Baan Acquisition Expands Product Set and Integration Issues

Event Summary

In a move aimed at strengthening its position in vertical markets, Baan Co. NV announced on August 31 the acquisition of fellow Dutch business software producer Proloq Holding BV. Baan and Proloq already have a history of jointly producing and supplying industry-specific enterprise applications, primarily for the cable and wire, pulp and paper, and metal industries. Under the terms of the agreement, Proloq becomes a wholly owned subsidiary of Baan, the company said. On August 23 Salomon Smith Barney (SSB) announced an upgrade in their rating of Baan's stock. In explaining their move, SSB pointed to Baan's improved second quarter financials, their new management team, and their ambitious new product portfolio. The week earlier, August 18, Baan hosted their supply chain conference and they used the opportunity to announce a new suite of supply chain products. According to the Company, the most significant capabilities of the Baan Supply Chain suite include:

• The industry's first global e-business supply chain model with embedded international business analytics, designed to optimize the supply chain in order to maximize profits by helping companies reduce international taxes and cross-border tariffs.

• Intelligent, open-source Internet-based collaboration with supply chain partners that is intended to help partners improve business processes, such as order promising across the enterprise.

• Decision-support analytics that help companies perform real-time monitoring of important business metrics, such as customer demand.

• Open integration with Baan ERP, Baan Front Office, Baan E-Enterprise and other competing enterprise applications, which will help deliver more accurate, timely and valuable supply chain functionality and planning.

Market Impact

As can be seen in TEC's note on Baan Co. N.V. ("Baan - Is the worst over?" August, 1999), these moves are in tune with our vendor recommendations, and we regard them as positive. Should Baan's new offering perform as they claim, this would give the Company a very strong product position in the major growth areas in the enterprise application market. This however, adds one more challenge to the array of Baan's burning issues, which include prompt improvement in organization, and quality of training materials and instructors for the newly released software.

User Recommendations

This announcement revalidates our recommendations made in TEC's August Technology Note ("Baan - Is the worst over?" August, 1999). In summary, discrete manufacturing, project and distribution industries should consider BaanERP due to its comprehensive functionality in these respective vertical markets. However, any organization evaluating Baan should consider existing functionality only, and be able to provide the majority of product support in-house or through a 3rd party, due to Baan's financial situation.