Infor CEO Charles Phillips Discusses Software Vendor's Remaking

The third-largest ERP company wants to get a whole lot bigger through specialization.

Infor CEO Charles Phillips mostly kept out of the limelight after landing the job in October 2010, following a high-profile stint as co-president of Oracle.

That's because he was busy figuring out the future direction of Infor's vast portfolio of ERP (enterprise resource planning) software applications, which make it the industry's third-largest ERP vendor after SAP and Oracle.

Phillips, who was known for his role in Oracle' long series of acquisitions, engineered a big one soon after arriving at Infor, when the company and its primary shareholder Golden Gate Capital bought Lawson Software in April 2011 for about US$2 billion. The new CEO also pumped additional money into development, hiring hundreds of developers and announcing plans to move Infor headquarters to New York's "Silicon Alley."

Now, several months after the launch of Infor10, a next-generation set of technologies, Phillips spoke at length about where Infor has been and intends to go in an exclusive interview with IDG News Service.

IDGNS: When you first arrived at Infor and took a look around, what needed fixing?

Phillips: The priority for me was reorienting resources into products and away from other areas. We basically reduced our expense in the back office and shifted all of that into product development. I think that the company had a stable customer base, but hadn't delivered enough innovation and change. Some customers tend to view that as a good thing, but I think you're better off shipping a lot of innovation even if it means a little disruption.

So with that in mind, the second thing we had to do was invest more wisely. Even though the company had invested a huge amount on R&D, and we obviously increased that, the way it was being spent wasn't optimal, in the sense that each distributed development group got to make their own decisions, and they largely did that with input from a very small number of customers. They were doing very tactical things, you know, changing the screen from blue to red, that sort of thing, because they talked to the same three customers.

You want to step back and look at ways that can differentiate yourself, things that can make a big difference for a lot of customers and translate into commercial success. You want to push back and say, why is that on the road map versus something else, and force people into a disciplined conversation with a process behind those decisions. Just doing that alone, you get a lot of development capacity back because you stop doing things no one cares about.

IDGNS: That being said, you have all these applications and customer constituencies, was it a challenge to normalize the development process?

Phillips: Actually, the development organization was ready for change. They weren't sure what that was, but they wanted a focus on products. That's what we brought, and that's where I spend 90 percent of my time, it's with the development organization, going through product strategy and helping to make those decisions. That part, getting change to happen, was actually less difficult than I expected. Engineers like a challenge.

IDGNS: Let's talk about your recent technology launch, Infor10, which includes components such as the ION middleware framework for tying together various Infor software modules.

Phillips: We've come up with a strategy and architecture that takes advantage of our strengths and helps customers as well. There are things that don't have to be in the core [application] engine, whether it's localizations or reporting, or a number of things that are infrastructure-related ... things that you don't need to do 20 times across all of your applications. You build it once. That gives us a lot of efficiencies.

That's what we're doing with Infor10. We build the localizations once, we build the reports once, and that way we can rev the engine, which has the industry functionality in it, a lot faster.

When I got there, every team had their own mobile team. Two or three guys trying to build mobile applications. We have one mobile team now that's much larger and much better, plus we save money, because when you add it all up you don't need 50 guys building it.

IDGNS: You just alluded to the importance of industry-specific functionality. What verticals are you focused on now and in the future?

Phillips: We have about 13 verticals we're focused on, where we already have strength and an installed base. Just to highlight a few of them, we're really big in fashion, we're big in automotive, high-tech, aerospace.

[But] to us, food and beverage is not really an industry, it's a section of the economy. Our customers, if they're a baker or butcher or brewery, they don't think of themselves as food and beverage customers. Their business processes have nothing to do with each other, although they would all come under food and beverage. So we have things that are specific to brewers, or butchers.

It's very micro-vertical focused. If you just really dig down underneath, there are minute processes that people have never even heard of, like grower accounting. These are all esoteric processes that are critical to you if you're in that one little micro-vertical.

That's our strength. At the end of the day, we have those industry features that you'd otherwise have to build yourself or customize. That lowers the time to market, lowers the customization expense and the risk.

The rest of the industry is going toward infrastructure as a basis of competition. Everyone's looking at analytics and in-memory databases and hardware. We're going in the opposite direction. That's great, we'll take advantage of that stuff, OEM it if we need to, but we're going to put more of the money into these micro-verticals.

So can we walk in, and say, 'we actually know how formula management works for a baker, let me tell you how you should be doing this.' That's kind of a lost art, because everybody assumes the consultants will customize it for that last mile. But that last mile is pretty important though. We want to walk in with that last mile done and say you don't need consultants, you can get started today.

IDGNS: What about SaaS [software as a service]? Is this a key area of growth for Infor or more of a niche play?

Phillips: I believe it's a key area for growth across our business. We have a million subscribers in the cloud today, and we're the only company where we have the exact same process, multi-tenant enabled in the cloud, that can also be run on-premises. What that means is we can do hybrid deployments. You may want to be in the cloud in some locations where you don't have much scale, but you also want to keep it on-premise at headquarters. People can mix and match and make that choice.

The second thing we're doing with the installed base is an upgrade center we're about to announce soon. It's a factory, essentially. We say, let us look at what you're doing. If you're on an older release, let's look at the customizations, and our preference is for you to upgrade directly to the cloud. You already know us, you already know the app, this is just another version. Do you still need to see the box? Why not let the next upgrade just go seamlessly to the cloud? That's lower-risk for some customers. You can do it in some locations and see how it goes. With single sign-on, you can't tell where it's running as a user.

We're going to focus that upgrade center on the cloud and also take a look at retiring their customizations. A lot of times, they were done a long time ago and the product has evolved, and they don't need them anymore.

We think there's a huge opportunity, because we have a huge installed base, of going in and incrementally upgrading them. That's the easiest way for us to double our cloud business.

IDGNS: What's your view of the notion that SaaS is dilutive to a vendor's margins?

Phillips: For us it's not, given the size of the deals we're doing. Second, you are basically taking a revenue stream that's maintenance and it's now going to be a subscription in the cloud for more money, because now I've got the network costs and the hardware costs. It's actually incremental. But we're the only ones with that upgrade story. Everyone else is a separate product. It's a re-implementation. Ours is not, it's an upgrade.

IDGNS: You made one large acquisition recently with the Lawson deal. Given that and Infor's long history of acquisitions, what can we expect moving forward?

Phillips: Well, we are making acquisitions as we speak, some of which were smaller and you may not have heard of. There are a lot of vertical products that are extensions to our products. Partners build things in our architecture using the same tool sets we use. It's a no-brainer to buy those products that are already sitting around my products and make them a little more elegant and integrated. We're looking for ones that are already built on our architecture.

IDGNS: Is buying a large SaaS vendor, as SAP and Oracle both did recently, in the offing?

Phillips: We won't do the big splashy $3 billion ones. There are a lot of smaller ones out there that add value, so we will be making SaaS-only acquisitions but it will be targeted ones a little bit under the radar.

IDGNS: So on balance, with all of these things going on, who are you competing with? Who is your biggest rival today?

Phillips: Well, we're a little unique in that we extend to the entire footprint. At the low end of the market we compete with Microsoft Dynamics and Epicor and all the way up to the high end we also compete with SAP and Oracle.

Since we're so big in manufacturing we may have a customer that has SAP and Oracle at headquarters for financials and HR, but we run the plants. That's not an uncommon scenario.

For that reason we have separate salespeople. We have a mass sales force that does the midsized deals and then we've got the strategic high-end sales force. We like being in both businesses.

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris's e-mail address is Chris_Kanaracus@idg.com

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