has as a platform - there's no reason why we can't offer that up to a consortium of retailers. They might not compete with each other, that might want to be part of the same buying process. So it's almost like we're creating funnels.”

I just think the whole concept of the shared economy hasn't hit the retail industry yet. And I feel like once it does, that combined with machine learning and AI, it's going to create more personalized experiences that can combat the whole phenomenon of just buying on Amazon.

My take

I had a wide ranging and incredibly interesting conversation with Tollefson. The deals that Infor has signed over the past few years in the retail sector highlight that there is indeed appetite for “an alternative”, as he puts it. And I agree that the combination of AI, the network and sharing economy makes an interesting sell for Infor. Whether or not it can continue to compete with Amazon and those future retailers that spring up, remains to be seen. However, it’s certainly in a good position to give it a go.