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Commentary: Baan seeks a "white knight"

As Baan acquisition fever runs high, many company names have been cited as possible buyers. The impact on Baan depends not only on the class, but the individual buyer.

See news story: Baan shares fluctuate on takeover speculation

By Bruce Bond and Daniel Miklovic, Gartner Analysts

As Baan acquisition fever runs high, many company names have been cited as possible buyers.

Suitors exist from three different classes of vendors. The impact on Baan depends not only on the class, but the individual buyer. Each category has plusses and minuses for Baan and its customers.

• A complementary solution provider. Examples include process automation, customer relationship management (CRM) and supply chain vendors.

Of these, process automation vendors would be the most likely, because CRM and supply chain vendors need to maintain relationships with many ERP vendors. However, there is a track record of process automation companies buying ERP vendors (specifically, Invensys acquired Marcam Solutions). Marcam provided Invensys with a key component for its process manufacturing factory application suite.

We believe that the speculation surrounding Invensys' acquisition of Baan makes sense because it would enable Invensys to build a factory application suite in discrete manufacturing.

However, Invensys' tendency to avoid bidding wars in acquisitions could allow a rival such as ABB or Honeywell to pick up Baan. These process automation vendors are large, well-capitalized companies with a global presence and the ability to protect user investments. Baan customers are likely to benefit most should this type of company be the buyer.

However, some of these process automation companies lack experience in managing a true software company, which could cause customer service problems.

• A technology holding company (for example, Computer Associates, GEAC and Gores Technology Group).

This type of company has cash and offers stability, which is well-suited for keeping an acquired company from disintegrating. The downside is that investment streams would not be very strong. As a result, it would be highly unlikely that the acquired company's product set would become leading edge.

GEAC has been widely speculated to be a buyer. Baan fits perfectly with GEAC's strategy, but the acquisition could weaken GEAC's balance sheet given its recent purchase of JBA Holdings. In addition, GEAC does not have a track record of aggressively investing in newly acquired products, which would not be good news for Baan customers.

• A Baan competitor in ERP (for example, SAP, PeopleSoft or Oracle).

The upside is these vendors know the market, know the product set, and know how to sell it. The downside is, depending on the buyer, there could be product overlap and a phase-out of Baan products. We don?t believe that it makes sense for Oracle or SAP to do this deal because neither is in need of anything that Baan has. PeopleSoft would be a more likely candidate.

Gartner's view is that, following an acquisition, Baan will likely cease pure technology development and will concentrate fully on building functionality. Another logical result would be that Baan would streamline its sales force and consulting staff. We believe that Baan's CRM subsidiary and its Caps Logistics unit will remain largely intact, but will be wholly or partially divested.

Until the buyer's intentions and capabilities are known, enterprises evaluating Baan for ERP, CRM or supply chain management capability should put their evaluations on hold. Enterprises experiencing difficult Baan implementations or in the early stages of implementation (e.g., just starting a conference room pilot) should similarly halt their projects until the buyer's intentions and abilities are known. Those enterprises well into a Baan implementation that is progressing relatively smoothly should proceed, but should also create plans to migrate over time to an alternative in case the new owner proves stingy with product investment.

Those deploying Baan ERP should, if they have a choice, deploy Baan IVc rather than Baan V, because support resources for the newer and as yet unproven Baan V are scarce. Overall, when considering Baan, service users should prepare to be as self-sufficient as possible.

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.