The systems of record employed to run the enterprise — ERP, CRM, HR, manufacturing, etc. — may not be the most thrilling software, but their successful implementation plays an outsized role in ensuring a smooth-running business. Oracle and SAP loom large as the broadest, deepest vendors in the space. But Charles Phillips, CEO of New York-based Infor, wants to elbow his way into the top tier.
How? In part by launching an IPO in 2019 or 2020, as Phillips explained in a recent interview with CIO. “We’re probably a much larger company than people recognize by our brand,” says Phillips, who served as co-president of Oracle from 2003 through 2010. “The easiest way to brand the company immediately is have a top-ten tech IPO of all time, as this would be, and the biggest one in New York. New York wants a big high-tech IPO. It’s never had one.”
Infor has been laying the groundwork for this Big Apple moment for some time. After acquiring various enterprise software companies (the last big one was ERP vendor Lawson Software in 2011), Infor has worked hard to create exceptionally usable SaaS versions. The company now offers 23 CloudSuite products and has integrated artificial intelligence and analytics (the latter through its 2017 acquisition of Birst) into its cloud platform. More importantly, roughly half of these CloudSuite offerings drill into verticals from aerospace to healthcare to fashion, drawing on common backend services while regularly adding new vertical features based on customer demand.
Despite these efforts, Phillips’ ambitions might seem outsized: Infor took in $3.2 billion in revenue in FY2018, as opposed to, say, SAP’s 24.7 billion Euros. But with an IPO pending and cloud subscriptions growing by 34 percent, the company is ready to ascend to the next level. The following interview with Phillips has been edited for clarity and length.
Eric Knorr: We last spoke in 2013, not long after you became CEO of Infor.
Charles Phillips: A lot has changed since then.
Knorr: Back then you said you were in the middle of a reboot of Infor.
Phillips: Which is essentially what we’ve done. We spent $4 billion. We refined the strategy and we’re in a much different place now, winning customers. The strategy back then was: Can we move these customers to the cloud? That’s the opportunity. We’re going to bet on the cloud, that you can put mission-critical apps in the cloud and people will accept that. Now that’s pretty much what’s happening. Fast forward from then, when we were just starting our cloud business, and it’s now at $700 million out of $3.2 billion.
Knorr: What’s the growth curve of the cloud business?
Phillips: The cloud business has grown over 30 percent and we’ve got over 70 million subscribers in the cloud. People log in from 105 countries. That’s kind of the core opportunity that you have. For our type of applications there aren’t that many choices. If you want fully cloud-enabled, multi-tenant, all the native cloud attributes, taking advantage of all the cloud services with a common infrastructure, identity management, security … we’re the only company that’s done all that for a complete suite.
Knorr: Still, most of your revenue is still coming from on-prem as opposed to cloud.
Phillips: Not our new sales — 70 percent of our new sales are in the cloud. We can’t help what was sold 10 years ago, but for new sales it’s almost all cloud.
Knorr: One of the problems of cloud adoption for the enterprise is customizability. This is an objection I frequently hear from CIOs even today. How do you solve that problem?
Phillips: That’s at the core of our strategy. That’s why we exist. What we do is say: Those mods are there because your industry has certain requirements. We think those are good requirements that we should put in the base product, so we want to do that last mile and customize it in the cloud.
We build our product by industry. We go and look at those mods and do an assessment of what people have built, and then if we don’t have it, let’s add it and customize their applications. That helps time-to-value and we can upgrade more easily. We’re doing the upgrades monthly now. It becomes our problem, and as you discover things, as your industry changes, tell us. Because, chances are, another 30 guys in your industry need the same thing.
That’s what the last eight years have been about: discovering all of that and moving those into cloud suites by industry. That’s why people upgrade. They go: I can drop these mods. We had an aircraft manufacturing company upgrade just last year from on-prem to the cloud and drop 2,500 mods. We’re trying to shrink the size of the systems integration industry. We don’t want them to customize any of our apps.
Knorr: You have a bunch of different verticals that you address. Are there common services behind that suite? Is that part of that whole endeavor?
Phillips: That’s how we’re able to address multiple industries. We have shared services for the infrastructure that’s called Infor OS. That’s the workload, analytics, federated security, document management, AI, just a bunch of stuff needed to build an application. About 700 people maintain that. And then it depends if it’s a cross-industry function like financials or HCM. Everything else should be by industry.
There are parts they can share but some parts are unique to that industry — and that’s what CloudSuite is. If you’re looking at CloudSuite A&D for aerospace and defense, it will have common components, but it has some things that are unique to aerospace and defense. We integrate all that together as if it was one product line and call that CloudSuite A&D — common UI, common sign-on, everything.
Knorr: What about adding functionality? Salesforce has its Force platform for that, for example.
Phillips: We have a platform called Mongoose, which is like Force. We have something like 30,000 APIs around a product line. Everything that we’ve done, you can call the APIs. If you want to extend your application, you use Mongoose, which has all the multi-tenancy and everything else. All these web services are built into the platform so anything you build is consistent with our infrastructure.
Knorr: That sounds like platform as a service. Hopefully not in some proprietary language.
Phillips: No, it’s Microsoft .Net.
