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Thursday, May 03, 2012

Infor’s Two-Pronged Cloud Strategy

While enterprise cloud computing pioneers such as NetSuite and Salesforce.com get much of the attention, there is some interesting cloud-work going on among traditional enterprise software providers. One such provider is Infor.

I had the opportunity to get an update on Infor’s cloud computing program last week, at Infor’s annual user conference, Inforum. The bottom line: I see Infor’s cloud strategy as having two prongs, and it is beginning to bear fruit.

I gave a brief overview of my thoughts on Infor’s cloud strategy in my video interview with Dennis Howlett. In this blog post, I expand on those initial thoughts.

Infor Representative of Traditional Enterprise Software Providers

Infor is generally known as a vendor that has accumulated a huge portfolio of enterprise software, by acquiring a number of players over the past decade. As a result, it claims an installed base of over 70,000 customers, making it the third largest enterprise applications provider by revenue, following SAP and Oracle. As such, it epitomizes the dilemma that such enterprise software providers face:
  1. They are competing against cloud-only ERP providers, such as NetSuite, Plex, Intaact, FinancialForce, Rootstock, Kenandy, and others, who offer simple one-stop subscription-based cloud ERP. Infor is increasingly seeing these providers in net-new deals for core ERP systems, especially in the SMB market.
     
  2. They are also battling against a host of cloud-based point-solution providers, who are creeping into Infor’s installed base offering everything from CRM to expense management to talent management. Infor has a number of good on-premises point solutions, but customers are increasingly finding cloud-based point solutions more attractive in terms of ease-of-implementation, flexibility, and time to value.

    The largest of these cloud providers, of course, is Salesforce.com, which a number of Infor customers have already chosen for CRM. Interestingly, Infor does not have its own best of breed CRM system—even on-premises. It does have its Epiphany CRM system, but that is more of a marketing automation solution, not a sales force automation system, which is what most prospects are looking for. 
 Infor, as typical for most established enterprise software providers, needed an answer to both of these competitive challenges. In response, Infor has a two-pronged strategy, as I see it.

First Prong: Infor Business Cloud

The first prong of Infor’s strategy is to offer customers its own cloud solutions, both for full ERP and for point solutions. This program, first launched as Infor24 in 2006, is now branded as the Infor Business Cloud. The products offered therein are not merely hosted offerings—some of them were originally built as cloud offerings, while others are originally on-premises offerings that have been re-architected, allowing them to be deployed as multi-tenant cloud services.

In other words, Infor is not merely hosting its on-premises offerings and relabeling them as “cloud” (so-called “cloud washing). In my interview with Jim Ploude, who is responsible for Infor’s cloud business, he made it clear: the cost for Infor to deliver multi-tenant cloud services is orders of magnitude lower than it is for single tenant hosted services. There are also great advantages in terms of economies of scale, administrative overhead, risk reduction, and flexibility.

For Infor customers that insist on traditional single-tenant hosted services, Infor or one of its partners can provide that. But those services are separate from Infor’s Business Cloud, which offers the full benefits of cloud computing, and are more cost-effective.
  • In terms of ERP, the Infor Business Cloud currently offers only its Syteline product as a cloud service. But other products—which Jim was reluctant to name—are also in the pipeline for re-architecture as cloud offerings. These will give new customers additional choices for cloud ERP.
     
  • In terms of point solutions, Infor has a broader selection of cloud services, including Infor’s Enterprise Asset Management (EAM) product (originally the Datastream acquisition), expense management, property management, workforce management, and hospitality management. Jim himself came onboard with Infor as part of the Datastream acquisition and already had extensive experience in deploying that product as a cloud service.
As I point out in the accompanying video, most of Infor’s large customer base cannot move their entire applications portfolio to the cloud. They have already invested in on-premises systems. But they are increasingly interested in cloud solutions that interoperate with their on-premises investments. Infor, therefore, must provide hybrid offerings. Hybrid cloud offerings are not a compromise—they are necessary to meet customers where they are. This first prong of Infor’s strategy, therefore, represents a pragmatic approach that can work for the majority of Infor’s customers.

