After a respectable first quarter, Swedish ERP provider IFS had a slow Q2 (to June 30). Although revenue showed some growth, with a 2% rise to 652SKr, licence revenue fell 3% to 92m SKr as deals slipped into the second half of the year.
Lower licence sales will be a disappointment. Having invested in the product set, the channel and additional sales and marketing, which were responsible for earnings before tax falling from 47m SKr to 21m SKr, IFS had tagged 2012 as a year to drive revenue growth. The drop comes as a surprise as Q1, which is normally a quiet quarter, was solid with licence revenue growth up 11% (see IFS upbeat on 2012). Q2 maintenance showed good growth with a 14% lift to 232m SKr however. Consulting was down 3% to 327m SKr but IFS is shifting the balance of its business to ensure a higher proportion comes from product revenue.
Performance in Western and Northern Europe lies behind the licence drop, with sales lower in both areas, although IFS is hopeful they have slipped rather than disappeared. IFS is not the only mid market ERP provider to experience fluctuating sales. Unit4 is in a similar position and from what we can see variable demand in Europe is a key factor (see Unit4: Modest growth, cautious outlook). These instances are further indicators that sales cycles are stretching as enterprises exercise caution when it comes to spending.