At first glance, Jan Baan does not look like a multi-millionaire who, together with his brother Paul, controls one of the world’s largest software firm. Short, smiling and simply dressed, he tends to establish direct personal contact with his interlocutor. But make no mistake. This Dutch businessman runs a software company with an annual sales volume of a billion dollars, whose products are relied on by mammoth companies to manage all their business activity.
"The industry is facing an enormous upheaval. It is starting to mature, and its products are becoming ‘goods’. What is about to happen in the information industry is comparable to what happened in the motor vehicle industry. Before World War II, the world had 1,500 automobile manufacturers. Since then, the industry has been totally transformed. Today, the United States has just three major manufacturers, but they supply employment for thousands of parts makers who turn out automobile components for them by the OEM method". The information industry too, according to Baan, is showing the first signs of moving in that direction. "If we examine the industry surrounding the PC, we shall see that Microsoft and Intel, which control the market, are involved in less than 10% of the sales taking place in their environment. Even though Microsoft has a tremendous market presence, it is not, itself, a big company". He views the Baan company in precisely that light, as a hub around which a wide diversity of transactions takes place. It is to them that he wishes to attract Israeli technologies.
"Globes": Until now, your overall investments in Israel have amounted to more than $30 million. Some of this went into the purchase of B.A. Intelligence
Networks, into real estate, and into the set-up of Baan’s international support centre. What comes next?
Baan: "I see three interesting technological centres in the world. Silicone Valley in California, the city of Boston and the ‘Shalom Valley’. There are a great many excellent technologies here, and since the country is small, and so close, it is very convenient to invest here. The State of Israel’s most valuable asset is the technology and the information it possesses, and the price of technology in Israel is still very low and attractive".
In practise, the Baan company has resolved on a strategic investment in Israeli technologies that support the ERP environment it sells. Baan will disclose nothing further, except that one of his latest investments was in the Israeli start-up Top Tier, which has developed an ERP-environment information retrieval technology. By means of simple queries on the part of the manager, the program enables information files to be researched via the Internet, giving intelligent answers. Baan’s investment amounts to a few hundred million dollars.
Its contribution to Baan is obvious. Since the Dutch company markets systems for the management of all of an organisation’s information resources, in accordance with a precisely defined business process specifically adapted to manufacturing or trading sectors and to the business structure of each individual company, the ability to collate all information contained in past systems is vital for it.
Generally speaking, this transaction reflects the company’s overall investment strategy in Israel. It acquired B.A. Intelligence Networks, which, last week, was renamed "Baan Engineering", and which will be responsible for development and handling of all Baan’s engineering information products. The company was acquired by virtue of its engineering information management program. Today, the product is sold both separately and as a module within Baan’s ERP system, under the name Baan PDM (Product Data Management).
Why do you invest in ‘incubators’ rather than acquiring them to be merged into Baan?
"It is cheaper to buy parts of companies than whole companies. Apart from which, we operate in an environment that we call the ‘Baan Web’. This refers to all the applications and modules developed by third party companies, and intended to complement and operate vis-a-vis our products. The investment in high-tech companies in Israel is intended to boost the number of participants in the Baan Web.
"When they work in our vis-a-vis, in addition to investing in the company, we can help them penetrate a gigantic market. They will receive the support of a company with a billion dollar annual volume, in an environment in which only 25% of business is transacted by us, and all the rest by Baan’s partners. In Year 2000, our annual sales volume will reach $2 billion, and, together with our partners, we will create an aggregate market of $10 billion".
How do you get along with Israeli entrepreneurs?
"People here are far from easy. They don’t listen a lot, everybody is prime minister, but they are enterprising people and risk-takers. This is an excellent climate for incubators (Baan’s preferred term for start-ups, R.L.). Also, technological know-how in Israel, composed as it is of military know-how and know-how brought by Russian immigrants, makes Israel unique.
"The problem is poor management. Israeli companies make their IPOs too soon, generate overblown expectations on Wall Street, and after their shares obtain good values, they promptly bottom out. Those companies in which we invest will also have our help in future in floating public offerings".
International businessmen, the Baan brothers are also orthodox Calvinists, and their love of Israel also has religious underpinnings. Last week, for example, Jan visited Israel for a private vacation in Galilee and the Golan Heights. This did not prevent him from meeting with Shimon Peres and trying to get a new initiative off the ground, in co-operation with the Peace Centre established by Peres. His idea was "to set up technological training centres in the Palestinian Authority Territories, and have Palestinian employees work for Israeli software firms. Why bring programmers here from India, when programmers from the Palestinian Authority and Jordan can be hired at the same price?".
Partly due to the founders’ religious faith, and partly out of well-calculated business considerations, Baan has a unique business structure. The software firm is owned by a company named Baan Investment, which presently has to hand $350 million in cash, for investment purposes. It is this company that executes investments in Israel. Above Baan Investment, however, is another entity, namely Oikonomos, by which it is controlled. Oikonomos is a charitable foundation with assets totalling $4 billion, and it is controlled by the Baan brothers. The foundation makes humanitarian investments world-wide, mainly in education and health, and is financing various projects in Bolivia, Indonesia and Nigeria. "We wish to act on behalf of the poorest of the poor", says Baan.
For the present, in any case, between vacationing in Israel and pursuing charitable endeavours in the Third Word, Baan continues doing great business. Baan, a world leader in providing complete business solutions, operates mainly in motor vehicles and electronics, process industry and heavy industry. Founded in 1978, the company presently operates through two principal centres: in the town of Putten, the Netherlands and Menlo Park, San Francisco, California.
The company supplies server-customer systems based on UNIX or Windows NT, and fully adapted for Y2000. It currently payrolls 3,000 employees and boasts an installations pool of 4,000 different customers including Boeing, Mercedes-Benz, Philips and Nortel.
Published by Israel's Business Arena April 7, 1998