Commentary: Baan success hangs on Invensys strategy

By Kenneth Brant, Gartner Analyst

U.K.-based industrial controls vendor Invensys has finally taken command of troubled enterprise resource planning (ERP) vendor Baan, despite lingering shareholder resistance to the stock purchase offer.

The viability of Baan is improved, but its long-term success hinges on Invensys' ability to retain Baan personnel and restore customers' confidence while restructuring operations.

On August 3, Invensys

	See news story: Baan removed from Amsterdam blue chip index

announced it had assumed control of Baan, having achieved 72 percent stock ownership. To assume total ownership of Baan, Invensys (with the agreement of Baan's management board) plans to liquidate the holding company Baan Company N.V. Invensys also announced that it has extended financing to secure Baan's operations.

In the short term, this development will benefit Baan and its customers. Invensys has taken the crucial first step in setting Baan back on course by relaxing its 95 percent ownership mandate and acquiring controlling interest in Baan.

With 72 percent of Baan shares already owned or tendered, Invensys has the voting bloc it needs to force liquidation of assets and assume complete control of Baan.

With European Union and U.S. regulators' approval, the shareholders meeting scheduled for August 18 to decide on the asset sale to Invensys is merely a formality. Baan then secures the funding required to sustain operations, avoid bankruptcy and fend off a wholesale breakup that would be more harmful to customers.

Invensys will take management control and start to restructure Baan immediately--first by laying off an estimated 800 Baan employees, rationalizing budgets and consolidating facilities within the Invensys worldwide network.

Invensys' major challenge is retaining and recruiting key personnel, especially in North America where the sales force has already been hit hard. A loss of forward momentum (and earning potential) in the market and a clash of cultures as Baan enters a period of austere controls under an industrial conglomerate will compound Baan's "brain drain."

Invensys has a reputation for maintaining tight management control over operations, and this approach plus the large number of layoffs may alienate some Baan employees.

Invensys must work hard to offset these negatives and retain key personnel in sales, support and development. Further flight of Baan's core personnel could erode customers' goodwill during the interim period until Invensys completes the asset sale and restructuring.

Entire contents, Copyright © 2000 Gartner Group, Inc. All rights reserved. The information contained herein represents Gartner's initial commentary and analysis and has been obtained from sources believed to be reliable. Positions taken are subject to change as more information becomes available and further analysis is undertaken. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of the information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof.