View all newsletters
Receive our newsletter - data, insights and analysis delivered to you
  1. Technology
February 28, 1999


By CBR Staff Writer

The ERP slow down has hit the enterprise software vendors hard. The days when the top-tier ERP suppliers reported growth rates that were the envy of the software industry have long gone and each player is now taking a long hard look at its core business and trying to work out where future opportunities for growth lay. Baan has felt the pain more than most. And, while the $160m restructuring recently completed by the Dutch ERP software supplier should make it leaner, more focused and subsequently more competitive, the short term impact is grim and signals shrinking revenues and deepening losses for at least another two quarters, say analysts.

Last month, Baan said it had delayed the announcement of year-end results on the basis that the restructuring, purchase of Mid- market Solutions, and the re-negotiation of terms for the Caps Logistics acquisition had presumably created fresh accounting dilemmas. When the numbers do hit The Street they are guaranteed to make depressing reading. Baan will see a 35% slump in fourth- quarter revenues to $142m down from $220m in same period last year and net losses of $250m (including the $160m in restructuring charges), compared to a profit of $29m in the same period last year. For the year, Baan’s revenue growth is destined to slow to a paltry 8% to approximately $743m, with net losses of $262m.

Baan has clearly hit troubled times and any plans to expand its product breadth have clearly been cast aside as it tries to re- focus on returning to its roots in mid-market manufacturing. The shift in corporate strategy has placed the future of its non-core businesses in sharp relief and led to speculation that Baan will sell-off non-manufacturing software businesses. Fingers are pointing at Baan’s accounting subsidiary, Coda, as the first likely IPO candidate. Baan has over extended its reach. The re- focus on manufacturing is the right thing but it means that Coda is no longer relevant to Baan’s strategy, says Bobby Cameron at Forrester.

Coda will be sold off later this year, Cameron believes, on the basis that it is a loosing expense line at a time when Baan needs revenues to add to its beleaguered bottom line. The UK financial software house reported net losses for the year to October 31st 1997 of 2 million pounds (approximately $3.2m) on revenues of 41.2m pounds (approximately $65.9m). And although the company does not break out figures for individual subsidiaries there is some suggestion that Baan has never been able to stem the tide of Coda’s leaking profitability since it bought the company for $86.6m in May 1998.

The Coda business formed the basis of Baan Corporate Office Solutions, the business unit set up toward the tail end of last year to target the financial accounting sector. Baan planned to integrate Coda Financials into Baan IV to improve the capabilities of its ERP offering, in addition to selling the Coda Software as a standalone suite to generate revenues in standalone financials. But any integration plans look as though they have been put on hold while the re-organization takes place. The move was also thought to be too little, too late. Baan found itself going head to head with Oracle, PeopleSoft and SAP who had superior more well-established financial software suites. Baan did not have the domain expertise to play with the big boys, says Cameron.

The top-tier ERP suppliers also had one avenue of opportunity that Baan did not – these vendors could rely on a captive installed base that could be milked for recurring revenues by virtue of the fact they had been in the market for longer a period of time.

The saturation of the financial applications market has not helped Baan’s cause much either. Around 70% of Fortune 1,000 companies will have bought a financial package by 2000, says Cameron, leaving Baan with little opportunity to reap rewards from the acquisition. Furthermore, the task of extending Baan’s ERP suite to embrace Coda Financials is believed to be onerous. Its like Frankenstein’s monster trying to do

Content from our partners
Are we witnessing a new 'Kodak moment'?
Fashion brands must seek digital solutions that understand the sector’s unique needs

that level of integration, says Bruce Richardson at AMR Research.

Naturally, Baan executives will not comment on its future plans for the Coda business. But if Cameron is correct Coda will not feature in them and the business will be sold at a bargain basement price to leverage buy-out company Platinum Equities, the Computer Associates of the packaged applications market.

Websites in our network
Select and enter your corporate email address Tech Monitor's research, insight and analysis examines the frontiers of digital transformation to help tech leaders navigate the future. Our Changelog newsletter delivers our best work to your inbox every week.
  • CIO
  • CTO
  • CISO
  • CSO
  • CFO
  • CDO
  • CEO
  • Architect Founder
  • MD
  • Director
  • Manager
  • Other
Visit our privacy policy for more information about our services, how New Statesman Media Group may use, process and share your personal data, including information on your rights in respect of your personal data and how you can unsubscribe from future marketing communications. Our services are intended for corporate subscribers and you warrant that the email address submitted is your corporate email address.