Baan, once one of the leading independent providers of enterprise application solutions for industrial enterprises, and subsequently part Invensys plc. (London Stock Exchange: ISYS), was sold on June 3 to an investment group consisting of Cerberus Capital Management, L.P. and General Atlantic Partners, LLC, two of the world's leading private investment firms. Backed by nearly USD $14 billion in investment capital, the investment group plans to employ a growth oriented, long-term strategy to the Baan business, in the manner similar to the incredulous comeback of SSA Global Technologies (SSA GT) (www.ssagt.com), incredulous comeback. Very likely the new mid-market manufacturing ERP empire-in-the-making will be spared from any unnecessary controversy and the stalemate that embroils Oracle, PeopleSoft, and J.D. Edwards.
One should note that Baan was by no means the only major ERP vendor to succumb to market forces in 2000, given Gores Technology Group (GTG) acquired at a similar time former Systems Software Associates, Inc. (SSA), also once a high-flying ERP vendor. It is even spooky to see Baan acquired by its former ill-fated �brother in arms', although SSA GT's current bullish posture should bode well for Baan's future. To be fair, the SSA GT's progenitor, former SSA, had suffered, over the past several years, a tremendous loss of market share and customer confidence, while its channel also dwindled during the same period of time.
Revenue for SSA GT is still only a half of once SSA's over $450 million turnover in the mid 1990s, though. Therefore, SSA GT, having gone through its bankruptcy and rebirth initially under the Gores Technology in 2000, has been charging back within Top 5 ERP vendors' club, although still steeply down from once being neck to neck with J.D. Edwards. To that end, the merger with Baan should be a sign of SSA GT's continued commitment to regain its former glory and the clout in the sector. The combined company now projects revenues in fiscal 2003 to be around $600 million, which should entrench it within the Top 5 of the ERP rating list, being possibly the No. 3 in terms of the geographic reach. In some individual markets like Japan or Brazil, though, the company even claims to be second to only SAP.
Like the previous few SSA GT's acquisitions, this merger too seems aimed at enlarging combined Baan and SSA GT's customer base, market share, and, more importantly, its predictably recurring support revenue and consequently larger R&D pool. The merger nears the new company closer to the landmark number of 16,500 active installed customers, rendering it possibly the largest ERP vendor focused solely on manufacturing, although at a possible price of stretching its R&D and service & support resources. One might notice the following common traits of Baan and SSA GT, with some complementary nature:
* Large customer bases with a wide geographic spread (particularly in emerging markets that have been much less affected by the recession); while Baan will have a larger footprint in Europe, SSA GT has a bigger presence in North America and Asia-Pacific (albeit Baan has a larger presence in India with a large development organization and a significant market penetration), which may result in significant savings due to offices and staff consolidation/sharing in many common markets,
* Recently adopted (or enforced) focus on selected vertical industries and/or platforms, with SSA GT focusing more on repetitive discrete and hybrid discrete/batch process manufacturing and Baan focusing on complex discrete manufacturing. Although there will be some overlap due to both vendors' presence in discrete industries (e.g., automotive or electronics), Baan's expertise in complex, project-based manufacturing should fill the gap that SSA GT has not traditionally been strong at. Also, the IBM iSeries (f.k.a. AS/400) remains SSA GT's main platform of choice, while Baan has long turned to Microsoft Windows and UNIX platform, which helps the demarcation line and the complementary nature of the merger.
* A prospect of much improved balance of partnering and native applications, with Baan filling much-needed CRM, PLM and possibly some SCM gaps in SSA GT's portfolio, and vice versa, SSA GT's MasterPiece/Net should cater for human resources (HR) and corporate financials, which have long been the gaps or weaker spots in Baan's natively provided functionality. Also, Warehouse BOSS might be a great cross-selling opportunity to existing Baan customers.
* Mid-market incumbent status, with iBaan being more suitable for the upper-end of the market, while SSA GT's products seem to fit well in the true mid-size space.
