For most of the first half century of business computing, most of the advances in this field came from harnessing Moore’s Law and the expanding scope, depth and quality of the capabilities that ever more powerful hardware and software allowed. With the advent of the worldwide web in the mid-1990s, Metcalf’s Law (the value of networks expand geometrically with the number of people attached to them) kicked in as well. However, I think these will have a more limited impact over the next decade. Gains in the value business computing will be limited unless organizations find it much easier to utilize the technology capabilities that exist and are able to harness the data these systems with far less effort than is required today.
I was reminded of this listening to several of Infor’s Virtual User Conference keynotes and presentations on its future technology direction. Infor, a private company, has been a consolidator of business software companies, many of which focused on large and midsize companies manufacturing verticals (including Baan, SSA and Symix) as well as financial software (among others, Geac, Sun Systems and Extensity) and performance management applications (Comshare). Infor tends to get considerably less coverage in the technology and financial press than its some of its rivals (notably IBM, Microsoft, Oracle and SAP). I think this is partly because it is private but also because so many of its customers are midsize corporations.
This decade of consolidation in the software business was driven partly by financial markets, which in turn has reflected an important change in the enterprise software business model. In particular, the value of a software companies’ maintenance stream often has been worth more than the stock price but only if the acquirer was able to achieve efficiency in new license sales and marketing efficiency and reduced administrative overhead (which has not been at all difficult to achieve), and efficiency in ongoing development efforts to existing products that users felt justified their maintenance payments. This can be difficult but one important reason why maintenance payment streams have become more valuable – particularly in business applications – is that the pace of technology evolution in these products is slower. Consequently, the interval at which it makes sense to completely replace business software packages has lengthened and the longer maintenance “tail” is that much more valuable. For a large percentage of Infor’s midsize customers this has been a welcome evolution because they either do not have or do not want to spend money on the resources needed to do more frequent upgrades and changes.
Which brings me to comments made by Infor’s CEO Jim Schaper in his opening keynote. Infor’s go-to-market approach is heavily weighted to customer retention which translates to making it easier for existing users to find value in doing business with Infor. My analysis of Infor’s market strategy is to target those companies that exhibit “late majority” or “laggard” buyer behavior; that is (ditching the pejorative connotations of those terms), a very conservative or dismissive approach to using information technology in their business. Although among technology folks this behavior model usually is associated with Geoffrey Moore’s Crossing the Chasm, this buyer profile had been used for decades for all sorts of products. While Moore was focusing on patterns of technology adoption, these major business software categories are already well adopted, which is why it’s important for a software company to understand its customers.
In its attempt to retain customers and even extend its presence to include, say, performance management applications from a manufacturing applications base, Infor is focusing on making its software (relatively) simple to deploy and offering fixed price implementation options. This demands discipline on both sides and software that is easy to configure (not customize) to the users’ needs. Many enterprise software vendors are extending their end-of-life support dates; Infor is now saying it will support the software as long as its customers wish. (Although there may be less to this than meets the eye as after awhile most will find what they have has become functionally obsolete.) It also is offering free upgrades with predefined implementation costs, with no new license fees, as well as migration to a different application within the Infor family with no additional license fees. All of these have been available in some form for a while, and it’s also important for existing and prospective customers to understand all of the conditions and limitations that go along with this. But it’s clear to me that Infor has decided to use technology trends (See: "Infor: Future of Technology In Their Products") to shape its product and marketing strategy to appeal to a specific, differentiated segment of the business software market.
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Robert D. Kugel - SVP Research