Infor Strikes Again (at Long Last): Getting “Soft” while Flexing its Muscles? - Part 1

Just when I had begun to think that Ned Lilly’s ERP Graveyard blog might go out of business soon (or at least change its name and charter), here came his new blog entry in early June 2009. The blog post’s cause was the official press release (PR) entitled “SoftBrands Enters Into Definitive Agreement To Be Acquired By Affiliate Of Golden Gate Capital And Infor.”

Now, the acquisition was certainly not an earth-shattering event by any stretch of imagination; after all, we are talking about a moderate US$80 million price tag here. Still, this move at least has a psychological and morale-boosting significance for Infor.

Indeed, it has been quite a while since the market had seen any significant moves from a once voracious and seemingly unstoppable company. After all, Infor became what it is today thanks to a slew of fast-paced acquisitions in the mid 2000s. In fact, the latest Infor corporate blurb in PRs reads as follows:
“Based in Alpharetta, Georgia, USA, Infor is one of the largest private software companies in the world. Today the company has revenues of USD $2 billion, over 8,000 employees and more than 70,000 customers. Infor’s vision is to change what businesses expect from an enterprise software provider. Infor develops and acquires proven software products that have rich, built-in functionality. Then it makes them better. Infor invests resources into product innovation and enhancement and works hard to simplify and shorten implementation times. It enables software, services, and support globally. And it provides more flexible buying options…”

Facts vs. Fiction

Vicious rumors and speculations about Infor’s mounting debt, financial backers’ impatience, some kind of possibly involuntary exit strategy, etc., have been swirling around for a while. I recently met and spoke with a number of Infor staff members, and was able to get a much better idea about what is really going on.

Without discussing SoftBrands (i.e., Infor cannot comment much about the deal before it is finalized), it appears that Infor has really needed some extra time to absorb and digest the hefty acquisition of former SSA Global. That megamerger from mid-2006 did double Infor’s size to today’s over $2 billion in revenues, but has also brought about a number of unpleasant surprises and distractions (i.e., the lack of former SSA Global’s viable product strategy and delivery, unhappy and defecting customers, etc.). For more details, see TEC’s previous article entitled “Ambitious Plans and Promises: An Enterprise Software Provider Keeps Its Word.”

By the time Infor felt like it was catching its breath again in late 2007/early 2008, the sluggish economy and deflated investors’ sentiments took their toll. The vendor indeed conducted some serious restructuring and layoffs at the end of 2008, and, to its credit, that action was all done publicly, candidly, and professionally.

But besides these layoffs for cost-cutting reasons, more recently there have been a number of quiet departures of some former top- and medium-level management folk. It turns out that the $2 billion revenue mark also requires a serious corporate culture shift for the company to begin to truly act as a global corporation.

Namely, Infor has until recently been an amalgamation of many smaller companies (each with $50 million in revenues or so), whose staffers have long had strictly a regional and parochial mindset. To be fair, Infor has been focused but in an impulsive way (e.g., tackle this industry now, that region tomorrow, etc.), but a $2 billion truly global company has to make decisions from a “big picture” vantage point.

Thus, those folks that did not fit with the new corporate direction were asked to leave and were replaced by the former members and top executives of large corporations (e.g., Oracle or Fujitsu). Moreover, the company recently instituted a field solutions marketing (formerly product marketing) team, whose role is to "inter alia" pass feedback from the field to the centralized product development team.

Previously, the sales person that would shout the most loudly would often get his/her customer’s wish on the product development priority’s list. Contrary to that, the solutions marketing folks are now in charge of coordinating Infor’s “Extend, Enrich & Evolve” or “Three E’s” strategy delivery enterprise-wide.

Where Will SoftBrands Fit?

Even if Infor cannot comment on SoftBrands at this stage for legal reasons, I certainly have a few thoughts of my own. SoftBrands is a company with somewhat a complicated history and lineage, formerly also called Fourth Shift and AremisSoft. For more information, see TEC’s previous article entitled “SoftBrands' Recovery Softens the AremisSoft Bankruptcy Blow.”

The latest company’s blurb in its corporate PRs reads as follows:
“SoftBrands, Inc. is a leader in providing software solutions for the businesses in the manufacturing and hospitality industries worldwide. The company has established a global infrastructure for distribution, development and support of enterprise software, and has approximately 5,000 customers in more than 100 countries actively using its manufacturing and hospitality products. SoftBrands, which has approximately 740 employees, is headquartered in Minneapolis with branch offices in Europe, India, Asia, Australia and Africa…”

I am not sure what more I can add to the pertinent blog posts by Frank Scavo and Ray Wang. With SoftBrands on board, Infor seems to have struck a good deal for its business in the hospitality market. Infor's Infinium product still has about 90 percent of the Las Vegas strip using the software for their human resource (HR) and financial management needs. I don't think Infor’s overall or Infinium’s (or any other Infor product’s) market share anywhere else (in any other market segment) are as high and dominant.

For its part, SoftBrands has a number of hospitality products with strong central reservation system (CRS) capabilities. These products have a few thousand installations, as described in TEC’s previous article “Vendor Extends Welcome Mat for Hospitality Industry.” It doesn’t take a rocket scientist to see many potential cross-selling opportunities between Infinium and SoftBrands hospitality customers within Infor. Both vendors have strong respective positions in the hospitality market, and this merger might indeed present a good combination.

