Service differentiates businesses. At every level, the way an organization is able to deliver service to customers is crucial. As such, it is perhaps no surprise to see the service-focused software sector now burgeoning as it is. The impact of service-focused software is having a key impact on our lives, the software application developers tasked with creating new service-focused functions and the wider state of the IT industry (not to mention the economy at large) as a whole.
Success stories in the form of start-ups turning into unicorns have captured the headlines by creating new markets and disrupting existing ones But what about the businesses who are reinventing themselves and taking the next step? We have heard of so-called unicorns i.e. firms with $1bn USD valuations – so now we are also talking about the $10bn USD valuation decacorn club.
One of the latest to join the decacorn club is IFS. A soon-to-be 40 year-old technology firm that has used the last three years to re-engineer and rebirth its products and technology proposition to help enterprise organizations gain customer loyalty and improve margins by using service as a point of differentiation.
Services 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 of describing the perfect storm where both suppliers and customers want outcomes 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) into one proposition, IFS and its sister company WorkWave (a company focused on cloud-based field service software products), have carved out what they hope is a differentiated space in the IT market.
IFS has detailed a new stream of investment in 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 (arguably) quite disruptive stuff. IFS has secured stronger backing faster than many might have expected, especially given the fact that the firm was only three-years ago describing itself as a ‘challenger brand’ in its own marketing voice. Long-term investor EQT remains the majority shareholder, with Hg and (the also previously invested) TA Associates as significant minority shareholders.
Often first recognized for its ERP software capabilities by many, the organization has now feathered out its bed of associated software functions to deliver what it hopes will be regarded as a less bloated platform play than others in this space, in line with the increasing appetite for companies to ‘compose’ tech capabilities according to their needs.
Set for scale, on two levels
“We’re proud to have built two solid and strong software brands – and we continue to go from strength to strength. We are structured to naturally scale, both operationally as a company and technically, as a software development organization. We have proven technology and our people and partners remain committed to our customers’ success. These have been the foundations of our success at both IFS and WorkWave - so with the additional backing and software expertise of Hg alongside EQT and TA, we have the ability to accelerate even faster,” said Darren Roos, CEO of IFS and Chairman of WorkWave.
Alongside IFS is sister company WorkWave’s suite of products are designed to give service-oriented companies in its target verticals the ability to use scalable, cloud-based software solutions that support every stage of a business lifecycle, including marketing, sales, service delivery, customer interaction and financial transactions.
Delivering at an industry level
Focused on growth in a set of defined vertical markets across Europe and North America, IFS specialises in industry-specific software services for aerospace & defense; energy utilities & resources; manufacturing; telecommunications and also organizations that would themselves be classified as services industry specialists today.
Senior partner and head of ‘Saturn’ funds at Hg has called out this exact positioning in the wider IFS technology proposition as core to why the firm putting forward its backing. “Both IFS and WorkWave offer very strong cloud products in verticals which are growing rapidly and we therefore see clear runway for sustained growth for the business,” said Humphries.
Johannes Reichel, partner at EQT has added to this sentiment and said that “IFS is well positioned to take advantage of several global thematic trends, including customers wanting to digitalize their core operations enabling them to deliver even better service to their customers as well as more sustainable usage of their resources and assets.”
Beyond buy-install-deploy
The trends here are clear. The software sector and the cloud software sector within it are not immune to faltering fracture and many tech start-ups and more established brands have failed over the last quarter-century. But, where there is cloud-native cloud-first and often mobile-first software built to be delivered in a services-first model (i.e. not in a standalone traditional old school buy-install-deploy), there is the most potential for growth.
Combine those factors with the increasing trend to deliver industry-specific software on a (also increasingly popular) subscription basis that lowers customer Capital Expenditure (CapEx) to maximize enough flexibility to work around a pandemic… and then you might just have a good bet.
Where does servitization go next? It may be a focus on more outcomes-based software delivery, although this is a thorny subject in and of itself. Where the Hg(s), TA(s) and EQT(s) of this world put their money next could be the signal.
