 Live from New York, it's the Cube, covering Inforum 2016, brought to you by Inforum. Now, here are your hosts, Dave Vellante and George Gilbert. Welcome back everyone. Charles Phillips is here. He's the CEO of Inforur. Charles, great to see you again. Congratulations. Yeah, thank you. Good to be back. You know, yesterday was so good, the keynote. Everybody was talking about, did you see Charles? He looks so great. They were talking about your suit. They were talking about what you said. Hopefully what I said, not just there. It just all came together. Well, you got their attention and then they listened to you, right? So, really, it's got to feel great. No, no, we're just appreciative. So many people turn out for us and take time out of their summer to come in here for a couple of days and partners, customers. So the size of this event has been growing every year. It's great for the city, it's buzzing as well. We have startups out here on the exhibition floor. And so we're trying to build an ecosystem, not just for end of war, but for the whole city. So, George, you got to ask you a question. Take us back to five years ago, six years ago. Oh, the, well, I guess I'll ask it at its most blunt. When Infor was a rollup of a bunch of different companies and a financial buyer, some people thought it was sort of the land of the misfit toys and Santa Claus came in and turned it into, I'm mixing my metaphors here, Santa Claus dropped in the chimney and turned it into an enterprise software company that's growing, you know, very impressively and even more than just the growth, having all the pieces increasingly fit together. How'd you do it? Yeah. Yeah, well, I had a great team that came with me. We all joined the same day in December of 2010. And these were colleagues of mine from Oracle who focused on industry, business units, and new industries. So I had to pick the right people, number one, happy to have your team. So we joined in, what we saw in Infor was through the course of those acquisitions, there were nuggets of specialties of industry expertise. If that's there, that industry expertise and those customers are still there, we knew we could rewrite the applications, re-innovate, and take the company forward. I loved your keynote. You talked about adjacent innovation. And you gave the example of Murano Glass. Yes. All right, and how that led to lenses, which I didn't know, named after lentils, because they look. That's where the word came from. So talk about that a little bit and how it relates to what Infor is doing. Yeah, so we're a complex company, very large, and people kind of wonder, how can you serve so many industries? And it's confusing for people. We understand that, so we're trying to explain that. No, that's our key strength, the fact that we serve so many industries. Things happen in one industry, in an adjacent industry, it's also applicable. We can see that. So innovations across these different industries, our job is to identify those, repurpose them where it's necessary, and reframe them for that industry. They can't do that. They only see one industry, the customers, and most of the consultants are the same way. We're one of the few companies in the world that are students of multiple industries. We can see things most people can't see. So let's use that as a strength. So let's talk about your business a little bit. I mean, you're fairly transparent for a private company that's, as Michael Dell says, not on the 90-day shot clock, but you share a lot of financial information. We do. We have publicly traded bonds, and we report earnings. We have earnings calls, we file SAC filings, so the equity is private, but we run it like a public company. Last quarter, we had 35% software growth year-over-year, cloud plus licenses, and we've been added, geez, another 700 customers last quarter. So it's all about growth. It's been changing. We now have something like 70 million subscribers in the cloud on Amazon, and that's from almost nothing three years ago. So this has all been a new business we created. And nearly 100,000 customers now, is that right? Yeah, 90,000 customers are growing, and that's almost twice the size we were when we got here. So five and a half years of growth and investment spent two and a half billion R&D, which normally didn't happen in a private company. But we took the time to rewrite the applications, and that's what we concluded up front. We told the investors when we came in, this is going to take five years. It's going to cost a lot of money, but it can be done, we see some value here, but we need time. And if you're willing to invest, we can fix this, you know? So when you talk about five years time and being able to fix this, I want to contrast this to what I saw at SAP going on in the time I was doing something there, and even with Oracle. I remember, not long after you started, you said, okay, so customers give us four years. This was about 2003, and it took both sides really long, much longer than expected. In fact, with SAP, between Netweaver and Business by Design, it was like that John Belushi quote, seven years of college down the drain. But you did something unusual. They did a sort of inside out heart and lung transplant, or so it seemed from the outside on Oracle, certainly from SAP. But you talked the other day about the Edge, then HCM and CRM, then the sort of ERP finance, and then the industry solutions. Now that struck me as interesting on a couple of angles. One, you're doing the things that are more loosely