Baan to highlight benefits of its buys

At BaanWorld, a customer conference which kicks off in Vienna, Austria, on Wednesday, the Dutch software maker is expected to showcase how it has integrated a host of technology obtained through those deals with its core enterprise resource planning (ERP) software.

More importantly, Baan will also use the customer gathering to convince customers that it is back on track after a series of financial miscues.

"[BaanWorld] is a real watershed event for them," said AMR analyst Pierre Mitchell. "They really need to convince their existing user base that the company is getting back on track."

The European meeting comes months after Baan canceled its American user show this year following weak financial results and job cuts.

Baan competes in the enterprise resource planning software market against rivals SAP, Oracle, PeopleSoft, and J.D. Edwards. With about $736 million in 1998 revenues, Baan is just a fraction of the size of $5 billion German software giant SAP.

Though most of Baan's business comes from its European base of customers, American companies, including General Mills, Russell Stover, and Boeing, have installed the company's software, which is used to track crucial back-office business needs, including financials, order entry, and human resources. Like the other enterprise resource planning vendors, Baan was once a darling of Wall Street with a 70 percent yearly growth rate. But Baan and its competitors have suffered in recent quarters as demand for ERP software has declined. Baan posted a total 1998 net loss of $315 million or $1.59 per share.

Baan is most known for its manufacturing management software, the area in which it has made the bulk of its acquisitions. The company has traditionally been weak in the financial software market. To combat that, Baan acquired Coda Group, a provider of financial software, last year.

Other acquisitions include Berclain Group, a maker of manufacturing software, and Antalys, a configuration management software maker in 1996. In 1997, Baan acquired sales software company Beologic and customer relationship management software company Aurum. Last September, the company bought supply chain software maker Caps Logistics. Caps Logistics provided Baan with coveted logistics and advanced scheduling technology, which enables companies to optimize their manufacturing schedules to save money and time.

Baan has used its acquisitions to build a new line of sales, customer service, and supply chain software. Like its rivals, Baan is moving to cross-sell this new software, which is in hot demand, to its existing customer base.

The market for customer relationship software is projected to grow to $11 billion in 2003, up from $1.9 billion in 1998, according to market research firm International Data Corporation. The supply chain software market is expected to grow 50 percent annually to reach $13.6 billion by 2002, according to Boston-based AMR Research.

Analysts have criticized Baan for lagging in efforts to integrate its product line following its various acquisitions.

In a recent interview, Stephen Palfrey, a financial analyst at Sanford Bernstein, said it's still too early to rule whether or not Baan's integrated product line is technologically ahead of the other ERP vendors.

At this week's show, Baan chief executive Mary Coleman, formerly head of Aurm, is expected to demonstrate the new software and show how the integrated suite will work.

Last month, the company announced it was shipping new supply chain software. In December, the company plans to ship software designed to facilitate buying goods such as office supplies on the Internet. The company has also finished integrating Coda's financial and accounting software with Baan's core ERP software.

"Baan will most likely demonstrate how Baan enterprise resource planning, supply chain, and the front office work together," Mitchell said. "Right now, the integration is pretty sparse, but they are spending a huge amount of effort in integration." Mitchell said more than 40 percent of Baan's research and development dollars are being spent solely on integration.

Rohit Agarwal, Baan's vice president of marketing, said Baan is now delivering on the vision for a complete product line that the company outlined several years ago.

"It's not just hype or noise from Baan," he said.