By the same token, the Ironside acquisition seems to have merits, especially the fact that Ironside has garnered a notable integration to SAP, with more than 200 large global corporations using Ironside Solution Suite (formerly Ironworks), and particularly its powerful order management functionality, within their SAP-centric environments. Given SAP, as the most functional product, has had to partner for sell-side solutions like Ironworks, SSA GT/Baan should benefit from the Ironside's customer service-oriented B2B platform that reaches well beyond four-walls and enables manufacturers and distributors to more effectively transact with customers and suppliers by automating key processes such as order management, supplier relationship management (SRM), customer service and e-procurement. In addition to SAP, Ironworks has many successful integrations to Geac System21 (formerly JBA System21), J.D. Edwards and Invensys PRISM products.
Ironside's vertical focus on Chemicals, Electronics/Hi-Tech, and Consumer Packaged Goods (CPG) companies should come in handy to enrich SSA GT's multiple products (if not even Baan's as well), particularly when one notes that the integration to BPCS has been completed during past engagements. It appears that Ironside's recent product developments within direct procurement and SRM are complementary to SSA GT's iProcurement module for indirect materials procurement, which was developed in OEM relationship with Digital Union, although one should watch the fate of this and many other OEM partnerships in the future (see SSA GT Beefs Up BPCS V8 Through Partnerships' Spree).
On its hand, it indeed appears that SSA GT understands and listens closely (via Global Guide Groups) to the needs of conservative ERP customers that are unwilling to dispose of a good functional product even at a cost of its technological antiquity. Further, it has a track record of strong functional development that preserves the customer's current investment. Indeed, BPCS V8 is a scaleable ERP system extended beyond traditional ERP boundaries, with several manufacturing mode flavors such as discrete lean manufacturing, assemble-to-order (ATO) and make-to-order (MTO) operations, and even process manufacturing.
Further, it is impressive that SSA GT has even shown some success with managing such a seemingly unwieldy set of disparate products, particularly coming from former interBiz, considering that a vendor of Computer Associates' stature was not able to do much with almost a dozen products, some being of vintage '78 or '82. To that end, recent enhancements within the latest releases of PRMS 9.2, BPCS 8.2, KBM 2.2, and Warehouse BOSS 6.2 are ever more impressive given the market skepticism about the viability of these.
Even the venerable MANMAN product has had some enhancements in its version 12, although this product faces the impending predicament of the HP e3000 hardware platform discontinuation in 2003. To that end, given MANMAN and Triton (an early version of Baan) have similar, if not identical, code base, migration to iBaan might be the most viable option for these customers. Namely, a former product of (also former) ASK's, called MANMAN/X, was the derivative of Triton 2.2d, (when ASK acquired the rights to code and distribution in the early 1990s), then called Triton 3 for a short while, and subsequently renamed MK Manufacturing under Computer Associates/interBiz. Thus, SSA GT might even be better off by handing over its MANMAN/X install base support to Baan, which would help Baan bolster its revenue stream and improve its P & L statements (which it will have to achieve badly anyway), while SSA GT would be relieved in that regard and be able to focus on other, more prospective product lines.
However, Baan's suitor will still have work cut out for itself to regain the former Baan glory, given a cultural mismatch between merged vendors. Namely, Baan has traditionally placed more importance on R&D and technological prowess, but it has yet to achieve the SSA GT's prowess in sustaining profitability. Given one cannot both have a cake and eat it, Baan will be hard pressed to produce consistent financial results �a la SSA GT', which might mean serious restructuring, while continuing to invest and evolve its products. Baan still has non-proportionally large number of R&D employees (i.e., nearly 1,000 out of 2,700 total employees), and its sales per employee ratio is quite higher than its competitors can boast, which will raise many eyebrows within profit conscious SSA GT and its venture capital backing owners. On the other hand, this pool of developers is needed to handle the launch of a product that might require a steep learning curve for both implementers and users of older product releases.
