Will 2001 Be The Year Of Baan’s Miraculous Comeback? Definitely Maybe.

Will 2001 Be The Year Of Baan's Miraculous Comeback? Definitely Maybe.
P.J. Jakovljevic - January 26, 2001

Event Summary

On December 15, 2000, Baan Company, once a leading enterprise applications vendor, announced it has signed contracts with more than 100 new customers around the world since being acquired by Invensys plc in August 2000. New customers include major aerospace organizations such as DARA in the UK (for more information, see Is Baan Showing Signs of Life After Death?), manufacturers such as ABB in Australia and Selcom in China, and e-Business companies such as 2BeSource.com, the Singapore-based textile and garment sourcing web portal solution.

"Since the Invensys acquisition, Baan has made solid progress in filling its order pipeline," said Laurens van der Tang, Baan Company president. "We've seen particularly strong market acceptance of our expanding portfolio of E-Business software, demonstrating our capability to successfully integrate solutions across the value chain - from the supplier, through the manufacturing process, to the customer. Our strength in linking complex supply chains to real-time, build-to-order shop floor environments has quickly become a key Baan success factor. In addition, our Baan OpenWorld approach of decoupled components is proving valuable for companies requiring integration of their best-of-breed enterprise components."

Laurens van der Tang said Baan intends to build on this progress over the next six months and is committed to returning to profitability by the middle of 2001. "We will make it even easier for customers to work with Baan. We've developed 'best-of-industry' solutions for key business processes that include all the products, support and initial consultancy necessary to give customers a fast-track route to successful E-Business implementation."

Baan has also extended the functionality of its BaanERP enterprise business solution with the launch of its new BaanTQM Total Quality Management solution for manufacturing organizations on December 13, 2000. BaanTQM is based on a quality management product supplied by Dutch company Guardess, and can also be used as standalone quality management software. Baan said the software can be integrated across the enterprise and will reduce operational costs while increasing production quality and customer satisfaction.

Baan TQM comprises three modules: TQM for research and development; TQM for quality assurance and quality control; and TQM for health, safety and environment. The separate components allow piecemeal implementation, simple customization and high flexibility. Specific discrete manufacturing features include non-conformance handling and acceptable quality level (AQL) procedures. Baan TQM assists in many ways to help process industry and discrete manufacturing companies to achieve and maintain compliance with key quality standards such as ISO and QS-9000 and with regulations as formulated by the FDA.

On December 12, 2000, Baan announced that its BaanERP 5.0c software is now 'Certified for Windows 2000 Professional, Server and Advanced Server'. BaanERP fully supports the Microsoft Windows 2000 operating system, offering customers real benefits in terms of application deployment, lower total cost of ownership and increased application reliability. The BaanERP solution leverages all the enterprise-focused features of the underlying Windows 2000 operating system including Active Directory; Microsoft Management Console; OnNow; Microsoft Software Installer; Single Sign On and Clustering, so the solution can fail over and restart on a second server without any need for client system restarts.

Market Impact

While Baan may have turned the corner, it is still far away from its halcyon days. Invensys' acquisition of Baan has been consummated, and Baan has made apparent progress. A major sign of relief is the completion of radical restructuring during which approximately a quarter of workforce and nearly half of offices worldwide were cut.

Since Baan has not publicly announced detailed financial results for its first quarter since being acquired, the estimates are that Baan has tremendously reduced its quarterly losses (down to less than $10 million) while maintaining revenues at the $50 million level of the last quarter that Baan reported as an independent company (Q1 2000). This has been achieved by implementing a shared services synergy where possible and establishing sales and consulting staff levels based on a realistic sales and service need projection. There is a much leaner management structure as well, while a consolidation of sales and development facilities worldwide has also been taking place. With all this in mind, management's predictions of returning to profitability in 2001 are not quite unrealistic (70% probability).

We endorse the company's renewed focus on the mid-market discrete manufacturing segment, the fertile ground that made Baan blossom during the mid 90s. The above-mentioned moves and/or announcements should boost Baan's attractiveness to this market segment. We would have almost bought the news about new 100 customers as a firm sign of resurrection if it were not for one 'minor' detail - there is a conspicuously small number of new customers in the US! This market, which was once enthusiastic about Baan products, has still been wary and is keeping 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 are indications of success in that regard. The next step would be 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, Supply Chain, and e-Commerce beyond its core ERP solutions. Possible momentum from these activities may then earn Baan renewed customers confidence and acceptance.

Baan must continue its efforts to shore up its customer base and to penetrate the low-end of the market with its entire product portfolio of component applications, mainly through indirect channels and outsourcing arrangements. Concurrently with that, Baan must expand 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.

All these endeavors have been undertaken to position Baan to address its past nemesis - poor customer support and satisfaction. The company pledges that the customer focus is the game play from now on. The alignment of the organization to enhance the customer issues has been propagated throughout the sales, technical, and client support divisions globally. We also know of a new account management feedback practice implemented in order for the company to hear the voice of its client base and to continually improve the process. These are indisputably positive initiatives. With more than 1,000 R&D employees (that were unaffected by the restructuring) enhancing the product quality and functionality, Baan may stand a chance to renew customer confidence by both establishing a growing pipeline and closing the deals in the mid-market discrete manufacturing enterprise applications market.

However, Baan still has a lot of work to do to regain its former glory. The positive sign is that Baan seems to be back on the radar screen, often through VARs. This is based on a number of recent TEC software selection engagements in the US that included Baan. However, the protracted difficult period has taken its toll in dismal product enhancements; as a result, many competitors seem to have caught up or even leapfrogged Baan's competitive differentiators of the past. It is ironic that the Baan business was hit with troubles exactly when it finally seemed to have delivered its most stable and mature product, Baan IV.

The new product release, Baan Series (or Baan V), which features more advanced architecture, currently lacks a number of pre-defined industry templates, which were available in Baan IV. Further, the Baan Dynamic Enterprise Modeler - Strategy Execution (DEM SE) concept, which attempts to remove some of the system configuration complexity by enabling users to graphically model (using flowcharts) and navigate enterprise business processes, organizations and events, and then automatically configures the product, have been emulated by many competitors . Also, its lack of native HR/Payroll functionality means that Baan will not attract customers that prefer a truly enterprise-wide 'one-stop-shop' solution, which is often the preference of the mid-market. Baan's openness to connect to 3rd-party products and support of many platforms and middleware standards are commendable though.

Another reason for concern is the recent Invensys' decision to roll the Wonderware Protean and Prism process manufacturing products into Baan's system, with integration to be completed in about a year (for more information, see Process ERP Market Loses PRISM and Protean). Given the fact that the current Baan product portfolio, achieved through a number of acquisitions, has seen hefty delays and costs that resulted from resolving integration issues and reworking disparate pieces into a single schema/data model, the market may expect to witness yet another daunting product development and delivery experience. Not to mention the dilution of the above-mentioned focus on discrete manufacturing.

User Recommendations

This is primarily good news and a sign of relief for current Baan customers. Although experience teaches us to be wary of the outcome of mergers and acquisitions, existing Baan customers can be assured of the company's viability. It may be quite a different situation regarding product development and service & support strategy though. Consequently, any organization evaluating Baan should keep itself posted, and consider existing functionality only. Current and potential users are advised to follow the company's new product introductions and keep a close eye on its future strategy.

Further recommendations for both current and potential Baan users can be found in Baan - What Will The Future In Invensys' Stable Bring? Part 2: Evaluating Baan.

Editor's Note:
This article has been modified from its original form since the original publication date.

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