SSA GT Aspect
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.
should note that Baan was by no means the only major ERP vendor to succumb to
market forces in 2000, given Gores Technology Group (GTG) acquired
at a similar time former Systems Software Associates, Inc. (SSA), also once
a high-flying ERP vendor. It is even spooky to see Baan acquired by its former
ill-fated brother in arms', although SSA GT's current bullish posture should
bode well for Baan's future. To be fair, the SSA GT's progenitor, former SSA,
had suffered, over the past several years, a tremendous loss of market share
and customer confidence, while its channel also dwindled during the same period
for SSA GT is still only a half of once SSA's over $450 million turnover in
the mid 1990s, though. Therefore, SSA GT, having gone through its bankruptcy
and rebirth initially under the Gores Technology in 2000, has been charging
back within Top 5 ERP vendors' club, although still steeply down from once being
neck to neck with J.D. Edwards. To that end, the merger with Baan should be
a sign of SSA GT's continued commitment to regain its former glory and the clout
in the sector. The combined company now projects revenues in fiscal 2003 to
be around $600 million, which should entrench it within the Top 5 of the ERP
rating list, being possibly the No. 3 in terms of the geographic reach. In some
individual markets like Japan or Brazil, though, the company even claims to
be second to only SAP.
Like the previous few SSA GT's acquisitions, this merger too seems aimed at enlarging combined Baan and SSA GT's customer base, market share, and, more importantly, its predictably recurring support revenue and consequently larger R&D pool. The merger nears the new company closer to the landmark number of 16,500 active installed customers, rendering it possibly the largest ERP vendor focused solely on manufacturing, although at a possible price of stretching its R&D and service & support resources. One might notice the following common traits of Baan and SSA GT, with some complementary nature:
Large customer bases with a wide geographic spread (particularly in emerging
markets that have been much less affected by the recession); while Baan will
have a larger footprint in Europe, SSA GT has a bigger presence in North America
and Asia-Pacific (albeit Baan has a larger presence in India with a large
development organization and a significant market penetration), which may
result in significant savings due to offices and staff consolidation/sharing
in many common markets,
Recently adopted (or enforced) focus on selected vertical industries and/or
platforms, with SSA GT focusing more on repetitive discrete and hybrid discrete/batch
process manufacturing and Baan focusing on complex discrete manufacturing.
Although there will be some overlap due to both vendors' presence in discrete
industries (e.g., automotive or electronics), Baan's expertise in complex,
project-based manufacturing should fill the gap that SSA GT has not traditionally
been strong at. Also, the IBM iSeries (f.k.a. AS/400) remains SSA GT's main
platform of choice, while Baan has long turned to Microsoft Windows and UNIX
platform, which helps the demarcation line and the complementary nature of
A prospect of much improved balance of partnering and native applications,
with Baan filling much-needed CRM, PLM and possibly some SCM gaps in SSA GT's
portfolio, and vice versa, SSA GT's MasterPiece/Net should cater for human
resources (HR) and corporate financials, which have long been the gaps or
weaker spots in Baan's natively provided functionality. Also, Warehouse BOSS
might be a great cross-selling opportunity to existing Baan customers.
Mid-market incumbent status, with iBaan being more suitable for the upper-end
of the market, while SSA GT's products seem to fit well in the true mid-size
is Part Three of a four-part note.
One detailed the event.
Two discussed the Market Impact on Baan.
Four will make User Recommendations.
Ironside Acquisition Impact
the same token, the Ironside acquisition seems to have merits, especially the
fact that Ironside has garnered a notable integration to SAP, with more than
200 large global corporations using Ironside Solution Suite
(formerly Ironworks), and particularly its powerful order management
functionality, within their SAP-centric environments. Given SAP, as the most
functional product, has had to partner for sell-side solutions like Ironworks,
SSA GT/Baan should benefit from the Ironside's customer service-oriented B2B
platform that reaches well beyond four-walls and enables manufacturers and distributors
to more effectively transact with customers and suppliers by automating key
processes such as order management, supplier relationship management (SRM),
customer service and e-procurement. In addition to SAP, Ironworks has many successful
integrations to Geac System21 (formerly JBA System21),
J.D. Edwards and Invensys PRISM products.
vertical focus on Chemicals, Electronics/Hi-Tech, and Consumer Packaged Goods
(CPG) companies should come in handy to enrich SSA GT's multiple products (if
not even Baan's as well), particularly when one notes that the integration to
BPCS has been completed during past engagements. It appears that Ironside's
recent product developments within direct procurement and SRM are complementary
to SSA GT's iProcurement module for indirect materials procurement,
which was developed in OEM relationship with Digital Union,
although one should watch the fate of this and many other OEM partnerships in
the future (see SSA
GT Beefs Up BPCS V8 Through Partnerships' Spree).
its hand, it indeed appears that SSA GT understands and listens closely (via
Global Guide Groups) to the needs of conservative ERP customers that are unwilling
to dispose of a good functional product even at a cost of its technological
antiquity. Further, it has a track record of strong functional development that
preserves the customer's current investment. Indeed, BPCS V8
is a scaleable ERP system extended beyond traditional ERP boundaries, with several
manufacturing mode flavors such as discrete lean manufacturing, assemble-to-order
(ATO) and make-to-order (MTO) operations, and even process manufacturing.
