For the past three years Infor had a limited marketing presence, no unified message and a weak, sometimes inconsistent brand identity. But now management has consolidated dozens of smaller companies into one cohesive entity. In so doing the current leadership has put Infor – particularly the pre-Lawson portion of the portfolio – solidly on the road to viability. Achieving operating efficiencies also required Infor to develop its ION middleware, which makes it easier for both a company and its users to maintain its applications. ION also can straightforwardly be upgraded, migrated to other portfolio applications and extended without difficulty through the addition of complementary applications. Infor’s “micro-vertical” applications provide deep functionality built for specific types of businesses such as food and beverage companies, milk producers, brewers or bakers. These moves provide reasons for current Infor customers and former Lawson customers to stay with the company and take advantage of its offerings. Other companies, especially midsize ones seeking enterprise software that is easy to implement, maintain and add more functionality to, should evaluate the fit between Infor’s consolidated set of applications and their business needs.
Infor faces at least four substantial execution challenges in achieving its objectives. The first is to build broad awareness of the benefits of its approach and the value of its software. The second is to identify, define and refine a set of core sales offers that promote cross- or upsales. Infor offers many options, but to clarify what’s possible and promote sales execution, the company must define offers to meet the needs of specific sets of users. The third challenge is sales execution. In each of its traditional areas (ERP, analytics and other software categories across multiple micro-verticals) Infor is now offering a broader, more complex array of purchase options. Training sales people to understand customer requirements and communicate value propositions for all the options will not be easy. The company can start by simplifying its many options with a short menu of predefined offers to make it easier for the sales organization. The fourth issue is demand. However compelling Infor’s value proposition may be, other capital or operating budget priorities and spending constraints are likely to be a limiting factor, especially in its core market of midsize companies.
Serious challenges also remain for Infor in the business environment. After a decade of modest, incremental improvements, the pace of technological change is accelerating. Software consolidators of the past decade benefited from limited technological evolution enabling them to work at stitching together their acquisitions. The economic slowdown also extended the useful lives of enterprise applications, especially record-keeping systems such as ERP, meaning vendors could keep customers paying for software maintenance longer. Now this is changing under pressure from innovations. For example, companies see that cloud computing can be a better choice for deploying software than doing it on-premises, functionally, economically or both. Increasing numbers of people are working with mobile devices, larger sets of data and more sophisticated analytics. Customers’ expectations of how to interact with systems are starting to change as vendors tout the “consumerization” of their business software offerings to make them more like the apps available on mobile devices and more appealing to the social media generation of business users. Infor is aware of these business environment challenges and is responding to each of them, including creating positions for Senior Vice Presidents of Cloud and Speed to promote rapid product development and innovation.
One of Infor’s key strengths is its installed base of midsize companies. These buyers want software that requires little customization or implementation effort because they have small IT staffs and limited budgets to buy, implement and maintain the software. With this base, Infor is now the third-largest enterprise software company, and it is expanding its presence in rapidly growing countries such as Brazil and China. However, it is competing with a roster of cash-rich titans (notably IBM, Microsoft, Oracle and SAP). Infor’s recent recapitalization put it on stronger financial footing, but it is still highly leveraged. How successful it is in generating incremental revenue will dictate its ability to get cash to pay down its debt. Solid revenue growth would give it the opportunity to raise equity in the public market and more quickly deleverage its balance sheet. To the extent that Infor is unable to generate “escape velocity” revenue growth, it will crimp its competitiveness because of the need to service the debt. The real test is whether it can sustain double-digit license revenue growth and its retention rate of existing clients in the mid-90 percent range over the next six to eight quarters. For this reason, how well the organization executes is very important.
One of Infor management’s more important objectives is to explain its new strategy to users. To persuade its installed base to stay with it, Infor is promising they can keep what they have for as long as they want. Moreover, Infor will make it easier and less expensive for existing customers to get a broader set of capabilities, such as analytics, performance management and cloud-based applications designed to meet their specific needs, from Infor rather than going to another vendor. For new customers, Infor is offering the promise of faster time to value and potentially lower implementation costs in its targeted verticals. Existing customers and other companies that fit these descriptions should closely examine Infor’s new offerings while simultaneously continuing to watch its performance in the market.