coupled first, and therefore have some give and take. You're, you know, more modular. And you're leaving- That modular was critical because you could have separate teams work on separate projects, as long as we have common standards. So you don't have this big monolithic piece of code that you're trying to get thousands of people to work on at once, and you get a release every five years. That's a hard thing, that's a hard bolt to move. And so you left that for last. Yes. But there was also a market advantage to doing it this way. Since the two big guys were doing the heart and lung transplant, you could ring fence their install bases. Yes. And sell around it, exactly. Get in where we can fit in to start selling where we can add value, fill off certain modules, and then start to grow within those customer bases, which is exactly what happened. We'd get in for some specialty function that was industry specific that they didn't have. They'd see how good it was. Okay, let's take two more modules and then we would just spread out. But it was also convenient in a way because you brought in Hook and Loop. And it's not just, you didn't just wave a wand and all of a sudden your software was beautiful. It's a great tagline, but it takes a while to make it beautiful. So you were probably still in the process of picking off those pieces. Is that right? Well, we, you had to make some technology decisions. So the first thing we did was let's uplift the UI, separate that layer to HTML5 and then hand that off to Hook and Loop. So it actually reduced the burden on the core industry developers. Let's take the integration off their hands. Let's take localizations out there. And so we actually removed a lot of things that you had been doing because when you're trying to do everything yourself, you do nothing really well. So all they had to do was focus on core industry processes, almost everything else that surrounds the application. We had a shared service that did that for them. So we had to find a way to get it efficient. Then secondly, let's not do things that we can rely on the industry to do. I don't want to build data centers. I don't want to build a lot of other infrastructure. If Amazon can build it for me, I'll use it there. When you were on Wall Street, the technology industry was like this big mystery. Nobody really understood it. They understood the processes that they wanted to automate. Those were really well understood, but the technology was this thing that nobody really understood. And you started writing about it, talking about databases and other technologies, how it sort of fit together. Today, it's almost the opposite. The technology's pretty well understood. You've got cloud, you've got social, you've got mobile. But now with IoT, with big data, with digital, you've got all these new processes that non-linear consumption, people don't really know what to expect next. So how do you help customers accommodate that? First of all, is that a valid point? That's a great description and a great perspective on it. That's the way we view it as well, is that we spend all of these years debating the infrastructure, getting that perfect, all these wars that will happen. That's over, that's going to happen. That's going to get them on a touch. That's going to be your service. Hyperscale computer, glass computer. Don't worry about the infrastructure. What problem are we trying to solve? What are these industries worth? How can you take all this great technology and actually help a non-technology industry improve and go digital? So that's that nexus of technology and business. That's where we sit. That's what we do is bring those two things together. The technology part has been pretty well solved. That's where we're focusing on the industry. And I can tell you guys are really excited. Benioff was one of the first to say this. They're going to be more SaaS companies that have come out of non-technology companies than technology companies. That's a real tailwind for you, isn't it? Yeah, exactly. So the more people move up and start talking about the application of technology and industries, the stronger we're going to get. At some point, the infrastructure battles get a little bit old and commoditized. Talking about that notion of non-tech companies becoming SaaS companies, partially tech companies. The old Saturday Live, is it a dessert topping or is it a floor wax? You can sell in your industry applications. They can automate some key business processes. But then on top, they can also be a platform as a service along which on one side, the digital transformation group can help turn it into something that's custom for that customer, differentiated for that customer. And then the, I forgot what you called the business technology office on this side. That's the McKinsey version, but the- Hook and Loop Digital, H&L Digital. Yeah, but then they can help quantify the business value. Oh, and the value engineering group. Value engineering. And then between the two of them, they can chart a path to help a normal company become essentially have a tech sideline. Is that how you see it? That's exactly what customers are looking for us to do. They see all this great technology. They're not sure, okay, how does the plight of my business? What should I be doing next? Who's can talk me through that? But I don't want just a generic person talking through that. They have to understand my industry, so I know it's relevant, so they can translate it for me. And so we have to have an industry hat