Baan Under Invensys
UK-based global automation and controls group Invensys plc.
(London Stock Exchange: ISYS) has announced that Baan is finally and definitely
for sale. This is a part of its parent's major divestiture move (i.e., over
two thirds of its current business) and as Invensys recoils to its bare fundamentals.
(For details of the announcements see Part
One of this note).
second half of 2000, crippled by eight consecutive quarters in the red and yet
another full-year loss, Baan was acquired by then buoyant giant automating equipment
provider, Invensys (for more information, see Baan
Yet Another ERP Vendor to Find a Sanctuary Under Invensys' Wing). The immediate
impact of the Invensys takeover was a radical restructuring during which approximately
a quarter of workforce and nearly half of offices worldwide have been made redundant,
and some inevitable instances of customer and reseller defection (for more information,
Defectors - Is This Only Tip of an Iceberg?).
received accolades in early 2001 for the speedy although traumatic early recovery
process it went through after the Invensys acquisition in 2000. It straightened
and strengthened its own house despite the fact that the economy (and particularly
the manufacturing sector, which happens to be its sweet spot) was already in
a steep slide downhill (see Baan
Achieves A Speedy Recovery Despite The Tough Times). This was achieved by
implementing a shared services synergy where possible and establishing sales
and consulting staff levels based on a realistic sales and service needs projections.
There has been a much leaner management structure as well, while a consolidation
of sales and development facilities worldwide had also taken place.
was a continuation of a very methodical turnaround being led by Baan's president,
Laurens van der Tang, as the Baan business strategy of providing industrial
companies in its core vertical industries with a comprehensive range of applications
focused on core business functions including ERP, CRM, SCM, and product lifecycle
management (PLM) had seemingly worked (see Baan
have then endorsed the company's renewed focus on the mid-market discrete manufacturing
segment, the fertile ground that made Baan blossom during the mid 90s. The majority
of Baan's customers and capabilities still lie in the discrete repetitive/make-to-stock
(MTS), assemble-to-order (ATO) and engineer-to-order (ETO) industries. However,
Baan also has considerable flexibility within its manufacturing functionality
style coverage because of the customer order decoupling point (CODP) concept,
which allows the user to determine where in the manufacturing process the forecast
vs. an individual order run the production demand.
unique project-based industries, Baan has created specific functional modules,
albeit the integration across major functional areas would be uneven, particularly
for the specialty modules in their early releases, such as the big' (i.e.,
complex or capital) project module. ETO-oriented manufacturers have fond Baan's
complex project and aerospace and defense vertically oriented functionality
strong from a project definition, estimation and management (e.g., project-based
resource planning or PRP) perspective. With the introduction of BAAN
IV product release, Baan was one of the first ERP vendors to deliver
serial effectivity and the US government-specific financial control and reporting.
is Part Two of a three-part note.
One detailed the recent announcement.
Part Three will discuss the Market Impact and make User Recommendations.
Responding to the US Market
would have almost bought the recent news about several hundred new customers
as a firm sign of resurrection if it were not for one minor' detail there
has been conspicuously small number of new customers in the US! This market,
which was once enthusiastic about Baan products, has still been wary and kept
the company under a magnifying glass. The company has, at least, addressed the
existing North American customer base attrition, partly by its senior management
personally reassuring the major customers of the company's viability. There
have been indications of success in that regard. The next step was to expand
the business in its existing large customer base, both by increasing the number
of seats and by offering enterprise applications such as Front-Office, Business
Intelligence (BI), SCM, PLM, and e-Commerce beyond its core ERP solutions. Possible
momentum from these activities may have then earned Baan some renewed customers
confidence and acceptance. Concurrently with stabilizing its finances, Baan
believes the growth was fueled by its recent strategic product broadening announcements
including iBaan for Product Lifecycle Management (iBaan PLM),
iBaan for Supply Chain Management (iBaan SCM), and iBaan for
Customer Relationship Management (iBaan CRM).
very recently, at CeBIT 2003 exposition mid-March in Hannover,
Germany, Baan, announced 'Measure Up' - its new business performance improvement
(BPI) initiative to help discrete manufacturers measure, monitor, analyze and
manage business processes to optimize enterprise-wide business performance.
Measure Up focuses on core performance measures such as demand forecast accuracy,
lead-time reduction and new product introduction (NPI), with the idea of enabling
organizations to establish objective baselines, determine where opportunities
lie and 'measure up' against these critical areas in order to improve Return
On Investment (ROI) and establish continuous monitoring improvement initiatives
and thereby get the best out of their alredy deployed software.
Measure Up uses the principle of Corporate Performance Management (CPM) - which encompasses Business Intelligence (BI) tools and platforms - to enable organizations to develop a monitoring system to measure and optimize their individual performance levels. However, besides mere measurement capability and identification of a problem it is also a diagnostic tool, since its portal-based diagnostic analyzer with its cause-effect (fishbone) diagram will typically come up with a solution of the problem too. For example, constantly late delivery of orders might indicate suppliers' late deliveries, poor configuration process, incorrect scheduling process, or inaccurate order promised date, all of the individual causes being able to be drilled into further.
