By William Fellows

Baan Co NV has bitten the bullet and is switching to a subscription-based model for selling its software to better the reflect the changing nature of the industry where applications are becoming metered utility services that are automatically updated online. Whether it will help Baan out of its hole is another matter, but it’s got little to lose.

Yesterday the company reported a net loss of $24.6m up from a loss of $39.6m last time on revenue which fell 26% to $142.8m from $194.9m. The loss was wider than analysts had anticipated but was in part impacted by the shift to a subscription model in which revenue is amortized over the life of the contract, instead of being divided into upfront license fees and subsequent service fees, which are usually 15% of the value of the contract. The company also blamed Y2K issues.

Baan said it did $34m revenue under the new subscription model. North American sales accounted for 38% of revenue; Latin America and Asia was 10% and Europe 52%. License revenue was $36m, less than half of the $86m it did last year, which is an important indicator of what services revenues can be expected down the road. It expects to record double digit revenue growth in the fourth quarter. CEO Mary Coleman said the company is looking to make small acquisitions.

The company has also won a wide-ranging agreement from longstanding Boeing Co which has paid for access to all of Baan’s products across all of its divisions. It claims the availability of CRM, supply chain and CRM applications alongside its core ERP software will help it shut out point solution providers such as i2 and win bigger deals against Oracle and Siebel. It says 35% of the value of the quarter’s sales were for CRM and front-office products. Later this year it plans to offer a new version of its software plumbed with CRM and better suited for deployment over the internet. It has put aside $25m a new advertising campaign and is tipped to begin advertising on Formula 1 cars.

This week the company unveiled a new application for buying office supplies and equipment online, hoping it can better compete with the likes of Ariba and Oracle in this market. It enables a customer’s employees to buy products from a self- service web site and is claimed to offer cost savings over traditional methods of buying these goods. It’s tied into the Baan ERP purchasing module.

At the nine-month mark Baan reported a net loss of $52.9m down from a loss of $20.4m last time on revenue down 18% at $491.4m compared with $604.5m for the same period last year. รก