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Recently, Infor held its second innovation conference with industry analysts at its New York City headquarters. Infor’s products include the major categories of ERP, human capital management and financial performance management applications. Behind the marketing aspects of its use of “innovation” is a business strategy for retaining existing customers, migrating a sizable percentage of those customers to the cloud and gaining new customers. (Because of the relative size of the installed base, renewals and migrating customers to the cloud are likely to be more important to Infor’s future revenues than adding new customers.) I think it’s useful to assess the content of the event in the context of the company’s business strategy.

To echo what I wrote last year, the company’s aim is to accelerate revenue growth by offering companies a lower and more predictable cost of ownership than its rivals in the business software market as well as innovation that improves productivity and organizational effectiveness. Infor is trying to innovate by focusing on improving the user experience and lowering its customers’ costs through its software design and architecture. One of the most important aspects of Infor’s approach to innovation is rethinking how users work with its software by simplifying and streamlining user interfaces, adding collaboration–in-context capabilities and providing a modern user experience (UX) akin to what people have grown accustomed to in their personal software. After two decades of development, the bulk of the core features and functions of most business software, especially ERP, have become commodities, which is why UX is increasingly important in vendor selection.

Infor adopted its current strategy because the software markets it serves are mature and offer limited growth using the traditional on-premises, perpetual licensing model. Our benchmark research finds that companies are keeping their ERP systems longer than they did a decade ago – on average 6.4 years vs. 5.1 years.vr_Office_of_Finance_01_ERP_replacement Migrating existing customers to cloud services will enable Infor to increase annual revenues from them. It can charge more than it currently bills for maintenance and still offer existing customers an all-in cost that is at or below their  total cost of ownership for the on-premises software. A software-as-a-service (SaaS) approach eliminates the need for customers to operate and maintain the software, and it minimizes the need for third-party consultants and systems integrators to set up, update and modify the application. A significant portion of Infor’s installed base is entities in verticals such as higher education and government that traditionally have underinvested in IT equipment and staff. They are likely to find a SaaS offering an attractive option because of improved performance and even responsiveness to user issues. Infor also will benefit if its SaaS customers buy additional capabilities, adding “edge” application services such as expense management or planning.

Meanwhile, almost everything that Infor – or for that matter any vendor – does to make its software an attractive option for a multitenant environment has the potential to lower the cost of ownership for an on-premises customer. For example, eliminating the need for customization is a prerequisite for any multitenant SaaS offering, but it also reduces the cost of buying and maintaining software that will be deployed on-premises or in a private cloud. Infor’s ION architecture simplifies application and data integration for cloud and on-premises customers.

To achieve superior cost-effectiveness for all customers and make it suitable for use in a multitenant cloud environment, Infor has redesigned its software to be more configurable and reduce the expense of integrating and customizing it. One component of this is building in richer functionality for narrowly segmented micro-verticals so that buyers do not have to pay a consultant to create customizations to provide these necessary capabilities. To lower the total cost of ownership, it has been building multitenant cloud versions of its software (currently there are 33 business-specific offerings) and 15 CloudSuites that automate industry-specific core processes from end to end. Another contributing factor to a lower cost of ownership is Infor’s use of less expensive open source infrastructure and third-party commodity services, which provides savings that can be passed on to the customer.

Innovation in general and a focus on the user experience are essential to the success of Infor’s strategy because they improve the company’s ability to sustain high customer renewal rates and provide a differentiated offering that can enable it to gain market share in adding net new customers. Of course, “user experience” is a bit of a buzz word. When applied to business computing it covers the totality of the effects of an individual’s interactions with the software. Assessing some aspects of the UX are quantifiable (for instance, the number of clicks and screens required to execute a task), while others such as the user’s alertness, attitudes and emotions when using the software are far more subjective and (thus far) usually difficult to quantify. Because the totality of the user experience depends on a variety of elements, many of which are not quantifiable, and – even with the same individual – can vary widely according to context and circumstances, this remains an inherently fuzzy term. Yet, to paraphrase a Supreme Court justice writing of obscenity, we know a good personal user experience when we see it. User experience is not just a pretty face. Data availability, for example, is a constraint that defines the capabilities of any business application. Infor’s ION architecture is designed to facilitate data integration to broaden and deepen the scope of information that its systems can present to individuals as they perform business functions. The user experience in business software involves a more complex set of factors than in smartphone apps; it’s not just the graphic design. Having an information architecture that facilitates collecting and combining all or most of the data to present to a user in a business process can provide a differentiated UX.

