Interview with Jim Schaper, CEO and Chairman of Infor

4th December 2006

The chances are that despite being the 10 th largest software company in the world and a dominant player in mid-market ERP with a turnover of around $2.1 billion, a large number of FSN readers may not have heard of Infor. However, in the software industry more broadly, Infor is well known for its rapid ascendancy built upon an aggressive acquisition policy backed by Golden Gate Capital, the private equity house.

Jim Schaper, CEO and Chairman of Infor In its short 4 year history, Infor has audaciously acquired, either directly or indirectly (through acquired companies) some of the world's best known software brands, such as JBA, Geac, SSA Global, Systems Union, Extensity, Baan and Mapics to name but a few. "Back in 2002, people thought we were crazy acquiring software companies at a time when customers were not acquiring software" says Schaper, "but we reasoned that there was a gap in the market."

With a long track record in ERP and supply chain software Schaper believed that the software market was ripe for consolidation. "Customers had a very limited choice. They could choose small niche providers of software who had domain expertise but were probably undercapitalised and under-distributed, or they could choose large horizontal providers such as SAP and Oracle and accept lots of customisation and third party implementation services," he said.

Schaper says that Infor's strategy plugs the gap by offering specific vertical market and domain expertise but with the backing of a global organisation. "We're vertically oriented and are not all things to all men," he says. But as time has moved on, Infor has made a push into "similar but different markets" bringing on board brands such as GEAC MPC and Systems Union, better known for their performance management and financials software respectively.

"We've definitely not stopped making acquisitions," says Schaper, "it's about giving customers a choice of ERP and best of breed solutions," he says. Countering the claim that organisations always had this choice Schaper says, "Companies want to reduce their number of suppliers. We are offering them choice from a single supplier relationship. They don't have to deal with multiple vendors."

Assembling the portfolio of acquired products and rationalising the interrelationships is well underway. The group is now structured into three broad divisions, namely; a strategy solutions group, a financials solutions group and an enterprise solutions group, each charged with determining their future road map for functionality. Schaper says that research and development spend is running at around 18 percent which he believes is at the higher end of the software industry. But the integration task, both organisational and technical is formidable. Infor's strategy of giving customers choice means that the products have to be widely integrated, so that for example, Infor's performance management suite is available across any of its ERP solutions – incidentally, a capability which Schaper says other ERP vendors cannot match. Some of the research and development budget is reserved to the corporate centre, to pay for the integration effort. "We've added asset management capability to Mapics – something that wasn't available before," he says.

Interestingly, Schaper says that Microsoft doesn't really compete in Infor's space. Nevertheless, Microsoft is a significant force in ERP software, particularly its design and technical direction. Schaper acknowledges that his R & D budget will have to cater for industry technology trends as well as functionality and integration effort. It's a lot to contend with at the same time. Technology decisions are amongst the most challenging aspects for the Infor organisation. "Inevitably, when you put several software houses together some developers believe their own development path is better than others," says Schaper who will need to shake out these issues quickly to provide certainty to customers.

In the meantime, customers seem remarkably resilient to all of the change that has happened. Infor has 70,000 of them worldwide and Schaper says that retention of customers on maintenance, which he regards as a proxy for customer satisfaction, "is the highest in the industry". Perhaps even more encouraging for Infor is the growing number of net new customers and the increasing number of sales of new software modules to existing customers.

As it stands, 80 to 85 percent of Infor's marketplace is mid-market, which Infor defines as having turnover between $50m and $2bn. "Although the mid-market is the biggest segment of our customer base our addressable market is much bigger and there are definitely customers that are much larger." So Schaper does not see Infor's strategy confined to the mid-market.

With early success under his belt Schaper is talking about the possibility of an IPO. "If I had to take an educated guess then I would say that we would be filing our intentions with the SEC in about a year but there are a number of regulatory hurdles to overcome as well." It's an interesting position for a company that has made a profession of taking public companies back into private ownership.

Nevertheless, Schaper stresses that Infor is in no hurry to pursue a listing and of course the economic climate may not favour a listing in a year's time. Despite its relatively short history, Schaper believes that Infor will be attractive to investors and rattles off six key performance metrics, ranging from EBITDA to net new customers to back his case. "We are the largest player in the market that we serve. Having a leadership position in a growing market is attractive to investors", he says.

Whilst Schaper enjoys the unfettered freedom of operation afforded to private companies, being 'private' has a notable downside. "We are just not well known," he says, lamenting that private companies are not routinely tracked by analysts and the markets. "We are the 10 th largest software company in the world but people haven't heard of us."

Nevertheless, Infor has come a long way in a very short period of time. Its ambition is formidable and one is left in no doubt that more acquisitions will follow, especially as the group seems to have virtually limitless access to debt to fund its acquisition strategy. The key to its success will be its ability to leverage its full complement of resources to bring about the choice, global reach and stability that customers apparently seek in its defined market.

The challenges of technical, cultural and organisational integration are great and with the ink barely dry on its latest acquisitions it is too early to judge the success of its strategy and whether shareholders, customers and employees will all be winners. But whatever ones view of the organisation it surely takes the prize for sheer boldness of vision and fearless implementation.

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