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February 26, 2010

Q&A with Alastair Sorbie, CEO of IFS

CEO Alastair Sorbie discusses how mid-range ERP firm IFS takes on the big guns of SAP and Oracle

By Vinod

Q What are the trends in the mid-range ERP market?
A The market has change significantly over the last five or six years. There’s been lots of consolidation and many players have exited the market. That means a lot of choice has been removed which helps us play against the big guys more easily as there’s less mid-range competition.

Q As a smaller ERP player, how can you compete with the “big guys” like Oracle and SAP?
A The real selling point against SAP is that mid-range companies like to acquire other companies and expand internationally – neither the price of SAP’s software nor the name are important to these companies, they are interested in whether a supplier can deploy in a dependable timeframe. If they get too bogged down with first implementation in one country, they won’t want to do more with that supplier. So the complexity of SAP and the complicated roll-out means in last 12 months we have replaced SAP, as well as Oracle, due to project inertia.

There’s a different buying pattern in the mid range. They have all the systems requirements of big multinationals, but the budget and cost consciousness of smaller companies. They are very discerning in their selection criteria and we play to that requirement. When we’re up against SAP we have a high conversion rate. 

Q Did the recession affect mid-range ERP investment?
A The companies we work with are investing in areas such as alternative energy, recycling or offshore oil, so they weren’t really affected by the recession as much as some other industries.

I characterise that time as one of  intense panic at the last quarter of 2008 when no large company put money into IT. We had an upbeat last quarter of 2009 and the recession has not been as bad as people feared, so there’s much more access to budget. We only play in fairly specific areas, such as defence with project-based needs, so the whole problems in the financial sector passed us by.

Q Where is the ERP market heading?
A A few years ago, Gartner said that the ERP market had generalists like SAP, Microsoft and Oracle, but that if you were a mid-range supplier you needed to be specific, which we are. It would be difficult for someone to come into the markets we operate in now because they are so demanding and finicky. Companies like QAD and Epicor are more generalists and that’s why they are facing problems, as the only way to differentiate your product comes down to price.
 
SAP is a company struggling to find its place, while Oracle, like Pacman went off acquiring companies. Its building up some problems – how do you offer a joined up offering to customers with so many different companies? Once you get on that treadmill you can’t get off, you have to grow by acquisition.

Q ERP is an established marketplace, what innovation is happening in the market?
A ERP doesn’t do itself any favours. I’d like to sweep it away and talk to customers about advanced business applications. IFS is not locked into any technology stack – we’re not wall-to-wall Microsoft or Oracle, so if we see technological innovation coming along we can see if it works for us.

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Q You’re seen as a mid-range ERP provider. Do you intend to move up into the enterprise space or down into the SME market?
A We certainly have no intention of moving down, but we are moving up. Most of our defence contracts, such as the US Army, are not small organisations anyway. So in certain areas we are moving up into the big enterprise space, but we will work with systems integrators here, because it is different to how you work in the midrange.

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