Koch backs Infor’s SaaS focus with $13 billion acquisition. What does it mean for both businesses?22nd February 2020,
Infor recently announced that Koch Equity Development has entered into an agreement to acquire full ownership of Infor. Previously Koch owned around 70%; its acquisition of Golden Gate Capital’s share will take it to 100%. The deal is estimated to be worth around $13 billion.
Here we examine why Koch has made such a bold move at this time. We move on to consider the opportunities it presents for the two businesses and their customers, as well as for ERP specialists looking for Infor M3 jobs.
What’s the reasoning behind the acquisition?
1. SAP and Oracle are the largest players in ERP. Both vendors are offering incentives in order to hold onto customers and move them onto their cloud-based platforms. SAP in particular is struggling to move customers from Business Suite 7 onto S/4HANA. As this is such a significant, risky and costly upgrade, those customers are vulnerable to a pitch from Infor based on its own cloud-based ERP solution.
2. There is currently a high demand for ERP as businesses look to increase their productivity through digital transformation and process improvement. Although SAP and Oracle hold the lion’s share of the sector, there is still a sizeable (over 30%) of the ERP market still using bespoke or in-house solutions. These systems will be phased out in favour of cloud-based technology, presenting more potential customers for Infor.
3. Koch already has an internal market for Infor’s ERP solution, its own subsidiaries and partners. Koch is one of the largest conglomerates in the USA in private ownership. It can implement Infor at sweetheart rates.
4. Infor has a good ERP product with the potential for increased usage, but is not large enough to compete with SAP and Oracle. Like them, it has customers running on-premise systems, reluctant to migrate to the cloud. It’s also a listed business. Infor would find it challenging to pursue the kind of growth-oriented strategy necessary to make inroads into competitors. By comparison, Koch is cash-rich and in private ownership. With Koch’s investment, Infor can retain customers, build its customer base and develop its products.
What are the opportunities?
Koch has the potential for a healthy return on investment. It can use its private equity to improve the value of Infor’s products and grow its customer base. With so many potential customers considering a move to the cloud, it’s a great time to invest in the ERP sector and grab a larger share of the market.
Infor has a strong opportunity to grow its customer base, particularly in Europe and Asia-Pacific. While Infor’s customers are primarily in the USA, Koch has partners and subsidiaries in over 60 countries. These present a safe, non-competitive opening in new locations. Infor will be able to tap into the emerging market for cloud-based SaaS with the advantage of local reference sites.
Like SAP and Oracle, many Infor customers are still using on-premise systems. The investment from Koch should help to persuade them of Infor’s long-term security.
ERP specialists, such as systems integrators, can expect to be busy. Koch had annual revenues of over $100 billion last year. It will need to spend some of that money on the migration and transformation of its partners and subsidiaries as they move onto an Infor ERP cloud solution.
There will also be Infor M3 jobs created by migration, as Infor customers move from on-premise to cloud. Finally, ERP consultants can expect to be involved in projects to move from on-premise, bespoke systems onto Infor solutions.
ERP enterprise customers may be offered incentives to stay loyal to Infor and to move onto its cloud-based technology. Financial incentives will also be needed to poach customers as Infor competes with SAP and Oracle for market share.
Koch is backing Infor and its cloud-based ERP solution. Infor is now in a great position to retain its customers and grow market share.