Baan finds a rescuer, user concerns remain

The fate of Dutch business applications vendor Baan NV is now known, but that of its users is less certain.

After seven consecutive quarters of losses and leadership woes that saw four different CEOs at its helm within 18 months, Baan on Wednesday was potentially rescued by Invensys PLC's offer to buy the company for 762 million euros ($US708.7 million). The deal is expected to close in late July or early August, said Allen Yurko, CEO of Invensys, a London-based supplier of industrial automation and control products, during a conference call with analysts on Wednesday.

If the deal is consummated, Baan will be integrated into a newly created Invensys Software and System (ISS) division. 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 specialises in enterprise resource planning (ERP) and supply-chain software, currently has a workforce of 4,300 people.

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

Craig Mey, vice president of manufacturing services at Phillips Plastics in Phillips, Wis., said he has followed Baan's financial woes with interest, hoping that the company would stabilise enough to continue maintaining and expanding its product line. Mey, whose company uses Baan's supply-chain modules plus some of its other applications, said he's still evaluating the Invensys deal, but his first impression is that the UK vendor's products complement Baan's software.

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

Still, Bearden said he's uncertain about Invensys' plans for Baan in light of the expected layoffs and the UK company's stated intention to rigorously cut costs at Baan to the tune of $60 million to $120 million per quarter.

Invensys said in Wednesday's announcement of the buyout deal that it's committed to Baan's research and development program and to its current suite of applications. Roche also stressed that Invensys "will continue with (Baan's) products and won't change the product direction."

But Bearden is one user who still wants to be convinced. "I have a lot of questions, and it's too early to tell," he said. Bearden noted that A-dec has had to deal with four Baan salespeople in the past 16 months and more than anything he wants Invensys to improve the way Baan's software is supported. "Support is not as good today because a lot of good people left," he said.

There's a collective sigh of relief coming from Baan customers now, said Ed Markowitz, an analyst at ChainNet Research AG in Cincinnati. But despite Invensys' assurances, those customers will have concerns about Invensys' plans to maintain Baan's product line as is, Markowitz said.

Laurie Orlov, an analyst at Forrester Research was more skeptical about the impact of the planned acquisition.

"There's still some hope Invensys will see an opportunity to re-energise Baan's (full) suite as a viable alternative, but it will be hard because (Baan) 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 added.

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