Baan rides out rough times and pushes ecommerce message

Baan rammed home hard the ecommerce message at its BaanWorld 99 user and partner conference in Vienna.

Whatever the product or service, Baan has slapped a big 'e' in front of it, recasting the company as a complete order-to-delivery provider rather than an ERP supplier. ERP has become a commodity item: integration of supply chains using the Internet is where Baan sees the future.

But the changes at the company are more than just a surface paint job. There's new blood at top in the finance, marketing and CEO slots, who are driving through a corporate strategy to restore the company's fortunes. It is mopping up the financial mess and it seems contrite about its past mistakes. Above all, the products hit the spot.

According to John Allen, managing director of market analysts E Technology Consulting: "The thin client/server architecture really is as good as Baan is saying, and it will create a lot of interest among resellers and end users."

The technology has moved on from being "prehistoric", he said. "The company is trying to take a major jump over everyone else."

The going gets tough

Baan has a lot of perceptions to change, however. Read any story about Baan and it will invariably be prefixed by adjectives such as 'troubled' or 'struggling'. It has had a rough time, even by the standards of the turbulent ERP marketplace. There have been staff cuts, office closures and quarter after quarter losses, and it has been buffeted by criticism from all sides.

"We've been through - and I'll use a kind word - 'transition'. Others might use another word," admitted Jim Mooney, Baan CFO. "A lot of companies stay mediocre forever, but it's our goal to turn this around to worldwide success."

Like rivals SAP and Peoplesoft, Baan has been forced off the ERP back-office territory to scavenge for new revenue opportunities. Front-office applications such as Customer Relationship Management (CRM) and supply chain software have become the new revenue hunting ground. Baan has gained expertise in those areas through acquisition.

Its strategy is to consolidate its position as the number one or two player in each vertical niche. In CRM, for example, it wants to secure the number two slot behind dedicated CRM supplier, Siebel. In supply chain software, it wants to nestle behind i2.

Where it aims to succeed is in gift-wrapping all the front-office apps together as an integrated Internet product set, so that, as CEO Mary Coleman eloquently put it, customers will have "one throat to choke."

Baan also aims to build on its existing manufacturing sector expertise.

Sound commercial sense

Ecommerce is worth $131bn today, and will hit the $1.5 trillion mark by 2003, according to Forrester Research.

The manufacturing business-to-business slice of that money mountain represents an $800bn market opportunity. "Our strategy is to leverage core strengths in manufacturing, exploit CRM and supply chain [expertise], and e-enable our entire product line," reinforced Coleman.

CFO Mooney's strategy this year was to take a hit in the third quarter with worse than anticipated losses. This was due to the introduction of a subscription-based pricing system, where customers do not pay a lump sum upfront. By mid next year, the bottom line should be much healthier, if everything goes according to plan.

When it comes to the crunch

With a clear strategy in place, with defined sales goals and plans to increase market share and services revenue, Baan is confident it will restore that licence revenue growth next year. And with extra cash freed up from cost cutting measures, it is heavily investing advertising and branding campaigns to help raise its profile to better compete with SAP and Oracle.

The next six months will be crunch time. Baan can no longer blame Year 2000 for affecting sales. Despite its emphasis on front-office apps, it is not abandoning its ERP home ground altogether. While it is anticipating a 40-50 per cent growth in front-office sales, ERP sales will still account for double-digit growth.

But whatever its product portfolio, SAP's sheer size and installed base will be a tough nut to crack, and the front-office market will be keenly fought over. In its favour, Baan has strong partnerships, notably with IBM - reinforced by the fact that Mooney joined from IBM.

Microsoft is another key partnership. It announced at the conference that BaanERP 5.0c is one of the first enterprise-class applications to be directory-enabled on the Windows 2000 operating system.

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