The ERP market has shrunk for the second time this week with Invensys officially announcing the sale of its Baan unit.
The sale, reportedly worth $135M, is to a venture capitalist group led by General Atlantic Partners (GAP) with Cerberus Capital Management.
GAP, which already made a $75M investment in SSA Global Technologies, plans to roll Baan together with SSA GT, a voracious acquirer of vintage ERP companies.
"The combination would give SSA GT almost $600M in revenue and an astounding 16,000 customers. This arguably moves SSA GT into fourth place in the ERP market," comments AMR Research.
In the last two days, the leadership of the ERP market has shifted more than it has in the last five years. Unfortunately for Baan, which has struggled for visibility while buried inside Invensys, the GAP deal is overshadowed by yesterday’s blockbuster news that PeopleSoft is buying J.D. Edwards, moving the combined company into the No. 2 slot.
The Baan sale is expected to be completed in about six weeks, with the combination of SSA GT and Baan happening a month or two later. Baan is expected to operate as a separate subsidiary. 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, which includes ERP systems acquired from SSA GT (BPCS), Computer Associates (PRMS, CAS, MANMAN, MK, Masterpiece, MAXCIM, and KBM), and Infinium.
"This deal is good for Baan customers because it brings the product into a company that is dedicated to the ERP business," comments AMR Research’s John Bermudez. "GAP has a long and successful track record in enterprise applications investment, and it won’t likely turn the purchase into a hardball maintenance rollup deal, in which Baan customers get higher maintenance bills with little new development."
Why all the market activity all of a sudden?
"From the late 80’s and through the 90’s the enterprise market grew rapidly, fostered by the need to automate back office transaction processes, address Y2K concerns, and exploit e-business opportunities. This growth supported hundreds of enterprise software suppliers looking to grab a piece of the action. Also contributing to growth were the manufacturers, who often let operating divisions select their own ERP software to address their specific needs," explains ARC Advisory Group vice president John Moore. "The end result today is a market with far too many suppliers to be sustainable, and the viability of the majority of ERP suppliers is questionable.”
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