IFS has published details of its growth over the last year. The company, backed by EQT, though with the recent addition of TA Associates as a substantial but monitor shareholder, is growing quickly both organically and through strategic acquisitions. Enterprise Times spoke to Darren Roos about the results. IFS is a private company that does not publish many numbers. Constance Minc, IFS Chief Financial Officer, stated: “This is the third consecutive year that IFS has delivered double-digit revenue growth, and over this period we have grown recurring revenue by 250%.”
The numbers are impressive and above the average Cloud ERP software market growth of 17.4% (Source ReportLinker) with a 26% increase in software revenues. Other key figures revealed include:
- 14% increase in total revenue (7.211 billion SEK, US$848.73)
- 26% increase in Software revenues (5.092 billion SEK, US$600 million)
- 60% increase in Cloud revenue YoY
- 43% increase in recurring revenue YoY (4.801 billion SEK, US$480.5 million )
- Recurring revenue share now 80% of software revenue
- Service Management license revenues increase by 105% YoY
- Aerospace and defence license revenue grew 37%.
Minc continued: “This consistency, together with the improved revenue mix, reveals a strong business that continues to deliver with the all the right ingredients to capitalize on our investment cycle. We have real strength in our service proposition, demonstrated by license revenue growing at 105% per cent in 2020, as well as an industry focus in sectors like aerospace and defence that will ensure that we continue to deliver value to our customers.”
A Unicorn* approaches
Commenting on the numbers, Roos said: “We have a big milestone this year, that will cross over the billion-dollar mark, which is significant, you know, we were less than 500 million in 2017.”
That is impressive growth it will also mean that IFS will need to increase growth slightly above 14%. That should not be difficult as the impact from the pandemic eases.
Is IFS evolving?
Over the last few years, IFS has evolved both its product and its focus. Over the last couple of years, it has seemingly changed its focus. It now seems to focus more on service management elements rather than ERP. It still has four separate product streams ERP, EAM, A&D MRO and FSM, and each has its strengths. Enterprise Times asked Roos about this.
He replied: “We’re about to go into a significant repositioning exercise. There is the launch of IFS cloud, then the new version of IFS. We’re looking at a trend that more of our customers, rather than buying in the traditional silos of EAM, ERP and FSM, are taking bits of each solution to make the business work. A customer needs CRM, HR and finance, but they also have remote assets. They have people who are servicing those assets in a service-based business model, which increasingly more and more people do. Then they need all of this capability.
“What we’re doing from an EAM perspective, is very much focused on how does it play a role in that servitization journey, and what we’ve come to refer to as the moment of service. Any company who wants to be outstanding, and one could argue any company that wants to be relevant and survive in today’s challenging times has to provide a moment of service.
“Whoever their customer is, whether that’s an enterprise or a consumer. It’s the orchestration of your assets, your people and your customers in your company that creates those moments of service. That’s the way we’re thinking about it going forward. So, rather than having a specific EAM go-to-market or a specific ERP go to market, it’s more about how do we make these journeys work for customers?”
Prospects are buying into the servitisation journey
Roos continued: “I know it resonates because I was with the CFO of a large construction company in Dubai this morning. They’re a prospect, not a customer yet, and they were talking about the fact that they’ve invested heavily in their supply chain. Now it’s about how do they differentiate themselves? I talked about this moment of service concept, and immediately you see the lights come on, they’re like, ‘Yes, I see this, I absolutely understand this.’ This is how we bring it together in our world for our customers.”
Yet does this also means that IFS stop its focus on manufacturers?
Roos replied: “Yes, and I’m not afraid to say that because we will have customers that will want to consume our service management capability standalone. We’ll have customers that want to deploy an ERP standalone, and that’s okay. When we do our Value Engineering assessments, we see the maximum impact in a business, when we’re not providing just the finance system or just a field service solution. It’s when we’re able to string these things together in a single application, that the magic happens. They’re able to do things that they simply can’t do with a heterogeneous jumble of applications.”
Addition: Roos has since clarified his answer further stating: “Since our conception, we’ve developed a compelling proposition for manufacturers and asset intensive organisations. Now in parallel with the explosion of our service management business, we’re seeing more manufacturers come to us with service needs – they realise the importance of getting service right, and the opportunity to evolve their business model and create differentiation through service”
Roos explained the IFS solution is modular. Existing customers can still upgrade and add the new functionality available to them. Some customers that might have started as a pure manufacturer can now extend, if relevant to take advantage of the other modules.
What does the future hold?
Besides the billion-dollar mark that Roos is looking to cross in 2021 Enterprise Times asked Roos about his future ambitions.
“We look through to 2024. We will continue to focus on making sure that we maintain our leadership in the analyst ratings that we value (Gartner Peer Insights), ensuring that we maintain our leadership from a customer satisfaction perspective. It’s something that we’re incredibly proud of, and we defend, vociferously.
“Making sure that we continue to build our ecosystem. That’s been a big focus for us over the last three years and will continue to be in 2021. Over 30% of our projects are now being delivered by partners. In 2017, that was almost zero. That’s important because when I joined, it was one of the key things that I heard from customers, especially the larger customers is that they wanted optionality around deployments and upgrade services.
“They wanted to choose a small boutique or a large Indian SI or a top-five consulting company, and we didn’t have that optionality. Whereas today, we can provide them with those options in any geography, which is a great milestone for us. Those are the big things for us. Dominate the segments where we’re strong like FSM, double down on the customer success metric that’s so important to us and continue to build the ecosystem. And as a product of that, we will cross over the billion-dollar mark.”
With the ambition to continue the growth Enterprise Times also asked Roos, what is the state of the pipeline?
“We track our four rolling quarter pipeline really closely. As we came into 2021, we were 32%, up from where we were at the beginning of 2020, which was obviously pre COVID. We also measure the velocity, which is the pace at which the deals are moving within the pipeline. What we noticed in 2020, was that that velocity slowed down. So while the pipe continued to grow customers longer to make the decisions, that’s impacting the pace at which the deals close. However, we’re well into Q1 now, and our Q1 looks strong.”
“For IFS for the last three years, over 50% of our business, comes from net new customers, we added 262 new logos in 2020. There are customers that are really looking at this period as an opportunity to transform their business. They have very real needs and demands that are shaping that investment. The construction company I met with this morning is a good example of that. Where this is in no way impacting their desire to crack on and invest and go on this transformation journey.”
Enterprise Times: What does this mean
There is no doubt that IFS is evolving. With the imminent launch of its new evergreen platform on March 10th, it is about to start a new phase. The growth has been a mix of organic and through acquisition. The most recent of which was that of Clevest, further strengthening its FSM portfolio.
IFS has always had strong customer loyalty. However, while it is not leaving its customers behind, it is also not investing in some of its more traditional manufacturing segments. On the other hand, its move to servitisation has adroitly captured the next evolution that the manufacturing sector is going through. It will be interesting to see the exact nature of the new messaging and whom it is targeting.
- Note: A $1 billion dollar revenue unicorn – a rarer breed than the $1 billion valuation unicorn!