Baan - What Will The Future In Invensys’ Stable Bring? Part 1: About Baan
Written By: Predrag Jakovljevic
Published On: November 29 2000
Baan - What Will The Future In Invensys' Stable Bring?
1: About Baan
Baan Co. once a leading global provider of enterprise business software
has gone from an independent force in the ERP market to being part of
the Invensys Software Systems Division. It is not dead, as some feared
would be the case by now, because it has begun to win new major contracts.
the acquisition, Invensys seems to be determined to capitalize on what
Baan has to offer. The Baan core development organization in the Netherlands
remained virtually intact during numerous restructuring moves. With plans
that focus on sales, marketing, services and administration, Invensys
seems intent on both maintaining and expanding Baan's customer base.
has a wide portfolio of enterprise software applications, including customer
relationship management (sales force automation, product configuration
and call center products), corporate, and operations management (ERP and
supply chain) solutions. Baan also supports these core products with such
add-on modules as business reporting tools, business-modeling tools, and
e-commerce versions of applications. By the end of 1999, the Company had
licensed approx. 15,000 system installations to more than 7000 customers
is a two-part note; the first part focuses on Baan's history, how it fits
in its market, recent developments of interest, and the direction the
company is headed under Invensys. It also contains a financial summary.
second part contains specific analyses of Baan's strengths and challenges
along with bottom line predictions and recommendations for the company
and Product Profiles appear in both parts.
Founded in the Netherlands in 1978 and with dual headquarters in Barneveld,
the Netherlands, and Herndon, VA, USA, Baan Co. was once the fifth-ranked
ERP vendor, with $736 million revenue in 1998. The Company posted stellar
growth (over 80% year over year) from 1995 to 1997, with a significant
slowdown in 1998 and sharp revenue decline to $619 million in 1999 (see
makes a wide portfolio of business applications that link a global enterprise's
internal and external operations. The software automates distribution,
finance, asset management, manufacturing, sales, customer service, transportation,
and other resources. Approximately 69% of Baan revenues come from maintenance
and other services, while 50% of its revenue comes outside of the European
market. The Company has direct and indirect sales, service and support
channels operating in 80 countries throughout Europe, North America, Latin
America and certain Asian, African and Middle Eastern markets. By the
end of 1999, the Company had licensed approx. 15,000 system installations
to more than 7000 customers worldwide.
Baan started Baan Co. in 1978, as a consulting firm specializing in financial
accounting and engineering. In 1979 he began developing software for enterprises.
His brother, former construction executive Paul Baan, joined the company
in 1981. In 1982 Baan shipped its first notable enterprise accounting
software. In 1987, Baan launched its first enterprise resource planning
(ERP) software, based on the UNIX operating system, for automating the
operations of manufacturing, building, and contracting companies. In 1993,
Baan bought several companies to expand its product and market presence,
including UK-based Agility Business Software and Canadian firm Probe Software
Sciences. Also in 1993 Baan sold 34% of itself to General Atlantic Partners
as part of an international expansion. Although initial US expansion efforts
were unsuccessful, a $20 million contract with Boeing in 1994 paved the
way for the establishment of a US headquarters.
1994 the Baan brothers gave the monetary value of their stock, while keeping
the voting control, to Oikonomos, a foundation they created to fund charitable
ventures. They also formed Baan Investment, a venture capital firm designed
to promote ERP software development. Baan went public in 1995 and began
its quest to challenge ERP market leader SAP by acquiring a slew of smaller
companies with special bolt-on products. Among these were
a supply chain management (SCM) vendor (1996);
a product configurator vendor (1997);
Software, a sales force automation (SFA) vendor(1997);
Logistics, transportation and distribution planning and management vendor
In 1997 Putnam
Investments sold its minority stake in Baan over concerns about the company's
relationships with Baan Investment and other private companies owned by
the brothers. There were widespread allegations that Baan had recorded
to Baan Investment sales of software that had yet to reach users. As the
attention intensified in 1998, Baan Investment changed its name to Vanenburg
to distance itself (it had almost a 40% stake in Baan at that point),
and the brothers stepped down from executive positions at the software
company to concentrate on running Oikonomos and Vanenburg. COO Tom Tinsley
was named chairman and CEO, replacing Jan Baan.
some shareholders filed a lawsuit against the company alleging accounting
irregularities. Subsequently, Baan cut about 20% of its workforce and
closed or consolidated dozens of offices worldwide. The accounting turmoil,
restructuring, a market slump, and difficulties in integrating the acquired
products, particularly in merging the myriad of sales teams with different
skill sets, all caused a substantial loss and tainted reputation in 1998.
In 1999, Mr. Tinsley resigned and former Aurum president and CEO Mary
Coleman took his place.
Leading to Acquisition
Despite its troubles, Baan continued to introduce new products to its
Supply Chain Solutions suite throughout 1999. In November 1999 Baan accelerated
its attempts to penetrate the North American market also by announcing
its "Open World" vision for business-to-business collaboration over the
early in 2000, Baan announced additional restructuring charges and Mary
Coleman resigned. Baan was never able to overcome the impact of successive
quarters of losses and the departure of Ms Coleman, who had been brought
on in May 1999 specifically to lead the company into the e-commerce world
(for more information, see Is
Baan Clinically Dead?).
response to financial difficulties early in 2000 included heavily publicizing
its entrance into the e-commerce market and selling off parts of its business;
one such sale was its financial applications unit, Coda (for more information,
Posts $236 Million Loss and Sells Off Coda for Nearly $40M Less Than It
bad news continued throughout the millennial year as pressure to raise
shareholder equity continued (for more information, see Q:
Who Wants to Marry a Multi-Billionaire? A: Baan - Foster Care for Its
Orphans Needed As Well). In second half of 2000, crippled by eight
consecutive quarters in the red and yet another full-year loss, Baan was
acquired by the British automating equipment provider, Invensys (London:
ISYS) (for more information, see Baan
Yet Another ERP Vendor to Find a Sanctuary Under Invensys' Wing).