Further, like SSA GT, Baan still has a lot of housekeeping to do given it admits that nearly 70% of its customers are still on Baan IV, owing to the unfortunate fact that the former Baan Co.'s business was hit with troubles exactly when it finally seemed to have delivered its most stable and mature product although technologically outdated, Baan IVc. BAAN IV is still a traditional monolithic third- and fourth-generation procedural language (3GL/4GL)-based product, with an internally developed proprietary toolset that requires significant domain expertise to be productive.
With BAAN V (now renamed into iBaan Enterprise 5.0), which was released in late 1998, Baan begun the evolution of its ERP product to a component-based architecture, and Web enablement. Therefore, the bifurcated releases of the core ERP products, Baan IVc and iBaan 5.0 — with diverse vertical solution extensions, while necessary to keep old customers aboard, will eventually have to be merged into one code set for development and support. To that end, the Gemini product release is to provide a smooth simultaneous migration for customers of Baan IV and iBaan ERP (and optimally of many SSA GT's old product users), given this is an issue that Baan was very aware of and was specifically addressing. Still, without massive migrations by existing customer base, Gemini's new sales will also be hampered for lack of reference sites, and the new company will have to watch closely for this vicious circle occurrence.
Moreover, the varied product portfolio under the SSA GT banner has also been taking serious pondering and soul-searching (in a manner depicted above for Baan). It doesn't take a rocket scientist to realize a number of potential product redundancies within the following overwhelming set of product: BPCS, Ironside, Infinium, CAS, KBM, MANMAN, Masterpiece/Net, MasterPiece/Net HRMS, MAXCIM, MK Logistics, MK Manufacturing, PRMS, SSA GT MAX+ and Warehouse BOSS. It, however, might indeed take a genius to figure out how to fully integrate organizational structure where employees are best integrated, service offerings best coordinated and cross-selling opportunities best tracked and pursued. While Baan's Gemini product would at first glance be seen as a logical migration destination for more than Baan users, it will likely happen mainly for MANMAN users, mainly because of SSA GT's install base's religious infatuation with the former IBM AS/400 platform. Further, Baan PLM, CRM and SCM enhancements to many SSA GT's products might not take off in earnest in the short term until cross-platform integration challenges are completely solved.
One should note that Baan was by no means the only major ERP vendor to succumb to market forces in 2000, given Gores Technology Group (GTG) acquired at a similar time former Systems Software Associates, Inc. (SSA), also once a high-flying ERP vendor. It is even spooky to see Baan acquired by its former ill-fated �brother in arms', although SSA GT's current bullish posture should bode well for Baan's future. To be fair, the SSA GT's progenitor, former SSA, had suffered, over the past several years, a tremendous loss of market share and customer confidence, while its channel also dwindled during the same period of time.
Revenue for SSA GT is still only a half of once SSA's over $450 million turnover in the mid 1990s, though. Therefore, SSA GT, having gone through its bankruptcy and rebirth initially under the Gores Technology in 2000, has been charging back within Top 5 ERP vendors' club, although still steeply down from once being neck to neck with J.D. Edwards. To that end, the merger with Baan should be a sign of SSA GT's continued commitment to regain its former glory and the clout in the sector. The combined company now projects revenues in fiscal 2003 to be around $600 million, which should entrench it within the Top 5 of the ERP rating list, being possibly the No. 3 in terms of the geographic reach. In some individual markets like Japan or Brazil, though, the company even claims to be second to only SAP.
