Swedish IFS becomes only major ERP and PLM vendor to rise

29-Oct-2009

Most companies of a certain size are in the red. And above all, there’s been an incredible fall-off in sales of new licenses.

The only reason the overall numbers on the debit side have been kept low is that consulting and service revenue has held up well. But there’s a shining exception—Swedish-based IFS. While big ERP companies have been mulling over how much they need to reduce headcount and cut costs, IFS has grown, continuously and sustainably, and the second quarter was no exception. The second quarter of 2009—known as the ‘Quarter of Death”. And not without reason.

The company increased revenue by 9% to SKr 640 million, compared with SKr 606 million last year. Consulting revenue also increased by 10% during the same period to SKr 357 million (2008: SKr 324 million). And earnings almost trebled to SKr 17 million from SKr 6 million.

Looking at IFS’s first six months, the trend persists. Net revenue was SKr 1,274 million, an increase of SKr 112 million, or about 10%, compared with the corresponding period last year. These are remarkable figures compared with most other vendors, with the exception of the obviously smaller and more local companies such as Monitor and Jeeves, who have also increased revenue in the downturn.

During the fall alone, IFS has announced deals and orders for its enterprise software suite, IFS Applications, valued at close to SKr 250 million.

In other words, IFS is generating good revenue and profit with its software suite IFS Applications and can, to put it simply, live up to the epithet ‘Best in Class’—and that during one of the toughest economic downturns in the history of the Western Hemisphere.

But the recession doesn’t seem to have bothered the company’s president and CEO, Alastair Sorbie. On the contrary, he has had clear growth targets that have not been disrupted to any great extent. He talked to VerkstadsForum about the growth targets and the secret behind the successful developments: 

“We have focused on specific markets in recent years. In doing so we have identified certain areas, such as defense and offshore, and have then developed our solutions to meet the specific needs of these sectors. But IFS has also been keenly aware of trends in manufacturing, which has moved from pure volume production to more specialized production in limited volumes. We have differentiated ourselves in this respect.”

Alastair Sorbie also points out that the company, in making its strategic choices, has targeted businesses that are less affected by the economic crisis and the general downturn than others. “The advantage is that today we are generating cash, resources that we will use to create even more growth in the company. For that reason we will grow organically and by acquisition.”

Speaking of acquisitions, IFS recently acquired Norwegian-based MultiPlus Solutions, which specializes in offshore solutions among other things, and has some 100 customers in Norway, Denmark, France, China and the U.S.A. In 2008, MultiPlus reported revenue of more than about SKr 60 million. Although not a major acquisition—IFS revenue last year was SKr 2.5 million—it is a clear signal that the company is getting involved in the consolidation trend in the ERP market.

All told, IFS has high ambitions. During the five years from 2008 to 2012, IFS plans to double product revenue (licenses, maintenance and support). The downturn has, however, had a certain effect on plans, which has meant that while the targets remain, they have been postponed somewhat. At present there’s no official forecast for how long, but it’s probably a matter of a few years.

So what is that makes IFS the customers’ choice? Most likely, the roots of IFS’s success can be traced back 10-15 years when the company rebuilt its business applications, called System 4, from the ground up and based them entirely on components. This suited project-based industries perfectly, with the earliest customers coming from the Nordic offshore and shipbuilding industry. But the entire Scandinavian utilities and manufacturing industries, including their maintenance operations, and the defense sector have benefited from this shift, according to Anne Vandbakk, who is Corporate Communications Director at IFS.

“We have produced a wide range of excellent solutions for our customers for many years. For 25 years, we’ve been delivering ERP solutions, and it’s our long-term approach that is now reaping its reward. And of course we’ve had some degree of luck, in that we have a strong customer base that’s not particularly sensitive to economic trends.”

That’s certainly true. Neither the utilities nor the defense sectors have been hit as hard by the global economic crisis as manufacturing has, for example. Yet IFS numbers manufacturers and the automotive industry among its customers as two of the seven industries that IFS targets.