Business software at the heart of major manufacturing and aeronautics companies could have an increasingly uncertain future, after the Dutch ERP supplier Baan was put up for sale last week by UK parent Invensys, analysts have warned.
Users of Baan software include the UK government's defence Aviation Repair Agency, engineering giants Boeing and BAE Systems, drinks producer Del Monte and car maker Volvo.
These companies could face either a costly migration to new software or risking potential underinvestment in a system that lies at the centre of their business.
"The worst case scenario is that someone comes in for Baan who sacks all the marketing and development staff and just milks the installed base," said Simon Bragg, analyst at manufacturing consultancy ARC Consulting.
"Users have to ask themselves, 'Do I continue to add Baan modules or ringfence my existing investment and connect Baan to other solutions with enterprise application integration tools?'"
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Judith Jordan, analyst at Ovum Holway, said Baan's future is uncertain because other software suppliers are unlikely to bid for the company. "Baan never got the focus it needed within Invensys, and its business model could not withstand the softening in the market as well as some other ERP suppliers, such as SAP and Oracle," she said. "The attractiveness of Baan's customer base must be offset by the investment needed to get it back on track."
Engineering group Invensys bought Baan for £470m in 2000, aiming to get the firm to break-even point in 12 months, but Baan has continued to make a loss.
Charles Homs, analyst at Forrester Research, said Baan users will be forced to wait and see rather than move to another software supplier immediately. "Because switching suppliers or upgrading are both expensive, most Baan customers should wait for a new buyer. If they cannot wait, a growing list of rapid implementation tools will help users review viable alternatives, like Oracle, Manugistics or SAP."
But Baan users in the UK said changing systems overnight was not a viable option.
"There is nothing we can do in the short term," said Jim Symington, group head of MIS at bed manufacturer Hypnos. "If we were to look at something new tomorrow it would be six months before it was bought and then two years before it was installed - with ERP you can't move quickly."
Baan insisted there is a high likelihood that there will be a buyer and that the situation will be resolved quickly. "We are well into a structured process (for selling the company) with several potential buyers," said Dave Wangler, senior vice president of global marketing at Baan. "We can assure users that investment has already been made in our next generation software products and we would ask them to look at the situation rationally."
Who's in the running to buy Baan?
- Most analysts believe rival ERP suppliers such as Oracle and PeopleSoft will not buy Baan, for competitive and financial reasons
- Microsoft may relish 6,000 extra .net prospects and has the cash
- Geac or Computer Associates might consider a low bid to capitalise on the maintenance revenue, Forrester Research said
- An acquisition by an equity investor would be the best news for Baan users because these firms would not have to integrate Baan's technology into another supplier's application stack, Forrester said.