Could Baan sale signal ERP shakeout?

By Staff -- Logistics Management, 7/1/2000

The sale of a major enterprise resource planning (ERP) software provider could be a harbinger of things to come in the software industry. A British industrial-controls and engineering company, Invensys plc of London, has offered about $708 million for Baan, which is based in Barneveld, the Netherlands.

Baan ran into financial difficulties last year, prompting its management to begin seeking a buyer for the troubled software maker. If the sale goes through, Baan will become a unit within a new Invensys software and systems division. At press time, the sale still had to gain both regulatory and shareholder approval.

Although the sale was expected to be approved, some analysts are skeptical about Baan's future under the Invensys umbrella. "It doesn't make sense," says John Fontanella, a research director for supply chain execution at AMR Research in Boston, who argues that Invensys is buying Baan at a time when the ERP software market is flattening. "We're not looking at 30-percent growth in the ERP [market] anymore," he explains. "We're looking at 5-percent growth this year."

In its heyday two years ago, Baan was the number three provider of ERP software, with more than $1 billion in revenues. ERP packages provide the information-technology backbone for many corporations, but their sales have begun slipping now that companies have become more interested in buying software that facilitates supply chain partner collaboration on the Internet.

Indeed, the acquisition of Baan could signal the start of a shakeout in the ERP software industry. "We will see more consolidation," predicts Fontanella. "Only SAP and Oracle will stand on their own."

Two software firms acquire new names