'Right-sized' Baan to become market focused

SSA Global Technologies Inc. found Baan Co. NV in shambles after acquiring it in June. But after cutting 800 of 2,800 jobs and instilling customer-focused business values, Baan should be profitable again in three months, its new president said.

"We were a bit surprised at how bad the business condition was," Baan President Graeme Cooksley said in an interview. "I cut 800 jobs to save 2,000. If we had not made the changes and restructured the Baan organization, Baan would be bankrupt; it would be out of business."

Barneveld, Netherlands-based Baan lost US$150 million in 2002 and probably has not made money for three or four years, according to Cooksley. Baan last year said that after six consecutive quarters of profitability it was pushed back into the red in April 2002.

Baan was a "bloated" company, operating at the scale of a company with $500 million in annual revenue while the actual revenue was about half that, Cooksley said. "Revenue per person was the lowest of any ERP software company in the world; it was terrible. We've now right-sized the business," he said.

Most of the cuts were made in overlapping areas, such as back office functions. "The area that we have left alone, and in fact I am building up, is sales and customer management, where I considered Baan understaffed and weak," Cooksley said.

As part of SSA, the leaner Baan also will develop products based on customer needs. The Dutch company had lost touch with its customers, Cooksley said. "I believe that Baan as a development shop lost its way and was no longer customer driven," he said.

Baan spent a fortune on developing Gemini, the code name for its next-generation ERP (enterprise resource planning) product, but had not asked customers about their needs, Cooksley said. Furthermore, Baan neglected to integrate CRM (customer relationship management) and logistics "gems" that it had bought, he said.

As a result, Cooksley has pushed back the launch of Gemini, originally slated for this month, until the second quarter of next year.

"We are committed to the Gemini product and when we release it, it will be a solid product, available in most main languages, with migration tools and the essential features and functions," Cooksley said.

Gemini is seen as a major release for Baan. About 70 percent of the 6,000 or so Baan users are still on Baan IV, not the newer iBaan V. If Baan fails to deliver with Gemini, it risks losing customers to competitors such as SAP AG, said Brian Zrimsek, a Pittsburgh-based research director at Gartner Inc.

"Baan IV is seven years old and those folks are nearing the end of the life cycle. Given what Baan has been through, I don't think that SSA can assume that they are just going to upgrade. They have to pay close attention to product quality and migration," he said. "Being careful with their launch of Gemini, I think, serves them well."

Cooksley has talked to many customers since taking over control of the company. He tells users that SSA offers financial viability and has a product strategy. That strategy will be laid out at the company's Global Client Forum, which starts Monday in Orlando.

Lifting a tip of the veil, Cooksley said SSA will demonstrate an early version of Gemini at the event. Also, the company is expected to talk about how it will try to sell Baan products to the rest of its customer base, and its other products to Baan users.

There may be some discounts up ahead, specifically for product extensions such as CRM for which Baan has only attracted few hundred customers, Cooksley said. "I am like a supermarket; I can actually lower my prices because of the volume and still make more money."

Baan was a trendsetter in the ERP market in the mid-90s. That stopped cold when an accounting scandal involving false sales records ruined the company in the late 90s. Baan faced stiff competition and analysts were all but writing its obituary when it was saved by Invensys PLC, a London engineering company, which bought it in August 2000 for about Euro 700 million ($708 million at that time).

Invensys saw itself forced to sell Baan in an effort to spur growth and reduce its debt. Baan was put up for sale in April and SSA owners Cerberus Capital Management LLP and General Atlantic Partners LLC bought the company on June 3 for $135 million in cash.

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