Baan is positioning itself for a rebound with the help of IBM after having had a difficult year, according to a new report from investment analysts, Lehman Brothers.
Over the last 12 months, the troubled based enterprise resource planning (ERP) applications vendor has been buffeted by a series of adverse analyst reports and rumours that the way it reported sales had inflated its figures.
As a result, market confidence waned in the company and a drop in license revenues led to heavy losses. This spurred a cull of more than 1,200 staff and the closure or consolidation of more than 50 offices worldwide at the start of the year (see VNU Newswire, 20 January, 1999)
But a report from Lehman's London office suggests there is room for cautious optimism. Although the firm is maintaining a ‘neutral’ position, it believes Baan is doing all the right things to put itself on the mend.
Mairi Johnson and Brian Skiba, researchers at Lehman's, said: "We recommend that investors put this name back on the radar screen," as a result of management changes, a focus on new applications such as supply chain and customer relationship management (CRM), and non exclusive technology deals with Microsoft and IBM.
And one of the keys to its potential turnaround, they claim, lies in Baan's ability to exploit the IBM relationship, particularly because lately, IBM is said to have become concerned over the amount of influence rival ERP vendor, SAP, is exercising over Global 1000 customers.
Baan also appointed Jim Mooney, a former IBMer, to the key post of chief financial officer earlier this year, and his influence is believed to have brought about introductions to five large, new customers.
Johnson and Skiba also said that, although Baan focused primarily on its supply chain and Internet initiatives at a recent analysts' conference, they were impressed it had recognised that traditional manufacturing businesses still need to deploy ERP systems to ensure they keep a lid on costs, but also respond to customers and suppliers in realtime.
"The Internet economy means ruthless and unparalleled competition combined with unmatched speed. Enterprise software plays a key role in compressing time within and between enterprises," said the report.
But Baan said that, while it had no plans to make further significant headcount reductions in future, there was still considerable slack in its organisation, especially in the educational services division. The company also suggested that its sales people could make a greater impact if market conditions were better, atlhough this is only flagging up what many in the ERP market already know.
As a result, Baan is concentrating its efforts on trying to sell its acquired product sets rather than making a sustained sales effort in the general ERP market with its more traditional offerings.
But Lehman's said performance here was patchy. Aurum, the sales force automation unit, which Baan acquired a couple of years ago (see VNU Newswire, 15 May, 1997) and which was previously headed by Mary Coleman, Baan’s current chief executive, is competing well.
But Coda Financials, which Baan bought last year (see VNU Newswire, 24 February, 1998) is said to be struggling as customers' requirements for core ERP functionality dry up.
"We believe the survival of the company is no longer an issue, and frankly growth in the company is now a question of timing - not if ever. Once again, execution of the 4,700 people is key. Moreover, timing of demand, particularly at the higher end of the ERP market has to play out in Q4, given the upcoming millennium clock tick," Lehmans concluded.
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