Is Baan Showing Signs of Life After Death?

Is Baan Showing Signs of Life After Death?
P.J. Jakovljevic - October 17, 2000

Event Summary

Baan, once a high flying Dutch ERP vendor has won its first new contract since being acquired by Invensys plc, a large British automating equipment provider; Baan is part of the Invensys Software Systems Division. Baan has won a major 3,000-user, multi-million pound order from the Defence Aviation Repair Agency (DARA). Part of British Ministry of Defence, DARA is the largest government-owned Aerospace and Defence facility in Europe.

DARA claims to have selected Baan because its solutions offered the best business fit for DARA's complex supply chain and production requirements. In particular, Baan's approach will enable DARA to accelerate the mapping of its new, best-in-class business processes onto the Baan software. The order comprises Baan Enterprise Resource Planning, Supply Chain Management, BaanFrontOffice, e-commerce and Baan Enterprise Knowledge Management, which combine to provide a comprehensive enterprise management and e-fulfillment solution. DARA hopes to reduce costs and significantly improve production turnaround time by increasing the visibility of design, product and maintenance information across the organization's multiple divisions and sites.

Bruce Henderson, Chief Executive of Invensys Software Systems Division, said: "Because of its product quality, it was clear that customers would return to Baan as soon as its future was assured. This is the first demonstration of that belief and we are confident that there will be many more contracts in the coming months."

Andy Hamilton, Corporate Development Director for DARA, said: "We chose the Baan package after an exhaustive 15 month evaluation period, not simply on the grounds of its unrivalled functionality in the Aerospace and Defence market, but also because of the attractiveness of Baan's e-commerce strategy and complete e-suite of products."

Market Impact

While "one swallow does not make summer", the news is, nevertheless, a sign of encouragement - particularly for Baan's existing customer base. Invensys, as a profit-driven company, has in the initial stages primarily addressed the issue of realigning Baan's financial structure to support its diminished revenue streams. Despite its assured future under Invensys' roof, Baan's negative publicity, personnel departures and channel shakeout, as well as the uncertain future product direction, have begun to take its toll on customers' loyalty and patience. There has long been an open season on disconcerted customers of struggling ERP vendors, Baan being the most prominent. Many more viable vendors have, with different levels of candidness, developed strategies of preying on dissatisfied and apprehensive organizations where those doomed systems were implemented (For more information, see Baan Defectors - Is This Only Tip of an Iceberg?).

However, Invensys has recently made some more determined steps with a view to stem the tide of defecting customers and to possibly start winning new deals. The blessing in disguise was that throughout the entire tumultuous period, and despite all the negative publicity and personnel departures, Baan has maintained its core development organization in the Netherlands. Also, the initial restructuring effort within Invensys, has spared much of the core development team and focused instead on sales, marketing, services, and administration. Another positive sign for the entire Baan Suite was the fact that Invensys has become one of its biggest users. Baan has therefore become a corporate strategy, which may well mean that Invensys is committed to the enhancement of the functionality and underlying technology. Since the acquisition, Baan stepped up plans to deliver on its Internet strategy with the upcoming release of a new Internet/HTML client, which is slated for delivery with BaanERP release 5.2.

Invensys has also allayed speculations regarding Baan's CRM product future by appointing Robert Karulf as Baan's Aurum CRM division leader. Finally, the company has recently launched an advertising campaign in some prominent magazines like Newsweek where it touts that "there has never been a better time to become one of our customers". The ad also reads "Our software is at the very cutting edge of technology and supports every facet of business processes including manufacturing, distribution and transportation, E-Enterprise, E-Fulfillment, supply chain and CRM no less. And, of course, we can guarantee absolute integration across your business processes".

While it may be too early to predict the future of the Baan product at this stage and while the market may not fall for the typical 'fluffy' marketing rhetoric, we believe that Invensys stands a chance of salvaging, and possibly expanding its customer base. It should, however, without any delay, further address customers' concerns by unequivocally stating a more detailed product strategy and the timeframe for its delivery.

The fact remains that Baan still has a competitive product within some industries, despite its dismal enhancements during the above-mentioned difficult period and a dubious history of functional consistency and integration across the entire product portfolio. But core product functionality and technology are only a small part of the selection process, with ever diminishing significance. While the acquisition may have allayed the viability issue, the company's channels, both direct and indirect, to sell and support its products were all but decimated during the last two years, and particularly recently, before and during the acquisition. Failure to rebuild these channels may annul all the above-mentioned steps in the right direction.

User Recommendations

The news enforces our belief that the operations of existing users and organizations in an advanced stage of implementation will not be seriously jeopardized. While we cannot advise Baan's customers to completely relax, neither do we recommend abandoning ship in a hasty manner. Due diligence and development of case scenarios either for a system change or for remaining with the status quo states is, however, recommended.

Unless there is a crying need for and apparent (preferably quantifiable) benefits from abandoning the Baan product currently in use, you may be better off by hanging on for a while. Nevertheless, be on high alert and develop medium- to long-term alternative plans for moving to a new technology. Ensure that you have the prerogative to change the source code, and a team of skilled resources available should that become necessary. 'Self-sufficiency' should be the name of the game, given that we expect Baan service and support to continue to suffer in the short term owing to continuing restructuring throughout the organization. We expect support services to improve in nine months time at the earliest. However, identifying and approaching your local Invensys/Baan sales representative and asking for assurances and firm commitment to future service and support would be the best course of action at this stage.

Until the new product strategy is crystal clear, we advise potential users to warily evaluate the product even within its engineer-to-order discrete manufacturing sweet spot, although learning about new features would be beneficial. For new clients considering Baan's complete product offerings, keep in mind this company had long been in trouble until very recently. We suggest evaluating the bells-and-whistles, price, and corporate viability of other vendors too, before making a selection.

For existing Baan clients, we suggest keeping the extended-ERP solutions on your long list. If you are interested, perhaps the existing relationship could be leveraged to dramatically reduce the cost of the suite. Consider negotiating a pilot or trial period at no cost to you. Also, use the Baan opportunity to negotiate a lower price with competitors. An upfront implementation guarantee by Invensys would certainly alleviate users' anxieties.

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