Infor the Long Haul? Analyzing the Roll-up King

Quick quiz: Name the 10th largest software company in the world? How about the largest privately-held enterprise software company? How about naming an applications company with more customers than SAP and Oracle combined (other than Microsoft)? 

Stumped? Here's one last question: name the vendor that has rolled up more than 50 different applications companies into one single...boy I wish I could use the term mashup, but it's already taken by some completely other phenomenon. Hodge-podge is probably the better word.

The answer is simple if you've bothered to pay attention to enterprise software over the last 15 years or so, but less simple if you've been following a more push-driven notion of the market, in which vendors try hard to be noticed instead of hiding their $2.25 billion bulk behind some very stealthly, as in invisible, marketing. 

Enough questions already? The company is Infor, the category is enterprise applications, and the market is any company, anywhere, with revenues north of $20 million, give or take a couple of bricks.  Infor, in case you don't know, is the roll-up of all roll-ups, having bought SSA Global earlier this year and effectively become the home for the aforementioned 50+ applications. (How many we'll never know. ERP Graveyard has a cute tombstone graphic that shows 53 different applications in the Infor family. The number is conservative: Baan alone was a roll-up of Berclain, CAP Logistics, Aurum, and one or two others. I think the final number would have to be at least 70.)

Why mention Infor now? Infor held an analyst conference this week in Boston, having decided to bat last in the analyst world series, and here's what I learned, bearing in mind that, as a privately-held company, Infor can say a lot of things that cannot ever be verified, at least until they one day go public. (More on that in a minute.)

This is a smart company that is doing amazingly well considering how many products it actually sells into the market. And, while the heritage is 70 or so applications, the real number of individual products still being actively sold is only a few dozen. (Even this relatively small number means that there are several thousand SKUs in its price list).

This is a company that is actively pursuing a SOA strategy, with the hope that it will allow customers to plug and play functionality from its few dozen best applications in a future web-services environment. With a portfolio with more choices than a Las Vegas buffet, Infor's SOA strategy makes Oracle's little problem with fusiing its relatively small product line look like child's play. 

This is also a company that claims it competes largely with SAP, despite being in many of the same markets that Oracle and Microsoft are in. I always take the "I don't compete with" line with a grain of salt -- a common manifestation of the professional discourtesy of vendors who think it's better to not acknowledge a competitor than grace them with bona fide competitor status. 

And this is a company whose acquisition binge is hardly over. Chairman Jim Schaper said that the company wants to be at $3-4 billion in revenues within two years -- and that no amount of organic growth could achieve half that number. So it's safe to say that the  "plus" in 70-plus will be beefed up in the next year or so with a couple more big companies or a dozen or so smaller ones. 

The final point about this company is its rather impressive license revenues and net new customer wins. When you look at a roll-up the size of Infor, you tend to think that it's all about maintenance revenue. In Infor's case, you'd be 46 percent right. But license revenues come in at a solid 25 percent of the total. And the net new customers are coming in at a run rate that could total 2000 per year in 2007: the latest quarter logged 368 net new customers alone.

So what does this behemoth mean for the rest of the industry? Infor doesn't necessarily come up on its competitors' radar-screens too often, but that's bound to change. Keeping a company this big on a high-growth path means stealing customers and winnning new deals, and SAP, Oracle, and Microsoft need to keep an eye on the roll-up king. Infor doesn't pretend it will be the most innovative company on the short-list, and, even with an advanced SOA strategy, it's going to be awfully hard for them to claim the innovator's mantle. But innovation is often the last reason a company buys enterprise software -- despite everyone's efforts to make each and every sale about innovation. And, in cases where vertical functionality, low-cost, one-throat-to-choke, and other considerations come into play, Infor can expect at least to get a hearing, and, according to Schaper and his team, actually win its fair share of the deals. 

Finally -- the game of private equity usually has a public exit, and Infor's private owners are definitely planning for a big payday. It won't happen soon -- Schaper hinted that 2008 would be the earliest. But at some point this company will probably return to the public markets. It could be one of the hotter offerings if the momentum holds -- and so far, there's enough gold in this mother of all roll-ups to make it look like the momentum could hold for some time.