Baan Achieves A Speedy Recovery Despite The Tough Times
Written By: Predrag Jakovljevic
Published On: July 02 2001
Baan Achieves A Speedy Recovery Despite The Tough Times
In June, Baan, the resurrected global provider of enterprise business
solutions, reported continued growth and profitability for the six months
ended on March 31, 2001, following its acquisition by Invensys,
the global automation and controls group with headquarters in the UK.
During the first three months of 2001 and its second quarter, Baan total
revenue was $103 million, which is 3% less compared to a year ago, but
a 3% increase compared to the previous quarter. License revenues grew
to approximately $36 million, which is an increase of over 12.5% compared
to the previous quarter, and an increase of 45% compared to a year ago.
Overall Baan made a profit of approximately $8 million for the second
half of the Invensys financial year.
it acquired Baan in August 2000, Invensys originally expected that it
would take until the end of June 2001 to return the Baan business to break-even.
In fact, Baan returned to profit a full half-year ahead of schedule, and
this latest performance shows Baan continuing to gain momentum. Geographically,
growth in the EMEA region was particularly strong, with license revenue
growth of 34% over the previous quarter. The number of new customer deals
also increased by 36% over the figure for the previous quarter. Baan has
now won more than 200 new customers since its acquisition by Invensys
with a strong increase during this period. Approximately over 12 contracts
valued above $1 million were closed.
on the performance of the business, Laurens van der Tang, President of
Baan, said: "Since the launch of iBaan earlier this year we have
really focused our attention on developing sales in this area. Organizations
are clearly looking to leverage the power of the Internet to expand their
business networks, and this latest growth in the number of new Baan customer
deals shows that our pipeline is growing and we're busy closing deals.
Longer term our goal is to maintain our strong progress and return Baan
sales to their historic high levels. However, we must remain cautious
about the future in the light of current predictions about the overall
global economic climate. Baan will build on its progress with an increased
focus on its target vertical market sectors. We've now developed 'best-of-industry'
solutions for key business processes that include all the products, support
and initial consultancy necessary to give customers a fast-track route
to successful E-Business implementation. An example of this approach is
in the EMS (Electronics Manufacturing Services) space where we've increased
our penetration and have secured additional commitments from both the
top two global companies in this sector. Our focus and the launch of our
iBaan approach has helped reinforce our leadership in the rapid deployment
of flexible systems in this high growth vertical and we will continue
to build momentum in this area."
a difference a year makes. Less than a year ago it seemed like one of
ERP's once shining stars had faltered and faced an inexorable doom. Not
only has Baan returned to profitability a full six months ahead of schedule,
it has also recently been a better performing part of its parent company
and then savior, Invensys. Baan added more than 200 new customers since
the acquisition, and several of these deals were over $1 million. Not
many vendors have been able to boast about numbers like these recently.
acquisition of Baan has long been consummated, and Baan has since focused
on rebuilding market confidence because there was a lot of bad publicity
that plagued its business. The radical restructuring during which approximately
a third of workforce and nearly half of offices worldwide were made redundant
is also the matter of the past. Invensys' restructuring involved cutting
Baan's quarterly operating costs from approximately $170m to $100m. This
was achieved by implementing a shared services synergy where possible
and establishing sales and consulting staff levels based on realistic
sales and service needs projections. There is a much leaner management
structure as well, while a consolidation of sales and development facilities
worldwide has also taken place.
Baan completed what it refers to as "the mother of all upgrades" when
it migrated 31,000 users at aircraft manufacturer Boeing to iBaan
Release 5, the latest release of its software. That was the essential
vote of confidence that the company needed form its most important customer.
At the beginning of 2001, the vendor also unveiled a suite of products,
called iBaan, which is fully web-based across the entire integrated Baan
product line, including enterprise resource planning (ERP), supply chain
management (SCM), and customer relationship management (CRM).