Like the previous few SSA GT's acquisitions, this merger too seems aimed at enlarging combined Baan and SSA GT's customer base, market share, and, more importantly, its predictably recurring support revenue and consequently larger R&D pool. The merger nears the new company closer to the landmark number of 16,500 active installed customers, rendering it possibly the largest ERP vendor focused solely on manufacturing, although at a possible price of stretching its R&D and service & support resources. One might notice the following common traits of Baan and SSA GT, with some complementary nature:
* Large customer bases with a wide geographic spread (particularly in emerging markets that have been much less affected by the recession); while Baan will have a larger footprint in Europe, SSA GT has a bigger presence in North America and Asia-Pacific (albeit Baan has a larger presence in India with a large development organization and a significant market penetration), which may result in significant savings due to offices and staff consolidation/sharing in many common markets,
* Recently adopted (or enforced) focus on selected vertical industries and/or platforms, with SSA GT focusing more on repetitive discrete and hybrid discrete/batch process manufacturing and Baan focusing on complex discrete manufacturing. Although there will be some overlap due to both vendors' presence in discrete industries (e.g., automotive or electronics), Baan's expertise in complex, project-based manufacturing should fill the gap that SSA GT has not traditionally been strong at. Also, the IBM iSeries (f.k.a. AS/400) remains SSA GT's main platform of choice, while Baan has long turned to Microsoft Windows and UNIX platform, which helps the demarcation line and the complementary nature of the merger.
* A prospect of much improved balance of partnering and native applications, with Baan filling much-needed CRM, PLM and possibly some SCM gaps in SSA GT's portfolio, and vice versa, SSA GT's MasterPiece/Net should cater for human resources (HR) and corporate financials, which have long been the gaps or weaker spots in Baan's natively provided functionality. Also, Warehouse BOSS might be a great cross-selling opportunity to existing Baan customers.
* Mid-market incumbent status, with iBaan being more suitable for the upper-end of the market, while SSA GT's products seem to fit well in the true mid-size space.
By the same token, the Ironside acquisition seems to have merits, especially the fact that Ironside has garnered a notable integration to SAP, with more than 200 large global corporations using Ironside Solution Suite (formerly Ironworks), and particularly its powerful order management functionality, within their SAP-centric environments. Given SAP, as the most functional product, has had to partner for sell-side solutions like Ironworks, SSA GT/Baan should benefit from the Ironside's customer service-oriented B2B platform that reaches well beyond four-walls and enables manufacturers and distributors to more effectively transact with customers and suppliers by automating key processes such as order management, supplier relationship management (SRM), customer service and e-procurement. In addition to SAP, Ironworks has many successful integrations to Geac System21 (formerly JBA System21), J.D. Edwards and Invensys PRISM products.
Ironside's vertical focus on Chemicals, Electronics/Hi-Tech, and Consumer Packaged Goods (CPG) companies should come in handy to enrich SSA GT's multiple products (if not even Baan's as well), particularly when one notes that the integration to BPCS has been completed during past engagements. It appears that Ironside's recent product developments within direct procurement and SRM are complementary to SSA GT's iProcurement module for indirect materials procurement, which was developed in OEM relationship with Digital Union, although one should watch the fate of this and many other OEM partnerships in the future (see SSA GT Beefs Up BPCS V8 Through Partnerships' Spree).
On its hand, it indeed appears that SSA GT understands and listens closely (via Global Guide Groups) to the needs of conservative ERP customers that are unwilling to dispose of a good functional product even at a cost of its technological antiquity. Further, it has a track record of strong functional development that preserves the customer's current investment. Indeed, BPCS V8 is a scaleable ERP system extended beyond traditional ERP boundaries, with several manufacturing mode flavors such as discrete lean manufacturing, assemble-to-order (ATO) and make-to-order (MTO) operations, and even process manufacturing.
Further, it is impressive that SSA GT has even shown some success with managing such a seemingly unwieldy set of disparate products, particularly coming from former interBiz, considering that a vendor of Computer Associates' stature was not able to do much with almost a dozen products, some being of vintage '78 or '82. To that end, recent enhancements within the latest releases of PRMS 9.2, BPCS 8.2, KBM 2.2, and Warehouse BOSS 6.2 are ever more impressive given the market skepticism about the viability of these.
