End of the Line
What happened to Baan?
The efforts of embattled ERP software vendor Baan NV to sell off its stock to British software and electronic-controls company Invensys PLC has become star-crossed as a group of 22 dissident stockholders threaten not to tender their shares.
Disappointed by the fact that Baan stock, which traded at more than $55 a share last April, has plunged to a low of $1.12 in June, the group is attempting to put together its own bailout plan.
Regardless of the outcome, analysts agree that little can be done to save the moribund organization. “I don’t know if Invensys can turn this around; it has no track record. It’s sort of a made-up company self-created through a series of acquisitions,” says Jim Shepherd of AMR Research, a Boston-based consulting and research firm.
Indeed, Invensys has no experience in the enterprise software business, as most of its focus thus far has been on plant-level solutions. In fact, Invensys is still grappling with turning around Marcam, another distressed company it purchased a year ago.
“Invensys does, however, have a strong European presence and financial stability, so it could breathe life back into Baan, at least in Europe. But,” Shepherd concedes, “it’s pretty safe to say that Baan is dead in the U.S. market.”
Joshua Greenbaum, principal of Enterprise Applications Consulting, agrees. “Baan is washed up in the U.S. market. There is no recoverability of market share here.” But he concedes that because much of Baan’s installed base is in Europe, “maintenance and add-ons in that market might be viable. Customers need new functionality and handholding.”
Greenbaum also believes that Baan customers will need advanced CRM and supply-chain management functionality. “There are a lot of holes that need to be filled in,” says Greenbaum.
But whether Invensys can fulfill that promise remains to be seen. “I don’t think Invensys has the strategic wherewithal to expand Baan into new markets,” says Shepherd. He predicts that instead, the company will sell off Baan’s Aurum CRM products to cover the cost of the acquisition. “It’s the most valuable piece of the Baan suite. It’s good software, and that part of the market is hot right now. Besides, it really doesn’t fit into Invensys’ market at all.”
Greenbaum doesn’t believe that the Baan collapse is indicative of a trend. “The Baan failure can be linked directly to management disasters, independent of external market forces.” He believes full blame goes to the Baan brothers for “gross mismanagement” of acquisitions and partnerships. “Baan was a viable company with plenty of room for more ERP solutions in the market. It also had a high degree of customer satisfaction. But its product strategy became a liability when it became obvious the company wouldn’t be able to integrate certain products.”
In fact, the genesis of Baan’s problems was a series of ill-fated acquisitions, like that of Aurum, which it failed to successfully integrate. “Baan was using money garnered from its successful IPO. But in trying to match up to its competitors by buying Aurum, Caps Logistics, and other companies without careful consideration, it grappled with integrating new products and strategies into its organization,” notes Shepherd.
In the same time period, the whole ERP market slowed down after Y2K. Because all momentum had disappeared, Baan was no longer on the short list, or long list for that matter, of new acquisitions. “Existing customers, where you’d expect them to buy additional sites, were backing away from Baan products,” notes Shepherd. “The money and momentum needed to pull it off were no longer available.”
Furthermore, says Greenbaum, the ERP market hit another critical inflexion point. “ERP players could no longer be pure ERP; they had to have e-commerce integrated into their solutions. Baan just couldn’t execute that combined vision.” He notes that former CEO Mary Coleman was brought in for that reason, “but, despite the fact she had the mandate, the problems were too great by that point. By the time she took over, the die was already cast.”
— Susanna Schwartz
Susana Schwartz (schwartec@aol.com) is a New York-based freelance writer specializing in emerging technologies in financial services.
Storage: Where the Growth Is
Sun takes on EMC with a headlong dive into the dot-com data storage market
When you imagine cutting-edge technology with a strong market momentum, storage is not the first thing that comes to mind. But as Internet companies accumulate large amounts of clickstream data about their customers, they are discovering just how important a role storage plays in the New Economy.
As reported by the Boston Globe (June 15, 2000), Roger Cox, a chief analyst with Gartner Dataquest in San Jose, Calif., estimates that “the market for storage devices … has exploded, growing over 23 percent a year to a $35.8 billion annual market.” In the Globe, Cox further predicts, “By the end of 2003, companies will spend more on storage than on servers.”
No small wonder then that Sun Microsystems, which according to Gartner will grow its server market share by only 5 percent during the same time period, has decided to “diversify” by jumping on the storage bandwagon. According to IDC, Sun’s 1999 market share for storage devices was only 8 percent, trailing EMC (27 percent), IBM (11 percent), and Compaq (13 percent).
At the Storage for the Net conference in June, Sun unveiled its latest strategy to wrest market share from EMC. Sun is promoting its network storage solutions — comprising products such as the StorEdge T3 array and Jiro-enabled Network Foundation Software and services such as Capacity on Demand and Sun Remote Services — for emerging dot-coms. The company plans to market its StorEdge products as smaller, more modular, external storage solutions that it believes will give Internet companies an open, less costly way to expand storage as they grow.
Ed Zander, Sun’s COO and president, says the company plans to “make storage a core competency” and “a revenue driver for the next several years.” Zander compares this initiative to Sun’s successful efforts to woo dot-coms with Solaris and Java, but some analysts believe that such customers will still willingly pay more for proven plug-and-play solutions from EMC.
Sun, however, is betting that in an economy where investment capital is drying up, these companies will no longer want to pay for multimillion-dollar units that are too large for their initial needs. Sun believes that the StorEdge T3 array’s “pay as you go” scalable capacity — from 162GB to 88TB — will let dot-coms expand their storage capability along with their needs at a much cheaper price than they could with EMC.
But EMC isn’t worried. As Don Swatik, EMC’s vice president of strategic planning, tells the Globe, “What’s most innovative about this [Sun’s] announcement is the marketing.” He also adds a backhanded compliment: “Sun is a great server company.” — Michelle Nichols
