Something About Mary

I'm writing this just days after Mary Coleman announced her departure from Baan-sans a successor-and rumors are running across the industry grapevine at a rate that could put a T3 line to shame.

The old Aurum will spin off from Baan and go it alone, say some; or Siebel will scoop up the ailing giant; IBM might be the acquirer; the company will be stripped and sold for piece parts-and that's just a sampling of the scuttlebutt going around. Regardless of what happens, most experts agree that Coleman's sudden exodus will have major repercussions, and many feel that the company won't be able to survive such a massive blow.

How significant is Coleman's abandoning ship at this crucial point in the company's history? "Very," says META Group's Liz Shahnam. "The departure of a CEO from any company is always important, but Mary's goes beyond that. She was the architect of Aurum's revival and was slated to revive Baan. Stepping down sends a message that she was faced with insurmountable odds." Gartner Group's Bruce Bond agrees. "Her leaving negates all the hard work Baan had been doing to regain the market's confidence," he says. "The result will be a self-fulfilling prophecy-clients, worried about Baan's viability, won't buy from the company, ensuring further financial losses."

Indeed, most analysts with whom I've spoken perceive this event as the proverbial straw that broke the camel's back, though according to Yankee Group's Chris Selland, the camel "was dead long before Mary got on it. In fact," says Selland, "I admire her tenacity in trying to revive what was, for all practical purposes, a dead beast." Various anecdotes I've heard over the past year support Selland's words. As early as last summer, for instance, analysts were telling me that they hadn't seen Baan on anyone's short lists in some time. And the one prospect I'm aware of that recently did have Baan on its short list was unable to get a response from the company's sales force, enabling a different vendor to win the deal merely by process of elimination.

Can Baan Survive?

Can Baan survive in its current state? Despite its many problems, the company still has around $150 million in cash, leading some insiders to think management will attempt to keep the boat afloat. And at least one analyst, Aberdeen Group's Hugh Bishop, sees survival as a distinct possibility. "I don't think by any means that Mary's departure will be the final nail in the coffin for Baan," he says. "The company has excellent technology and products, so I think it will survive this. It will, however, face significant marketing and positioning challenges in the near future."

Others with whom I spoke were less optimistic, noting that while Baan may have strong products, that won't be enough to keep the company intact. "It's an interesting situation," explains Bruce Bond. "As a company, Baan is not viable in its current form, but it has a very viable product set. We think that by the end of 2001, if Baan hasn't been acquired, it will have broken itself into smaller pieces around its business units in order to boost shareholder value. Either way, we don't believe it will remain in its current state."

"The departure of a CEO from any company is always important, but Mary's goes beyond that. Stepping down sends a message that she was faced with insurmountable odds."

Along those lines, there's also talk that the company may adopt some type of "Titanic" strategy-the big ship goes down but a few lifeboats push off and survive. In this scenario, the CRM division-formerly Aurum Software-has by far the best chance of survival. (Certain equity analysts, in fact, have claimed that Aurum's market cap should be worth several times more than all of Baan put together.) Chris Selland feels that such a spin-off strategy could work, especially for Aurum. "Aurum has lost a lot of market share," he comments, "but it's still a very viable company and is definitely the gem of the piece parts. Spinning it back off as an independent business would make a lot of sense."

Even more prominent on the rumor mill, however, is the buzz surrounding a possible acquisition, with Siebel and IBM being mentioned frequently as potential suitors. "Baan is an acquisition target because its stock is so low right now," points out Bruce Bond, "and Siebel will certainly look at doing a deal. I'm not saying that they will definitely buy, but they will be doing their due diligence. I also think PeopleSoft will be taking a look."

Chris Selland, however, feels that while Siebel may have at one point been interested in Baan, those days are over. "No one could be happier about Baan's state of affairs than Siebel," he asserts, "but that doesn't mean they want to buy the company. If Siebel felt threatened by SAP, a Baan acquisition might be likely, but SAP isn't much of a threat. And as for Siebel buying the company as a means of gaining a back-office piece, I personally don't think Baan's back-office technology is worth buying. It's not put together well. The real threat for Siebel is coming from the e-commerce side, and a Baan acquisition wouldn't address that issue."

A Little Respect

Often, when a company begins submerging into the waters of defeat, the CEO's reputation goes down with the ship. That's definitely not the case with Mary Coleman, however. Her reputation as a golden child of the industry would be hard to tarnish, and if anything, she has come out shining. Along with just about everyone else in the industry, I've admired her business sense for years and am confident she'll go on to greater success in her new position as managing director of Internet Capital Group. As Chris Selland notes, "Mary is well respected and with good reason. She earned that respect. Had she turned Baan into something viable, she would have gotten all the credit in the world. But even so, I think she's in a `that which does not kill me makes me stronger' situation. I'm sure the opportunities for her are plentiful."

From Mary's perspective, the world is still coming up roses. For Baan, on the other hand, the future doesn't look so pretty. The company is in a do-or-die situation right now and most analysts are predicting death. While I can't say for certain what the future holds, if Baan somehow manages to succeed in these troubled waters, it would definitely make for one heck of a comeback story. All the same, I'm not holding my breath.