Baan Is Rescued, Users' Concerns Remain

BOSTON (06/02/2000) - The fate of Dutch business software maker Baan Co. NV is now known, but that of its users is less certain.

After seven consecutive quarters of losses and leadership woes that saw four CEOs at the helm within 18 months, Baan last week was potentially rescued by Invensys PLC's offer to buy the company for 762 million euros (US$708.7 million). The deal is expected to close late next month or in early August, said Allen Yurko, CEO of Invensys, a London-based supplier of industrial automation and control products, during a conference call with analysts.

If the deal is consummated, Baan will be integrated into a newly created division called Invensys Software and System (ISS). According to Katrina Roche, Baan's chief marketing officer, 1,000 jobs will be cut from ISS, with the bulk of the layoffs coming from the Baan side. Baan, which specializes in enterprise resource planning (ERP) and supply-chain software, currently has a workforce of 4,300.

Users and analysts questioned how the cuts and the ISS integration will affect Baan's products and support.

Craig Mey, vice president of manufacturing services at Phillips Plastics Corp. in Phillips, Wisconsin, said he has followed Baan's financial woes with interest, hoping that the company would stabilize sufficiently to maintain and expand its product line. Mey, whose firm uses supply-chain modules as well as other Baan products, said he is still evaluating Invensys and noted that his initial impression is that the U.K. firm's products complement Baan's offerings.

Keith Bearden, CIO at dental equipment maker A-dec Inc. in Newberg, Oregon, said he's relieved that Baan wasn't acquired by another ERP company that might force Baan's installed customer base to switch to its software. "I'm not ready for another ERP installation. It's too painful," he said.

Still, Bearden said he is uncertain about Invensys' plans for Baan, in light of the layoffs and its stated intention to cut costs.

Invensys said in a statement last week that it is committed to Baan's research and development program and its suite of products. Roche also stressed that Invensys "will continue with [Baan's] products and won't change the product direction."

But Bearden seemed unconvinced. "I have a lot of questions, and it's too early to tell," he said.

Above all, he wants Invensys to improve support, "because a lot of good people left," he said. Bearden noted that A-dec has gone through four Baan account representatives in 16 months.

Baan customers are relieved now, said Ed Markowitz, CEO of ChainNet Research AG in Cincinnati. But despite Invensys' assurances, customers are concerned about Invensys' plans to maintain Baan's existing products, Markowitz said.

Laurie Orlov, an analyst at Forrester Research Inc. in Cambridge, Massachusetts, expressed some skepticism.

"There's still some hope Invensys will see an opportunity to re-energize Baan's suite as a viable alternative, but it will be hard because the company is being pulverized by downsizing," Orlov said. As a result, there will be "a blurred [Baan] brand, a terrified customer base, slice-and-dice employees and an alienated knowledge workforce," she said.

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