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.