Not That Simple With SoftBrands Manufacturing

However, much more dubious is the situation with SoftBrands’ manufacturing products. As displayed in (possibly somewhat outdated in SoftBrands' case) TEC’s Vendor Directory:
"The manufacturing group of SoftBrands Inc. has three complementary product sets for mid-sized manufacturers: Fourth Shift, evolution, and DemandStream. Fourth Shift and evolution operate as trading entities of SoftBrands Inc. Currently the manufacturing group has 2,000 active customer sites in 60 countries and its software is translated into more than a dozen languages. Licensees include some renowned manufacturers and global enterprises from the Global 2500."

DemandStream is the youngest of the three products, and with its lean manufacturing and supply chain visibility/supply chain event management (SCEM) capabilities, it might find some cross-selling use within Infor’s manufacturing portfolio. Infor already has some notable lean manufacturing capabilities, and the addition of DemandStream cannot hurt in that regard. In fact, Infor might use these capabilities to possibly tackle manufacturing execution system (MES) and enterprise manufacturing intelligence (EMI), which have been notably missing from the the vendor’s portfolio.

Evolution is another interesting ERP product, to say the least, due to being designed with flexibility in mind. The product features native business process management (BPM) capabilities, and also focuses on some esoteric industries like material converting and cut-to-size environments. Infor could fairly easily find a defendable niche for this product. For more information on both evolution and DemandStream, see TEC’s previous article entitled “Extended Enterprise Resource Planning Vendor Shows Its Lean Side.”

But the “$64,000 question” remains about where to fit the “mother” SoftBrands manufacturing ERP product, Fourth Shift, within Infor’s manufacturing roster. Namely, on the discrete manufacturing ERP side, Fourth Shift has functional capabilities and install base comparable to those of Infor ERP LN (formerly Baan) , Infor ERP SyteLine, Infor ERP System21 (formerly Geac System21), Infor ERP Visual (formerly Lilly Visual), Infor ERP XA (formerly Mapics XA), and so on  and so forth.

Even with Fourth Shift’s solid mixed-mode manufacturing ERP capabilities, it is difficult to find a defendable niche in light of the Infor ERP LX (formerly SSA BPCS) product. True, Fourth Shift was one of the first ERP products to penetrate the Chinese market and be certified by the local authorities. Thus, Infor might try to leverage that strength (although its own products like SyteLine have been making good strides in China lately).

The SAP B1 Question

But finding a niche for the original (or “classic”) Fourth Shift product (without overlap and internal competition) might even be a smaller issue for Infor, given that SoftBrands has long stopped selling its own (“classic”) Fourth Shift product. For last few years, SoftBrands has only been peddling the SAP Business One edition of Fourth Shift after the two vendors’ alliance agreement from 2004. For more information on both classic Fourth Shift and FourthShift Edition for SAP Business One, see TEC’s previous article “Classic Enterprise Resource Planning Solution Shifts Over.”

SoftBrands manufacturing has lately basically relegated itself to an independent software vendor (ISV) and value-added reseller (VAR) partner for SAP Business One. Somewhat bizarrely, the vendor asked TEC over a year ago to even remove the classic Fourth Shift product from our ERP evaluation centers, in order not to mislead prospective customers. Truth be told, I am not aware of any inquiry about SoftBrands manufacturing products in my recent memory anyway.

Ned Lilly’s blog entry from 2007 indicated SoftBrand’s sole focus on SAP Business One to the extent of the vendor even hoping to be acquired by SAP. Some pundits have indeed raised a possibly legitimate question why SAP did not buy SoftBrands.

It would seem an obvious way for SAP to build out its manufacturing functionality for SAP Business One [evaluate this product]. Thus, if SAP wasn't in the bidding contest, what does that say about its commitment to Business One? Conversely, if SAP was in the bidding, why did SoftBrands ultimately go to Infor?

Well, my take to the first question above is that SAP might have been interested in buying only the Fourth Shift Edition’s part of SoftBrands, whereas the giant did not want to deal with other non-related businesses (that are way beyond SAP’s core competencies). On the other hand, SoftBrands’ hospitality part of business was apparently attractive enough for Infor, as mentioned earlier.

Some folks are now rightfully pondering the future of SAP Business One FourthShift Edition due to the fierce rivalry between SAP and Infor in many other fields. Well, like with politicians, what happens will depend on whether the SAP and Infor executives are pragmatic business folks or egotistical knuckleheads.

Some kind of a strange bed-fellows agreement is not beyond the realm of possibility. On one hand, Infor is likely not going to cancel the ongoing contract (and royalties from SAP), especially in this economy. On the other hand, will SAP want to strand its existing install base by switching to another third-party manufacturing ERP product? Even more, will SAP want to invest heavily in developing its own capabilities, again in this slow economy?

After all, how many fierce competitors of SAP are still embedding SAP Business Objects’ business intelligence (BI) and performance management products? Let me just mention Sage and here to give you an idea about being pragmatic in this market.

Part 2 of this blog series will continue to analyze Infor’s opportunity with SoftBrands in light of its even more recent announcement of Infor Flex, a well thought-out program that was devised to give customers on active maintenance contracts a clear, fast and cost effective path to adopt Infor's latest product innovations.

In the meantime, what are your views, comments, opinions, etc. about the upcoming merger? Also, what do you think about how Infor will fare against its formidable competitors in light of its lofty strategy and recent moves?
comments powered by Disqus