 Live from Washington D.C., it's theCUBE, covering Inforum DC 2018, brought to you by Infor. Well, welcome to the nation's capital, a rain-soaked Washington D.C. We're here for Inforum 18, Dave Vellante, John Walls. We're in the Walter Washington Convention Center, the fourth time Cube has been at an Infor show and getting bigger and better than ever, David. That's right, John. Let's see, the first one was in New Orleans several years ago, then Infor skipped a year and then did Javits a couple years in a row. That's sort of the headquarters of where Infor is, is very close to the Javits Center. And Charles Phillips, of course, lives in New York City. And this year, they decided to come to the nation's capital. I mean, Infor is an interesting company, about $3 billion in revenue. Essentially, it's a private equity roll-up from Golden Gate and others that really the roots of it are in loss in software. Some of you may remember loss in software, the enterprise software company. And then Charles Phillips came on, and of course he was the architect of Oracle's M&A, probably spent $30 plus billion for Larry Ellison, remaking Oracle, completely transforming Oracle, brought some of that expertise to Infor in this private equity play, this roll-up, and then bought many, many software companies, rolled them up together, and really started to compete in using a different model. So Infor's sort of expertise, if you will, is around so-called micro verticals. So they cover a lot of different industries, hospitality industries. They've got also manufacturing, ERP, retail financial, healthcare, and then they also have horizontal applications like human capital management. Their differentiation is several fold. One major point is they go after what they call the last mile. So they call this micro verticals. So the last mile functionality that would normally have to be customized Infor does that work for you. Now the advantage of that is two-fold. One is you don't have to do a bunch of custom mods, all that hard work is done. The second is another part of the differentiation is cloud. So they chose several years ago to go with the AWS cloud, put their SaaS on the cloud. Charles Phillips said, hey, when we were an on-prem software company, we didn't manage our own servers for our customers or managed customer servers. We didn't do that. So why would we do it in the cloud? We don't want to compete with Google and Microsoft and Amazon in terms of scale. So we're going to put our software on the Amazon cloud. So that was another point of differentiation. The reason why that's so important in the context of custom mods is if you're rolling out new upgrades on a periodic basis. And you hear this a lot from service now customers, for example, another cloud software company. You can't do custom mods and then take advantage of the new releases, right? So this is because you're going to be way behind. Okay, so you have to have that hard work done so that you can avoid those custom modifications. And that's something that Infor has been very proud of. So as I say, $3 billion company. Last year they took a $2 billion investment from Koch Industries. Now that investment largely went to recapitalizing the company. I think the private equity guys probably took some money off the table as did the four, what I call the four horsemen. They were the four sort of new founders of Infor, including Charles Phillips, Pam Murphy, who is still there. And then two others, Duncan Angov and Stefan, who have left the company. So they've got some succession planning now. We saw different two new faces up on stage. Soma and we're going to have some other folks on that we'll introduce you to. But so now we're entering a new phase and it's the phase of what Charles Phillips coined human potential. So big focus this year on human capital management. We heard that big focus on AI. They talked a lot about robotic process automation. I just had a meeting last night at the airport in DCA with the head of marketing at an RPA company, UiPath. And they're smoking hot. They just raised 225 million. They've gone from like 2 million to 200 million overnight. And that space is exploding. It was interesting to hear Charles Phillips talk a lot today about robotic process automation, RPA, which is essentially software. Yeah, break that down for me. So RPA is software robots. And software robots are used to automate mundane tasks, having machines do very specific tasks. So you're seeing this a lot in financial services and a lot of back office automation. It's not physical robots moving around. It's basically software-based processes that machines can do, repetitive processes, that machines can do better. The machines don't get tired. So they can do these repetitive tasks, take that away, those mundane tasks away from humans. You heard a lot of conversation about that today. You also heard a little competitive fire. So Oracle is now taking ads out against Infor. We've seen that. All the cabs here, many of the cabs, have Oracle branding on them. So Oracle's paying attention to Infor. And they're right down the road here too, by the way. Rest in Virginia, not far. So this is their backyard. Well, congratulations, Infor. Oracle's paying attention to you. That must mean you're hurting. We've seen this before with others. I mean, we certainly saw it in past days with IBM. We see it extensively with Workday. We've seen some kind of tit for tat with Salesforce, even though Salesforce is one of Oracle's largest customers. That's been kind of fun to watch. And now Infor. So Infor clearly is doing some damage to the traditional guys. Oracle, SAP, Workday, maybe