Analysts weigh in on Infor’s Koch funding

Most anticipate Koch’s $2 billion infusion in Infor will enable it to target larger customers with its cloud-based approach, centered around its GT Nexus commerce platform.    On Wednesday, the cloud-based enterprise resources planning (ERP) software provider Infor announced a massive equity injection from the investment arm of the conglomerate Koch Industries.
   The news was described by one analyst as a “thunderbolt” in the ERP market, with Koch’s $2 billion investment designed to allow Infor the wherewithal to innovate and target larger customers.
   “It serves yet another indication of serious money being invested in cloud-based applications and technology and on the customer adoption attractiveness of these technologies,” wrote analyst Bob Ferrari in his Supply Chain Matters blog Thursday.
   Questions about the investment abound, many of which won’t become clear for a while. First of all, why did Koch place such a huge bet on the third-biggest ERP provider in a market where giants Oracle and SAP control a huge amount of the market?
   “Infor’s demonstrated capability to help companies across a wide spectrum of industries automate and improve efficiency is relevant to our broad portfolio of invested companies and we look forward to exploring co-innovation opportunities,” Brett Watson, senior managing director of Koch Equity Development, said in a statement Wednesday.
   Another analyst suggested that Infor might eventually become the ERP of choice for Koch’s portfolio of constituent companies.
   “While Koch’s businesses today are predominantly Oracle and SAP shops, the investment in Infor could prompt a move off of those systems to Infor over time,” according to Constellation Research founder and CEO Ray Wang.
   Indeed, Infor CEO Charles Phillips said the cash infusion gives Infor the tools to go after larger enterprises with its cloud-oriented model.
   “Some of the largest companies in the world have approached Infor looking for a modern alternative to the legacy options available for mission critical business applications,” he said in a statement. “Infor has the scale and capital to provide a digital platform for the Global 5000.”
   Constellation notes, however, that Infor has yet to even convert all of its existing customers to its cloud-based ERP tools. The analyst firm said that under Phillips, Infor has transformed from “a holding company for aging ERP products to a progressive enterprise software vendor.”
   Ferrari said much the same.
   “Under CEO Charles Phillips, Infor has undertaken a new phase of growth and innovation that is clearly leveraging cloud-based technologies,” Ferrari said. “This new $2 billion infusion obviously represents a significant boost in such efforts, representing the equivalent of what the company has invested in product design and development in the previous five years.”
   Privately-owned Infor’s closing cash balance in Q4 was $705 million. Add Koch’s cash infusion and “that represents a lot of firepower in the world of mid-market ERP technology.”
   Ferrari said he suspects some of the funding will go to bolster GT Nexus, which Infor acquired in 2014.
   “(The) B2B network supporting customer global transportation and logistics transactional and business process support needs may well be another area of added investment in either further network and applications development or leveraging growth by added acquisitions that can support process needs beyond logistics and transportation, including procurement and planning,” he said. “Our bias points to a lost opportunity if Infor does not take the opportunity to expand its capabilities to be a unified cloud ERP, supply chain B2B network and managed services provider and GT Nexus is the key to such strategy.”