Infor Sheds More Light on ‘Flex’ Upgrade and Migration Programs
June 30, 2009 Alex Woodie
Infor provided more answers to questions on how its new Infor Flex program is going to work. The company confirmed that Flex will trade some of Infor’s short-term profits in favor of a better long-term outlook for its business. And while the company is adamant that it’s not imposing a “forced march” on customers, a senior company representative confirmed that a goal of Flex is to consolidate its customers–particularly its 15,000 AS/400 customers–onto a fewer number of strategic ERP applications.
The fact that Infor would like its customer base to upgrade to newer releases of its products should come as no great surprise. Ever since it unveiled its “Open SOA” program more than two years ago, the company has been encouraging customers to upgrade to the latest releases of its products, which have been adapted to work in a service oriented architecture (SOA).
Today, Infor refers to the latest SOA-enabled releases of its various ERP products as “Evolve-ready,” and they are central to the Flex equation. But before jumping into the SOA fray, customers should ask themselves why they are upgrading or migrating ERP packages. The answer, as Infor sees it, is take advantage of the various “add-on” products that were designed to work with the Evolve-ready ERP releases.
The MyDay customer Web portal was the most mentioned add-on product during last week’s Flex launch. Other major add-on products categories include enterprise asset management (EAM), product lifecycle management (PLM), business intelligence (BI), warehouse management, and employee, supplier, and customer relationship management (ERM, SRM, and CRM).
Starting Out with Flex
The Flex program starts with an initial application assessment conducted by Infor. Based on the outcome of this assessment, the vendor will recommend one or more destination products for the company’s particular geographic region, its industry, and its mode of operation. For example, a beverage company in Germany that operates as distributor with some light manufacturing will be pointed to a different ERP system than an automobile component manufacturer in Illinois that operates solely as a discreet manufacturer.
Platform also plays a big role when a Flex migration is in order. “There’s no way around it–there’s a strong cohesive bond between some customers and the i platform,” says Infor senior VP Dennis Michalis, without a hint of understatement. “If it’s a System i customer, for example, we spend a lot of time ensuring that [we can] fully embrace that. The upgrade packages, for example, are designed to maximize that platform.”
Currently, Infor has three Flex upgrade packages for the IBM i platform. These Evolve-ready products include ERP XA 7.8, ERP System 21 Aurora version 2.3, and ERP LX 8.3 FP3. Michalis envisions adding another five ERP products to this list for IBM i in the next six weeks, including one for ERP A+. These five additional IBM i Flex Upgrade packages are currently in beta, although Michalis indicates they may need a little more baking before becoming generally available.
The total number of Flex Upgrade programs for all Infor products (i OS and open systems) will be 15, Michalis says. There will be Flex Upgrade packages created for ERP SyteLine, ERP SX.enterprise, ERP VISUAL, and ERP LN products, as well as the Enterprise Asset Management (EAM) and Warehouse Management products.
Each Flex Upgrade package will carry a fixed cost, somewhere between $20,000 and $80,000, Michalis says. There will typically be no license fees associated with Flex transactions (major platform upgrades and legacy contractual agreements for feature or module upgrades notwithstanding). Customers will also be eligible for 0 percent licensing for up to 24 months, and up to 50 percent off certain add-on products.
Infor has committed to keeping customers maintenance fees at the same dollar amount that they paid before embarking on a Flex Upgrade. But there is less clarity when a potential Flex customer has stopped paying Infor maintenance fees. If a customer has been off maintenance for a long time, they may be required to pay extra. If it’s been a short period, the coverage gap may be forgiven (only customers currently on maintenance are eligible for Flex).
Infor’s Global Maintenance business unit will make maintenance forgiveness decisions, Michalis says. “It depends on what the context is,” he says. “Sometimes people just have to cool their jets for real practical business purpose. You’ll find us pretty good to work with if we know what’s up. It’s the customers that just disappear and want to come back after five years, and things are really out of shape” that are more likely to have to pay a reinstatement fee or back maintenance.
Maintenance fees are a huge deal for Infor. They account for roughly half of the company’s $2 billion in annual revenue. The company claims a maintenance renewal rate of about 93 percent. But that figure doesn’t include customers who have been off maintenance for a long time, or customers that were inactive even before Infor acquired their application developer. The exact size of this inactive group is unclear; Infor refuses to disclose the figure. But it’s likely a sizable chunk of Infor’s 75,000 total customer base.
While Infor realizes each customer installation is going to be unique, the company is trying to make the Flex upgrade packages as repeatable and “cookie cutter” as possible. It has already done a lot of work developing standardized methodologies that can be applied to a variety of environments, and now it’s looking for ways to speed up the implementations.
