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The Connected Web

Phil Wainewright

Why Enterprises Move ERP to the Cloud

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Listen to my conversation with Bruce Richardson, chief strategy officer at enterprise application vendor Infor, and a highly respected industry analyst in his former role as head of research at AMR. This is part one of a two-part interview.

In this podcast, learn what factors lead businesses to move their financials to the cloud and find out which well-known SaaS vendor has yet to make that move.

Listen to or download the 6:38 minute podcast below:

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PW: Bruce, Infor is a pretty big business software vendor serving the mid-market, but I guess some of our listeners may be unfamiliar with exactly what the company does. So just to get us started off, can you give us a few brief sentences to convey the scope of what Infor does?

BR: Sure. Infor was started in June 2002 — so we're just more than eight years old — and one of the ways we've grown to $2 billion in annual revenue and 70,000 customers was by making a lot of acquisitions within the software market. As a result today, we've got a line of ERP products: supply chain, CRM, product lifecycle management, HR, business intelligence; and performance management, enterprise asset management, expense management. We also have solutions for specific verticals: hospitality and public sector. So if you can think of a product category, it's an excellent chance we have a product for it.

Right, okay. And obviously, you're looking at competing up there with the big names in the industry. And one of the interesting developments in recent weeks is that you now have a new CEO, Charles Phillips, who until a few months ago was president of Oracle — so obviously, a very big name in the enterprise software world. And does having Charles Phillips on board mark a change in direction for Infor or is it designed to reinforce what you're already doing?

Well, to be honest, Phil, it's really hard to say. He doesn't start till December 1 and I've only had a brief conversation with him. But knowing how he works — I knew him when he was a top enterprise software analyst while at Morgan Stanley and I've spent a fair amount of time with him while he was at Oracle so I think I have some insight into how he works. I just mentioned that we have a really broad portfolio of products and I'm guessing that what he's going to do is narrow the focus. One of the things that you can't help missing is, every story that mentions Charles Phillips coming to Infor mentions that we're the largest software company you've never heard of. So I think he's going to narrow the focus so that we're definitely associated with some of the fast-growing products.

Right, okay. And yes, I think getting on the radar screen and making sure that people know what you're up to is very important. Something else I know that has been a big part of the strategy for Infor recently, and one of the reasons why we're talking today, is because of the move to software-as-a-service. Do you think that's now going to start to become more mainstream in the enterprise application space?

Well, it's funny, if you would've asked me a year ago when I was an analyst how I thought the cloud market, SaaS market, on-demand market would take off, I would've told you that I thought ERP, financial applications, order management — sort of the crown jewels, the stuff that companies most want to protect — I would've told you those would be the last applications to go over to the cloud. I'm actually surprised by the amount of interest. Virtually every RFP we get for a deal has a cloud component. The truth, though, is that often they're asking about your cloud strategy and they have no intention but to continue to run it in their own data center. So I think there's more and more interest.

Our most popular product today in the cloud is our expense management application, but we're building a growing pipeline for ERP in the cloud and some of the deals are huge. We've been participating in an opportunity that's going to be more than 5,000 users. Whether or not they actually deploy all of those in the cloud, I think remains to be seen. Our very first deal is a biotech company. They had the option of buying hardware, networking, storage capabilities, adding IT resources; or putting that money into hiring some additional scientists. So to them it was a no-brainer. They went with adding more scientists rather than adding a lot of capital expense.

Of course, there is this reluctance to entrust core financial data to third parties. It's interesting what you say about people wanting cloud as an option to be there on the vendor roadmap, even if they've got no intention of taking up themselves. Are you starting to see people being more prepared to put that financial data into the cloud?

You know, it's funny. If you were to ask Marc Benioff, the founder of Salesforce.com, he'll tell you every application that they have, that they use, whether it's their own or a third party, runs in the cloud — except for Oracle Financials. They actually have those as their back office and he's reluctant to move that to the cloud.

That must really grate. That must grate, mustn't it? [laughter] I remember there was all those years when Bill Gates was so annoyed that Microsoft did its financials on, what was it? [IBM] System 38s or something. It's exactly the same scenario. Right. Yes, yeah.

No, I think it's gradually going to happen. There seem to be three types of companies out there that are looking at ERP in the cloud. Some are the small ones, like startups — like the biotech company that I just mentioned. At the opposite end are companies that are the early true believers, that — they think in the future all applications will run in the cloud, and so they're already planning for that. Whether or not they are five, or ten or twenty years ahead of the rest of the market, that's the direction.

The middle part are people that are saying, where cloud works for us is, we've got an ERP standard that we're running now. I'll give you an example. We're working with a large SAP customer. They have a small division that has six plants around the world. They don't want to have to put IT resources, and computers and storage — basically data centers — in these six countries. So they came to us and said, 'SAP is too expensive to run at these six smaller sites, we'd like to talk to you about putting your SyteLine product there.' So we're working with them to develop a plan. All of us believe that it's going to be a fraction of what it would've cost for them to run in an on-premise mode, so this could be win-win for all of us.

Right. And so there are particular examples of businesses that actually see big benefits from a cloud or a SaaS deployment because of particular situations like that.


This is a two-part interview. In Part 2, find out Why Cloud Apps Must Co-Exist With On-Premise.

Phil Wainewright blogs about how businesses are using the Web to get better plugged into today's fast-moving, digital economy.

Phil Wainewright

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