not so much, Workday's growing like crazy. But Infor claims it's growing SaaS revenue 50% faster than Oracle's SaaS revenue, to growing at double the rate of SAP and growing as fast almost as Workday is kind of what it claims. And so this whole enterprise resource planning, HCM, vertical market software, horizontal software, the market has always been hot. It's a huge, huge market. Many, many tens of billions, it's probably a $100 billion TAM. And the big whales of course are Oracle and SAP. And then of course Salesforce. And you're seeing the emergence of companies like ServiceNow, which has quite a bit of different strategy. But with Infor's sort of Oracle heritage, a lot of people in the company came from Oracle. So they know where the skeletons are buried, they know how to compete, they have relationships with the customers, and they're offering some differentiation, as they say, with those microverticles, the last mile, and the pure cloud model. Now, if you look at the income statement, you'll see the SaaS portion of the business only represents about 25% of the revenues. But remember, that's a ratable model. So you're only recognizing revenue as the months go on. So you're billing sort of monthly, if you will, or recognizing monthly. And so as a result, it skews and dampens the effect of the SaaS software. I think from a booking standpoint, it's probably a much higher proportion of bookings. I would guess closer to 50%. As I said, they took $2 billion last year from Koch Industries. That $2 billion didn't really hit the balance sheet. They got about 330 million on the balance sheet. And they have a lot of debt because it was a private equity leverage deal. They did a lot of acquisitions. So they probably got about $5.7 billion of what they call net debt, which presumably is debt after cash. So I would guess close to $6 billion in debt. They're a quasi, they're not a public company, they're a private company, but they act in many ways like a public company. I would suspect within the next couple of years here, if this kind of growth continues, that you'll see an IPO from in for. Although, presumably Koch Industries, we heard Koch on stage today. They said they've made $15 billion in investments in technology companies. $2 billion, this has to be one of their largest. But that's patient capital. They get the benefit of the cash flow. They can probably take dividends if they want to do that. And if they're smart and they invest and they can take market share from Oracle and SAP and others and gain share in the market space, they can do an IPO. Their revenues are $3 billion, their valuation, their implied valuation based on the Koch Industries investment is $15 billion. So that if they could take that $15 billion to $30 billion, $20 to $30 billion, there's going to be a nice return. Yeah, I thought what's interesting about Koch too, they talked about it's certainly, as you talked about $2 billion, right? They put the money in, but they're also, it's a symbiotic relationship in that. That Koch is using its organization as a test lab for a lot of products and services that Infor is producing and allowing them to refine that under the Koch umbrella before they take it out to the marketplace. So that was pretty shrewd. I thought, well, that seems to make sense. You have a company with 60,000 worldwide employees. You're in dozens of countries. You have a chance to let them take their products to scale in maybe a somewhat more friendly or controlled environment before you take it out to the marketplace. That seems to make a lot of sense. Yeah, we heard the CIO of Koch Industries today and I talked to him last year, talking about some of the technical debt that they had, again, going back to those custom modifications that I was talking about earlier. They were in this terrible virtuous cycle, almost a negative virtuous cycle where they had so many custom mods that they couldn't make changes. So the applications were becoming fossilized. So they were becoming non-competitive and that's the last thing that a line of business wants to hear is, hey, we can't make the changes. IT says no, we can't touch the code. It's working or changes take too long. They take months or sometimes years to get to a major release. And so as a result, Koch was looking for ways to simplify its application portfolio and its application infrastructure. The other thing that Koch Industries has brought is you might notice on the show floor here, you see Accenture, you see Deloitte, you're seeing Grant Thornton. Now these guys weren't really going after or going hard after the Infor base before. I think a company like Koch Industries does a lot of business with these SIs. And so I think Koch has introduced the SIs to the Infor opportunity and maybe nudged them a little bit and said, hey, as a big supplier to us, we're a big customer of yours, we want you to pay attention to that opportunity and in earnest, go look at ways to partner with Infor and that's happened. My intelligence suggests that there are many multi-million dollar deals that are being catalyzed by these big SIs and they do a ton of business with SAP and Oracle. So that's another positive and a tailwind that Koch Industries, I think, has brought to the table. You mentioned human potential, which is really the overarching theme of the show here this week. Again, we're here in Washington, D.C. I was just listening to Van Jones from CNN, one of their anchors and a political contributor. Talking about that is his personal mantra, but certainly that intersects with what Infor is talking about in terms of unlocking human potential and using