Baan’s purchase by venture capitalists is good news for customers because the supplier will now be housed in a dedicated ERP shop rather than being “buried inside” Invensys, according to AMR Research.
The troubled UK engineering firm announced it was selling its Baan unit for $135 million to a venture capitalist group led by General Atlantic Partners (GAP) and Cerberus Capital Management yesterday.
The deal is expected to close in about six weeks, but a couple of months later, GAP, which already has a $75 million stake in SSA GT, intends to roll Baan into the group, where it will operate as a separate division.
The move, says AMR in an alert, arguably moves SSA GT, which it describes as “a voracious acquirer of vintage ERP companies”, into fourth place in the ERP market, with revenues of $600 million and 16,000 customers.
SSA sells BPCS, Computer Associates’ former PRMS, CAS, MANMAN, MK, Masterpiece, MAXCIM and KBM, and Infinium, many of which will be up for replacement over the next five years.
“The strategy behind the deal is that bringing Baan into the fold gives SSA GT a competitive ERP system to sell to the rest of its installed base. Considering the $200 million that GAP has put into this venture…simply riding a declining maintenance revenue stream into the ground will not provide this leading venture firm with the type of return on investment it requires,” AMR said.
As a result, SSA and Baan will need to work hard to make migration easy and affordable to customers. But this will also require ongoing investment from GAP, particularly if the development effort behind Gemini, the next version of Baan’s packages, is to come to fruition as planned this September.
AMR added: “GAP has a long and successful track record in enterprise applications investment, and it won’t likely turn the purchase into a hardball maintenance roll-up deal, in which Baan customers get higher maintenance bills with little new development.”
As a result, it concluded: “Baan’s product is a viable upgrade for much of the SSA GT installed base. The prospect should be cause enough for SSA GT to act in the best interest of Baan customers. Happy customers make good references. No references, no upgrade revenue.”