Infinium Software Inc.: Having All the Right Cards?
Inc. develops, markets, and supports enterprise business applications
for service organizations, mid-sized companies and divisions of large
global corporations. Founded in 1981 with headquarters in Hyannis, MA,
USA, Infinium ranks among the Top 20 ERP vendors with $122 million in
revenue in fiscal 1999 (approximately 12% thereof derived from the international
company has two major product lines. The first one, designed for IBM AS/400
computers, automates financial, human resources, materials management,
process manufacturing, and customer relationship management (CRM) functions
of organizations in a broad range of industries worldwide. Its second
product line, released in 1997, and called Infinium Advantage, is designed
to automate human resources management systems (HRMS) and payroll on a
Microsoft Windows NT Server. Infinium also helps clients migrate to network
computing installations. Services account for nearly three-quarters of
1981, Robert Pemberton, the current Infinium's CEO & President, founded
Software 2000 (the name was chosen for its futuristic connotation at the
time) to develop software for IBM System/38 minicomputers. The company
shifted its focus to the AS/400 platform after it was launched in 1998.
Due to the international popularity of AS/400 platform, Software 2000
opened offices in Singapore and London, UK during the mid 1990s. In 1996,
EVP Frederick Lizza was named president and CEO.
1997, the increasing noise about year 2000 compliance and consequent confusion
with Software 2000 name prompted the company to change its name to Infinium,
after its financial application. In the same year, the company also introduced
a Windows NT software line. The impact of this investment lead to significantly
reduced profits in coming years. In 1998, Infinium bought the payroll
software specialist company, Cort Directions. In 1999, Lizza resigned
and was replaced by founder Pemberton. The cost of discontinuing some
obsolete product lines created losses in fiscal 1999, for the first time
in Infinium's recent history. In 2000 Infinium bought Dutch Web-based
customer relationship management (CRM) application provider Dexton Information
Systems, and formed a separate line of business, Infinium ASP, to build
its application service provider business. Infinium went public in 1995
and currently trades on NASDAQ.
Trajectory and Strategy
Over past two decades, Infinium has shown the commitment to deliver solid
back-office functionality and customer support within certain industries.
Infinium is considered an undisputed leader in the hospitality & gaming
industry with over 70% of market share. Its focus on AS/400 and the decision
not to fully embrace a true client/server concept resulted in modest growth
during the 'golden' years of ERP. Nevertheless, by the end of 1999, the
company had more than 2,000 customers worldwide. The company offers its
product and services through a worldwide network of over 20 branch offices
and through business partner channels worldwide.
company believes that its host- and network-centric product architecture,
which was possibly disadvantageous a few years ago, positions itself well
for the new Internet economy. Following the market trends, Infinium has
recently made an energetic push into a number of prospective areas such
as: Web-enablement and self-service product capabilities, business intelligence,
CRM, and application hosting services.
notable is its aggressive move to become an applications service provider
(ASP). The company believes that will help it become platform-agnostic
and will compensate for its decision to downplay the development of its
NT-based product. In order to effectively deliver its ambitious undertaking,
Infinium has reorganized itself into four lines of business (ASP, eBusiness,
CRM, ERP & AdvaNTage), each having a general manager and unique P&L and
business plan, while the general & administrative staff will be shared.
expect Infinium Software to continue its focus on the lower-end of the
ERP market (companies with $25 million - $5 billion in revenues), by maintaining
and enhancing the existing functionality of its Infinium solution. The
product will likely be enhanced also through 3rd-party alliances in the
areas of Advanced Planning & Scheduling (APS), Product Data Management
(PDM), reporting, and transportation management. The company recently
announced its strategic alliances with elcom.com and TRADEPAQ Corporation
for business-to-business (B2B) e-commerce and supply chain collaboration
within its industries of interest. Additionally, Infinium will invest
more aggressively in sales and marketing, international business expansion
through distributors, and will seek to become more verticalized, concentrating
on the hospitality/gaming, transportation, healthcare, retail, and process
has long embraced concepts of component (modular) technology in designing
its product; While its product is not based on object oriented programming
(OOP) code, it has nevertheless provided a great number of APIs for
interconnectivity among its own and 3rd-party components, all providing
for flexibility and incremental deployment. Infinium is generally competitive
in speed of implementation, total cost of ownership (TCO), and price/performance
ratio. Furthermore, the Company supports both IBM and Microsoft endorsed
middleware standards and is well poised for future technological developments
with interconnectivity and workflow enablement of its suite, Infinium
has also developed strong back-office functionality (human resources/payroll
and financial management, material management, and process manufacturing)
and sharp vertical focus for some industries (See Vendor Industry Focus).
Also, it has struck a good balance between expanding its core ERP product
through acquisitions and product alliances.
has achieved solid long-term track record and congenial corporate culture
manifested in honest and fair treatment of customers, and in prudent
acquisitions and/or strategic partnerships with other leading vendors.
It has been known for adroit blending of 3rd party products with its
own and delivering the blended product as a tightly integrated unit.
As an example, one of its strongest vertical industries is transportation
to which Infinium delivers the feature product in partnership with Rippe
and Kingston Systems.
timely initiatives in the CRM and ASP arenas may result in ample opportunities
for increased business. Particularly its acquisition of Dutch CRM vendor
Dexton Information Systems may result in a true synergy for the following
reasons. First, Dexton had a renowned market presence and customers
within the European market, which supplements Infinium's North American
strong presence. Second, there is platform compatibility, which should
mitigate the integration effort to a degree. Third, in addition to a
very comprehensive CRM product suite, Dexton offers interfaces to SAP,
J.D. Edwards, SSA, and JBA, which create additional selling opportunities.