Baan Co. which had gone public in 1995, traded until the acquisition on
both NASDAQ and the Amsterdam Stock Exchange. The immediate impact of
the Invensys takeover was some instances of customer defection (for more
information, see Baan
Defectors - Is This Only Tip of an Iceberg?
part of the Invensys Software Systems Division, Baan has begun to win
new major contracts (for more information, see Is
Baan Showing Signs of Life After Death?). The company claims to have
signed nearly 100 new customers since the acquisition. Note that Baan
was by no means the only major ERP vendor to succumb to market forces
in 2000. Gores Technology Group (GTG) successfully acquired Systems Software
Associates, Inc. (SSA), also once a high-flying ERP vendor (for more information,
Belle poque Officially Ended With the Demise of Baan and SSA).
Trajectory and Strategy
Like most of its peers, Baan Company has made attempts, largely through
its entry into the e-commerce arena, to counteract the effect of the ERP
market slump that started at the end of 1998. While the challenges of
creating "e" offerings have been significant for most companies, Baan's
efforts have been exacerbated by loss of market share and user confidence,
hindered product development, harsh restructuring, staff exodus, and extended
financial losses over the past eight quarters.
in the past 36 months, Baan has made several attempts to expand beyond
its core ERP functionality and stimulate sales growth. Initiatives included
the introduction of an enterprise application framework, vendor enhanced
plug-ins, sales force automation (SFA) tools, customer relationship management
(CRM), and - following the latest trend - business-to-business (B2B) e-commerce.
During 1999, Baan pursued a dual product strategy: 1) becoming one of
the first ERP vendors to offer a fully integrated ERP-CRM-SCM product
suite, and 2) e-enabling and extending the suite to respond to the changes
taking place in the marketplace as a result of the Internet and the growth
that end, in 1999 Baan continued to add new products to its Supply Chain
Solutions suite (for more information, see Baan
Releases New Supply Chain Products).
November 1999, Baan announced its Open World framework for connecting
business applications (for more information, see Baan
Announces "Open World": Business-To-Business Collaboration Over The Internet).
In January 2000 it announced a strategic reorganization to focus operations
on e-enterprise solutions for the manufacturing industry. Stemming from
the Open World initiative, Baan has announced "E-Enterprise" as a product
suite to help deliver business-to-business functionality (for more information,
E-Commerce: a Wing, a Prayer & and a Single Platform).
further delivered on some of its original promise during 2000 with the
release of BaanFrontOffice. The new BaanFrontOffice is the first release
that truly integrates a collection of acquired front-office products with
each other and with other Baan applications. The result is that sales
and pricing information is linked to product information running in the
back office. The release also included a new marketing component, a new
product-pricing module, and an upgrade to its configuration tools (For
more information see Vendors
Begin to Round Out Their CRM Suites.).
Currently Baan is focusing its E-Enterprise and other extended ERP applications
sales efforts on the manufacturers within its large client base. Its notion
is to establish the product suite within that wide vertical and use the
existing client base to help refine the e-business applications and restore
depleted user confidence. Baan hopes this introduction and refinement
will coincide with customers' Internet education and grow with their needs.
If this plan is successful, Bann will then focus on winning new accounts.
sharp declines in software license sales, Baan has narrowed its customer
focus to the following four market sectors:
Industries: includes Aerospace and Defense, Shipbuilding, Trains,
includes Industrial Machinery, Machine Tools, Components, Fabricated
Products, Furniture, Plastic and Rubber Products
and Electronic: includes Computer Equipment, Telecom and
Radio Equipment, Electrical Appliances, Instruments, Electrical and
Processes: includes Construction Material, Glass Products, Steel
Production, Paper and Pulp and Card products, Steel and Non-Ferrous
of Baan's product strategy is the delivery of scalable and flexible enterprise
application solutions that can be implemented quickly and re-configured
rapidly as business requirements change. To do this, the Company is stressing
both intuitive, graphical business modeling as a starting point for software
implementation, and strong out-of-the-box functionality. During the last
three years, Baan has been seeking to improve its penetration in the Small
to Medium Size Enterprises (SME) market and to expand into enterprise
applications beyond the traditional ERP solutions.
Baan to also target individual product lines such as CRM to other industries,
including healthcare, hospitality, insurance, professional services, telecommunications,
transportation, wholesale, and utilities. Baan has partnered with resellers
both to address additional market segments and to reach a larger number
of enterprises, and claims to have achieved some success in gaining mid-market
customers through these initiatives.
More to the
point for Baan, Invensys seems to be determined to capitalize on what
Baan has to offer. The Baan core development organization in the Netherlands
remained virtually intact during numerous restructurings. With plans that
focus on sales, marketing, services and administration, Invensys seems
intent on both maintaining and expanding Baan's customer base. It plans
to use the next twelve months to complete a significant restructuring
program and to restore customer confidence while fully integrating e-business,
ERP and automation business applications.
enhancements, such as the release of a new browser-based client, continue.
In the next 24-36 months the company intends to further expand extended-ERP
products, reestablish the growth of the Baan ERP customer base and attempt
a significant cross selling within the entire Invensys' portfolio. Invensys
has been arguing that Baan still has a competitive product in some industries;
in this regard it particularly stresses manufacturing, where Invensys
has made significant penetration with its other complementary, plant automation
part one of a two-part evaluation of Baan. Part two focuses on specific
information about Baan as it relates to its current customers and to companies
considering its offerings.