: The $2B Company No One Has Ever Heard Of”>
Infor is like the Rodney Dangerfield of the software world.
For a company that has amassed 72,000 customers—more than SAP and Oracle combined—has acquired more than 30 companies in the past five years (running neck-and-neck with Oracles much ballyhooed acquisition tally), and realized more than $2 billion in sales last year alone, Infor doesnt get no respect.
Founded in 2002 by a group of software industry veterans and private equity firms, Infor has grown to become the third-largest enterprise applications vendor in the world behind SAP and Oracle. Yet the company is little known outside of its customer base, and, because its private, according to the companys top executive, receives little attention from analysts and media.
Jim Schaper, Infors chairman and CEO, is out to change the companys perception—or lack thereof—in the marketplace. At Infors annual Inforum user conference in Las Vegas Sept. 9-12, Infor is making a slew of announcements—from the decision to support versions lV and V of Baans ERP (enterprise resource management) software despite Baans previous decision to stop upgrading the software, to a newly defined SOA (service oriented architecture) road map that includes new components that evolve each brand beyond its core functionality, and free enhancement packages that upgrade each suites SOA capabilities.
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Perhaps more importantly, Schaper is shoring up the companys internal processes and systems—winnowing 72 general ledgers down to one later this month, for example—to prepare for a potential IPO.
“To be clear, we are very comfortable today absent an IPO. We do not need to go public to sustain organic growth,” Schaper said in an interview. “We are getting awfully large to be private. Because we are the leader in the mid-market, there is an inherent advantage to being public. You get covered by certain analysts. Now were not mentioned much in research reports. It puts the company at a disadvantage. [An IPO] would put us in a position to be considered in the same way as our two largest competitors: Oracle and SAP. As a private company, were not even known.”
While Schaper is clearly not committing to an IPO, he is hedging his bets that the company will be capable of filing an S1 form some time in the end of the first quarter of 2008. In light of the billions Infor has spent to achieve its size, Schaper said he would use the cash raised in going public to pay down debt. “We would clearly keep some on the balance sheet for investment and potential acquisition,” he said.
But Infor is reversing its acquisition strategy, moving from an Oracle-like “buy rather than build” modus operandi to more of an SAP-like approach of growth through organic development, with some technology- or service-related acquisitions to fill holes.
Where Infor is clearly diverging from Oracle and SAP is in its SOA strategy. Rather than develop an underlying integration and development platform to its applications, Infor is componentizing its applications and adding phased feature packs and incremental upgrades that it will provide free to customers on current maintenance plans. Dubbed the Infor Open SOA plan, the initial phases are focused on enabling applications to use standardized business object documents for linking business process flows across applications in a publish/subscribe, event-driven and decentralized framework. The framework itself leverages native support for the Open Applications Group Interoperability Standard for document exchange via the Infor Enterprise Service Bus, according to Infor Chief Technology Officer Bruce Gordon.
“Weve got to simplify for customers, make it easier to take feature packs and have the product SO-enabled, to use other products weve acquired or to take new products weve developed and operate across multiple systems,” said Gordon. “Were not trying to force all products into a single box. We dont believe thats the right way…to have customers rip and replace and upgrade to a single project. We dont believe its logical. By moving to a component-based strategy [this] allows our customers to extend the life of an application and still be competitive.”
What Open SOA will do is enable interoperability between Infors major suites—the company announced interoperability between ERP SL, Infor Enterprise Asset Management and Infor SRM SupplyWeb—third-party apps and newly developed components.
The new components—Infor has designated about a dozen areas of focus—will tap business-specific functionality and industry experience from Infors global development team to provide functionality that will work with software from Infor and others. One example, being announced this week at Inforum, is Multi-books Accounting, which is designed to work alongside financial management systems to help companies cast their financials in multiple ways.
“If you have an operation in China and you have to follow the Chinese governments rules of what you call accounting concepts like salary, how do you get a system so customers dont have to rip and replace to work in China, the U.S. and Europe?” Gordon asked. “Weve designed a new component that can run independently of ERP and can coexist with others to manage financials through the component and be compliant.”
: The $2B Company No One Has Ever Heard Of”>
Another component example Infor is announcing is the development of roles-based home pages—an AJAX-based Web 2.0 environment that lets users customize a user interface to their role in a company, and the way the user operates within that role. “We have 138 roles in a library,” said Gordon. “We take the roles and go out and discuss with many customers and get input. Were really looking at saying, Weve got to capture and understand better the customer we are writing code for.”
In a December 2006 research note titled “Infor: The 2B Enterprise Applications Company Youve Never Heard Of,” AMR Research analyst Jim Shepherd described Infor as a company that is “shaking up the enterprise applications industry with an interesting new business model [based on vertical functionality for 25 vertical industries] and a passion for acquisition that makes [Oracle CEO] Larry Ellison look like a window shopper.”
Infors acquisition strategy—backed by tech investor Golden Gate Capital—is still up for questioning. As Shepherd pointed out in his research note, “private equity financed rollups are quite common in other industries, but no one has attempted one on this scale in the application software market.” The question is whether customers will see the model as a safe bet. At the same time, the current crisis in the financial services sector is impacting the tech sectors ability to raise capital, according to Infors Schaper.
“The impact on the debt market has absolutely affected the IT sector as it pertains to public-to-private transactions,” he said. “Over the past 24 months, private equity firms acquiring public companies, because the debt market is choppy, the vehicle for financing these buyouts is gone. Access to capital is gone.”
The good news for Infor, according to AMRs Shepherd, is that the company has a philosophy and strategy that is very customer-friendly—particularly given Infors maintenance and cross-selling revenue strategy that requires happy customers. That and—at its 2007 Inforum conference—the company committed to enhancing its acquired product lines rather than continue to buy new ones.
But clearly Infor has some work ahead of it, according to Shepherd.
“At the moment the companys rather unique strategy is working well,” Shepherd wrote nine months ago. “The revenue and profitability numbers are very impressive and the growth in new customers and licenses is far better than we had guessed. Now the company needs to put some effort into building brand awareness— being the $2 billion company that no one has ever heard of doesnt do them any good.”
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