 Live from Boston, Massachusetts, it's theCUBE, covering IFS World Conference 2019, brought to you by IFS. Hi everybody, welcome to Boston. You're watching theCUBE's coverage of IFS World in the Heinz Auditorium in Boston. I'm Dave Vellante with my co-host, Paul Gillin. Paul, this is the largest enterprise resource planning software company that our audience probably has never heard of. This is our second year covering IFS World last year, which is in Atlanta, they've moved to Boston. IFS is a Swedish-based company. They do about $600 million in annual revenue, about 3,700 employees, and interestingly, they have a development center in Sri Lanka of all places, which is kind of was war-torn for the last 15 years or so, but nonetheless, evidently a lot of talent and beautiful views, so welcome. Thank you, Dave. I have to admit, before our coverage last year, I'd never even heard of this company, been around this industry for more than 30 years, never heard of this company. They've got 10,000 customers. They've got a full house next door in the keynote, and a very enthusiastic group. This is a focused company. It's a company that has a lot of vision about where it wants to go, some impressive vision documents, and really a company that I think is coming out of the shadows in the US and will be forced to be reckoned with. So as I say, they were founded in the mid-1980s, and then they kind of re-architected their whole platform around client-server. You remember the component move? It was sort of big trends in the 90s, and in the mid-90s opened up offices in the United States. We're going to talk to the head of North America later, and that's one of the big growth areas. They're growing at about three, they claim to be growing at three X, the overall market rate, which is a good benchmark. They're really, their focus is really three areas. ERP, asset management software, and field service management, and they talk about deep functionality. So for instance, although they compete with Oracle, SAP, certainly Microsoft, and Info, a company we've covered, Info talks a lot about the last mile functionality. That's not terminology that IFS uses, but they do similar types of things. I'll give you some examples, because okay, what's last mile functionality? Things like detailed invoicing integration, contract management, very narrow search results on things like, I just want to search for refurbished parts, so they have functionality to allow you to do that. Chain a custody for handling dangerous toxic chemicals, certain modules to handle FDA compliance. So real kind of nitty gritty stuff to help companies avoid custom modifications in certain industries, energy, construction, aerospace and defense is a big area for them, as well as manufacturing. This is a segment of the ERP market that often is under scene. There's a lot of these companies that started out in niches, PeopleSoft being a famous example, starting out in a niche of the market and then growing into other areas. And this company continues to be very focused, even after 35 years, as you mentioned, just energy, aerospace, a few construction, a few basic industries that they serve, serve them at a very deep level, focused on the mid-market primarily, but they have a new positioning this year, they're calling the challengers for the challengers, which I like, it's a message that I think resonates, it's easy to understand. They're positioning their customers as being the companies that are going to challenge the big guys in their industries. And at this time of digital transformation and disruption, that's what it's all about. I think it's a great message they're bringing out this year. Well, of course I like it because theCUBE is a challenger, right? Even though we're number one in the segments that we cover, we started out as a sort of a challenger. Interestingly, IFS in the Gartner Magic Corner is actually a leader in field service management. They made an acquisition that they announced today of a company called Astia. Astia. Astia is a pink sheet OTC company, I mean they're a very small, is a tuck in acquisition, and maybe they had a sub $20 million market cap, they probably do $25, $30 million in revenue. Darren Ruze, the CEO said that this places them as the leader in field service management, which is interesting, we're going to ask him about that. To your other point, you look around the ecosystem here, they have 400 partners. I was surprised last night I came early to sort of walk around the hall floor. You see large companies here like Accenture, and I'm surprised, I mean I remember the early days when we did the Service Now conference, say 2013 or so. You didn't see Accenture, Deloitte, EY, PWC, now you see them at the Service Now event. Here you see them, I mean, and I talked to Accenture last night, I said yeah, well we actually do a lot of business in Europe, particularly in the Scandinavian region, and we want to grow the business in the U.S. Europe tends to be kind of a blind spot for U.S. companies. They don't see the size of the European market, all the activities where some of the great ERP innovation has come out of Europe. This company, as you mentioned, growing three times the rate of the market, they have a focus on, they're very tight with those customers that they serve, and they understand them very well. And this is a, you can see why Accenture is serving this market, because they're simply following the money. There's only so much growth left in the SAP market, in the Oracle market, but as the CEO, Darren said this morning, half of their revenues last year were from net new customers. So that's a great metric that indicates that there's a lot of new business for these partners to pursue. Well I think there's some fatigue, obviously, for big, long, multi-year SAP integrations. You're also seeing, you know, at the macro, we work with enterprise technology research and we have access to their data set. One of the things that we're seeing is the slowdown in the macro. Clearly, buyers are planning to spend less on IT in the second half of 2019 than they did in the first half of 2019, and they expect to spend less in Q4 than they expected to in July. So things are clearly softening at the macro level, they're reverting back to pre-2018 levels, but it's not falling off a cliff. One of the things that I've talked to ETR about, it's sort of the premise we put forth, love to get your thoughts, essentially we started