IFS reports 13% increase in first half software licence revenue

IFS, the Sweden-based ERP company that focuses on sectors such as aerospace, defence, and oil and gas, has reported half year license revenue growth of 13%.

IFS CEO Alastair Sorbie (pictured) contrasted this with SAP’s 2% decline in traditional on-premise software licence revenue in the second quarter of 2014.

While SAP positions itself as a business applications supplier in transition to the cloud, Sorbie said that in the last 18 months “not a single customer has asked for multi-tenanted software as a service (SaaS) licensing”. 

He said the large, global enterprises that IFS targets, with large assets such as aircraft carriers or oil rigs, will continue to eschew the cloud, in the sense of multi-tenanted SaaS, paid for by subscription.

“We do offer products over the cloud as a complementary add-on, working with Microsoft [on the Azure Cloud] and Logicalis, but it is peripheral to what our customers want for their core ERP”.

For the half year to date, IFS reported software licence revenue of SKr 241m [£20.6m], up 13%, from SKr 214m, on the first half of 2013.

It also reported consulting revenue of SKr689m and maintenance and support revenue of SKr505m. “But licensing drives the other revenues”, he said.

“CEOs and CIOs of global companies just want enterprise software systems that they can deploy quickly internationally, and that is reliable and relevant to their industry," said Sorbie. “And that is why our business is growing well”.

He said that systems integrators are “courting IFS aggressively” in part because his company is winning large ERP deployments that SAP used to win. “For companies like Emirates, building an aircraft engine overhaul facility, there are so many integration points in the software required, and it is such a long-term programme that adopting a subscription model would cost phenomenally more than a traditional licensing one”.

He said recent partnerships with systems integrators Capgemini, Deloitte Consulting, and L&T Infotech illustrates the sophistication of IFS’s “ecosystem”.

The company, he said, puts its research and development money into its applications. “We don’t have to invest in the database since we are based on Oracle”.

He added, in his CEO summary to the company’s half year report, that “the gradual improvement of the buying environment seen over the last couple of years is expected to continue, with growth coming from the replacement of legacy core ERP platforms as well as continued appetite for cloud-based extensions”.