News Analysis: Why wired ERP will make Baan dance

The Dutch company hopes to grow its enterprise resource planning by moving over to the Web

Any company that grew from a small manufacturing resource planner to an operation worth in excess of $380 million would face a challenge of continuing its growth.

This is precisely what Baan, the world?s number two enterprise resource planning (ERP) developer, is up against. It is active in 59 countries with over 2,500 customer sites and its 1996 turnover was $388 million, up 79 per cent on last year.

At Baan?s user conference last week, chairman and CEO Jan Baan said he saw the open market as an opportunity. ?We are not afraid of the open market, trading on both the Dutch Exchange and Nasdaq. We think it is better to ask forgiveness for any mistakes than to see initiative decline.?

Baan invests on a global basis, performing much of its R&D in developing countries, notably in India. By investing in these countries, high-tech projects create work for a highly skilled workforce. Baan also derives economic benefits by reducing the high labour costs and churn factor associated with European and US-based workforces.

Tom Tinsley, Baan COO, said: ?Our R&D costs are about half those of our competitors. That?s because we are geographically spread, using cheaper rates in India and elsewhere. Our executive compensation costs are also lower than average, with the top executives compensated with stock options.?

Tinsley advised against big-spend ERP consultancy programmes, saying that they take too long to implement. ?Three years? implementation should be nearer 60 days,? he said. ?Customer satisfaction remains low, and it?s a high priority for us. Customers complain that products are not easy, that installation is too long and that input from expensive consultants is spun out far longer than it should be.?

He added: ?We?re trying to correct that. For example, the turn period in Unix software was six weeks and it?s now about one week. The new NT Compaq server implementation can be installed within two hours.?

The need to simplify installation and delivery is a key point, putting a premium on speed, simplicity and a fast return on investment. Baan is developing its template route to speed up implementation, while rival SAP is adopting a similar approach, targeting SME sites with a more open, component-based R3. Both companies are ramping up their internet systems.

One of the crucial factors in Baan?s future plans is a wholesale move towards the internet. Does this mean the end of EDI, often a key component of ERP? Tinsley maintains not entirely. ?EDI will be bundled into applications labelled ecommerce. The downside of sacrificing EDI for internet communication is that despite what the technologists say, many business are unwilling to trust data to the internet.

?EDI is expensive in comparison, but it offers a wide array of industry accepted standards. Net comms are cheaper, but more standards need to evolve.?

Similarly, as Baan and its ilk look to the future, the sheer volume of multidimensional data is an issue. Database vendors claim they can handle multidimensionality, but the truth is that very few have solved the problem in a cost-effective way or in one that avoids the problem of database explosion.

Tinsley said the database vendors are lagging behind Baan in their multidimensional capabilities. ?The need is there and no one has really cracked it yet. We?re held back by the database vendors.

?It?s not an immediate priority, but it could be a next dimension of where we?re going and what we?re doing. We are creating such volumes of information that we certainly need to think about the possibilities of data warehousing.?

Given the array of query and forecasting tools being added to Baan?s portfolio through the Baan Family and Friends Network, data warehousing looks to be on the company?s agenda. It says it plans to acquire Aurum Software, a customer relationship specialist that provides linkages across financial, sales and marketing information.

Earlier this year Baan and Hyperion Software signed a letter of intent to develop a venture and co-operative strategy. Phase I will see the immediate introduction of a financial product line combining Baan IV with Hyperion?s Enterprise and Pillar systems. Phase II is timed to coincide with the release of Baan V. It will provide more function, a sophisticated interface and implementation of the Hyperion Analytical Ledger technology. Phase III will focus on the joint development of internet-based accounting and financial software, and all products are designed to be database independent.

Baan and Compaq are also providing a joint migration path to NT-based Baan IV Back Office. Andreas Barth, Compaq senior VP and general manager EMEA, a keynote speaker at Baan World, touted the benefits of Web computing, describing it as ?the ERP of the future?.

Citing the Gartner Group?s forecast that 80 per cent of business critical applications will run under NT by 2000, Barth said: ?With Compaq as Baan?s Microsoft Windows NT development and deployment partner, 1,000 joint customers will be installed on Baan IV by the end of 1998.?

Informix is the database supplier of choice; Oracle is a rival that wants to lock in users, said Baan, but a crucial partner for increasing Baan?s NT sales this year. And Microsoft SQL Server functionality is being touted by Compaq, which claims to be Baan?s NT deployment partner of choice.