A Safe Comeback

On the face of it, it would seem that mergers and acquisitions are the only
way left for mid-market ERP vendors to sustain themselves in this business.
PeopleSoft acquired JD Edwards in a $1.7 billion deal, even as Oracle fought
bitterly to get controlling stakes in the company.

However, it’s Baan that has been ‘in the news’ in the merger and
acquisitions space. Ever since the exit of the Baan brothers, the company has
been trying to grapple with survival, and hope shimmered in 2000 when Invensys
acquired Baan in a $708 million deal. However, three years later, Baan has been
sold off to SSA Global for $135 million to an investment group consisting of
Cerberus Capital Management and General Atlantic Partners. The investment group
combined Baan with another of its investments, SSA Global Technologies, and Baan
is now a division of SSA Global Technologies to create a manufacturing-specific
enterprise software behemoth.

Users were surprised by SSA’s plans to acquire Baan but cautiously
optimistic that the merger could improve the product lines of both companies.
Watching closely the dogfight taking place in the ERP market, Baan is all set to
make a comeback under the new brand SSA Global.

SSA’s new strategy includes a bouquet of solutions for the Indian market–Baan
CRM, ERP, supply chain logistics and service applications, as well as its
analytical application, Cross Enterprise Analytics. The company is aiming to
distinguish itself from other large CRM vendors such as SAP and Oracle by
focusing on vertical markets it has been traditionally strong in–aerospace and
defence, and automotive and industrial manufacturing, and at the same time
deliver a message that CRM is not just a technology, but a strategy as well.
Asserted SSA Global country manager Gopal Madnani, "Since we’ve been
acquired by SSA, we’ve really focused the business and continued significant
investment in areas such as support and product development and
innovation." He added that SSA would distinguish itself by focusing on its
vertical market strengths. "Post SSA acquisition, we will continue to focus
on acquiring new customers and adding value to existing customers in these
segments."

Mike Greenough, CEO and chairman, SSA Global, said his strategy was to
acquire market share, support customers and continue to sell software licenses
to users who want to extend systems managing everything from accounting and
human resources to sales, purchase and distribution. Also, he has no
intentions to target tier-1 ERP upmarket. "We don’t intend to go to
upmarket" he said, referring to industry giants SAP AG, PeopleSoft and
Oracle Corp., which focus on selling to big corporations and government.

While the company has formalized its CRM vision later than other major
vendors, its history in the CRM space goes back as far as its 1997 acquisition
of Aurum Software, a sales force automation firm founded in 1990. In May 2000,
Baan was acquired by London, England-based Invensys Plc, which incorporated
BaanFrontOffice products along with its Invensys CRM brand offerings. 

SSA currently supports the automotive, electronics, projects and process
industries. Now, with an expanded portfolio, it is also considering launching
the logistics, supply chain solutions and also solutions for the pharma market.
In addition, it is also exploring opportunities for financial solutions.

In the crowded mid-market ERP, SSA is riding high and aims to grow upwards of
20%. The company currently has about 150 customers for Baan solutions and about
50 for business planning and control system solutions, both now being offered as
part of the SSA Global solution portfolio. The company had 20 new ERP
installations last year and is expecting 25 new accounts this year.

With Baan’s acquisition, SSA can leverage Baan’s expertise in verticals
like manufacturing. Post acquisition, SSA Global now has the largest customer
base in manufacturing in the world. Prior to the acquisition, SSA itself
had a substantial customer base in this segment. Now, the combined solution
portfolio is available for its customers, which will providing SSA an
opportunity to add even more value to its offerings. For example, Baan’s
supply chain offerings can now be positioned to an expanded customer base.

Pre-acquisition, Invensys spent a lot of money helping Baan develop its next
generation of software and now SSA is all set to leverage it to bolster
its bottom lines. Explains Madnani, "The R&D investments made by
Baan before and after Invensys are all being realized and aggregated into IPR,
as part of SSA Global. These solutions will be offered as part of the
normal innovation cycle by SSA Global and we expect that such innovations
will yield good returns on investment for both us and our customers."

The company currently operates with 400 plus employees in India, with most of
them being located at the two development centers in Mumbai and Hyderabad. In
the next two years, as it plans to invest more in different activities in India,
the recruitment rate could go up by about 30% or so. 

"We are in the process of upgrading our development centers in Mumbai
and Hyderabad and the new recruitments will boost up the bottomlines in the
country as we are expecting a 30% growth in software industry this year in the
country," Greenough maintained.

Claiming to be the leader in the mid-market ERP segment, the company will
double its expenditure from the present $10 million as it has plans to make
India a global hub of operations, considering thaat in the next phase the thrust
will be more on outsourcing. 

Recently, Peoplesoft acquired JD Edwards and has strengthened its position in
the mid-size ERP market. Since Baan’s strength has always been mid-market, the
company plans to strengthen it more in the changed ERP market. Also, the company
hasn’t denied the fact that consolidation has already begun in this space and
in fact SSA Global itself has been one of the first aggregators. As for the mid
market, which is their core strength, the company will continue to focus on
this. Madnani says "Today, we have the largest market share of the
mid-market in India and globally and we will continue to defend this
position. There will certainly be more consolidation in this space with SSA
Global being one of the likely consolidators. Of course, we will do it when
it makes the most business sense and allows all our solutions to be positioned
in a synergistic and complementary way for our customers."

A flurry of acquisitions among high-profile ERP players has customers and
vendors mired in the fallout of a consolidation period. Industry experts expect
large-scale vendors to bolster existing products in an effort to fill the
mid-market void that these acquisitions have created in enterprise application
arena.

Doing business in today’s knowledge-driven networked economy requires more
than software that allows access to vital information across the enterprise and
Baan is all set to help enterprises gain business benefits in this scenario.
Post the SSA acquisition, the company claims that it has now become a one-stop
shop that provides all required solutions to enhance business value for its
customers. In fact, even with current ERP solutions, namely SSA Baan, it
has customer testimonials that highlight the benefit and value achieved by
customers. ERP customers can now realize even more value by using the ERP
integration backbone and deploying solutions like CRM for customer intimacy, SCM
for operational excellence, and PLM for product
innovation.    

Alliances and partnerships give SSA the much needed boost in its mission to
deliver world-class information solutions so as to help customers run a better
business in the industrial enterprise sector, and help them enjoy substantial
growth in profits. The company leverages partnerships and alliances in two
ways. In the services area, this happens by ensuring that partners are
vertically focused for the industry being served while in the product area it’s
by bringing to customers world-class components, for example, Cognos for
the business intelligence area.

But analysts have apprehensions over Baan’s sell-off by Invensys to SSA
Global and cast doubts over future support for the well-regarded ERP software.
SSA’s track record of development spend is not good. The company has been
contract mining–contacting users and squeezing more licenses out of existing
implementations, rather than developing new ones. 

Consolidation has started happening in the ERP space and SSA is ready for
further acquisitions to enhance its portfolio. Baan has been sold twice in the
last few years and Greenough has not ruled out further sell-off of Baan if
required and if in interest of customers.

RAHUL GUPTA/CNS in Mumbai