Dutch Enterprise Resource Planning (ERP) vendor Baan has entered boldly into the Windows NT market with its announcement of a scheme to offer integrated business software from Microsoft and Baan. At its BaanWorld '98 Europe conference in the Hague, the company stated that the bundle will also offer implementation, maintenance and support at a fixed monthly fee of $99 (#58) per user for licences of more than 5,000 seats.
The Baan Enterprise Software agreement is good news for Microsoft because it has been trying to break into the embedded database market for some time but without notable success. The company appreciates that most customer buying decisions are based on the application rather than the database it runs on and has been courting application vendors to standardise on SQL Server 7.0 and do the selling for it. Jeff Raikes, group VP sales and marketing at Microsoft, claims that Microsoft has invested $500 million (#290 million) in developing partnerships, largely based around SQL Server.
The hope is to mirror Oracle's strategy which hinges on its ability to convince application vendors to embed its product.
The Baan agreement exclusively targets the Windows NT operating system through its reliance on Microsoft's SQL Server database, due to launch next month, and Site Server Commerce Edition. Baan claims to have no plans to broaden the offering to include other operating systems or databases from other vendors - but behind this deal there are clear signs of an ERP vendor desperately trying to rethink the way it delivers its products to market.
"Nobody buys a database for the database alone and then decides what application to put on it. The application comes first and there is not much argument over which database should be used," said Rob Hailstone, chief analyst at Bloor Research. "This appears to make a lot of sense for Microsoft and less for Baan but we don't know the details yet. SQL Server has lost a lot of ground because Version 7 is so late out. Oracle has been doing well and this is a good way for Microsoft to make up some time."
Baan is aware that this deal is unlikely to remain exclusive. "If this is very successful it won't take (Microsoft) long to replicate it," said Amal Johnson, president of Baan supply chain solutions. "Microsoft's game is driven by volume." But Baan doesn't think Microsoft will be rushing off to replicate the deal with other ERP vendors, like SAP. "This leasing deal pivots on the tight integration of the Baan software with the Microsoft platform, the product of two years' close partnership, whereas SAP's product is based on a backbone written long before NT came to the forefront and would be harder to integrate into the infrastructure," claimed Andrew Nash, president of Baan corporate office solutions.
Neither are Oracle or PeopleSoft likely to commit to the Microsoft platform, said Nash. Oracle and Microsoft are "diametrically opposed" to each other, and PeopleSoft prides itself on its independence.
The Microsoft deal marks the beginning of the end for the strict user-by-user licensing model. Baan will now issue licences based on the number of employees a client has, not the number of employees using a particular function at a given time. The company claims the key to killing complexity is to have "business software on every desk".
Baan admits it is seeing a slowdown in the ERP market, witnessed by third-quarter results that fell below market expectations. In the short term, both the threat of recession and the Year 2000 issue are pushing ERP down on the list of priorities but, even in the longer term, ERP lacks the drive it once had. "There is no future in ERP," said Jan Baan, the company's founder. "It's too complex, too costly and takes too much time to implement." Consequently, Baan aims to take the complexity out of buying ERP.
This is evidenced by last week's announcement with IBM of three Baan Implementation Factories to help provide customers with the infrastructure and support to leapfrog the traditional timely and costly process of implementing custom-tailored solutions. Key benefits include a quick return on investment, easy upgrade, flexibility and increased executive confidence in the project, claimed IBM.
Looking forward, Baan plans to release Baan FieldServices at the Field Services show in Las Vegas later this year. This will be the first standalone Baan product to be launched. While Baan is working to have interfaces with Baan ERP and Baan FrontOffice, it can work independently sitting with legacy systems, SAP R3 or just on a Windows NT box. FieldServices is aimed at companies who send engineers out into the field to maintain complex capital equipment, such as heavy plant equipment.
This paves the way for Baan to move into Web distribution by stripping down all the products into individual components which can be delivered independently. The goal is to provide modules that can be quickly downloaded over the Internet by the customer and slotted into existing Baan products like a jigsaw puzzle, possibly on a thirty-day trial basis.
Last week, the company announced BaanConnect 98.3 which links the Baan FrontOffice with Baan ERP and other back office packages. This ties together the customer-facing side of a company with its supply chain management.
It also announced Baan Business Object Interfaces to allow products from 200 complementary vendors, such as TopTier and Aspect Development, to be downloaded from the Web and snapped onto Baan.
As with all customer conferences, the emphasis in Holland was on the good news - though Baan did admit that integration with rival packages from SAP, Oracle and PeopleSoft is not high on the agenda. If Baan has got its strategic thinking right, it could gain a considerable marketing advantage over these competitors but it depends on how long the lead time is before the others wake up and follow suit.
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