On the ASP side, owning all elements of ASP business and its readiness
to accommodate some degree of customization as well as future wider
platform support of its outsourced applications may reduce customers'
initial reticence to venture into the uncertain land of ASP.
is confined to the AS/400 platform, which does not provide it much maneuverability
within an already crowded market with a declining growth rate. While
the ASP's mantra of being 'platform agnostic' may alleviate the problem,
the ASP business model is still unproven on a large scale. Although
many CIOs make outsourcing software a serious consideration for any
future IT plans, few are willing to jump on the bandwagon at this stage.
has not achieved very strong mind share and brand awareness outside
of its niche industries, despite strong horizontal ERP functionality
and a fair global presence. Very few practitioners are aware, for example,
of the fact that Infinium financial and HR/Payroll modules often can
go head to head against SAP, Oracle, or PeopleSoft. The situation had
long been additionally aggravated by a bland user interface, although
it should be resolved to a degree with the release of new Web-based
- The company's
financial position during the last 9 months has been eroding (see Fig.
1 & 2 - Infinium Software Inc. - Annual & Quarterly Results Chart) due
to the combined effects of decreased license revenue, significant investments
and obsolete products' write-offs. While Infinium's cash situation is
still solid, any hiccups and delays in its product development execution,
possibly bundled with continued poor sales execution, may put further
significant strain on it. Furthermore, the return to its hefty investment
in the ASP part of the business remains dubious in the immediate future,
despite Infinium's initial success in attracting a few early adopters.
mitigating factors such as the focus on the AS/400 platform and the
proven interconnectivity of the product, the company faces the challenge
of delivering its very ambitious undertakings (full Internet and wireless
product re-architecting and disparate product integration) as planned.
Any product integration requires a painstaking effort, and most of it
is still in various stages of progress throughout the Infinium product
suite, with plans to deliver fully Web-enabled product in August 2000
(70% probability). Furthermore, Infinium has only very recently announced
its strategic partnership with elcom.com and TRADEPAQ regarding e-commerce
and vertical marketplaces, which will additionally burden products integration
2000 will prove to be challenging for Infinium. We predict flat revenue
or minor revenue growth (maximum 10%) as the best scenario, with a return
to profitability in fiscal 2001 (60% probability). However, despite
a competitive environment, we predict that Infinium will reach $200
million in revenues within the next 4 years (60% probability), assuming
its success in the ASP and CRM markets.
service and support revenue will contribute more than 65% of its total
revenue within the next 4 fiscal years (60% probability), based on the
company's readiness to integrate its products with other 3rd party products.
Within the same period of time, we believe Infinium CRM products will
contribute more than 15% of its license revenue (60% probability).
the next 4 years, more than 25% of Infinium's revenues will come from
outside the US market (70% probability). We believe that Infinium is
an unlikely candidate for acquisition by a competitor within the next
2 years (30% probability) due to its broad functional scope and recent
restructuring and/or acquisition activities. We also believe that it
will remain among the Top 20 ERP vendors within the next 4 years (70%
should expand its visibility within the global ERP market in the following
business in its existing customer base, by upgrading older versions
of software and by offering new extended ERP modules and enterprise
expand its global presence, both by opening new offices and developing
new affiliate partnerships. Consider acquiring or partnering with
affiliates of struggling competitors, e.g., SSA and Baan. Also,
target customer bases of these vendors, which are contemplating
a technology switch.e.g., SSA and Baan. Also, target customer bases
of these vendors, which are contemplating a technology switch.
more new, focused and pre-configured vertical solutions (e.g., professional
service automation), and vigorously market its differentiating ASP
value proposition to make Infinium attractive to resource-constrained
must remain committed to new product introductions and take more decisive
steps regarding the B2B e-commerce vertical applications delivery, possibly
through product alliances. It should also enhance its core ERP product
with some currently missing functionality (e.g., 'catch-weights' and
potency, for the process manufacturing).
ongoing cost and organization scrutiny to identify opportunities for
further improvements. In fiscal 1999, the general & administrative personnel
count, as a percentage of a total number of employees, was one of the
highest in the industry, 15%, compared to the industry average of 11%.
Furthermore, the service & support employees' count was 38% (compared
to the industry benchmark of 44%), this is somewhat out of sync with
the high contribution of service revenue (73%) to Infinium's top line
(industry average 64%).
- We encourage
the company to market more aggressively and to reinstate strong relationships
with leading analyst houses concurrently with the above-mentioned developments.
- We generally
recommend including Infinium in a long list of an enterprise application
selection for mid-market and low-end Tier 1 companies (with $100M-$2B
in revenue) as well as for divisions of Fortune 1000 companies within
the following industries: hospitality & gaming, transportation, healthcare,
retail, process manufacturing, and financial services.
should be included on any package selection short list within the above
markets where financial, human resources/payroll, and process manufacturing
are the main pillars of an enterprise application. Users from industries
not mentioned above may benefit from evaluating some stand-alone Infinium's
product components (e.g., CRM, HR, and BIAS - business intelligence
application suite) on an opportunity-by-opportunity basis and as leverage
against other vendors in the selection exercise.
seeking a Web-based solution and out-of-box functionality with some
customizing effort may benefit from evaluating Infinium ASP offering.
Support, connectivity, ease of use, security, acceptance, and scalability
are only a few regular considerations.
- As for
the newly added and/or anticipated functionality through product alliances,
users are advised to ask for firm assurances on the availability and
timeframes of future upgrades, and more detailed scope of combined product