CNET también está disponible en español.

Ir a español

Don't show this again

Tech Industry

Baan fights for middle kingdom

Baan may finally break its image as "the other European software company," behind German software powerhouse SAP.

    Just because Baan (BAANF) doesn't get as much ink as its competitors doesn't mean the Dutch company isn't a player in the business application software arena.

    In fact, with the acquisition of two software companies last week, Baan is catching the eye of analysts and competitors alike and may finally break its image as "the other European software company", behind German software powerhouse SAP.

    Last week, Baan announced it completed its buyout of customer relations software provider Aurum in a stock swap valued at about $250 million. The very next day, the company said it is purchasing the business software unit of Siemens Nixdorf Information Systems, a leading German-based technology firm, for an undisclosed amount.

    Analysts said the company's acquisitions are significant because the moves are expected to strengthen Baan's position in a hotly contested market selling software to midsize businesses.

    Baan, along with such competitors as SAP, PeopleSoft, and Oracle's applications group, is targeting the so-called middle-market companies, which aren't quite mom-and-pop affairs but don't qualify for the Fortune 1000 either. Companies with annual revenues of about $20 million to $250 million make up this middle market, according to Judy Hodges, an analyst with International Data Corporation.

    Baan is the smallest of this bunch. But analysts say Baan may have a card up its sleeve that could give it an advantage over its well-heeled competitors.

    Baan is a nimble company that has long provided its enterprise software to middle-market enterprises. This means that the company is more attuned to doing battle in the midmarket against bigger competitors that are just getting into the fray.

    In the battle for the middle market, "Baan will have an easier go of it," said Judy Hodges, an analyst with IDC. "The Aurum purchase gives Baan a higher-end product. It is an extension of the supply-chain business line and it helps integrate the supplier, customer, and prospects."

    Baan specializes in ERP (enterprise resource planning) systems that are used to automate and integrate corporate functions such as sales forecasting, inventory, control, procurement, manufacturing planning, distribution, finance, and project management.

    Since its inception in 1978, Baan has provided ERP systems to medium and large manufacturing firms. Last spring, Baan launched a new marketing initiative designed to join SAP and a handful of its other competitors, focusing on manufacturing firms within the middle market.

    ERP applications for automated supply-chain management have become fixtures at a large majority of multinational corporations in recent years, but sales have begun to stagnate with market saturation. Now, Baan and other traditional players in this market have turned to small and midsize manufacturers for additional sales.

    Baan said that the latest acquisitions represent an execution of the new marketing strategy for the middle market.

    "This is an attempt to bring more of our product to the supply-chain market," said "Rocky" Gunderson, Baan's vice president of product marketing in the United States. "More and more people are trying to connect salespeople with the manufacturing process. Aurum will help us do this."

    Analysts agree that providing a link between the manufacturing process and the front-office user provides a new market for business software makers.

    "There is a synergy between the front office and the back office," said IDC analyst Henry Morris. "And you want salespeople to be able to use data from the back-office software."

    Hodges said that the benefits for Baan from the recent acquisitions spread across industries as well as continents. "The Aurum purchase will help them penetrate all markets with a front-end integration," she said. The Siemens Nixdorf buy pairs well with the company's strategy to help it establish stronger roots in the middle market in Europe, where the German technology firm has long had a foothold, she added.

    Baan executives, too, believe that the middle market holds promising global opportunities for the company and that the purchases, particularly of the Siemens Nixdorf business unit, help to expand the company's ability to reach midtier customers around the world.

    The Siemens Nixdorf business unit buy also "establishes Baan as a leading midmarket vendor within Europe," explained Karl-Heinz Voss, president of Baan's Central Europe division, in a recent statement.

    The Siemens Nixdorf business unit delivers products targeted to medium-size companies using NT or Unix.

    Baan, which splits its headquarters between Putten, the Netherlands, and Menlo Park, California, is riding the same wave of increasing demand for business applications that is driving up the sales and profits of its competitors.

    In July, the company reported that total net revenues were at $146.1 million for the second quarter ending June 30, a 65 percent increase over revenues of $88.5 million for the second quarter of 1996. Excluding hardware revenues, net revenues increased 71 percent for the second quarter of 1997 compared with the same period last year. License revenues were a record $92.3 million, an increase of 86 percent over license revenues of $49.7 million for the prior-year second quarter.

    Although acquisitions of last week strengthen Baan's hold in the middle ERP market for supply chain management, sales and manufacturing configuration, said there is still room for improvement.

    "One of the areas Baan is weak in is the human resources software area," said Hodges. Though the company has recognized it--the Siemens Nixdorf buy adds some human resources software to its package, for instance--it still has a ways to go.

    And observers close to the company said that may be a large part of the next acquisition on the horizon.