Knorr: Are all your cloud applications built on .Net?
Phillips: Most of our applications are Java-based and run on Linux. We do have a significant contingent of .Net apps as well, but most of our new development is on Java and Angular 2.
Knorr: When you acquire new cloud customers, do you still get some of them saying, “I don’t want multi-tenancy. I don’t want to be sharing anything with other companies”? You know this has been a problem historically, particularly when it comes to ERP. People still worry about putting their financial data in the cloud.
Phillips: Not much anymore. Three or four years ago, yes, but now we have so many important processes and customers in the cloud. We’re running intelligence agencies in the cloud. That’s pretty sensitive data and they’ve decided to do it in the cloud with us. Some of the largest companies in aerospace and defense who told us they would never do cloud are doing it now. We explain that once you go through our architecture, there’s no mingling of data. It’s the application layer that’s shared.
Knorr: Let’s talk about how Infor relates to digital transformation. A lot of digital transformation is about agility and continuous iteration and programmers dynamically changing applications constantly.
Phillips: That is what generates our business. That’s the heart of our demand generation. That’s what gets these projects started. It’s not like everybody just naturally wants another ERP system unless there’s some reason to do it. What they want is: What can I do differently to generate revenue? They have some reason that they see value in it. We do that every day. We have a whole team of people that do nothing but discovery and work with customers to do that.
Knorr: That goes back to your original statement about the differentiation of the company.
Phillips: If you’re in the rental car industry, for example, we’ll build you a new rental reservation system — but we want to do it differently. A lot of people who rent cars don’t return them, for instance. … Alright, have somebody drive them back. Let’s re-rent it right there and give everybody an app. Now you’ve saved the traffic back and forth. Let an Uber driver use it for two days. We came up with those ideas. If you know enough about that industry, you’re going to come up with five ideas. Then they say, OK, that’s worth investing in.
Knorr: But isn’t that expertise expensive for you across all those different verticals?
Phillips: It is, but that’s the business we’re in. That’s your point of creation. I’d rather put the money there than building data centers.
Knorr: You’re on AWS right now?
Phillips: Yeah. We started that eight years ago so we’re not going to build any of that stuff anymore. We got out of that business. We’ve picked AWS, which turned out to be not a bad deal. They have some 400 services you can use, whether it’s network segmentation, backup and recovery, whatever. We rewrote all our applications to call those APIs. That saves us a ton of work and middleware and other things we’d normally have to build. We have enormous leverage from that and they are motivated to help us, so they recommend us all the time, and they’re also a customer.
Knorr: A lot of the new technology is being introduced now in the cloud before anywhere else.
Phillips: Yeah. Anything they’re working on, we get it a year early. When they came out with their Lex API, which is Alexa for the enterprise, we were the first one to come out with it and to apply it to our applications on our ecommerce site. You can order products by talking to the application, for instance. We are motivated to use anything they come out with and so they can showcase it with us.
Knorr: Since you’re in all these vertical areas, one of the most exciting technologies that people talk about is IoT. How are you extending into IoT in manufacturing or inventory management or retail or whatever?
Phillips: There are a lot of ways we could do it, but the convergence point for a lot of that data is something called the asset management system. We’re No. 1 in the world in enterprise asset management. That’s where all the requisitions are generated. The MTA uses that in New York. The CERN nuclear collider, most Caterpillar dealers, anybody who has complex equipment and wants a part. The connection to IoT is now that you’ve got sensors on those pieces of equipment, so you can be predictive with maintenance and optimize scheduling because we know these three things have failed or these things are about to fail.
Knorr: How do you see IoT and AI affecting you as a business? How do you intend to be ahead of the game in a way that your competitors are not in those two areas?
Phillips: The fact that we built these cloud spaces at all. The ancillary benefit is we have access to a lot of data that’s semantically consistent. Now we have a full suite of data, and the value now is to look across all these silos with HR data, manufacturing data, and correlations between them that people don’t naturally see but it’s obvious when you think about it. If I’m making decisions on people, it’s going to impact product quality. It’s going to impact a lot of different things. What are the correlations? How can we make these decisions that are going to happen to your product or sales? With our data science team, that’s what they’re building — those use cases analytics by industry.
Our Coleman AI is the opportunity we have now with so much data. And we know all your trading partner data; we know who you’re working with. Just getting that data was the hard part and now that we have it at scale, we put everything in our applications, so when Amazon has its data lake technology, it shows every event in an application. Then when you plug in there with something we call community data — weather information, HR, healthcare, just whatever data that everybody is going to need anyway — you don’t have to buy that yourself. We put all that in a giant data lake and then the data scientists will be coordinated across that.
Knorr: Since we spoke last time the field has gotten more competitive. How do you see the competitive landscape?
Phillips: I would say the irony is that this is one of the few areas of computing where you don’t get that many new entrants because it’s hard to do this stuff. It takes a long time to build enterprise applications and get them rich enough and stable enough for people to use them, especially in the cloud. In the grand scheme of things, there are just a handful of companies that can do this, and that’s part of the attraction: It’s challenging, it’s complicated, it takes a long time to build. But if those are the limits of play, we feel good about where we are.