Even the venerable MANMAN product has had some enhancements in its version 12, although this product faces the impending predicament of the HP e3000 hardware platform discontinuation in 2003. To that end, given MANMAN and Triton (an early version of Baan) have similar, if not identical, code base, migration to iBaan might be the most viable option for these customers. Namely, a former product of (also former) ASK's, called MANMAN/X, was the derivative of Triton 2.2d, (when ASK acquired the rights to code and distribution in the early 1990s), then called Triton 3 for a short while, and subsequently renamed MK Manufacturing under Computer Associates/interBiz. Thus, SSA GT might even be better off by handing over its MANMAN/X install base support to Baan, which would help Baan bolster its revenue stream and improve its P & L statements (which it will have to achieve badly anyway), while SSA GT would be relieved in that regard and be able to focus on other, more prospective product lines.
However, Baan's suitor will still have work cut out for itself to regain the former Baan glory, given a cultural mismatch between merged vendors. Namely, Baan has traditionally placed more importance on R&D and technological prowess, but it has yet to achieve the SSA GT's prowess in sustaining profitability. Given one cannot both have a cake and eat it, Baan will be hard pressed to produce consistent financial results �a la SSA GT', which might mean serious restructuring, while continuing to invest and evolve its products. Baan still has non-proportionally large number of R&D employees (i.e., nearly 1,000 out of 2,700 total employees), and its sales per employee ratio is quite higher than its competitors can boast, which will raise many eyebrows within profit conscious SSA GT and its venture capital backing owners. On the other hand, this pool of developers is needed to handle the launch of a product that might require a steep learning curve for both implementers and users of older product releases.
Further, like SSA GT, Baan still has a lot of housekeeping to do given it admits that nearly 70% of its customers are still on Baan IV, owing to the unfortunate fact that the former Baan Co.'s business was hit with troubles exactly when it finally seemed to have delivered its most stable and mature product although technologically outdated, Baan IVc. BAAN IV is still a traditional monolithic third- and fourth-generation procedural language (3GL/4GL)-based product, with an internally developed proprietary toolset that requires significant domain expertise to be productive.
With BAAN V (now renamed into iBaan Enterprise 5.0), which was released in late 1998, Baan begun the evolution of its ERP product to a component-based architecture, and Web enablement. Therefore, the bifurcated releases of the core ERP products, Baan IVc and iBaan 5.0 — with diverse vertical solution extensions, while necessary to keep old customers aboard, will eventually have to be merged into one code set for development and support. To that end, the Gemini product release is to provide a smooth simultaneous migration for customers of Baan IV and iBaan ERP (and optimally of many SSA GT's old product users), given this is an issue that Baan was very aware of and was specifically addressing. Still, without massive migrations by existing customer base, Gemini's new sales will also be hampered for lack of reference sites, and the new company will have to watch closely for this vicious circle occurrence.
Moreover, the varied product portfolio under the SSA GT banner has also been taking serious pondering and soul-searching (in a manner depicted above for Baan). It doesn't take a rocket scientist to realize a number of potential product redundancies within the following overwhelming set of product: BPCS, Ironside, Infinium, CAS, KBM, MANMAN, Masterpiece/Net, MasterPiece/Net HRMS, MAXCIM, MK Logistics, MK Manufacturing, PRMS, SSA GT MAX+ and Warehouse BOSS. It, however, might indeed take a genius to figure out how to fully integrate organizational structure where employees are best integrated, service offerings best coordinated and cross-selling opportunities best tracked and pursued. While Baan's Gemini product would at first glance be seen as a logical migration destination for more than Baan users, it will likely happen mainly for MANMAN users, mainly because of SSA GT's install base's religious infatuation with the former IBM AS/400 platform. Further, Baan PLM, CRM and SCM enhancements to many SSA GT's products might not take off in earnest in the short term until cross-platform integration challenges are completely solved.
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