Commentary: Is Baan buy a sign of consolidation?
The enterprise resource planning market is weak, and Gartner believes it will continue to consolidate. But Baan's problems were not just the result of a weak market.
See news story: Baan sells to Invensys in $708 million deal By Bruce Bond, Gartner Analyst
The enterprise resource planning (ERP) market is weak, and Gartner believes it will continue to consolidate. But Baan's problems were not just the result of a weak market.
Rather, Baan's strategy of building a wide range of functionality and technology stretched the company too thin. Once it began to experience credibility problems in 1997, its inability to fully deliver on any one major initiative prevented a recovery. The timing of Baan's poor execution was particularly bad because the horrible market of 1999 catalyzed the company's demise.
Customer relationship management (CRM), on the other hand, is not yet a consolidating market. It is still growing. Over time, as CRM goes through its logical life cycle, Gartner expects takeovers similar to what has happened in the ERP market.
Invensys, which has offered to buy Baan for about 762 million euros ($708 million), has a somewhat unique strategy to provide manufacturers with an offering that attempt to meet all needs. Gartner knows of very few specialists that are looking to provide that kind of a complete set of products. That translates into few remaining "white knights" available to rescue other future struggling ERP companies.
The only remaining question is: What will the end game look like for other ERP vendors? Some will close their doors, others will be acquired or merge. Some will be able to adapt their business and attempt to get into e-business services. Because traditional ERP is increasingly becoming a commodity market, customers will have to look for companies' strength in vertical markets. Gartner believes many ERP vendors will not be able to make the shift from general to industry-specific ERP and to the new demands of e-business and will not survive. However, we do not anticipate acquisitions and mergers until specific ERP vendors begin to fail. The ERP market is no longer a very hot market, so the upside for most potential acquiring companies is not particularly attractive.
Gartner envisions ERP companies only getting acquired if the price is low.
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