"The company's aggressive expansion strategy has spread resources too thinly," said Dennis Keeling, analyst at Ovum, a Burlington, Massachusetts-based research firm, in his report. "Baan increasingly works through partners, but even these are under severe pressure."
Keeling made the statements in a recent report on the enterprise resource planning (ERP) market. According to the report, SAP will remain at the top of the ERP heap. However, the German software giant may have difficulty maintaining its lead over the long run because of its conservative approach to implementing new technology, specifically its component architecture, leaving a door open for more nimble vendors to enter.
Meanwhile, Oracle, like Baan, will face tough times. Baan's trouble stems from a heavy development load undertaken this year. Oracle, according to the report, has bet too much on its network computing architecture (NCA) which users may or may not be ready for just yet. And PeopleSoft, while gaining popularity, faces a tough fight to get users to accept its new manufacturing applications.
It's an analysis confirmed by other industry watchers in recent months.
Baan has taken on a heavy load in the past year, buying up product configuration software maker Antalys, sales force automation maker Aurum Software, British financial application maker the Coda Group, and advanced planning software maker Berclain. The company also took a minority stake in Spanish human resource management system maker Meta4 and formed an integration relationship for budgeting software from Hyperion Software.
Aurum itself bought two companies earlier this year to integrate products into its front office systems, Denmark-based interactive selling and sales configuration applications maker Beologic S/A and the Netherlands-based sales automation provider Matrix Holding BV. Baan has also handed the new Antalys division over to Aurum where its products are to be completely absorbed and carry the Aurum brand name.
Nearly 26 percent of Baan's 2,000 employees have been dedicated to integration duties, Baan executives have said.
Keeling said all of these purchases were necessary for Baan to shore up its product line as it continues to do battle in the highly competitive ERP market. It now has the functionality to compete and is very scalable, he said. And while its close competitors like SAP, Oracle, and PeopleSoft go after any vertical market they can, Baan so far has kept its sights locked on the manufacturing industry.
"Baan has adopted a smart marketing strategy,'' Keeling said. "It focuses on specific vertical markets in the manufacturing sector, targets key organizations in those vertical markets, and then rolls out its products to its supply chains."
However, pressure to expand beyond its core clients is mounting. Baan executives said that some of the purchases such as Coda were necessary if Baan were to explore new markets like financial services, shipping, retail, and publishing.
So far Baan is betting on components and business objects to integrate the products and the firm is giving itself plenty of lead time to complete the projects.
Under the umbrella of its Evergreen program and new BaanSeries application package, Baan is initially integrating the products using simple application programming interfaces. They are loose but relatively effective integration mechanisms.
Then, over time Baan developers will be building common components which will more closely bind the disparate applications together for a more seamless integration.
As for Oracle, Keeling said Oracle's partnering and best-of-breed approach to tackling new markets and its promotion of a network-centric architecture is falling "far short of Oracle's expectations." Keeling blames this on users' reluctance to test a new technology like NCA while trying to prepare their systems to handle the year 2000 and the European Monetary Union conversion.
Oracle executives said there is no big technology shift to move to NCA. In fact, they said it is easier than upgrading current client-server systems. It takes a browser on users' computers, a new application server, and a TCP/IP network, which the majority of users have. Software that once had to be installed on every users' machine now only needs to go on a single server where it can easily be managed.
Keeling also criticized Oracle for paying more attention to its database and tools business and pushing its applications division off to the side. But Oracle CEO Larry Ellison the past few months has taken over the applications division to get it back on track.