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Mid-market business applications giant argues that private ownership protects it from the survivalist tactics of public companies

Two years ago, Jim Schaper was planning for a party, with a vision of ever-rising investor confidence leading to an over-subscribed IPO. “I thought we would be getting ready to go public by now,” says Schaper, CEO of Infor, the (still) privately owned, mid-market business applications maker whose $2.2 billion in annual revenues, 70,000 customers and 9,000 employees make it the world’s tenth-largest software vendor.

Launching on the stock market has always been the plan for Infor, the chimerical conglomerate of acquired application vendors that has over this decade absorbed, among others, Baan, SSA Global and Systems Union.

“Clearly it’s not going to happen right now,” Schaper says – and won’t until the return of a high-growth environment.

For the time being, showing any growth at all would be a plus. In its most recent financial quarter, Infor’s performance waned as licence revenues fell by around 19% year-on-year. With consultants in less demand for sales support, they were able to turn attention to professional services and keep revenues from falling there. And a modest rise in maintenance revenues means revenue numbers will be “either flat or slightly down compared to last year” when they are finalised.

While sales of customer relationship management (CRM), enterprise asset management (EAM) and financial packages are holding up, he adds, demand for new enterprise resource planning (ERP) deployments is slowing.

So why is Schaper optimistic about the future? “I’m incredibly bullish at our prospects coming out of this,” he says. “I couldn’t be more pleased with the way we are stepping up to the plate.”

The reason, he explains, is that while publicly listed competitors are under intense pressure to limit the immediate impact of the global IT spending dip, Infor can continue to invest in longer-term goals.

These goals include Infor’s service-oriented architecture (SOA) strategy, launched in 2006. Applications are now shipping with an enterprise services bus (ESB) baked in. This is intended to make it easier for customers to integrate its various offerings, and therefore to buy more of them, the company hopes.

Thanks to that SOA drive, Infor will shortly begin selling componentised add-ons, including a role-based user interface skin called myDay and an analytics plug-in called Decisions, to customers across its product range. “We’re not slowing down our investment in SOA at all,” says Schaper. “If anything, we may accelerate it. But we are not going to see revenue payback for SOA investments until 2010.”

Hosted ambitions

Two other areas demonstrate Infor’s freedom to make investments that will not deliver immediate payback, Schaper argues.
First is the company’s investment in application outsourcing services. While the company already offers application hosting and software-as-a-service (SaaS) delivery for certain applications, there is growing demand for a full service managed hosting offering, Schaper reports.

“Some of the applications in the market today are ageing, but many customers aren’t willing to swap them out,” he explains. “So they need help supporting those applications, and they need access to the expertise and experience that we have.”

Infor has between 500 and 600 customers using its application managed services (AMS) offering, a number Schaper expects to grow. To support those services, and its professional services division, Infor has built a 500-employee offshore unit in Hyderabad, India. “Again, that isn’t going to yield any results this fiscal year, but will next year.”

Secondly, having historically relied on indirect sales channels to take most of its applications to market, Infor is now building up its own internal sales team. “Believe it or not, on 1 June 2008, we only had eight internal sales people in the US,” Schaper explains. “Now we have 120, and that’s going to go up to about 140, and we’re rolling [that model] out to Europe and Asia now.” Once again, no revenue payback from this strategy is expected until fiscal 2010, he adds.

While the economic downturn has also forced Infor to put its signature expansion strategy on hold, Schaper says that acquisition activity is bound to return.

“There aren’t many willing acquisition targets out there at the moment, because the vast majority of directors on public boards feel their companies are undervalued,” he explains. “But eventually, some of them are going to realise that they don’t have the scale to weather this downturn. We are beginning to see that already.”

“We are going to make some acquisitions,” he says. “I don’t know who it’s going to be, or when, but we are going to take advantage of this downcycle.”