New CEO Mike Ettling wants Unit4 to run like a cloud company

Newly appointed Unit4 CEO Mike Ettling signaled that the Netherlands-based ERP vendor is entering the final phase of its cloud journey at the company's annual customer event in Amsterdam this week. Speaking about changes still to come, he also touched on growth potential and interest in further acquisitions.

Just one month into the role, the former SAP SuccessFactors President says his primary goal is to see Unit4 "operate like a cloud company" and cast off any remaining on-premise habits:

One of the biggest transformations I will bring to the business is, today we operate like an on-premise software company doing cloud — and our cloud growth is brilliant and phenomenal — but we need to operate like a cloud company who happens to have a book of on-premise business still.

How you run a cloud company is quite fundamentally different to how you run an on-premise software company — things like community, how you let your customers engage, how you do customer success management, how you do professional services. In a cloud company, it's all about, get live as fast as possible, not the longest project possible. How you market, how you price, is all quite different. So that's where I think you'll see us change quite significantly in the next twelve months, is to look and feel like a cloud company.

Cloud-native platform

The two-day event focused on product enhancements that mark the final stages of Unit4's multi-year transformation from its on-premise roots to build a cloud-native software platform. The current version 7.0 of its Business World ERP product is based on a thoroughly modern microservices architecture. This has been built to run on Microsoft Azure but can also be installed on-premise while accessing some functionality, such as machine learning, from Azure or third-party cloud services. Three announcements this week build on the platform:

• A raft of new cloud services built using a standard extensions kit. These include automated functions such as posting a planned absence to an Outlook calendar, importing a customer's credit risk evaluation from Dun and Bradstreet, or reporting if a customer or donor is on the US government Watch list. Customers and partners can use the kit to build their own extensions on the Unit4 platform.
• A range of conversational software bots for functions such as purchasing, travel & expenses, HR and workflow built using Unit4's Wanda bot technology. Originally announced in May 2017, Wanda now comes of age as a standard function within Business World at no extra charge. Operating either natively in Business World or through third-party messaging platforms such as Slack, Skype, Microsoft Teams and Facebook Messenger, Wanda is now available in English, Norwegian, Swedish, French and German.
• Smart automation services, initially for resource planning and invoice processing, that leverage machine learning to provide a 'self-driving' ERP experience.

Migrating customers to the cloud

Ettling emphasized that these capabilities are available even if customers choose to stay with an on-premise deployment, but they are only available with an upgrade to the latest version:

The People Platform, extensibility, Wanda — everything else which we're going to be able to create in that microservices world — you need to be on 7.0 to start availing yourself of that. You don't have to be in the cloud because you can avail yourself of these services even if you're on premise, but you need to be on version 7.0 ...

We are not trying to force customers to the cloud ... We're just trying to get you on the right railroad so you can start enjoying all of this.

Nevertheless, Unit4 sees its destiny in the cloud, and announced a set of fixed-price cloud migration packages to entice the roughly 50% of Unit4 customers that still run on-premise to make the move to the cloud. Subject to an assessment of the customer's current environment and needs, the packages offer a fixed fee and a committed timeline, ranging from €15k and 20 working days for small businesses, €35k and 40 working days for medium-sized organizations and €75k and 75 working days for larger businesses. The largest enterprise accounts will be quoted a tailored price.

Changing the customer experience

Much of the work Unit4 still has to do to in its own cloud migration revolves around support and professional services, says Ettling:

When I look at customer success, support, there's going to be work ... the roadmap to get there, is that you start repurposing support people to customer adoption people. They're focused on adoption. How do you use the product, how do you get more success out of it? They're not just focused on taking support calls. So I think we're starting that journey.

I think our biggest challenge will be professional services where, by definition as you move to the cloud ... like-for-like, the cloud project is a quarter of the effort of a legacy on-premise project. So that is where I think the biggest transformation happens.

As part of that change, the company is working to define what it calls 'Model X' — standardized implementations for businesses, local authorities, and colleges that can be deployed on a fixed timescale, he says:

Once that's done then we can get into much more fixed price type professional services model. Directionally, I want customers to pay less for the implementation — and pay me more for the software.

That in turn means that Unit4's partner ecosystem will have to get used to earning less from implementation projects and focus instead on building extensions based on their own intellectual property. This too is at an early stage of the journey. Ettling is keen to add an ecosystem leader to his team and says expanding the partner base will help:

We've got a lot of partners but we need to grow our partner base. Certainly finding born in the cloud partners — partners who only deploy cloud — is more interesting to me because they know how to think and do the fast deployments. They're not coming with the legacy approach.

Acquisitions and growth

Alongside all of this work to infuse Unit4 with more of a cloud-native approach to market, the company will look at further acquisitions to expand its reach, says Ettling.

I absolutely think the mid market will get consolidated and I think we are really well positioned as potentially being that consolidator for people-based software businesses in the space.

But acquisitions will be focused on innovation, he says, rather than the traditional consolidation playbook of simply buying maintenance streams:

I'm interested in consolidating the people market, but from a very different playbook of buying innovative product ...

With the work we've done on the platform and the architecture, ideally I'm looking to buy companies which can jump onto our railroad.

He cited the recent acquisition of cloud-native talent management vendor Intuo as an example of the type of company that is attractive:

I want to buy companies which look like what I want to be, not what I am today. So Intuo, even though it's a smaller company, it looks like what I wanted, it's a cloud company with cloud DNA and cloud tools and cloud infrastructure. So the cloudiness of the company is quite important.

The other aspect is, we want to buy companies which are growth-accretive ... And then lastly, helping us scale in geographies.

Seeing a bigger runway

If these growth plans mean looking to Unit4's private equity backers Advent International for more finance, then so be it, he says:

I might need fresh capital along the way, and then I'll cross that bridge when I get into it ...

As any good investors, if [Advent] can see growth and they can see runaway and they buy into my vision that actually there's a much bigger runway here than what they thought — if they see that and we deliver, then they may want to double down even in it.

He wouldn't have taken on the CEO role if he didn't believe the company has the potential to grow strongly, he emphasizes:

I have a very simple philosophy that if you run a growing successful business, the value will follow you. If you try to orchestrate a value event, you'll never get the value ...

I joined with a very genuine belief that I can consolidate a market, there's a really big market opportunity and Unit4 is a phenomenal platform to go and do that with that market opportunity in the people space. That's the journey I'm going to take this business on.

My take

It's a common misconception to believe that once the technology has moved to the cloud, then the job of transformation is done. This misconception misses a crucial point about being in the cloud — that vendors remain connected to their customers and therefore it becomes part of their role to iteratively engage, monitor and improve the customer experience — a phenomenon we've been calling The XaaS Effect.

Ettling understands this intuitively and now has the opportunity to instill that philosophy at Unit4 with probably more freedom than he had in years past as part of SAP at SuccessFactors. The team at Unit4 have done what appears to be an admirable job of remaking the core ERP system as a modern, extensible, cloud-native platform, and recent acquisitions such as Intuo have certainly strengthened the offering. But as I commented after last year's Connect event, it's the change management that's the hard part. It's a tough job to reset customer relationships in an XaaS model — especially when working alongside an existing partner ecosystem. However Ettling has the experience and motivation to make it happen.

It's a challenge he clearly relishes, along with taking on the "Unit who?" reaction that his new company's name often evokes. A new CMO is about to take up office to set about changing that reception, he says:

We are a best-kept secret. We don't have enough market presence. We don't shout enough about what we do. We don't get enough coverage.

Look forward, then, to hearing quite a bit more about Unit4 in the next year or two, in these pages and elsewhere.