Golden Gate Capital

Infor announces hiring plans along with Q3 software license growth of 17%

This morning  Infor announced it will expand its engineering organization by hiring approximately 400 additional software developers and plans to add significantly more new features and releases this year than ever before.  Reinforcing, the strategy shift away from building middleware, all these new hires will be focused on building business applications.
This signals an increase in investment in product development under the leadership of the new management team put in place by Charles Phillips who took over as CEO, bumping Jim Schaper to chairman of the board.  Infor also announced license growth of 17% and increased cash operating margins of 24% (which includes Infor and Softbrands Q3FY11 results over Q3 of Fiscal Year 2010). Infor added 400 net new customers last quarter. This is an important statistic since we have witnessed slowed growth of ERP solution providers, coupled with the downturn in the economy over the last two plus years. Indeed, Infor’s customer count has hovered around 70,000 for the past five years, ever since the acquisition of SSA Global, Systems Union and Extensity in August 2006. Since then, new customer growth has compensated for attrition, but has not moved the needle significantly.
New releases, standards based integration through Infor’s new ION platform, and planned changes to a new and universal user interface are all necessary components in order for Infor to break out this year and grow that number, especially if it wants to grow organically, as well as through acquisition. This announcement comes just days after the new of the proposed bid to acquire Lawson by Infor and its major investor Golden Gate Capital. Clearly Infor management wants to send the message that while acquisitions are likely in the near future, organic growth is also important.  
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Infor and Golden Gate make a bid for Lawson

Over the weekend (or on Monday if you really “turn off” over the weekend), we all saw the news that Infor and Golden Gate Capital had made a $1.84b bid for Lawson. I watched all the Tweeting and chatter yesterday with interest. Prior to venturing into the analyst/research community about five years ago, I spent over 30 years in the enterprise applications world, the last 22 of which I never officially changed jobs. But during those 22 years, the company name on my business card changed five times. Also during those 22 years, I “experienced” first-hand 14 different acquisitions, sometimes being the acquirer, sometimes being the acquiree. Sometimes I was intimately involved and sometimes I was a casual observer on the periphery.  So I consider myself quite experienced, if not an expert, on mergers and acquisitions of software companies.  While all this chatter is interesting, one thing I can say with certainty is this: at this point it all boils down to speculation and gossip.
I know both of these ERP companies very well, both from the context of their products, as well as their history of software acquisitions. Within my first few months of joining Aberdeen back in March 2006, I wrote about acquisitions by Infor and Lawson that were quite momentous. About that time, three companies were approximately the same size in terms of revenue: Infor, SSA Global and Lawson. Shortly thereafter, in part in a bid to outdistance Infor and SSA, Lawson acquired Intentia in May 2006, only to be one-upped by Infor , which not only acquired SSA Global but also Systems Union and Extensity in August.
Lawson and Infor are both similar and different. They are similar in that both are primarily ERP solution providers that have grown by acquisition, and have stretched the boundaries of traditional ERP with complementary solutions such as Human Capital Management, Asset Management, Performance Management and Business Intelligence, etc. Also, neither has grown very significantly since those major acquisitions back in 2006.
However, there are some glaring differences. Lawson essentially has two major (largely non-overlapping) product lines:
·         S3 (which stands for Staff, Source and Serve) targets healthcare, retail, government, education, financial services, general service
·         M3 (which stands for Make, Move and Maintain) targets fashion, food and beverage, wholesale distribution, asset intensive industries and general manufacturing
Infor has many different ERP solutions as well as stand-alone complementary solutions. Here’s the latest list I have of just its ERP solutions alone:
  • Infor ERP Adage
  • Infor ERP SX.enterprise
  • Infor ERP SyteLine
  • Infor ERP VISUAL
  • Infor ERP COM
  • Infor ERP FACTS
  • Infor ERP LN 6.1
  • Infor ERP LX
  • Infor ERP Baan5.x
  • Infor ERP BaanIV
  • Infor ERP BPCS
  • Infor ERP Xpert
  • Infor ERP Blending
  • Infor ERP XA
  • Infor ERP TRANS4M
  • Infor ERP AS
  • Infor ERP System 21
  • Infor ERP VISUAL Jobshop
  • Infor ERP A+
  • Infor ERP TakeStock
  • Infor ERP Enspire
  • Infor ERP commerce@work
  • Infor ERP CAS
  • Infor ERP Infinium MM/PM
  • Infor ERP MK
  • Infor ERP MANMAN
  • Infor ERP MAX + TM
  • Infor ERP MAXCIM
  • Infor ERP PRISM
  • Infor ERP Protean
  • Infor ERP KBM
  • Infor ERP Leanware
  • Infor ERP PRMS
Some of these are strategic to Infor’s growth, while others must be viewed as legacy or “heritage” products (a “heritage” product is a legacy application you are proud of.) Although Infor has decried a rationalization strategy and maintained all acquired products, not all get equal share of the marketing or development budgets. Unlike Lawson’s two product lines, which have little overlap, many of Infor’s product lines do indeed overlap with each other and this has presented a challenge to Infor in the past, both in product maintenance and development, as well as market presence. If this acquisition does go through, M3 will compete with several of Infor’s existing ERP solutions. There is less similarity with S3, but it will compete with the Masterpiece and Infinium product lines, but will position Infor better in competing in the Human Capital space and also in Healthcare.
But, as I mentioned earlier, this is all just speculation. Will Infor raise its bid? Will others start to bid? If so, who? There are only questions right now, no answers. But some of the questions that must indeed be answered before this is all played out are similar to the questions that must be asked in most any acquisition. Questions like:
·         If there is a merger between Lawson and Infor (or any other competing vendor) will Lawson remain relatively autonomous or will it be entirely integrated? This will impact both its brand as well as the possible reduction in force that generally follows any acquisition.
·         What will be the impact on product roadmaps of all the products owned by the combined companies, regardless of whether additional bids emerge and who wins?
·         Will technology infrastructures be merged, or kept a separate? Consider for example very different cloud strategies, Lawson on the Elastic Compute Cloud (EC2) platform (Amazon and other partners provide the infrastructure; Lawson provides the application.)  The two key components of Infor’s cloud strategy and its infrastructure: Microsoft’s Windows Azure and Infor ION.
One thing that should be a “given” is the continued support to Lawson’s existing customer base. In any acquisition of this magnitude, growth (and not attrition of) the installed base is always a goal. Existing customers should rest assured this will be a primary goal of Infor, or any other player that joins the fray. Exactly what that means remains to be seen.
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