digital transformation projects, let's say in earnest in 2016, 2017, doing a lot of pilots, started kind of pre-production in 2018, and during that time what people were doing is they had a lot of redundancy. They would maintain the legacy systems and they were experimenting with disrupted technologies. You saw obviously a lot of UI path, a lot of snowflake and other sort of disruptive technology, certainly in infrastructure, pure storage was a beneficiary of that. So you had this sort of dual strategy, we had redundancy of legacy systems and then the new stuff. What's happening now is the theory is that we're going into production with digital transformation projects and we're killing the legacy stuff. Okay, we're ready to cut over to the new. We're not going to spend on that anymore. Right, we're not going to spend on that anymore. Dial that down, number one. Number two is we're not just going to spray and pray on all new tech, blockchain, AI, RPA, et cetera. We're going to now focus on those areas that we think are going to drive business value. So both the incumbents and the disruptors are getting somewhat affected by that slowdown and that narrowing of the focused. And so I think that's really what's happening and we're going to, I think have to absorb that for a year or so before we start to see new wave of spending. There's been a lot of spending on IT over the last three years. As you say, driven by this need, this transition that's going on now, we're beginning to see some of those legacy systems turned off, the more important they got to look at, I think, than overall spending, is where is that money being spent? Is it being spent on servers or is it being spent on cloud services? And I think you would see a fairly dramatic shift going on there. So the overall, the macro I think is still healthy for IT. There's still a lot of spending going on, but it's shifting to a new area and they're killing off some of that redundancy. Well, the ETR data shows a couple of things. There's no question that server and storage spending has been declining and attenuating for a number of quarters now. And there's been a shift going on from that core infrastructure obviously into cloud. Cloud continues its steady march in terms of taking over market share. Other areas of bright spots, security is clearly one. You're seeing a lot of spending in analytics, especially new analytics. I mentioned Snowflake before, disrupting kind of Teradata's traditional legacy enterprise data warehouse market. The RPA market is also very hot. UiPath is a company that continues to extend beyond its peers, although I have to say, automation anywhere looks very strong, blue prism looks very strong. Cloud Air interestingly used to be the darling is hitting sort of all time lows in the ETR database, which is by the way one of the best data sets I've ever seen on spending. Enterprise software is actually still pretty strong. Particularly Workday looks strong, Salesforce still looks pretty strong, Splunk because of the security uplift still looks pretty strong. I don't have a lot of data on IFS. Like you said, they don't really show up in the ETR survey base, but I would expect with the kind of growth we're seeing, a $600 million company hopes to be a billion dollars by 2020-2021, I would think they're going to start showing up in these spending surveys. Well, again, in Europe, they may be a more dominant player than we see in the U.S. As I said, I really had not even heard of the company before last year, which was surprising for a company with 10,000 customers. But again, they're focused on the mid-market and the mid-market tends to fly a bit under the radar. Everyone thinks about what's happening in the enterprise. There's a huge opportunity out there. Many more mid-market companies than there are enterprises and that's been historically a fertile ground for ERP companies to launch. JD Edwards came out of the mid-market. These are companies that may end up being acquired by the giants, but they build up a very healthy base of customers under the radar. Well, the other point I wanted to make and kind of started to you about the digital transformation is, as I say, people are getting sick of the big, long SAP complicated implementations. As small companies become mid-sized companies and larger mid-sized companies, they look toward an enterprise resource planning type of platform and they're probably saying, wait, I've got some choices here. I could go with an IFS, you know, or maybe another alternative to SAP. You know, SAP is maybe the safe bet, although, you know, it looks like IFS is got, when you look around at the customers they have, has some real traction. Obviously a lot of references, no question about it. One of the things they've been dinged for, I saw this Gartner dinged them for API integrations, well, they've announced some major API integrations. We're going to talk to them about that and poke at that a little bit and see if that will sort of solve that criticism what Gartner calls caution. You know, let's see how real that is in talking to some of the customers. We'll be talking to the executives and members of the ecosystem and obviously Paul and I will be giving our analysis as well. Final thoughts here before we break. Just the challenge, I think as you note for these mid-market focused companies has been growing with their customers and that's why you see the Lawson's and the JD Edwards of the world. Many of these mid-market companies eventually are acquired by the big ERP vendors. Their customers, eventually if they grow, have to go through this transition. If they're going to go to enterprise ERP, they're forced into a couple of big choices. The opportunity and the challenge for IFS is can they grow those customers as they move into enterprise grade size? Can they grow them with the IFS product line without having them, forcing them to transition to something bigger? So a lot of action here in Boston. We heard from several outside speakers. There was Linda Hill from Harvard. They had a digital transformation CEO panel. The CEO of SUSE, who will be on later. And some other company, PTC. With Hankelman, Conway, former PeopleSoft CEO was on there. And then of course Tony Hawk, which was a lot of fun. Obviously a challenger. All right, so keep it right there. But you're watching theCUBE live from IFS World, conference at the Heinz in Boston. We'll be right back right after this short break.