Infor released its Q3 2017 results yesterday. Charles Phillips, CEO at Infor comments in the analyst briefing began with: “Infor delivered another solid quarter in Q3 driven by continued momentum in SaaS revenue, strong services revenue growth and solid maintenance retention.”
Total revenue was up 6.5% year on year (on a constant currency basis) to $778 million. This was driven by higher SaaS subscription revenues, up 15.1% year on year to $209.4 million (on a constant currency basis). SaaS revenues more than offset the drop in revenues from license revenues.
While the growth of SaaS revenues is important it does not mean that traditional revenues will always fall. Within the Infor ecosystem there are customers such as Alphamega who are re-investing in on-premises solutions, maintaining the software license revenue figures. While the license figure continues to fall still, there may come a point where that stops as existing customers retain and even enhance their existing solutions due to geographic, compliance or other reasons. Overall SaaS revenues make up 65% of the total license revenue in this quarter.
International is key
Infor has seen much of its SaaS growth from the US market. Phillips is confident that this is about to change. He recently completed a tour of Europe and
Asia. He commented: “I am increasingly confident in our international business. While Europe and Asia were slow to embrace SaaS solutions things have changed and we are now seeing significant demand in both regions.”
In Europe Infor recently appointed Cormac Walters to run the business unit there. Previously with SAP, he brings a level of experience and a set of relationships that Infor are already leveraging across the continent, according to Phillips.
Asia is also seeing a growth in adoption of cloud. Phillips commented: “I believe we have reached a tipping point in Asia, as the technical infrastructure in many companies is just now robust enough to run applications in the cloud.”
In Asia Infor opened a new data centre in Sydney with AWS to help boost SaaS adoption in Australia. It also has a data centre in Singapore but this latest addition reduces the latency that Australian companies would experience. Phillips is seeing greater traction and assistance from the SI’s as well adding: “Accenture, Cap Gemini, Deloitte, Grant Thornton getting us into places that we couldn’t get into before.”
What does this mean
Most of the SaaS growth that Infor is gaining is organic. Although Phillips was quick to point out that Infor is now being invited to more conversations. They are becoming the third choice (behind SAP and Oracle one assumes). It also means that if an implementation fails then Infor are often invited in for a further conversation. The growth is also being seen across multiple industries. Phillips commenting: “Distribution , Wholesale Distribution and Retail is still really strong for us, I met with large retailers in London. Our core manufacturing is doing well for us both domestically and Europe.”
More importantly the pipeline is strong and “growing” according to Phillips. He added: “The pipeline continues to grow but it is shifting more towards SaaS and away from perpetual.”
With that shift to cloud one would expect more cloud KPI’s and metric such as retention to start being aired. They are not though. It will be interesting to see whether these figures are released by Infor. They are likely to be high nevertheless. The nature and length of the implementations means that most customers are unlikely to shift quickly.
This was indeed a solid quarter. It is too early to tell when growth will accelerate in certain verticals but Phillips believes that Infor is winning market share. The indications, especially in retail are good. The only problem is that retail is an industry in turmoil, recent company and store closures make the sector less attractive than it was ten years ago.
