IFS Applications Review

It’s Time For Another Look at IFS

IFS (Industrial and Financial Systems) is a mature ERP software publisher that has done well globally but has yet to be recognized in the largest IT market in the world—the North American market. Few CIOs and business executives are aware of this solution, which is unfortunate as IFS offers a compelling ERP solution to a well-defined target market.

I recently had a chance to catch up with IFS, and I’m going to use this post to share the most salient benefits and limitations of the IFS ERP software solution.

IFS Benefits

• Narrow Target Market—Up until about five years ago, IFS was a broad-based, middle market manufacturing application. The company sought to break out of that generic positioning and carve out more tightly defined target markets. Today IFS pursues (~$100M+) middle market and enterprise companies which primarily depend upon projects, service & asset management, manufacturing and supply chain operations. Or put another way, IFS best serves manufacturing, project-based and asset intensive businesses. The IFS ideal customer is a multiple mode manufacturer (i.e. batch/process manufacturer, configure/engineer/make to order manufacturer) that seeks one agile ERP manufacturing application for all manufacturing processes and types. For customers that seek to self-select the most relevant ERP vendors, the more “multi’s” you have – i.e. multiple manufacturing modes, multi-locations, multi-currencies, multi-languages, etc.— the better the likely fit with IFS. Common customer industries include oil and gas or aerospace and defense. Companies seeking ERP manufacturing software for relatively static, repetitive processes or unsophisticated MRO (Maintenance, Repair and Operations) will likely not find IFS to be their best fit.
• Product Focus—Unlike many ERP competitors who manage several ERP systems which generally stem from multiple acquisitions and the oft under-estimated rationalization of overlapping products, IFS develops, sells and supports one ERP system aptly named IFS Applications. A one product company results in a singular focus and leaves no doubt among prospects and customers about whether any particular product in the ERP software portfolio will be favored, under-invested, divested or sunset.
• Enterprise Asset Management—IFS is the third largest publisher of enterprise asset management (EAM) software. The company holds the number one market share position in EAM for aerospace and defense, number two position in oil and gas, number three position in power generation and the number three spot for overall market share across all industries. Gartner positioned IFS in the visionary portion of the EAM software magic quadrant.
• Regional Strength—IFS is headquartered in Linköping, Sweden. The company was founded in Sweden in 1983, and has since acquired significant ERP market share throughout Europe. In December 2011, the company acquired Latin America IFS partner, LATINIFS Tecnologia da Informação S.A. (“LatinIFS”), in order to strengthen its position in the Latin American ERP market.
• Time to Value—IFS is generally deployed faster and at a lower implementation cost that many midmarket and enterprise ERP systems. The company is continuing to enhance accelerated ERP implementation methodologies and devise deployment methods that get customers up and running more quickly.
• Company Viability—IFS is publicly traded on the Stockholm exchange (OMX Stockholm: IFS), achieved SKr 2,676M / USD $418M in 2012 revenues, counts over 2,000 customers and employs over 2,800 staff in 60 countries. The company demonstrates strong executive leadership, conservative governance and a mature business operating model.

