Market Impact Summary
once one of the leading independent providers of enterprise application solutions
for industrial enterprises, and subsequently part Invensys plc.
(London Stock Exchange: ISYS), was sold on June 3 to an investment group consisting
of Cerberus Capital Management, L.P. and General Atlantic
Partners, LLC, two of the world's leading private investment firms.
Backed by nearly USD $14 billion in investment capital, the investment group
plans to employ a growth oriented, long-term strategy to the Baan business,
in the manner similar to the incredulous comeback of SSA Global Technologies
(SSA GT) (www.ssagt.com), incredulous
comeback. Very likely the new mid-market manufacturing ERP empire-in-the-making
will be spared from any unnecessary controversy and the stalemate that embroils
Oracle, PeopleSoft, and J.D. Edwards.
GT has unequivocally said that it does not intend to discontinue any of acquired
brands, but will rationalize the organization structure, as already seen in
letting almost half of former interBiz' and ~20% of former
Infinium staff go, which will have caused inevitable disruption
in a short term. While Baan's and Ironside's workforce exodus
is not expected to a such degree, partly given worker-friendly Dutch labor law,
the pressure for that will build up over time in case of continued poor financial
performance. Thus, user companies will still need serious convincing that SSA
GT/Baan will not stabilize' or even discontinue some brands. Moreover, even
in the cases where the company has been showing close attention to its customers'
wish lists, its crucial tenet of operation is profitability and setting realistic
goals (the ROI justification works for the vendor as well). It does not appear
very realistic to expect the equitably due attention to over a dozen products,
though, as only the enhancements that will result in marketing value to SSA
GT/Baan will pass.
of an unfocused, multi-product and multi-technology strategy in the markets
with diverse dynamics typically multiplies and overstretches sales, R&D, and
service & support resources jeopardizing the chances its products could stand
a chance of long-term success in their respective niches. In addition to Invensys,
Geac, Epicor, Ross Systems,
and SCT Corporation would be relatively recent examples of
companies where this strategy has failed: all have had to eventually resort
to divestiture and to a focus on core competencies. With SSA GT/Baan stating
more appetite to acquire more vendors in light of impending large-scale consolidation
Merger-Mania Spiced Up With Vendettas Leaves Customers Anxious), before
even putting this two mergers well behind, it might be flying into face of these
negative experiences, and it may soon have too much on its platter to handle.
one hand, SSA GT/Baan's acquisition spree might result in many manufacturing
and distribution global enterprises, currently using a plethora of diverse products,
ending up with eventually dealing with virtually only one vendor (i.e., SSA
GT/Baan). Still, the dichotomy is that the vendor in case will still have a
slew of disparate products in its fold, which are yet to start seamlessly talking
to each other. That is where the cultural difference comes again into light
while SSA GT's CEO Mike Greenough considers underlying technology a plug-and-play
commodity that does all the integration behind the scene and transparent to
the user, Baan's excruciating efforts (i.e., time, money and human resources
wise) to deliver Gemini and OpenWorldX (not to mention SAP's
colossal task to deliver still evolving NetWeaver platform)
certainly shows that we are not there yet (see What's
Wrong With Enterprise Applications, And What Are Vendors Doing About It?).
It may be interesting to note that SSA GT, although recently acting from a position of strength, yet has to ensure that the erosion of user companies that have already initiated a switchover replacement strategy (either due to lingering bad market perception of certain products' viability or due to SSA GT's lack of approaching them) or that are being merged or acquired by other companies having other renowned ERP products is outnumbered by new accounts and new reactivated customers. Some companies may still need more value proposition than the SSA GT CEO's often cited mantra that "changing an ERP system is like a brain surgery should be performed only if the patient is dying". Time will tell how Gemini and OpenWorldX (and Ironside in part) can help in that regard, both as glue for disparate divisional systems and as a long-needed upgrade for some legacy products. At least, the Ironside purchase might indicate, more than others, that SSA GT is not a mere bone collector'. Ironside was more an acquisition of a good fringe technology, since its fledgling customer base will not be a major support revenue contributor.
the new combined company's profit margins will likely be under pressure given
that vendors such as IFS, J.D. Edwards, SAP, Oracle, Intentia,
QAD, Ross Systems, Geac,
MAPICS and even Microsoft Business Solutions
(coming from the lower end), most of which offer more unified solutions and
that have strong vertical presence, may therefore give Baan/SSA GT's prospects
a value proposition that can be difficult to decline. This will make the task
of concurrent organizational restructuring and product development much more
difficult for SSA GT/Baan.
On the other hand, SSA GT with Mike Greenough at the helm has many times surprised even the biggest skeptics by turning around seemingly non-viable vantage products (which iBaan and Ironside certainly are not) and/or ailing vendors (which Baan has been, and Ironworks will have likely become). We impatiently expect the next quarterly report that should include Baan's operations to see whether this is becoming the tradition. Assuming the huge venture capital funding philosophy holds out and profitability continues to grow, the combined company might move faster than many could currently comprehend and give it credit.
is Part Four of a four-part note.