renewed focus on the mid-market discrete manufacturing segment, the fertile
ground that made it thrive during the mid 90s, is undisputedly a wise
move. Unified master data across ERP, SCM and CRM systems are of a paramount
importance to attract the mid-market customer. It is advantageous to any
company not to have duplicate customer masters in their disparate ERP
and CRM systems. By the same token, it is also advantageous to eliminate
duplicate vendor masters in ERP and SCM systems. Baan was one of the first
ERP vendors to promote the idea that ERP should be integrated with adjacent
functionality of e.g. SCM, CRM and eBusiness. In that endeavor, it unfortunately
went on a rampant shopping spree, buying e.g. Aurum for CRM and
Berclain for SCM (for more information, see Baan
- What Will The Future In Invensys' Stable Bring? Part 1: About Baan),
and then choked while trying to integrate these products into the core
ERP system. For many reasons other than the acquisitions' indigestion,
it was unfortunate to witness the more forward thinking Baan stumble in
executing its strategy and temporarily loose its place in the ERP elite.
overcome these hardships, Baan should try to expand the business in its
existing large customer base, both by increasing the number of seats and
by offering extended-ERP enterprise applications such as Front-Office,
Business Intelligence, Supply Chain, and e-Commerce. Baan must also continue
its efforts to penetrate the lower-end of the market with its entire applications
portfolio, mainly through indirect channels and outsourcing arrangements.
To that end, Baan must expand global distribution, sales, services and
support capabilities, primarily by leveraging qualified indirect channels.
For that purpose, the sales channel has been streamlined and cross-trained
to sell the entire product portfolio and reduce the past confusion among
disparate sales organizations (e.g., ERP, CRM, SCM, e-Commerce, etc.).
The indirect channel has also been reevaluated and reduced to only tried-and-true
strategic suppliers that can deliver the necessary customer satisfaction
the new organization has been striving to achieve.
company pledges that customer satisfaction and support is the game play
from now on. The alignment of the organization to enhance the customer
issues has been propagated throughout the sales, technical, and client
support divisions globally. A new account management feedback practice
was implemented in order for the company to hear the voice of its client
base and to continually improve the customer support process.
Baan is still quite far from its former glory - its revenues are still
almost the half of its revenues for 1998 despite a much larger product
offering. The constellation within the ERP space has meanwhile changed
too. While Baan's decision to avoid the direct competition with SAP
is prudent, it may not be possible given SAP's (and other Tier 1 vendors')
increased appetite for the smaller enterprises.
the protracted difficult period has taken its toll in Baan functional
product enhancements; as a result, many inferior competitors seem to have
caught up or even leapfrogged Baan's competitive differentiators (product
functionality and/or geographic presence) of the past. Good examples are
Intentia, IFS, Frontstep (formerly Symix)
and QAD to name but a few, while one should not neglect PeopleSoft's
incursion in the manufacturing segment too.
is also unfortunate that the Baan business was hit with troubles exactly
when it finally seemed to have delivered its most stable and mature product
although technologically outdated, Baan IV. The new product
release, which features more advanced architecture, currently lacks a
number of pre-defined industry templates, which were available in Baan
IV. Also, the lack of native HR/Payroll functionality means that Baan
might not attract customers that prefer a truly enterprise-wide 'one-stop-shop'
solution. This is often the preference of the mid-market. Baan's interconnectivity
to third-party products and support of many platforms and middleware standards
(iBaan OpenWorld architecture) should be a strong mitigating
possible challenge is recent Invensys' decision to roll the Wonderware
Protean and Prism process manufacturing products into Baan's offering,
with integration to be completed in about a year (for more information,
Announces New Division - Baan Process). Given the fact that the current
Baan product portfolio, achieved through a number of acquisitions, has
seen hefty delays and costs that resulted from resolving integration issues
and reworking disparate pieces into a single schema/data model, the market
may expect to witness yet another daunting product development and delivery
experience. And, don't forget the dilution of the above-mentioned focus
on discrete mid-market manufacturing. However, with more than 1,000 R&D
employees (that were unaffected by the restructuring) enhancing the product
quality and functionality, and with the prior grueling product integration
experience, Baan may stand a chance to deliver the promise this time.
Baan's viability does not seem to be an issue any more. Baan's rejuvenated
management team has done a praiseworthy job of bringing the company back
to health while concurrently unveiling a new product release that can
compete with the other products in the market. Baan should be evaluated
in a number of enterprise software selections within the discrete and,
to a degree, within the process mid-size manufacturing market. Still,
any organization evaluating Baan should keep itself posted, and consider
existing functionality only. Current and potential users are advised to
follow the company's new product introductions and keep a close eye on
its future strategy.
recommendations for both current and potential Baan users can be found
- What Will The Future In Invensys' Stable Bring? Part 2: Evaluating Baan
Announces New Division - Baan Process).