and a technology hat on when we go in and then be willing to talk that change. And that's why we use the word a lot, assemble. So we have some of it that's custom for that customer, how you assemble technologies to meet their strategy, but we want to reuse a lot of what we've already built. But this is your pioneering something that I guess I haven't seen other enterprise technology companies do, which is not only make the platform available, but innovate on the delivery side. Exactly. And I think that it can talk to the business managers who don't speak the technology language. Well, the minute I knew we were on to something is when publicists and McKenzie, those sorts of companies start calling us and say, what are you guys doing? You kind of viewing, you guys are kind of popping up as kind of competitors or are you getting into advisory or design? And Brandon, I said, well, we're kind of doing that, but a lot of what you're doing, we're giving away for free because we want the actual execution and deployment of the technology. So we got pushed further and further upstream because when we started this hook and loop, it was originally about, let me co-design a few screens with you and show you how we can make it beautiful. Then people ask, can you do my website? Well, sure. Well, okay, if I'm going to do your website, what do you want it? Well, you have to help me, let me think my brand. Okay, when we think your brand, well, depends on what your strategy is. So now we end up in strategy, we kind of walked up that curve and became strategy people without setting out to do that. But now that we're there, we realize that's a better place to be. And McKinsey can't do that. For that matter, they can't go the whole stuff of the way down. Charles, the technology business, and specifically the software business, kind of like the NFL, it's a copycat business and everybody's got a playbook and they follow it. You got a different playbook. Not going to own your own data centers. You go buy hook and loop, design firm. Interesting, several years, four years ago and nobody was thinking about doing that. So somewhat of a non-conventional way of thinking. My question is around the ecosystem. I would expect at an event like this to hear about developers and the platform and opening up APIs and so forth. I hear about ION and Mongoose. Is that part of the strategy or where does that fit? It is the part of the strategy. Tomorrow's conference, it's a follow-on conference for this, it's partner day. So we have a whole separate keynote for them. There are people who are extending our platform, they're using Mongoose to develop applications. Two of the acquisitions we've made have been small companies that extended our applications. They were partners at first, implementing our apps, saw a vertical niche, built something, we ended up buying them back. So we want partners doing that because it's also a low risk way to buy companies. If you've built it on your platform, you've been to co-selling it. And so we have a lot of that going on. It's just in a separate conference tomorrow. So you talk about micro-verticles and you invest whatever, $3 billion, which is a lot. But is it fair to say you can't do it all and you're going to look to the ecosystem to do more and more of that or do you want to actually do more of that development and own that? We can't do it all. There's thousands of micro-verticles. We measure over 2,000 of them. And so what we do is encourage these partners to extend our applications in those micro-verticles. In fact, we bucket them by vertical, micro-verticle. We don't just give you a partner, go do what you want. Here, you're a partner for this vertical, for this geo. And that's the way the partner ecosystem is built, 1,500 partners in those micro-verticles. And then if something pops up that looks like we can't attract it, we can buy one of them. And the persona of a developer maybe is different in your world. Maybe it's not the hoodie. Maybe it is, but there's more. Maybe it's more of a business line. Is that? We need people like us who wear hoodies some days of the week and a suit some days of the week to see both sides of it that enjoy applying the technology and not just dreaming up a widget. We need someone who cares about the outcome. A follow on question on sort of, I guess back to the dessert topping, floor wax idea. He has the greatest analogy. I don't know where this comes from. How do you do that? Really gets into movies. Don't get me started on stripes. We got the peanut gallery in on that one. You remember the age-old I2 versus SAP and then when IT made SAP a mortal enemy when they told TI, implement us first. You don't really need the transactional underpinning. It seems now with retail and predictics and I guess some of the other tuck-ins around them that you can turn whatever operational data they have and operational applications into something very effective in terms of making better decisions without doing the transactional renovation. Is that something to be generalized? Whether or not it's predictics, are we entering an age where we do the analytics first? We use the term outside and so sometimes that's the better approach. Deliver value quickly on the plain point that they have today and the analytics often address that, the same thing for the UI. So they don't like it's not usable, they can't consume it. We can do a quick fix on that. Same thing around CX, the website, facing customers and then the analytics. Those things have a lot of