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Baan customers remain positive

Companies that have invested in Baan software are wary of the firm's financial troubles but believe that it will recover.

Companies that have invested thousands of dollars in business software from Baan say they are wary of the firm's lingering financial troubles but believe that the company will recover.

Baan announced last week that it was canceling its annual BaanWorld user conferences in North America and Europe, replacing them with a series of town meetings with customers.

"I am somewhat unnerved, yes, that they have lost such a huge amount of money," said Norman Thomas, director of information systems at wastewater treatment company Trojan Technologies in London, Ontario, which is installing Baan software for 115 users. "But I am confident they will get this sorted out."

Thomas, who calls himself a happy Baan customer, is disappointed he won't be making the trip to BaanWorld this year, but he said he understands that Baan needs to save money in any way possible.

The Dutch business software firm, which makes enterprise software to automate core business processes, is expected to announce a $250 million loss when it unveils fourth-quarter earnings tomorrow. In an effort to cut back, Baan, which laid off 1,200 people last fall, is not replacing employees who leave and is curbing travel, phone, and other costs in an effort to save $15 million a quarter.

Mark Manuel, president of the Toronto-based Baan World Users (BWU), said Baan's troubles are "certainly a cause for concern." But Manuel, who works for Crown Equipment, a forklift manufacturer currently installing Baan software, said his company remains confident in Baam's prospects.

"I think they grew too fast," he said. "The purchases they made--Aurum, Coda, etc.--they grew too fast, and now they're trying to get their feet back under them."

While BaanWorld is canceled, BWU still plans to hold its user conference this fall, he said. "Knowing that's going to take place makes me feel less concerned about not having BaanWorld," Manuel said.

But analysts said the cancellation is indeed bad for the company's image.

"Baan is in serious trouble," said Joshua Greenbaum, head of Enterprise Applications Consulting in Berkeley, California. "Baan is in no position to walk away from the premiere marketing event of the industry, which is the user conference."

Baan has been unlucky scheduling its past several user conferences, mainly because the firm held them at the same time it released its earnings.

Disappointing results shifted the focus away from Baan products, and Baan spent much of its time "defending itself against the long knives of Wall Street," Greenbaum said. Last fall, Wall Street investors also criticized Baan for its business dealings with resellers controlled by cofounders Jan and Paul Baan.

The company's new BaanERP back-office software was also delayed for nine months last year before it was shipped in September.

Like Baan, other big enterprise resource planning companies are reporting slower growth as the millennium approaches. But analysts said Baan's problems go deeper and are partly a result of Baan struggling to get an indirect sales system off the ground.

Baan is the first of the major firms to try to sell its product to customers through indirect channels. The strategy has yet to pan out for the company, which has lost fiscal momentum since 1997, when it reported an 82 percent license growth and a 133 percent increase in profit. German software giant SAP still holds 36 percent of the enterprise software market, vs. 10 percent for Oracle, with PeopleSoft in third place, followed by Baan.

However, all ERP software providers have seen their license revenues slip in the past several quarters, partly because companies are putting off IT projects until they're done preparing their computer systems for the Year 2000. The high end of the ERP market is also somewhat saturated, as companies that have already invested in the software grapple with the long, complicated, and expensive process of installing it.

The market is also shifting to include lucrative new areas, including front-office software and supply-chain management, where ERP firms face intense competition.

In the past year, Baan, like other ERP vendors, has turned its attention to midsize users. Baan has also tackled the hefty project of tying together its core back-office applications to a mixed bag of software it has obtained through a slew of acquisitions.

"Baan has made a commitment to clearing up the bugs and to integration issues," Thomas said. That and getting expenses into line should help the company rebound, he added.

"It's one thing to have the design and another thing to deliver on it," he said.