IFS Limitations

• Business Growth—IFS shows modest growth (about 8 percent), but is not matching the growth of most ERP software leaders and challengers, thereby losing market share with each passing day. More so, the company’s revenue from software licenses is disproportionately low at 17% of total revenues, with maintenance delivering more than twice as much revenue as software licenses and consulting delivering nearly three times as much revenue as software sales. While both maintenance and professional services tend to deliver strong margins, the low portion of software license sales suggests challenges in acquiring net new customers and poses serious implications to be regarded as a viable challenger in the competitive landscape.
• Brand & Message—Despite having a good story to tell, IFS is a sleeper in the space. The company would do well to clarify its messaging, amplify its voice, demonstrate thought leadership in its space and better engage the analyst and influencer communities.
• Regional Absence—It’s difficult to argue that you’re a global ERP leader or even a credible challenger when you fly under the radar in the largest IT market in the world, or even the second largest IT market in the world. Sure, IFS competitors in the U.S. and Japan are quick to label IFS a “European company” during competitive sales cycles; a comment that is not negative but clearly suggests caution for American and multi-national CIOs and CXOs who are about to bet big on their next ERP partner. IFS has some presence in the U.S. but if the company desires to be seen as a credible challenger to the more well-known ERP vendors, it would do well to go beyond thinly spread staff in remote locations and advance its vision and messaging in the U.S.
• Cloud Resistant—IFS is resisting the SaaS and cloud ERP movement. IFS Applications are not built for cloud delivery (it’s not a multi-tenant database architecture and doesn’t offer a PaaS tool), but the bigger issue seems to be the company’s denial of the SaaS/cloud ERP movement and benefits. IFS suggests that its customers are not asking for SaaS solutions. A somewhat true statement but one that is clearly changing. For example, Oracle Fusion ERP, which is targeted at midmarket and enterprise customers and supports both SaaS and on-premise, is being adopted twice as fast in the SaaS model as on-premise. NetSuite which only sells its ERP software in the cloud is perhaps the fastest growing ERP vendor in the world and the bulk of its new customers are middle market and global organizations. IFS also seems to suggest the benefits of SaaS aren’t as applicable for ERP as other business systems, and references cost as the primary example. This is short sighted thinking as cost is generally not the most cited benefit by cloud customers, and studies by Aberdeen and IDC clearly show that when you consider the offloading of IT labor and infrastructure afforded by SaaS, costs are not higher over a long haul with SaaS. The absence of a cloud ERP solution is not yet a material hindrance to customer acquisitions, but will become one in the near term.
• Technology—Finally, IFS technology is a two sided sword. On one side, the ERP software is dated and in need of a technology refresh. On the other side, the application uses an SOA and component based architecture, and has received incremental updates over the years as opposed to a rewrite in a more modern architecture. The most evident technology update being the Enterprise Explorer user interface delivered with version 8. Possibly more importantly, the company appears willing to adopt certain new disruptive technologies such as social media at least a trial basis. IFS Talk was released as an internal (subscription-based, push-based) social network for staff collaboration within the IFS Applications. The company has also pioneered some simple Wiki use for online help and basic unified communications. Whether the company will advance these social tools at the same pace as its competitors, or whether IFS technology is sufficient for a customer’s needs will depend upon the customer, and their customization, integration and similar requirements.

There's no question IFS Applications is a solid, functionally rich, flexible ERP manufacturing application. However, flying under the radar is not a viable growth strategy and failing to recognize ERP market movements will certainly forego market share. Further, ERP buyers are making what is often the biggest IT investment in their company's history, and want to be confident that they're investing in a market leader. I'm hopeful that IFS will apply the same type of thinking that developed an impressive ERP solution to the promotion of that solution, and significantly increase its brand awareness, visibility and thought leadership within its core competency areas.

Comments (3)	— Comments for this page are closed —

	Jeanie Lutz
	You mention that cost is often not the top cited benefit of cloud ERP systems, so what is?

		Chuck Schaeffer
		Like any technology investment, the benefits of SaaS are dependent upon the specific objectives and constraints of each company. Having said that, I've been speaking to business and technology leaders adopting SaaS CRM and ERP systems for a decade and several of the most cited benefits include i) business agility (this is the top benefit I hear from most business leaders), ii) the offloading of low-value/high cost IT labor associated with business systems administration and maintenance, iii) increased focus on core competencies, iv) accelerated implementation/ faster time to value, v) more intuitive and easier to use applications, vi) on-demand scalability, vii) predictable expenditures and viii) lower Total Cost of Ownership (TCO). I think the first seven SaaS benefits are largely indisputable with the current era of SaaS applications (although I'm sure on-premise providers will find some argument). The final item of cost/TCO is less clear. I've seen well performed analysis show SaaS is both more expensive and less expensive than on-premise ERP systems over the life of the application software. The devils in the details (primarily the cost model assumptions) and the answer is going to be different for different companies, which therefore requires any particular business to create their own cost calculation and determine the cost differences themselves.

	Ron Jenkins
	Business agility is exactly why we went with Oracle Fusion Financial Management in the cloud. The days of being hamstrung with rigid ERP software are behind us. If your ERP system cannot adapt to fluid changes in the business model, your company will suffer.

Share This Article

Unlike many ERP competitors who manage several ERP systems which stem from multiple acquisitions and the oft under-estimated rationalization of overlapping products, IFS develops, sells and supports one ERP system aptly named IFS Applications.

Related Articles