it is impressive that SSA GT has even shown some success with managing such
a seemingly unwieldy set of disparate products, particularly coming from former
interBiz, considering that a vendor of Computer
Associates' stature was not able to do much with almost a dozen
products, some being of vintage '78 or '82. To that end, recent enhancements
within the latest releases of PRMS 9.2, BPCS 8.2,
KBM 2.2, and Warehouse BOSS 6.2 are ever more impressive given
the market skepticism about the viability of these.
the venerable MANMAN product has had some enhancements in its
version 12, although this product faces the impending predicament of the HP
e3000 hardware platform discontinuation in 2003. To that end, given
MANMAN and Triton (an early version of Baan) have similar,
if not identical, code base, migration to iBaan might be the
most viable option for these customers. Namely, a former product of (also former)
ASK's, called MANMAN/X, was the derivative
of Triton 2.2d, (when ASK acquired the rights to code and distribution in the
early 1990s), then called Triton 3 for a short while, and subsequently renamed
MK Manufacturing under Computer Associates/interBiz. Thus,
SSA GT might even be better off by handing over its MANMAN/X install base support
to Baan, which would help Baan bolster its revenue stream and improve its P
& L statements (which it will have to achieve badly anyway), while SSA GT
would be relieved in that regard and be able to focus on other, more prospective
Challenges to Baan and SSA GT
However, Baan's suitor will still have work cut out for itself to regain the former Baan glory, given a cultural mismatch between merged vendors. Namely, Baan has traditionally placed more importance on R&D and technological prowess, but it has yet to achieve the SSA GT's prowess in sustaining profitability. Given one cannot both have a cake and eat it, Baan will be hard pressed to produce consistent financial results a la SSA GT', which might mean serious restructuring, while continuing to invest and evolve its products. Baan still has non-proportionally large number of R&D employees (i.e., nearly 1,000 out of 2,700 total employees), and its sales per employee ratio is quite higher than its competitors can boast, which will raise many eyebrows within profit conscious SSA GT and its venture capital backing owners. On the other hand, this pool of developers is needed to handle the launch of a product that might require a steep learning curve for both implementers and users of older product releases.
Further, like SSA GT, Baan still has a lot of housekeeping to do given it admits that nearly 70% of its customers are still on Baan IV, owing to the unfortunate fact that the former Baan Co.'s business was hit with troubles exactly when it finally seemed to have delivered its most stable and mature product although technologically outdated, Baan IVc. BAAN IV is still a traditional monolithic third- and fourth-generation procedural language (3GL/4GL)-based product, with an internally developed proprietary toolset that requires significant domain expertise to be productive.
BAAN V (now renamed into iBaan Enterprise 5.0),
which was released in late 1998, Baan begun the evolution of its ERP product
to a component-based architecture, and Web enablement. Therefore, the bifurcated
releases of the core ERP products, Baan IVc and iBaan 5.0 — with diverse vertical
solution extensions, while necessary to keep old customers aboard, will eventually
have to be merged into one code set for development and support. To that end,
the Gemini product release is to provide a smooth simultaneous
migration for customers of Baan IV and iBaan ERP (and optimally of many SSA
GT's old product users), given this is an issue that Baan was very aware of
and was specifically addressing. Still, without massive migrations by existing
customer base, Gemini's new sales will also be hampered for lack of reference
sites, and the new company will have to watch closely for this vicious circle
the varied product portfolio under the SSA GT banner has also been taking serious
pondering and soul-searching (in a manner depicted above for Baan). It doesn't
take a rocket scientist to realize a number of potential product redundancies
within the following overwhelming set of product: BPCS, Ironside, Infinium,
CAS, KBM, MANMAN, Masterpiece/Net, MasterPiece/Net HRMS, MAXCIM,
MK Logistics, MK Manufacturing, PRMS, SSA
GT MAX+ and Warehouse BOSS. It, however, might indeed take a genius
to figure out how to fully integrate organizational structure where employees
are best integrated, service offerings best coordinated and cross-selling opportunities
best tracked and pursued. While Baan's Gemini product would at first glance
be seen as a logical migration destination for more than Baan users, it will
likely happen mainly for MANMAN users, mainly because of SSA GT's install base's
religious infatuation with the former IBM AS/400 platform. Further, Baan PLM,
CRM and SCM enhancements to many SSA GT's products might not take off in earnest
in the short term until cross-platform integration challenges are completely
In fact, SSA GT has already developed an integration architecture that runs on a J2EE application server and provides common integration for portal applications to legacy applications. The infrastructure also enables integration to SSA GT extension products, other software solutions and to future SSA GT product acquisitions. This infrastructure includes the development of an integration broker, which provides an object model, transaction services, and connectors to multiple systems. It remains to be seen whether and how Baan and/or Ironside platform are going to supplant this or blend within.
concludes Part Three of a four-part note.
One detailed the event.
Two discussed the Market Impact on Baan.
Four will make User Recommendations.