“We’re trying to avoid, as much as possible, a lot of technicality with upgrades,” he says. “We’re absolutely comfortable that we’re in a position to start streamlining it, to make it easier for customers to upgrade and stay evergreen.”
Once a customer upgrades to an Evolve-ready release, it becomes easier not only to adopt Infor’s add-on products, but to maintain the ERP product itself going forward. That brings benefits to Infor and the customer, Michalis says. “Once they’re at the latest [release], we see a whole lot of ease in maintaining the way forward, because we really do separate the deep technical upgrades from feature upgrades,” he says.
In this manner, Infor is adopting a bifurcated product development strategy that separates underlying tools and technologies from application functionality, as Oracle does with JD Edwards EnterpriseOne and Lawson Software does with M3 and S3 suites. At a certain level, it’s the same thing IBM does with i OS and TIMI, and it makes a lot of sense.
Flex Migration Terms
Like with the Flex Upgrade plan, there will be no license fees associated with Flex Exchange, but they will carry a “transaction fee” of $150 per migrated seat, plus the cost of the implementation itself ($100,000 to $150,000 for a typical “FastStart” implementation). Maintenance fees will be subject to the same terms as Flex upgrades.
Infor plans to have 13 or 14 pre-defined migration packages available through Flex. In many cases, they will be the same strategic products offered under the Flex Upgrade program (ERP XA 7.8, ERP System 21 Aurora version 2.3, and ERP LX for the System i). Infor hopes to steer customers to adopting one of a number of strategic products for computing platforms, geographies, and business type. “For discrete ERP, for example, there are five or six suggestions, based upon platform premise and desire,” he says.
Infor has built a very large matrix that shows the recommended migration paths under the Flex Exchange program. What does the matrix look like? What does it show for System i customers currently running old releases of MAPICS, BPCS, PRMS, PRISM, Infinium, System 21, A+, KBM, Xpert, Daly.Commerce, BRAIN, CRM AutoRelease, and Anael products?
Infor isn’t sharing the matrix, yet. But Michalis provided a clue as to what it looks like. “I can say for sure that there are more solutions on the ‘from’ side of the equation than on the ‘to’ side of the equation,” he says. “It just wouldn’t make sense for us to create this big maze. We recommend a couple of solutions for discrete [manufacturing]. We recommend a couple of solutions for process [manufacturing]. We recommend a couple of solutions for financials. And so on and so forth.”
While Infor is trying to steer customers to adopt a fewer number of strategic products, the company is in no way cutting off options to customers, or requiring them to move, Michalis says. “Hopefully you can appreciate we’re creating a lot of latitude for them,” he says. “They can stay on the release they’re on. They can upgrade to the latest release of the product they’re on, whether we have a [Evolve-ready] package for that or not, it’s their choice. Or they could move to another i solution or an open solution.”
Sharing the Pain
Obviously, Infor hopes that customers will take the company’s offer to help them get onto one of the Evolve-ready products. That much is readily apparent. The question, then, is how badly does Infor want its customers on the preferred Evolve-ready track? How much is Infor willing to risk? What’s its stake in all this?
Michalis refused to put a figure to the potential loss that Infor might incur through the Flex program. It is Infor’s right, as a privately held company, to not discuss such matters (and since the stock market took a dive, a potential spring 2009 IPO never materialized). But as a privately held company, Infor is also freer to gamble a bit more than a public company to drive a certain outcome. And Infor is not afraid to admit that Flex, indeed, is a gamble.
“We’re putting our money where our mouth is by saying we’re going to share the risk,” Michalis says. “We’re just going to set the number, cap it, package it, and say ‘Bang, we’ll do that part for a number, absolutely transparent, no ups, no extras.'”
The hit for Infor won’t be so much on software license revenue as on professional services. “We’re not going to make as much margin on the services. We’re willing to take a bit of a clip there and get the customers moving,” Michalis says. In other words, don’t get your hopes up that the 50 percent discount will apply to all Infor products across the board.
Infor is “more interested in the long game, and having a long-game mentality,” Michalis says. “Has anybody ever had a long game in this industry? I’ll be the first to say this industry has had its bandits. But this is not a bandit trying to move in. It’s an honest to goodness endeavor to get customers to move.”
Customers should not take Infor–or any other vendor for that matter–at its word. But if a customer’s legacy application is starting to function as a serious impediment to progress and efficiency, they could do a lot worse than seeing what Infor is willing to bring to the table, and get that modernization ball finally rolling.