By Jeff Moad

For several years now, I’ve noticed a disconnect of sorts between manufacturers and the companies that provide the ERP and other software suites on which most businesses run. Increasingly, the software vendors like to talk about the innovations they are bringing to the edges of their applications. They are busy adding things like mobility, social networking, “big data”-capable analytics, and role-based user interfaces to their enterprise application suites.

The implication from the vendors is that there’s not much need to innovate on the core business functionality of these applications, that customer requirements at the core are static, and that those requirements have largely been met.

But the stories I hear from manufacturers paint a different picture. Manufacturers are still keenly interested in the core functionality of their enterprise software. They want applications that, out of the box, support the business processes that are essential and unique to their business and their vertical industry. And they want applications with core functionality that keeps up with what, in many vertical industries, is a very dynamic set of requirements.

Think about it. As pharmaceutical manufacturers embrace concepts like continuous manufacturing, and as automotive OEMs attempt to move toward mass customization, the way they do everything from sourcing materials to planning production is changing dramatically. They need their enterprise software to support those changes.

But that’s not the only reason manufacturers need the core to keep up. Another reason is that many manufacturers of all sizes no longer have the budgets or the IT staff to customize generic applications and to keep those customizations functional through generations of application upgrades. Manufacturers want their software vendors to provide within the core applications up-to-date functionality that is specific to their vertical industry.

This perennial disconnect came to mind earlier this week as I sat through a briefing provided by Infor Global Solutions, a provider of ERP, asset management, and other enterprise applications that are used by about 70,000 companies, many of them manufacturers. Infor went through a major management shakeup a year ago, with former Oracle co-president Charles Phillips taking over as CEO. Phillips and several members of his management team this week told us that a core part of his strategy is to invest in adding deep micro-vertical industry functionality to existing Infor applications such as SyteLine, LN, VISUAL, and now Lawson.

“We’ve shifted to being a product-driven company,” Phillips said.

Since taking over Infor, Phillips said he has slashed back-office costs and plowed much of the savings into extending the core functionality of existing applications, with an emphasis on enhancing functionality for 13 different vertical industries, from automotive to metal fabrication and paper manufacturing. Over the past year, Infor has added 500 software engineers and vertical-industry experts. The company has also restructured its sales organization around vertical industries.

Supporting this drive to innovate at the core is Infor’s ongoing ION middleware strategy. A simplified, event- and document-based integration platform, ION also includes a series of edge technologies such as business intelligence, an advanced graphical user interface, and mobile apps that are being added as standard features across Infor’s substantial product catalog. Before ION, each of Infor’s product groups had been independently developing its own BI, UI, and mobility products, creating wasteful duplication of effort. Now, with a more unified approach to developing such features, Infor can invest more of its resources in core, industry-specific functionality.

“The rest of the market is not focusing on core industry-specific function, but we’re focusing on the core ERP engine,” said Duncan Angove, Infor’s new president, who moved with Phillips from Oracle. “Forty-two percent of software customization is done to fill industry-specific gaps. The other guys are not doing much to solve that.”

Customers seem to be responding positively to the “innovate at the core” strategy. Infor recently reported that it enjoyed a 17% growth in license revenue for the 12 months ending November 2011. The company’s ERP revenues grew 25% in the quarter that ended in November.

Of course, the “new” Infor isn’t the first enterprise software company to tout its vertical-industry focus as a differentiator. The “old” Infor made vertical solutions a key part of its marketing message, as do other midsize vendors such as Epicor.

The big question for Infor will be whether it can attract and retain the vertical-industry experts who can help the company invest in the right functionality for the right industries. In the U.S., the strategy will also depend on Infor’s ability to transform its brand image from that of a sales-driven aggregator to a product-driven innovator.

If Infor is able to do those things, manufacturers could have a viable new enterprise software option.