Boeing Expands Baan Licensing Deal

Event Summary

Dutch business-management software maker Baan Co. NV on December 16 said it had expanded the scope of its contracts with Boeing Co. in deals that make Boeing Baan's largest customer. Baan said it would expand existing contracts with Boeing and its Commercial Airplanes Group to cover Boeing's military aircraft and missile systems unit and space & communications unit, its two other business segments. Financial terms were not disclosed. Spokesmen for both companies were not immediately available to comment further. The expanded deal gives Boeing full access to Baan software used to tie together so-called "front-office" sales, marketing and customer service functions with "back-office" supply procurement, purchasing, manufacturing and training tools. Baan is now one of the key software suppliers to the Boeing Commercial Airplanes program called "Define and Control Airplane Configuration/Manufacturing Resource Management" (DCAC/MRM). It also supplies software to Boeing operations in Wichita, Kansas; Salt Lake City, Utah; Decatur, Alabama; and Irving and Corinth, Texas. In late October, a Baan official had said prior contracts with Boeing covered roughly 25,000 users and the contract to be announced this quarter would cover 75,000 users. "Boeing is looking to Baan to make enterprise solutions available to our major business segments enabling us to realize efficient internal systems. These enterprise solutions will be based on standardized business processes and will avoid customizations," said Kristi Savacool, Information Systems vice president, Boeing Commercial Airplanes Group. Baan Consulting will support the Boeing ERP Competency Center to enhance efficiencies of implementation between the three Boeing business segments. Finally, Baan will work closely with Boeing to create new product enhancements that will support the needs of Boeing and other customers. "Boeing continues to enable Baan to innovate its offerings, and Baan solutions continue to help Commercial Airplanes achieve its goals to improve internal processes and enhance the group's ability to deliver more value to its customers," said Mary Coleman, chairman and CEO, Baan Company. "We see this enhanced relationship with Boeing as a model for serving other global operations as they seek to create the most efficient and effective means of accessing the benefits of extended enterprise solutions."

Market Impact

This contract has multi-dimensional importance for Baan. First, it should boost the Company's dismal software license revenues in 1999 (down over 50% compared with the first 3 quarters of 1998). Second, Baan badly needs a revived market penetration of the North American market, and this contract provides needed credibility. Third, Boeing has always been one of Baan's most important customers, and any break in the partnership would be all but fatal for Baan's future. Boeing has also been a "playground" for testing beta releases of new Baan products. Once an ERP powerhouse, the Dutch software vendor stumbled a few years ago after buying up a slew of other companies and then failing to quickly tie all the applications together. Baan seems to be on the right track with its technology, and Mary Coleman has proven to be an effective manager at the helm. However, Baan's integration technology has yet to be proven with users, which will be necessary for Baan to sell its extended applications suite instead of point solutions. Baan must also prove to its customers that its new subscription-pricing model is a good deal. The Boeing contract seems to be the perfect opportunity for all the necessary proofs of concept.

User Recommendations

Users are advised to closely follow future news releases about Boeing's satisfaction with the new Baan functionality and easiness of implementation. Although Baan's cash and equity position is significantly better today compared to the corresponding period of fiscal 1998, we advise any organization evaluating Baan to consider existing functionality only, until the Company exhibits consistently profitable performance and shows more confirmed news about the success of the new product portfolio implementations.

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