Baan has thereby continued its efforts to shore up its customer base and to penetrate the mid-market with its entire product portfolio of component applications, mainly through indirect channels and outsourcing arrangements. Concurrently with that, Baan has been expanding global distribution, sales, services and support capabilities, primarily by leveraging qualified indirect channels. To that end, the sales channel has seemingly 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, etc.).
The indirect channel has also been reevaluated and reduced to strategic suppliers that can deliver the necessary customer satisfaction the new organization has been striving to achieve. The vendor has last fall also reformed its indirect sales channel organization to be comprised of several companies that sell the entire iBaan suite of solutions to customers in a specific market-size category. The channel develops and implements sales programs that contribute to drive demand for Baan products, strategies, and solutions in six core industries — automotive, electronics, aerospace and defense (A&D), industrial machinery and equipment, logistics, and hybrid manufacturing.
Prior to that, during 2001, the indirect channel was 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. Baan had also then pledged that customer satisfaction and support was the main theme, since 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 has also reorganized its sales force, with pre-sales consultants now being merged with the technical product architects. The fact that Baan's field organization, which was never truly merged into Invensys, will now be some blessing in disguise for the future owner.
All these endeavors have been undertaken to position Baan to address its nemesis of the past -- poor customer support and satisfaction. Because of four years of cumulative aggregate growth rate (CAGR) over 80% and significant functional enhancements, Baan's implementation services network had been stretched and inexperienced in the 1990s. However, still with more than 1,000 R&D employees (that were unaffected by the multiple waves of restructuring) enhancing the product quality and functionality, Baan may stand a chance to renew customer confidence in the mid-market discrete manufacturing enterprise applications market. Baan also claims that monthly surveys show that customer satisfaction is up nearly 50% in over two years since the company was acquired by Invensys, during which period, Baan also added ~400 first-time customers. While that figure is not mind-blowing, it helps to reinforce the company's viability and value proposition that perseveres even during these adverse times.
Baan's viability was again tainted lately first due its parent's financial hardships
(over a year ago, Invensys was at the brink of a collapse due to the heavy debt
load it had accumulated while acquiring a string of companies including Baan),
and the indications that even the Baan division might have incurred losses during
its last two quarters (after six consecutive positive quarters against its parent's
dismal results). The main reason for Baan's recent losses will likely have been
a hefty $150 million investment in the next-generation platform that is envisioned
to supplant its older ERP predecessors Baan IV and iBaan Enterprise,
and which is code named Gemini and slated for delivery in September
2003. Although publicly traded, Invensys does not report its parts' P&L statements,
but our estimates of Baan revenues in 2002 would be nearing $350 million. Second,
during its recent revenue predictions on February 14, Invensys was conspicuously
cautious on its second half of the year results, citing weak demand at Baan,
but strengths in other areas.
order to stem any further speculations about its own and Baan future, Invensys
had long begun to restructure the software unit and installed stronger management.
During its event for the user group last fall, Invensys declared it had quite
restored its financial health (i.e., it has cut its debt in half albeit still
well over a $2 billion level, which eventually prove to be too much to handle)
and that it was ready to execute a new strategic vision with Baan as a prominent
team player. Early in 2002, Invensys announced its new strategic direction and
Baan was positioned as a key component of the newly formed Production Management
Division. Since then, Invensys has been integrating its three principle software
companies Baan, Wonderware and Avantis, under the leadership of Laurens van
der Tang, the president of Baan, and Joe Cowan, who was chief operating officer
of the combined organization until his recent departure to EXE Technologies.
Unfortunately, the burden of debt, with no sign of the market recovery in sight,
has forced Invensys to back out of its above strategy.
At the end of the day, the Baan's phase under Invensys, after a turbulent three years that have seen considerable people, market and technology change, and considerable worthwhile investment, is nearing the end. One should note that Baan portfolio will include its ERP, CRM, SCM and PLM systems and, most important, its considerable web-based integration platform and technologies. This might be an appealing combination of back-to-basics, stable, pragmatic, manufacturing-focused ERP software developers and implementers, and modern collaborative, web-based extended-ERP enterprise software.
recently-announced technology developments seem to be in sync with the market's
trends, and leaning shrewdly towards the requirements of holistic business requirements
from engineering design collaboration, to CRM and on to SCM. Baan, for one,
offers a core stack of modules under iBaan Enterprise suite that includes ERP,
OpenWorldX integration middleware layer that even features
a framework for cross-application processes like supplier and engineering design
collaboration, then Decision Manager, B2B Server, Portal, and Reporting capabilities.
To enhance this stack, the company strives to address customer intimacy, operational
excellence, and product leadership capabilities (supported by the respective
CRM, SCM, and PLM products) tailored to specific industry requirements.
the importance of integration looms large, Baan's OpenWorldX framework was devised
to make it possible for Baan solutions to plug in with third-party enterprise
systems. Baan proudly claims its technology is "Integrated but open", since
by using OpenWorldX Baan solutions can co-exist with legacy and third party
applications. This has already been demonstrated in practice, where Baan sell-side
e-commerce solutions are running fully integrated with SAP back end installations
via OpenWorld SAP Connector (there are indications of ~1,000
enterprises where SAP and Baan coexist on corporate/divisional level).
concludes Part Two of a three-part note.
One detailed the announcement.
Part Three will discuss the Market Impact and make User Recommendations.