By Antony Akilade
The newly-installed chief executive at troubled ERP vendor Baan Co NV, Mary Coleman, predicted yesterday that the company would return to profit in the second half of 1999. We are already seeing the return of high dollar contracts from large enterprises, she said, noting that six such contracts were expected in the third quarter, before adding cautiously that the deals could well slip into the fourth quarter.
Coleman blamed the company’s recent poor performance on the Y2K slowdown. Far from being dead, as some commentators have observed, ERP was merely evolving, said Coleman. ERP was now embracing new functions – such as customer relationship management, supply chain planning and e-commerce – and Baan claims that the series of acquisitions it has made over the past two years means it now has all of those bases covered.
Post Y2K, Coleman expects revenue growth to be around the 20%-30% mark with the strongest surge coming from the mid-market where, in recognition that the Fortune 1000 ERP market is now mostly saturated, Coleman has repositioned the company. This takes the vendor back to its core mid-cap and discrete manufacturing sectors. The re-focusing of the Barneveld, Netherlands-based company on its traditional base has given rise to speculation that it would be forced to sell off its Coda unit, which is not geared toward manufacturing industries.
Ever since the $86.6 million Coda acquisition closed in May 1998, Baan has faced difficulties positioning the product as part of the BaanERP suite. In fact, Baan also had development problems with its Cap Logistics buy. But reportedly the transportation and scheduling software for industrial manufacturers has now achieved a ‘good level of integration’ in the BaanERP suite of applications. Coda will have to wait, Coleman told us.
The company does not break out revenue for individual subsidiaries but it was rumored that Baan had been unable to turn UK financial software house Coda into a profitable business line. Competitors in the ERP space (most notably Oracle) already have fully-integrated, well-established products on the market and competing stand-alone packaged financial software applications have had a particularly strong year.
However, Coleman told ComputerWire that Coda was already profitable, had a strong revenue stream and a broad customer base. Coda will not be sold off, she insisted. It will remain as a stand-alone, best-in-class financials package targeted at non-manufacturing industry sectors. she said. Most recently, Baan acquired Proloq Holding BV, a Dutch R&D company, for an undisclosed amount. Proloq provides planning software for the primary metals, cable and wire, and pulp and paper industries. Coleman said that further acquisitions were on the agenda, but they would be technology buys.
At the end of 1998, Baan was forced to cut 1,000 staff. Emphasizing the message that Baan had turned the corner, Coleman said the company was now re-hiring to bolster its R&D activities and customer support operations. Coleman claimed that Baan would spend between $160m-$200m in the current year on R&D – a figure significantly above the $140m estimate for fiscal 1999 given by analysts at BancBoston Robertson Stephens. Coleman claimed that the company’s R&D division, with 1,500 engineers, was now the second-largest in the industry after SAP AG.
To get the Baan message across, Coleman has departed from the ‘no-ads’ philosophy of the company’s founding fathers and announced that its current marketing campaign, with an estimated $25m price tag, will not be a one-time affair. With Baan third quarter results due to be released early in October, all eyes will be looking to see how far performance has improved under the guidance of its new chief.
This article first appeared in our sister publication M&A Impact.
