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Infor CEO is ready to fight SAP in midmarket

SAP plans easier said than done, Schaper says
  • John Blau (IDG News Service)
  • 27 November, 2006 08:51

Midmarket applications vendor Infor Global Solutions sees challenges for companies like SAP and Oracle to adapt their enterprise software products for small and medium-size business.

Earlier this month, SAP announced plans to establish a dedicated SMB unit and expand the company's footprint in the huge midmarket, a move that Infor Chairman and Chief Executive Officer (CEO) Jim Schaper thinks is easier said than done.

In an interview with IDG News Service, Schaper talked about Infor, a relatively young provider of business applications that has grown through acquisitions and now generates more than US$2 billion in annual sales, and discusses growth markets and competition with SAP, Oracle and Microsoft. The following is an edited transcript.

The midmarket means different things to different people. How do you define it?

Midmarket customers are typically independent businesses that range in revenue from US$25 million to US$2 billion. We believe that somewhere between 60,000 and 62,000 customers of our total 70,000 customer base are in the midmarket. If we compare that with SAP, which estimates that 65 percent of their 36,000 customers are SMBs or little more 23,000, we are clearly twice the size of SAP in the midmarket.

How large is the market you're going after?

Our market is globally 1 million prospective customers, including the plants and divisions of large enterprises.

Why do you include these?

A number of very large global enterprises run our applications on a decentralized plant or division basis. That's why, for Infor, a classical view of an SMB definition doesn't work.

Why should a midmarket company choose Infor and not SAP or Oracle, which have substantial expertise in business software and have stepped up efforts to target SMBs?

We fill a hole in the market. We have maximized on what smaller niche providers provide -- namely business-specific solutions with domain expertise to implement them -- and on what the large players have to offer: global distribution. We provide our customers with global reach, alternative channels and products built for their markets at the lowest total cost of ownership.

SAP would argue that it also offers products with deep industry-specific functionality. Would you disagree?

If they're digging down deep, then they've just started because that hasn't been their business model in past. They said they will do this primarily through partners.

SAP does offer different versions of its software for different markets. Could this provide a competitive edge?

They've attempted to take a tier 1 product and move it down market. You don't leave the complexity of the product behind, or the cost or length of time it takes to implement.

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And Infor has a different approach?

Our products were built for the markets they're serving. We're not attempting to take a product that was built for large enterprises and cram it down into the midmarket. We're equally not trying to take something that is prepackaged for mass consumption and move it up market as Microsoft is trying to do. There are inherent complexities that are built into a product to serve large enterprises.

So what do SMBs want?

They want very specific functionality at the lowest total cost of ownership with the least amount of complexity.

Where are your customers?

Fifty percent of our revenues come from the Americas, 41 percent out of Europe and 9 percent out of Asia Pacific region.

How important is China?

Not unlike every other software company, including SAP, it is our highest growth area. We have typically looked at the Chinese market, earlier in the evolution of Infor, as a market where we wanted to go after multinationals, whether U.S. or European-based. We have now moved with some new product capabilities into the mainland Chinese market, which is a much lower-end market but one where we believe we're perfectly positioned

And what challenges do you face in this particular market?

You start small but your products must be able to scale quickly because what today is a local Chinese auto supplier, for example, is likely to become in a few years a global supplier as China exports automobiles to the U.S. and Europe. This is coming in the next 18 months.

Do you offer any on-demand or hosted services?

We do but not for all applications. Most of what we build is at the request of customers. They have a lot of influence in our long-term development plans. But there are components that can be provided on either a hosted or on-demand model. Asset management is one, customer relationship management is another. But when you get into the extended supply chain, like warehouse management, planning and scheduling -- all core ERP applications -- we just haven't seen customer demand for that. Our products are capable of being hosted and we will host them as we see customer demand.

What about open source?

Open source is a key contributor to Infor and we will be a key contributor to open source over time. It is one of the critical differentiators in our business strategy of how we will SOA-enable our applications.