technology to do that. Shed a little light from Charles Phillips' perspective, the keynote that he gave, the address he gave, in terms of how do they view human potential and unlocking it with the use of their services? Well, we're going to have Charles Phillips on and so we'll certainly ask him that, but Charles Phillips is a guy with a lot of potential and that he's realizing that potential. This is a- A lot of track record, too. Exactly, this is an individual with a military background. He became, I don't know if you know his story, but he became a highly successful Wall Street analyst. He wrote the seminal piece in the 90s that said the software industry is too many software players and it's going to consolidate. Larry Ellison, prior to reading that, used to denigrate competitors for writing checks, not code, meaning his competitors were acquiring companies instead of innovating. Well, then he went on a spending spree, probably $30, $35 billion in acquisitions orchestrated by Charles Phillips and he totally remade Oracle starting with the PeopleSoft hostile takeover. And then now you see Oracle, obviously this SaaS powerhouse with many, many companies that were bought in. Charles Phillips left Oracle, became the CEO of Infor and we heard today architected an entirely new strategy with a stack, they call this thing the stack, I'll just go through it briefly. I wrote about it last year on the Wikibon blog. They've got the Infor platform, the Infor OS, and then it goes all the way up to AI, the last mile software, the cloud. They have this thing called GT Nexus, which is a supply chain network and that's where their IoT play fits. Then they bought a company last year called Burst, BIRST to do BI and analytics. And then on top of that is Coleman. So they've got this stack that they're basically infusing into their applications and I will answer your question. Essentially what they want to do is use automation and artificial intelligence to essentially coach people, workers, as they're doing their jobs. So we heard today that there are more openings and there are unemployed and productivity's going down. So Infor, Charles Phillips wants to attack that problem through software and through automation. How do you do that? Well, if you can use artificial intelligence to monitor people's KPIs, they didn't use those terms, but that's essentially what they're doing and then provide feedback on outcomes. Hey, you could have done it differently. You could have done it more quickly. The outcome could have been better if. Also analyzing other factors like the relationship, for example, using data to analyze the relationship between say tenure or where you recently promoted or turnover on the productivity of, for instance, stores, retail stores, for example. And so you're seeing the infusion of AI and software and automation into the entire application portfolio to unlock human potential. That's one part of it. The other part of it is Charles Phillips big on diversity, big on women in business. And so that's another angle that I'm sure we're going to hear more about this week. Yeah, I thought it was interesting too. Anytime a show comes to Washington, there's a reason, right? It's, and it's generally, you know, federal sector-based, policy-based. There's a regulatory undertone of some kind. And it was addressed somewhat on the keynote stage here this morning. But the idea, the notion was, was that federal regulation, federal mandates, whatever, can't keep up the pace. They just can't. And it really is up to the tech sector because it works on a much different timeframe, right? I mean, changes are made by the minute, whereas policy gets shaped by the year, you know, up on the hill here, not for about three miles from here, two miles from here. So the tech sector's responsibility in that regard, in terms of being more diverse, of having more inclusivity, of looking at environmental considerations, all these things, and of unleashing human potential and not making a government do that, not letting a regulation do that. That certainly plays into enforced thinking as well, I would think. Yeah, so first of all, so we were down here at the AWS Public Sector event in June. And there were 10,000 people here. So AWS has a huge presence here in foreign AWS or big-time partners. And remember, the CIA was the first deal, first cloud deal that AWS did. They won, IBM contested it. The judge eviscerated IBM and his ruling, basically saying they were gaming the system. They were misinterpreting, purposefully misinterpreting the RFP. Amazon won hands down. It was a huge victory for Amazon, forced IBM to go out and capitulate and purchase software for $2 billion. I believe that that only helps a company like Info who has decided to be all public cloud with AWS and drafting off of AWS's deep ties to various government agencies in the Gov cloud. So for instance, AWS was first with FedRAMP, first with a lot of different certifications and security hurdles. And so Info can just draft off of that. The CIA, again, big account. We heard the CIA talk in June about how security on the worst day of cloud is better than his client server applications on their best day. And so I suspect Info is doing business with the CIA, although that's not come out publicly, but I would think that there's an advantage that Info has because of that AWS relationship and that makes DC all the much more important for them. Well, we are in forum 18. We have a full two days of scheduling for you. Great guests coming up here on theCUBE. I'm with Dave Vellante. I'm John Walls. We'll continue here on theCUBE live from DC right after this break.