value. If we do those things well, we usually get the transaction system anyway because they want it all integrated because we've added so much value. Let's go, let's do the whole full suite. Our largest deals start that way where we start around the edges and then over time we grow and they see the value that gives the entire cloud suite. Can any of the competitors offer that same sequence and value delivery? They tend to be weak because they started in the core on just core ERP and usually financials. They get weaker as they go out at the edges and those things are more unique by industry and don't scale as well. So they're less interested in those. We like the fact that it's hard and it doesn't scale across all industry and it's niche, you have to know the industry. That's all the stuff that we do. This is really asymmetric competition. Yeah, we flip the model. All the stuff that people normally don't want to do and they let the consultants do, we want to put that in the product. Wow. So what does that mean for the future of the software industry? You have a really interesting background. You've got military background, so you've proven you've got an execution ethos, you've been on Wall Street so clearly financial but also you did a lot of writing. When you write, you think and you accurately predicted and then actually went to Oracle and executed on that many parts of that prediction. And now you're basically, if I understand it quickly, embedding that the world, your customers are becoming technology companies, software companies. So what does that mean for the future of the business as you see it? I think there are only a few companies in the world that can kind of do what we and Oracle SAP do and the number of new entries takes a long time to build a business application. So we have a tremendous opportunity to not only build on what we have but that multi-enterprise view which none of the other guys really have yet, at least not for direct goods. If we're right on that, we need to automate the interactions between companies. That changes the entire industry completely and we're well ahead of anybody else in doing that and we know where the bodies are buried, what are the companies we can buy, how the logistics ecosystem work, the ocean carriers all know us now, the 3PLs all know us now. So that whole world of how do you actually move goods in the tariff supply chain? We're the only ones doing that right now and so if we can get that working, that will solve a lot of issues going forward. Would you be working again from the edge inwards on those? That's what happens. So in that world, the ERP in that world is almost the bookkeeping system. That's what happens at the end of the day once all the action is done. Oh yeah, let me update the ERP systems. During the day, the transactions are going, decisions are getting made, orders are getting changed, things are going to reroute it. ERP didn't even know about any of that. So we know that, that that world is actually the live world and trying to do that and we can take that to other industries. The day we announced the GT Nexus transaction that evening, I had dinner with one of the largest aerospace companies in the world whose name you would know, a fortune kind of 10-type company. CFO tells me, I understand what you just announced. The biggest problem we have is it takes us nine months to do a change order on a plane. Why is it? Because I have 300,000 suppliers that can't communicate a change order to and get it confirmed. So we're doing that manually. Could you do that for me? I think we can do that. Whole Foods, I forgot to mention on States, we announced that acquisition. He calls me and goes, is that what I think it is? I go, yeah, he says, I have 100,000 suppliers. The way we get paid and we differentiate ourselves is to prove that we have organic produce that we're different from everybody else. Could I put my suppliers on there and validate that with video and the country of organ certification and show where the food has been grown and certify something about that farmer? Absolutely. So every industry starts to think like that because everybody has an ecosystem but they're not on any network. The timing of sort of switching topics to New York, timing of your moving in forward to New York City was quite interesting. Big developer community growing, huge talent pool, Silicon Valley's unique vortex. I live in Boston. I saw what happened to Boston, China compete with Silicon Valley. New York has found a way to do that. Talk about New York, why it's important. And that was a big decision to move the company and the entire board is still in California. So they didn't quite get the reason to be doing it. Go ahead, Charles, you go ahead. Initially, yeah, but now they love it and there's several reasons. Number one, we build applications. When you build applications, you need to meet with customers to understand their business process. The customers are here. They all come here for some reason or they're based here. It's easier for them to get here than they get to the West Coast. So you see a lot more customers versus engineers, which is what you have in Silicon Valley, which is great, but it's a different thing. And that's okay for infrastructure. The second thing is all the design talent we were looking for, kind of the people who came to New York to do something design, whether it's the fashion schools or architectural schools or media companies, those schools are here and they now have tech tracks now. So we