Once high-flying ERP vendors, Baan and SSA, have officially ceased to
exist as independent companies on the same day. Baan's new owner, a British
industrial automation company Invensys, took control of 72% of Baan stock
as of August 4, giving it enough leverage to assume management control
of the once powerful Dutch ERP vendor. Invensys claims it plans to continue
investing in development of Baan products and looking after its large
customer list, which includes such big names as Boeing.
the same time, Gores Technology Group (GTG), a leading privately held
international acquisition and management company, announced that it successfully
acquired Systems Software Associates Inc. (SSA). The company plans to
continue investing in SSA products and supporting SSA's huge installed
base of approximately 20,000 customers. GTG will provide its well-established
operations, management and turnaround expertise to the recently restructured
SSA. The initial focus of the newly formed company will be on its customers,
employees, and profitability. Once the company has addressed these functions,
it will focus on the market-driven expansion of product development and
is a significant acquisition and an important opportunity for GTG," said
Vance Diggins, president of GTG. "It firmly places us in the fast-growing
ERP market and reinforces GTG's growing worldwide presence as a leading
provider of software and services."
is great potential for this new venture," said Vic Shepherd, the new CEO
of SSA. "This acquisition will help to ensure the long-term viability
of the company. We will continue enhancing the value of our core products
while starting to invest in new market opportunities."
Serendipity or not, the demise of these two ERP juggernauts marks the
end of an era when robust, inward-oriented enterprise transaction-crunching
product suites were a guarantee of success. Today's ERP systems are required
to address more than the processes taking place within the walls of an
the Web and e-commerce will continue to be a major ERP direction, easier
enterprise applications integration (EAI), more flexible pricing, acceptance
of standardized applications (reflecting a reduced willingness to customize),
and embedding analytical applications and knowledge management are some
of the best prospects among the next wave of ERP hot-buttons.
is needless to say that almost all traditional ERP vendors had to experience
a rude awakening and are now trying to expand their product offering in
tune with the ever-changing trends and requirements of the new economy.
The fatal misfortune of Baan and SSA lies in the fact that their endeavors
were severely hampered by serious management blunders. Their troubles
were only asseverated by a downturn in the entire ERP market combined
with current investor pessimism about technology stocks (ERP in particular).
on one hand, had struggled for over two years to turn around its flailing
business. Management blunders exhibited in distrustful accounting practices
and subsequent loss of confidence, and its megalomaniac strategy of creating
holistic enterprise applications by acquiring a myriad of disparate products
sent the company in a downward spiral. For SSA, on the other hand, transformation
of its main product into a cross-platform and object-oriented product
proved a gut-wrenching experience. A badly executed new product introduction
in 1996 caused SSA's earnings to plunge, due to the combined effect of
stalled new license sales and the huge R&D budget overrun. Top management
upheaval, staff exodus, a dissatisfied and stranded customer base, and
affiliate partners' defection ensued.
companies' protracted financial sagas, negative publicities, personnel
departures and channel shakeout, as well as the uncertain direction of
acquired companies, have begun to take its toll on customers' loyalty
and patience. There has long been an open season on disconcerted customers
of beleaguered ERP vendors.
renowned and more viable vendors have, with different levels of candidness,
developed strategies of preying on dissatisfied and apprehensive organizations
where those doomed systems were implemented. These predatory aspirations
are based on the assumption that users often choose to rip-and-replace
an existing outdated system rather than upgrading it because of the proverbial
complexity involved in installing a back-office application. Back-office
systems have a typical usability cycle period imposed by technology shifts
(e.g., Internet vs. client server architecture, component-based vs. monolithic
product) and/or applications functionality scope expansion.
Invensys and Gores Technology have a history of buying up depressed software
companies for their customer base and infrastructure. While it may be
too early to predict the future of products at this stage, we believe
that the new owners will be able to salvage the two companies. They should,
without any delay, address customers' concerns by unequivocally stating
a more detailed product strategy and the timeframe for its delivery. To
that end, we commend Invensys' efforts to reinvigorate Baan's Aurum CRM
division with appointment of Robert Karulf as its new leader.
is also very important that the companies explain why they believe impending
restructuring will not jeopardize future product development and/or service
& support. The fact remains that Baan and SSA still have competitive products
despite their dismal enhancements during the above-mentioned difficult
period. However, core ERP product functionality and technology are only
a small part of the selection process, with ever diminishing significance.
While the acquisitions may allay some of the viability questions, the
companies' channels, both direct and indirect, to buy and sell its products
were all but decimated during the last two years. Failure to rebuild these
channels will have far-reaching consequences.
We believe that the operations of existing users and organizations in
an advanced stage of implementation will not be seriously jeopardized
in the short term. While we cannot advise Baan's and SSA's customers to
remain cool, calm and collected, we do not recommend abandoning ship in
a knee-jerk reaction. Due diligence and development of case scenarios
for either a system change or remaining with the status quo states goes
without saying. An unsuccessfully implemented system and unhappy and/or
demoralized users would be one of the additional crucial arguments for
the case of switching to another system. On the other hand, in the case
of a successful implementation, smooth business processes flow and users
being fond of a system, one would have to reckon with the tremendous issues
of managing change and user resistance.
there is a crying need for and apparent (preferably quantifiable) benefits
from abandoning the Baan or SSA product currently in use, you may be better
off by hanging on for awhile. 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. 'Self-sufficiency' should be the name
of the game. Approaching Invensys and Gores Technology and asking for
assurances and firm commitment to future service & support goes without
the acquisitions are consummated and new product strategies become clear,
we do not advise potential users to evaluate these products, although
learning about new features would not hurt. We suggest evaluating the
bells-and-whistles, price, and corporate viability of other vendors instead,
before making a selection.
a more general note, given that over the last few years, the ERP market
became stratified into growing and profitable vendors on one side, and
stagnating and non-profitable vendors on the other side and since this
will become even more accentuated, customers are advised to conduct due
diligence regarding vendor viabilities.