On the middle path

On the face of it, it would seem that M&As is the only way left for
mid-market ERP vendors to sustain in the business. The ERP market is seeing a
major shake-up with Baan’s takeover by SSA GT and PeopleSoft swal-lowing up JD
Edwards.

Following in the footsteps of rival enterprise resource plann-ing vendors,
SSA Global has finally outlined its strategy to provide customized software
solutions to vertical markets in India. Baan was sold for $ 135 million to an
investment group consisting of Cerberus Capital Management and General Atla-ntic
Partners.

As part of the acquisition, Baan has become a division of SSA Global
Technologies to cre-ate a manufacturing-specific enterprise software behemoth.
SSA’s plans to acquire Baan surprised users but they were cautiously
optimistic that the merger could improve the pro-duct lines of both companies.
Watching closely the dogfight-taking place in the ERP market, Baan is all set to
make a come back under the new brand SSA Global.

SSA’s new strategy include bouquet of solutions for Indian market- Baan CRM,
ERP, supply chain logistics and service app-lications, as well as its analytical
application, ‘Cross Enterprise Analytics’. The company is aim-ing to
distinguish itself from other large CRM vendors such as SAP and Oracle by
focusing on vertical markets it has been traditionally strong in–aeros-pace
and defense, automotive and industrial manufacturing, and at the same time,
deliver a message that CRM is not just a technology, but a strategy as well.

SSA Global CEO and chair-man Mike Greenough said that his strategy is to
acquire market share, support customers and continue to sell software licen-ses
to users who want to ext-end systems managing everyth-ing from accounting and
human resources to sales, purchasing and distribution. Also he has no intentions
to target tier1 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 com-pany 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
automa-tion firm founded in 1990. In May 2000, Baan was acquired by London,
England-based Invensys plc, which incorpora-ted BaanFrontOffice products along
with its Invensys CRM brand offerings.

SSA currently supports the automotive, electronics, proje-cts and process
industries. Now with an expanded portfolio, it is also considering launching the
logistics, supply chain solu-tions 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 percent. The company currently has about 150 customers for Baan solutions and
about 50 for Busi-ness Planning and Control Sys-tem solutions, both now being
offered as part of the SSA Global solution portfolio. The company had 20 new ERP
insta-llations last year and is expec-ting 25 new accounts this year.

If we look at the history of Baan, after a collapse in sales Invensys bought
the company in 2000 for $ 708m and in rec-ent months the management team have
stabilized Baan and announced a number of new customer wins. Now after 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. Therefore now the combined solution
portfolio is now availa-ble for its customers–provid-ing SSA an opportunity to
add even more value to them. For example Baan’s supply chain offerings can now
be positio-ned to an expanded customer base. Pre-acquisition, Invensys spent a
lot of money helping Baan develop its next genera-tion of software and now SSA
is all set to leverage it to bolster its bottom lines. Explained Madnani,
"The R&D invest-ments made by Baan before and after Invensys have all
being realized and aggregated into the IPR that is now Baan solutions as part of
SSA Global. These solutions will be offered as part of the normal innova-tion
cycle by SSA Global and we expect that such innovations will yield good Returns
of Investment for both us and our customers."

The company currently ope-rates with total of about 400 plus employees in
India–most of them are scattered in the two development centers in Mum-bai and
Hyderabad. In the next two years as it plans to invest more in different
activities in India–the recruitment rate co-uld go up by about 30 percent or
so.

" We are in the process of upgrading our development centers in Mumbai
and Hydera-bad and the new recruitments will boost up the bottom lines in the
country as we are expec-ting a 30 percent 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 ex-penditure from the present $10 million as it has plans to make
India as global hub of opera-tions as in next phase the thrust would be more on
outsourcing.

Recently PeopleSoft has 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 aggrega-tors. As
for the mid market, which is their core strength, the company will continue to
focus on this. Madnani says "We have today 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 consoli-dation 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 compleme-ntary way for our customers."

A flurry of acquisitions among high-profile ERP players has customers and
vendors mired in the fallout of a con-solidation period. Industry exp-erts
expect large-scale vendors to bolster existing products in an effort to fill the
midmarket void that these acquisitions have created in enterprise app-lication
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 SSA acquisition, the company claims that it has now become a one stop shop
that provides all required solutions to enhance business value for our
customers. In fact even with current ERP solutions, namely SSA Baan, it has
customer testimonials that highlight the benefit and value achieved by the
customers. The ERP custo-mers 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 gives SSA 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 levera-ges partnerships and alliances in two
ways. In the services area by ensuring that partners are vertically focused for
the indu-stry being served while in the product area by bringing to cus-tomers
world class compone-nts–for example, Cognos for the Business Intelligence
area.

But analysts have apprehen-sions over Baan’s sell-off by Invensys to SSA
Global and casts doubt over future support for the well-regarded ERP software.

Rahul Gupta

(CyberMedia News Service)