To achieve a differentiated user experience, Infor’s Hook & Loop internal design studio has been working for several years to overhaul the design and organization of the screens in Infor’s applications to improve the mental ergonomics of working with business software. Among the more obvious changes have been the reduction of clutter, better graphics and easier navigation. In general, improving the user experience builds on decades of research to better understand how people work with software and therefore how to lay out screens and page flows to make interactions more pleasing and efficient.

vr_Office_of_Finance_16_next-generation_technologiesAnother element of the user experience is how individuals are able to collaborate. Because business is an inherently collaborative process, collaboration capabilities are important to the productivity of business software. Infor’s Ming.le collaboration platform is designed to deliver collaboration in context; that is, the software must be “aware” of what an individual is doing and can provide ready access to the specific colleagues whom the user may need to contact at that moment. This approach is superior to instant messaging and email because the work product is easily incorporated in the discussion. For example, if there is an issue with an invoice, the underlying data about it is viewable and searchable. The discussions around the invoice are saved so that if later some other issue arises about that invoice, the original discussions are readily available to anyone who has permission to see them. That noted, initially Infor may find it difficult to convince finance departments of its utility. In our research only 16 percent of participants said that collaboration features in software will affect performance. This may be because in their initial marketing of collaboration features vendors focused on Twitter-style feeds or a Facebook-style approach that broadcasts widely. As I’ve noted, this style is inappropriate for many parts of a business, especially finance and accounting. However, I expect that as companies use collaboration in context it come to be viewed as an indispensable capability.

The evolution of the user experience is under way, and we believe it will be an increasingly important source of competitive advantage and product differentiation in business applications over the next five years. Smartphones and other mobile devices have opened the eyes of many people to the possibility of being delighted by software, even in accounting and shop floor applications. The next generation of UX will promote the longstanding objective of having software that readily adapts to how individuals work rather than forcing individuals to adapt to the limitations of information technology.

I’ve been covering Infor’s transformation from its inception. The company has made significant progress in creating software that is more efficient to operate, supports better visibility and insight into how a business is performing, is easier to manage and has a lower cost of ownership. It is also setting the bar for improving the business software user experience. That noted, Infor is still a work in progress in a dynamic market with well-financed competitors, and its long-term success will depend on a steady stream of innovations in addressing the requirements of its targeted microverticals, affordability and the user experience.

Current Infor customers should look into whether it makes sense for their company to migrate its existing on-premises applications to the cloud to lower the total cost of ownership or improve software performance. Those considering purchase of ERP, HCM and performance management software should have Infor on their list of vendors to consider.

Regards,

Robert Kugel – SVP Research

There’s a long history of companies not paying close enough attention to the contractual elements of acquiring software. Today, this extends into the world of cloud computing. Many companies are choosing to acquire software services through cloud-based providers and increasingly rely on access to cloud-based data, as is shown by our forthcoming benchmark research, in which a large majority of participating companiesvr_DAC_01_importance_of_cloud_data said that having access to data in the cloud is important or very important. As they say, I’m not a lawyer and I don’t play one on television, so what follows is intended to be nothing more than a conversation starter with legal counsel. But I do advise companies on how to use software to improve their business performance and provide guidance on what software they need to achieve their objectives. From that perspective, let me offer this blanket recommendation: Your company should examine the terms and conditions of its contracts carefully to be certain that it has the ability to control, access and retain its data in single or multitenant cloud-based systems. It should be prepared to add terms and conditions to any software-as-a-service (SaaS) contract to preserve ownership of and access to the data as well as other proprietary elements of that business relationship.

The fact is that choosing a cloud-based option presents a different set of legal issues that purchasers do not face with on-premises software, so it’s important that they consider the terms and conditions of the contract. Some of these issues aren’t completely new – they go back to the days before perpetual contracts and “open systems” were the norm. In that era, a company could find itself hostage to a vendor that shut down the company’s system remotely and prevented it from using the technology to run its business and retrieving its data from the system. Before entering into any SaaS contract or renewal, it’s important to review the details of the contract and its terms and conditions. The company should insist on modifying the wording of the contract if necessary to the satisfaction of both parties. It’s essential to perform this review early on, when vendors are short-listed, not at signing. It’s also important to review and, if necessary, revise the contract before each renewal. Customers have leverage at renewal since the most expensive event in a subscription-based business is losing a customer.