hire them directly out of those design schools once they've been trained in a little bit of software and we can teach them the rest of the software side of it, but you want somebody with that eye for beauty. And it opened up a lot more hiring for us. No one's here, but us and we're building the ecosystem, no one large. We can hire from Europe. We move people here. We can hire from Israel. They don't mind moving. This is close enough and familiar to them. They don't want to move all the way to California. So all these different things that we're seeing and all the universities here are all over us because we're the ones who are willing to invest here. We have multiple universities. You saw one on States, a couple on States this morning, who are building curriculum around us. The kids are getting trained in our technology. We're giving them our software. We're training professors. And when they graduate, we'll guarantee them a job with us or one of our partners. Well, that initiative is amazing to me, right? Because you don't usually think of, you think of Apple giving computers to schools, not, you know, ERP companies, right? But it's become a really interesting thing. But they want jobs because they've been trained in just generic stuff and they can't get jobs when they graduate. So now they realize, okay, give me a skill set. So the alternative is they graduate, they think somebody asked me for a job and I have to train them for a year. Let the universities train them. A lot cheaper for me. Yeah, you did. You were profiled in Fortune Magazine, I think, talking about diversity in tech. What's the, give us the bumper sticker on that. I think we're much further ahead at our company than most companies. Partly it's where we're located. Partly it's an effort. So we hire a lot of veterans of our veterans hiring program as well. We also have a, when we do these internship programs with these universities, we're going to different university. Everybody goes to the same 10 universities, we're not. We're going to Cooney, we're going to Pace, places that tech companies don't recruit from. You have good students too. And then we take them, when we place them in the businesses at our corporate cost, so you're getting an intern, they always, if it's free, they'll take it. And they do just happen to be a little more diverse than you're used to because we get the pick. So that's the way you seat it is start sending them interns the ones they see and then they want to hire the one they graduate. I don't know if you're golf, I don't know if you're golfer. I'm not. No time. I am, but I'm a bad one. But so if you had a mulligan and you go back five years, anything you'd do differently, anything you wish you'd... We've had a ton of success and been a lot of fun. It's always a challenge. You're already running the things that you're going along and you had a few bad hires on people here and there. And then you just reset, okay, that didn't work and you find the right, it's all about the right talent though. But now the team is there. Certainly the core team that we brought here is everybody's still here, but then you have to build a big team. We've hired something like 5,000 new people in the last four years. So you're going to make a few mistakes along the way. You having fun? We're having a ton of fun. And we think we're changing the world and the brand without much advertising has been improving dramatically. We're going to start doing some of that and people are calling us. We have the mayor here, the NYPD commissioner here, they're all coming by to see us. You know, White House is calling us, asking how we're creating this job. They heard about the internship program. So we're doing things that the other companies aren't doing it and we're doing it at scale. Well, we were talking to Duncan. I mean, you guys went through several years of heavy lift. And it now feels like you're over that hump and there's a real tailwind. And now it's time to get the story out in a bigger way, which is obviously this is part of what Inform is about. And we get a two forward, not only growing a company, but if we can put New York on the map technology wise in the ecosystem here and help a lot of other people who normally don't have access to technology, we can do other things beyond just helping for. So put the bumper sticker Charles on Inform 2016 as the trucks are pulling away from the chavons. What should people know about Inform 2016? Tons of innovation, our customers loved it and they've been telling us that and the idea that we can do things that are unique and different by industry. We think we made some bets and they're turning out to be pretty right. We'll see what happens. Well, congratulations on your progress thus far. You've never done in this business, but it's been really fun to watch your career and watch what you and your team have done with Inform. Well, thank you guys and thank all the employees and the customers and the customers have been great. You know, when we got here, they hadn't had a lot of new technologies. We told them to wait. We're going to deliver some stuff when they wait it and now they're getting it. Well, we appreciate the great set here at Inform and the awesome guest. So thanks again for coming on the show. All right guys, good to see you again, man. All right, keep right there. Everybody will be back with our next guest. Right after this, I'm Dave Vellante with George Gilbert. This is Silicon Angles the Cube, right back. I'm the Chief Financial Officer for...