Despite the phenomenal success of Baan & Co NV, the Dutch-based integrated business applications specialist has traditionally been comparatively weak in the area of financials software. This inevitably has diminished the company’s presence in the wider market of integrated business applications. Any weakness has not be apparent from its financial results. Since the company first signed its momentous $20m deal with aircraft giant Boeing Inc in late 1994, it has not looked back. In two years, its revenues have soared from $123m to $388m. And, according to chief financial officer Tom Tinsley, Baan is aiming for revenues of $1 billion by the year 2000. But it has always been looking for a way to overcome its financials problem. Now Baan has announced a tie-up with financial application software vendor, Hyperion Software Corp. The deal is that Baan and Hyperion will co-develop a high-end accounting product, which combines the Baan IV Finance package with Hyperion’s Enterprise and Pillar products for financial reporting and analysis, and financial planning. Baan will market the product to customers looking for a fully-fledged enterprise resource planning package, while Hyperion will offer it as a stand-alone system. This should enable Baan to break into new markets and to target customers in areas such as sales and distribution, retail and financial services. That would be a logical move, agrees Kievit of Baan. We’re certainly thinking about it, and it would be a relatively easy step for us. The company is hoping that the deal with Hyperion will give Baan a competitive edge against companies such as Oracle Corp, PeopleSoft Inc, SAP AG and JD Edwards & Co. The deal also brings substantial advantage to Hyperion. It offers an escape route out of an embarrassing situation. According to Bobby Cameron, packaged application software specialist at market researchers Forrester Research, Hyperion has been working on an integrated suite of financial applications for over two years.
Acquisition is ruled out
However, the project extended beyond Hyperion’s core competence of financial reporting and planning, and proved more complicated and expensive than expected: It was not going great guns, Cameron confirms. The alliance with Baan instantly inflates Hyperion’s status. Hyperion will also benefit from Baan’s broad database platform support, multi-national transaction technology, and Internet-based processing technology, as well as its European customers. Baan is charging Hyperion $4 million for the privilege, a charge the company will take in its fourth quarter ending in June, but analysts believe that Hyperion will see a reduction in development costs from its alliance with Baan which should boost profits in its 1998 fiscal year. To date, an acquisition of Hyperion by Baan has been ruled out by both companies. According to Ted Dacko, senior director of marketing at Hyperion, Neither company wants to lose focus, and we’re very different in focus…both companies wish to remain independent. Production facilities and brand names will remain entirely separate, but key executives from both companies will form an advisory board to manage the venture and to guide development of the product. But, according to Kievit, Baan will take total responsibility for the day-to-day management of the venture. Despite the denials, analysts have argued that it wouldn’t be difficult for Baan to fund an acquisition of Hyperion. Baan usually buys at least an equity stake, points out Cameron of Forrester, This looks like a test drive. Backing this up, a week after the deal was announced, Peter DiGiammarino, president and chief operating officer of Hyperion, resigned after less than a year at the company. Hyperion has released only the briefest details regarding DiGiammarino’s sudden departure. Chuck Phillips, software industry analyst with Morgan Stanley, believes that the agreement is positive for both companies, but warns, such partnerships have historically been difficult to manage. One point of contention may be Hyperion’s relationships with other business application software vendors. The company already shares customers with Oracle and SAP. We are committed to remaining open to other ERP vendors, but will enjoy a favored relationship with Baan, says Jim Perakis, chief executive of Hyperion.
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