Baan rescue plan won't work, say analysts

Industry analysts said yesterday that Invensys is not a suitable rescuer for Baan, following the UK firm's proposal to acquire the troubled enterprise resource planning (ERP) software vendor.

Invensys stepped in earlier this week with an offer of £2.85 cash for each Baan share, valuing the company at around £474m.

However, while analysts said the offer is close to the best Baan could have hoped for, they believe that Invensys is poorly suited to sustain Baan in the ERP and customer relationship management (CRM) markets. US researcher Forrester has even urged Baan to reject the offer.

In its report, Invensys Can't Resurrect Baan, Forrester advises Invensys' management team to reconsider the offer. It suggests that even if the company believes it is getting a good entry into the fast-moving ebusiness software market, Baan's legacy software, anxious customers and shattered market perception form hurdles that no company can overcome.

Laurie Orlov, a senior analyst at Forrester, is sceptical about the impact of the planned acquisition. She said the "cutting up" of Baan has prompted Forrester analysts to urge the Dutch vendor to reject the offer, adding that Invensys' plans would "scare away customers and alienate knowledge workers".

Another research company, Gartner, said the deal would benefit Baan and its discrete manufacturing ERP customers, but added that Invensys' core competency of addressing manufacturing operations within the enterprise is not well aligned with the demand to deliver inter-enterprise solutions.

Gartner analyst Bruce Bond said that while Invensys has publicly said it will not sell off Baan's CRM subsidiary, Caps Logistics, it will struggle to make the division competitive.

"We believe that by the fourth quarter of this year, Invensys will spin off Caps Logistics and cease development of some Baan tools, for example, Nucleus and Report Writer. Overall, Baan customers can expect fewer leading-edge technological developments and functional enhancements outside of discrete manufacturing," he said.

Of the expected 1000 job losses, a large majority will be from Baan's research and development division, said Bond.

"This is radical. Throughout this entire episode, Baan has stuck to its story that it will not cut research and development jobs. This will result in the company becoming much more of an execution focussed vendor rather than a visionary."

Bond added that widespread job cuts are also expected in sales and consulting. "These will be cut big time," he said.