There are many facets to a SaaS contract, including performance, reliability and security as well as data. My focus here is on the last item.

Going into a relationship with a SaaS vendor, it’s essential that the contract specify what data the customer owns, whether that ownership is shared with any other parties, including the SaaS provider, and how the customer can obtain its data from the vendor. A SaaS contract should delineate what data the customer will have the right to take at the time it terminates the contract. This should include its data in the database tables but also might cover data about its specific configuration of the application and data from the database logs that pertains to its use of the system. It also should specify the form and format for that data as well as the timing of when the customer will obtain that data (for example, how many hours or days from when the customer requests it), how often the customer will be provided with data (unlimited requests is preferable) and the charges for such data transfers. Creating a set of extraction reports that harvests all the data from the buyer company’s tables may be adequate, but then again it may not be sufficient. The contract also should address contingencies for change of control (that is, if the vendor is acquired by another company) and bankruptcy.

Having database table data and information about the database structure is useful in the process of moving from one cloud vendor to another. Migrating from one vendor to another almost always involves setting up the successor system before the previous vendor’s contract expires. Also, in the process of finding and selecting a new vendor, a company will find it necessary to provide information about its existing system and the data that’s in it. This should be part of the background information included in a request for proposal (RFP), which should include a section detailing how the implementation service provider will manage the migration. Clarifying this part of the process ought to be a part of the selection process, and getting the details of the migration in writing before selecting a vendor and implementation partner reduces the possibility of encountering a potentially time-consuming and expensive problem. The responses to the RFP can help the buyer craft the contract terms and conditions with the successor vendor and implementation partner.

How often the customer can transfer data from the system vendor’s system is important because it’s likely that a customer will need to do so multiple times. For example, in most cases it will need to extract the data from the current vendor’s system at least once before the contract terminates in order to begin the implementation process for the follow-on system. This will be necessary weeks if not months before the termination date, followed by additional data extracts from the old to the new system. Companies also should consider how to replicate the process of running the incumbent and new systems in parallel during a testing phase. There may be fewer potential “gotchas” in migrating from one cloud to another because there are no system configuration and other infrastructure issues with which to contend, but there still will be many process, business logic and configuration kinks to work through. Even after migration, a company may find it necessary to maintain its instances with the old vendor for legal or audit purposes for several years. Setting the parameters of pricing a decommissioned version in a contract is likely to save money down the road.

There’s also the related issue of data ownership. A contract with a SaaS provider should acknowledge that the customer is the sole owner of its data and lay out the ability of the service provider to access that data with the objective of ensuring that the data can be used only to provide services to the cloud customer. Also, the legal ramifications of connecting a company’s cloud system to other applications or an operational data store should be spelled out.

Data retention and third-party access should also be covered in the contract because during a civil, regulatory or criminal legal proceeding, the customer may be subject to electronic discovery. This involves the exchange of information from electronic systems in electronic format. Data identified as relevant by the attorneys involved in such a process is placed on legal hold, which means that it cannot be deleted or altered. Making this explicit in a SaaS contract may reduce the possibility of legal repercussions if, for example, the vendor inadvertently eliminates or alters data that is covered by a legal hold.

The physical location or locations where the customer company’s data is held, as well as any backup sites, ought to be included in the contract. This is important because of requirements by some countries (for example, the EU Data Protection Directive) that specify where data can or cannot be located and whether data transfers are permitted. The contract also should spell out how the customer company will be notified ahead of time if the locations where its data is stored will change.

It strikes me that we are still in the naïve stage of the cloud software revolution, but it’s time to imagine the worst that can happen. I recommend that SaaS vendor user groups focus on the contractual aspects of their relationship with vendor, especially with respect to their data. They can collectively engage their corporate counsels in crafting a set of desired contract terms and establishing best practices for ongoing access to data and for facilitating migration from that vendor’s environment when customers wish to make the move. They also should focus on how secure their position would be in the event of a corporate bankruptcy and on the change of control provisions (if any) should their vendor be acquired. For their part, I recommend that vendors develop their side of contracts to anticipate having to meet their customers’ demands for open access and control. Just as buyers forced vendors to adopt a more open systems approach two decades ago, SaaS customers are unlikely to want to find their data locked in. Developing a legal framework to handle unfortunate contingencies makes better sense than trying to deal with issues on an ad hoc treadmill.

Regards,

Robert Kugel – SVP Research

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