Infor’s Business Cloud is more than a statement of direction—it already boasts 1,200 customers and somewhere in the neighborhood of 2.4 million named users consuming its services. Although Jim would not give specifics, I have reason to believe that the majority of these customers are for the point solutions, with cloud ERP (Syteline) representing a small, but growing, number. This is not surprising, as ERP is really the last bastion for enterprise cloud computing.

Cloud Services to Facilitate Version Upgrades

There is one more angle to Infor’s business cloud that Jim was not able to discuss at length, because Infor still has announcements pending in this area. This is in regard to the use of cloud infrastructure, such as Amazon Web Services, to facilitate customer upgrades to new versions of Infor products.

When customers are considering to upgrade an existing on-premises system, much of the preliminary planning work—such as exploring features of the new version, conference room piloting, and analyzing differences between the customer’s version (which may include source code modifications or extensions)—requires a second working instance of the application. Those activities are a natural use-case for cloud infrastructure. For vendors such as Infor, who have a large installed base of customers—a significant percentage of whom are trapped in older, highly modified versions—cloud infrastructure represents an opportunity to more quickly move those customers to new versions, where they can benefit from the new products that Infor is developing.

At Inforum, Infor was not ready to announce plans for leveraging cloud infrastructure to support customer upgrades. But there is a real need in this area, and I’m looking forward to hearing more about how Infor plans to move in this direction.

Second Prong: Partnering with Salesforce.com

The second prong of Infor’s cloud strategy is its partnership with Salesforce.com, branded “Inforce.” As Salesforce already has made inroads into Infor’s installed base, and as Infor does not have its own best-of-breed salesforce automation system, a partnership between the two players makes a lot more sense than Infor attempting to build or buy its own cloud CRM offering.

I discussed the first deliverable of this partnership, Inforce Everywhere, in my blog post, Infor and Salesforce.com: More Than a Barney Relationship, and I was happy to see one Infor executive “borrow” this phrase in an analyst briefing.

Inforce Everywhere is an application, built natively on the Force.com platform and using Infor’s lightweight ION middleware, that allows a Salesforce.com users to see Infor ERP data in Salesforce.com screens. Conversely, it gives Infor ERP users access to Salesforce.com data. As a result, users can have a 360 degree view of customer information encompassing both CRM and ERP data.

For most ERP customers buying Salesforce.com, system integrators build such integration on a one-off basis. What Inforce Everywhere does is to provide such integration as a standard product. During Inforum I had an opportunity interview Julia Klein, CEO of CH Briggs, one of the first early adopters of Inforce Everywhere, and she gave a powerful testimony of how important this integration is to her company. She said that if Infor didn’t build this integration, she would have to hire someone to do it for her company.

Success Hopeful but Not Guaranteed

Infor’s two-pronged cloud strategy is coherent, but as with any strategy there are obstacles. On the first prong, the Infor Business Cloud, I see difficulties moving a sales force accustomed to selling software licenses with large up-front payments to selling cloud subscription services. I did receive some indication that Infor is aware of this problem and is taking steps to mitigate the sales disincentive to sell cloud services.

The second prong, the relationship with Salesforce.com, also has the same challenge related to the sales model, which it hopefully will address. In addition, the pricing I have seen so far for Inforce Everywhere appears a bit rich, especially when combined with Infor’s own ERP pricing and Salesforce.com subscription fees. Of course, nothing stops Infor or Salesforce.com from negotiating more aggressive discounts, but wasn’t cloud computing supposed to simplify the rug-merchant nature of enterprise software sales? My concern is that if the pricing is too rich, many good prospects may find it more attractive to just do a minimal amount of one-off integration between the two products, just like they’ve done in the past.

In spite of these challenges, I think Infor has a good chance of success. If so, it will be a good sign for other traditional vendors working on making the transition to the cloud.

Related Posts

Infor and Salesforce.com: More Than a Barney Relationship

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by Frank Scavo, 5/03/2012 02:04:00 PM | permalink | e-mail this!

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 Reader Comments:

Good signs, but traditional software vendors are leaving major growth to startup entrants. Because they are not back-fitting on premise with core services adding customer value and growth. Case in point Kewill succumbing to Francisco Partners bid. http://cliveboulton.com/post/22715195453/back-fitting-on-premise-for-web-2-0-growth
 
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Independent analysis of issues and trends in enterprise applications software and the strengths, weaknesses, advantages, and disadvantages of the vendors that provide them.

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