Service differentiates businesses. At all levels, how an organization is able to provide service to customers is crucial. As such, it’s perhaps no surprise to see the service-oriented software industry booming. The impact of service-oriented software has a key impact on our lives, the software application developers tasked with creating new service-oriented functions, and the broader state of the IT industry (not to mention the economy in general) as a whole.
Success stories of start-ups turning into unicorns have made headlines creating new markets and disrupting existing ones. But what about companies reinventing themselves and taking the next step? We’ve heard of so-called unicorns, i.e. companies with valuations of $1 billion USD – so now we’re also talking about the $10 billion USD valuation decacorn club.
The IFS is one of the last to join the decacorn club. A nearly 40-year-old technology company that has used the past three years to redesign and revive its products and technology proposition to help businesses build customer loyalty and improve margins using service as a point of differentiation .
Service proliferation means servitization
With a history and stronghold in the manufacturing industry, IFS wants to coin the term and concept of “servitization” as a way to describe the perfect storm where suppliers and customers want results more than products.
By combining its capabilities in Service Management (both Field Service Management and Enterprise Service Management), Enterprise Asset Management (EAM) and Enterprise Resource Planning (ERP) in a single proposition, IFS and its sister company WorkWave (a cloud-focused software-as-a-service company), have carved out what they hope will be a differentiated space in the IT market.
IFS has detailed a new investment stream into its corporate foundations from Hg, a private equity investor focused on developing software and services companies. Hg will now become a significant minority shareholder in IFS and WorkWave.
This is (no doubt) something quite disruptive. IFS gained stronger support faster than many might have expected, especially since just three years ago the company described itself as a “challenger brand” in its own marketing voice. Long-term investor EQT remains the majority shareholder, with Hg and TA Associates (which also previously invested) as significant minority shareholders.
Often first recognized for its ERP software capabilities by many, the organization has now fleshed out its bed of related software features to deliver what it hopes will be seen as a less bloated platform game than others in this space. , in line with the growing appetite for companies to “compose” technological capabilities according to their needs.
Set for the ladder, on two levels
“We are proud to have built two solid and strong software brands – and we continue to get better and better. We are structured to grow naturally, both operationally as a business and technically as a software development organization. We have proven technology and our employees and partners remain committed to the success of our customers. These have been the foundations of our success at both IFS and WorkWave – so with the added support and software expertise of Hg alongside EQT and TA, we have the ability to accelerate even faster,” said Darren Roos, CEO of IFS and President of WorkWave.
Alongside IFS, the sister company’s WorkWave product suite is designed to give service-oriented businesses in its target verticals the ability to use scalable, cloud-based software solutions that support every stage of the life cycle of a business, including marketing, sales, service delivery, customer interactions and financial transactions.
Supply at industry level
Focused on growth in a set of defined vertical markets in Europe and North America, IFS specializes in industry-specific software services for aerospace and defense; utilities and energy resources; manufacturing; telecommunications and also organizations that would themselves be classified today as service industry specialists.
The senior partner and head of “Saturn” funds at Hg called this exact positioning within the broader IFS technology proposition as central to why the firm is offering its support. “IFS and WorkWave both offer high-performing cloud products in rapidly growing verticals, so we see a clear path for continued business growth,” Humphries said.
Johannes Reichel, Partner at EQT, added to this sentiment and said that “IFS is well positioned to take advantage of several global thematic trends, including clients wishing to digitize their core operations, enabling them to deliver an even better service. to their customers as well as more sustainable use of their resources and assets.
The trends here are clear. The software industry and the cloud software industry within it are not immune to a failing divide and many tech start-ups and more established brands have failed over the past quarter century. But, where there is cloud-native-first and often mobile-first software designed to be delivered in a services-first model (i.e. not in a traditional standalone buy-install-deploy of the old school), there is the greatest potential for growth.
Combine these factors with the growing trend to provide industry-specific software on a subscription basis (also increasingly popular) which reduces capital expenditure (CapEx) for customers to maximize enough flexibility to work around a pandemic…and then you might have a good bet.
Where does servitization go next? This may include emphasizing more results-oriented software delivery, although this is a tricky subject in itself. Where the Hg(s), TA(s) and EQT(s) of this world place their money next could be the signal.