Olivier Le Moal - stock.adobe.co
ERP heavyweight Infor is divesting its enterprise asset management software business, but it won't be leaving EAM behind entirely.
Infor is selling its Infor EAM business to Hexagon AB, a company that provides "digital reality solutions," specializing in sensors and autonomous technology, for approximately $2.75 billion in cash and stock, according to the company.
Infor and Koch Equity Development -- both subsidiaries of Koch Industries -- will pursue product development and strategic partnerships with Hexagon, and Koch Industries will take a 4% stake in Hexagon.
Based in Stockholm, Hexagon provides technology and infrastructure that enable users to create 3D digital simulations of industrial equipment, buildings and geographies, which can then be analyzed. Hexagon's applications are primarily used by manufacturing, oil and gas, utilities, construction, agriculture and surveying industries.
Soma Somasundaram, president of products and CTO at Infor, said the divestment of Infor EAM will enable the company to focus on developing its core CloudSuite ERP products.
Partnership needed to advance Infor EAM
The deal with Hexagon was made to advance the EAM platform, not to generate cash for Infor, Somasundaram said.
The EAM market is changing as customers are looking to go beyond traditional EAM functionality by adding more capabilities that target asset performance management (APM), which relies on advanced technology such as industrial IoT sensors and AI to enable more predictive maintenance.
For Infor, the customer push toward APM meant it would need to put money into developing the technology, which was a daunting prospect, Somasundaram said.
"We never really invested much in the APM space, and that became a drawback, because just having EAM is not good enough," he said.
The company considered three options. Infor could build its own APM technology, but, Somasundaram said, "as prior experiments like GE Predix and others showed, this is not for the faint of heart -- you need a lot of investment, a lot of time and a lot of expertise to do it." The ERP company could acquire the technology, "but doing that requires organizational focus on the APM space," he said.
Or Infor could form a partnership with a company that already had APM building blocks in place, "which is what led to this Hexagon announcement," Somasundaram said.
Somasundaram said that Infor EAM customers should not feel any disruption from the divestiture and move to Hexagon AB. The vast majority of customers use Infor EAM as a standalone product, with fewer than 10% also running Infor CloudSuite or other ERP products, he said.
Infor EAM applications will continue to be run from Infor's AWS data center for the foreseeable future, and Infor will continue to be the primary point of contact for customers using both Infor's ERP and Infor EAM applications. Customers who are Infor EAM-only will transition to support by Hexagon over time, according to Somasundaram.
"These things are still being worked out, but keeping the customer experience seamless from a commercial, support and product standpoint is critical, and we're very focused on that," he said.
The deal is expected to close later in 2021, after the regulatory approval process concludes. Infor EAM's approximately 500 employees will become Hexagon employees, with the core development and support staff remaining in Infor EAM's base in Greenville, S.C.
Good for Hexagon, questionable for Infor
The deal appears to be a good one for Hexagon, but it's a questionable one for Infor as Infor EAM is a profitable growth engine, said Predrag Jakovljevic, principal industry analyst at Technology Evaluation Centers.
"Hexagon has been desperate to get into the application business, so they get a very good product line in a growth segment needed by most verticals and the public sector, and with relatively low staffing compared to ERP," Jakovljevic said. "I think it's a shortsighted deal for Infor to dump a crown jewel."
Predrag JakovljevicPrincipal industry analyst, Technology Evaluation Centers
The Infor EAM deal is an extension of Koch Industries' strategy to place businesses where it thinks they will do best, while retaining some ownership and access to future returns, said Juliana Beauvais, research manager at IDC.
Hexagon AB has an asset-centric portfolio of customers but lacked a core EAM application, Beauvais said. The move is also part of the larger trend of industrial automation companies buying maintenance-related software vendors to support their customers' modernization efforts.
For Infor, selling off its EAM business enables the company to focus on expanding its financial, HR and supply chain application CloudSuite products across a wider range of industries.
"The initial impact on customers is expected to be minimal because the whole Infor EAM division is moving over, and key implementation partners are on board," she said.
But, she added, for other EAM providers, including IBM Maximo, SAP, Oracle and others, it creates an opportunity "to leverage any uncertainties, especially with companies in the evaluation stage of purchasing an EAM solution."
Jim O'Donnell is a TechTarget news writer who covers ERP and other enterprise applications for SearchSAP and SearchERP.