Users concerned as Baan woes rise

Several users of Baan Co.’s applications said earlier this month they were growing alarmed after the struggling vendor delivered a surprise triple whammy: the resignation of its CEO, more restructuring moves and the forecast of another big loss.

“I’m shocked,” said Mike May, vice-president of information technology at Teknion Furniture Systems Ltd. in Toronto, after Baan announced that CEO Mary Coleman had quit after just seven months in that job.

“This takes me from being confident about the future with Baan to being nervous,” May said.

Teknion, which makes office furniture, uses Baan’s enterprise resource planning software and recently bought new e-commerce and supply-chain planning applications developed by the Netherlands-based vendor.

Coleman is the third CEO to exit Baan since mid-1998. Her surprise departure and a projected fourth-quarter loss of up to US$250 million leave the company in “probably as close to an impossible situation as you can find,” said Rod Johnson, an analyst at AMR Research Inc. in Boston.

The latest restructuring at Baan — which has now lost money for six quarters — includes a shift in development priorities from ERP to e-commerce. Katrina Roche, chief marketing officer at Baan, said planned ERP enhancements are being dropped to speed development of Web-based applications, such as a business-to-business collaboration package.

That change didn’t raise any immediate red flags for users, including Frank Hannig, CIO at Altera Corp. in San Jose, Calif. Hannig said the semiconductor maker is more interested in testing Baan’s on-line sales software than in its adding new functionality to its ERP system.

But a longer-term concern is how good Baan’s ERP software will be “in two or three years, when we’re ready to do the next major upgrade,” Hannig added. “It’s unfortunate to see them continue to lose money.”

Even worse is the brain drain at Baan, said Keith Bearden, CIO at dental equipment maker A-dec Inc. in Newberg, Ore. “They’re not just bleeding money,” he said. “They’re bleeding people.”

Coleman’s departure hurts, and Baan has lost a lot of sales and support workers, said Bearden. The salesman who worked with A-dec quit last month and was temporarily replaced by someone in faraway Dallas, he noted.

SAP AG and Baan’s other ERP rivals also are having a tough time selling software and keeping key employees. But Baan’s U.S. business “has really been destroyed, and they’ve been unable to rebuild it,” said Johnson.

Baan’s troubles surfaced in 1998 after an acquisition spree left it with a group of incompatible applications and an unwieldy organization. Questionable financial dealings by co-founders Jan and Paul Baan also hurt, as did flattening demand for ERP software as the window for fixing Y2K problems closed.

Coleman, who became president in late 1998 and was named CEO last May, got credit for uniting Baan’s operating units and prodding the company to deliver on promises to tie together its applications.

Roche said Coleman “absolutely was not pushed” out. Baan’s fourth-quarter software licence revenue more than doubled from a tiny US$25.6 million in the last three months of 1998, Roche added, but she wouldn’t predict when Baan would be profitable again.

Last week’s events call Baan’s future as an independent company into question, said Joshua Greenbaum, an analyst at Enterprise Applications Consulting in Berkeley, Calif. Especially for prospective new buyers, there’s “too much chaos at the top of Baan to make it a safe bet,” he said.

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