One detailed the events.
Two covered the Market Impact on Baan.
Three discussed the Market Impact on SSA GT.
This is indisputably great news for Baan and Ironside customers, and possibly for some users within the SSA GT's fold. While Baan and SSA GT's large cash coffers are assuring, a more positive sign is the merged company's intent to reinstate itself as a true software-developing vendor, not simply a software broker and dealer. Thus, combined respective customers should consider these events as a move toward a more viable position for their IT investment, and treat it in a business as usual manner' but with open eyes. The "catch 22" for current and potential users is to discern Baan/SSA GT's corporate strategy viability within the product line/industry in question.
Users will benefit from approaching Baan/SSA GT and informing themselves about what the company plans for future service & support (or discontinuation and/or product stabilization?) of its individual products are, and what would the ramifications of migrating (or not) to its new product offering be. Users should vigorously question the management on how their product line will evolve in the future and investigate all alternative solutions now to fully understand their situation and options. As for existing users and those currently going through implementation project work, business as usual would be the best course of action. Baan is now a solid Web services-compliant product and a valuable property, and it will seemingly be taken seriously by the new owners, at least for significant maintenance revenue if not for an ample cross-sell and up-sell opportunity within the existing install base.
Baan existing install base's diversity, different strokes may still be applicable
for different folks, although, given some time bracket before the merger consummates,
the decision does not necessarily have to be made in a hurry. Baan IV
users, which constitute the vast majority of the install base, have the least
reasons to worry about their ongoing support. Users that are on older versions
than Baan IV (i.e., green-screen' based Triton product) may benefit from upgrading
to Baan IVc as to increase their chance of protected support in the future.
Baan IV Process, Baan Dimensions and Baan
Cable & Wire customers are likely in the least favorable situation,
and they might still want to look for other alternatives, although the migration
opportunity might present itself within the SSA GT's offering (e.g., the BPCS,
Infinium or PRMS products). Current iBaan
5 customers and Baan IV customers anticipating an upgrade to iBaan 5
may want to postpone their major plans until the new owner successfully launches
the Gemini product. Users of iBaan CRM, iBaan SCM
and iBaan PLM should assume the same approach.
Existing SSA GT customers, particularly former interBiz ones, which have been yearning to rejuvenate their almost outdated technologies in place should welcome the above merger plans and check whether Ironside Solutions and/or the Bann Gemini product, once launched and proven, might be a fresh replacement or a long awaited migration path, although switching products is typically a bumpy road for users of legacy applications.
Less technologically aggressive global companies and/or their divisions that have been happy with their product instance's performance may be better off by staying with older BPCS instances or any former interBiz product for the time being. Nevertheless, not only MANMAN users will have to undergo thorough what if' scenarios' assessment such as, e.g., porting onto another platform, keeping the status quo, migrating to another SSA GT/Baan product, going for another ERP provider, etc. Identifying and approaching your local SSA GT/Baan sales representative and vigorously negotiating assurances and firm commitment to future product roadmap, and service and support would be the best course of action at this stage.
more rationale on what to do about your legacy application in place, see The
"Old ERP" Dilemma: Replace or Add-on, The
Old ERP Dilemma: How Long Should You Pay Maintenance?
involved in Global Guide groups, since by voicing your concerns/requirements
that might have otherwise been overlooked by SSA GT/Baan you will be increasing
the likelihood of your system's future enhancements. Be aware that no core development
enhancements will likely be provided for very old products, but the benefit
of Baan and/or OEM partner products might likely be extended to these as well.
Also, XML interfaces cannot be retrofitted over a few generations' old products;
therefore SSA GT has had to deliver the BPCS Enable layer for
users of BPCS V4.05CD release, while users of interBiz products will have to
see what similar SSA GT's plans in that regard are, and how much Baan and Ironside
merger can help in that regard. Some products will most likely not receive major
functional enhancements owing to aging technology, and you should also help
the vendor figure it out.
the new product strategy is crystal clear and publicly committed to by the new
owner, we advise potential users to warily evaluate the products even within
their manufacturing sweet spot. (Of course, learning about new features and
attractive pricing would be beneficial, at least for information and for leverage
with other vendors.) We suggest evaluating the bells-and-whistles, price, reference
sites within your industry, and corporate viability of other vendors as well,
before making a selection. Current SSA GTs customers with OEM-ed components
from many partnerships such as Logility, Applix
or Digital Union should clarify any ramifications of the above
recent acquisitions on their current IT investment.
detailed information about iBaan Enterprise 5.0 and for some
SSA GT products (i.e., BPCS, PRMS and Infinium)
is contained in the ERP Evaluation Center at http://www.erpevaluation.com/