In 1996, Baan, with soaring sales and profits, was the new darling of technology investors after a rousing initial public offering and a surprising deal to supply a $20 million manufacturing system to Boeing Co.

SAP, although still growing, was backpedalling, racked by a sudden slowdown in growth, a plunge in its share price, doubts among computer industry analysts and a painful insider trading investigation.

"For a while Baan was really coming on and some people had questions if SAP could stay on top," said Michael Schatzschneider at BHF Bank.

But instead of SAP, it is Baan that is now scrambling to hang on while its German rival's stranglehold on their $17 billion industry seems more solid than ever.

In this year's third quarter, SAP saw pre-tax profit jump 50 per cent and celebrated aNew York Stock Exchange listing that made it the big board's largest software stock.

Baan, meanwhile, had a $31.7-million third-quarter loss, its stock is down 67 per cent this year, and the situation is unlikely to change soon with the firm now loaded down by a string over acquisitions and management turmoil.

The 20-year-old firm will lay off 1,200 of 6,000 employees and take a restructuring charge of $110 million. Growth is wavering as the manufacturing sector, its core market, scales back spending in response to the world economic slowdown.

Less dependent on manufacturing because it has released versions of its R/3 programme tailored for 17 different industries, SAP is still on the rise. Third quarter American and European growth was more than 50 per cent.

New products: It has also started releasing new products that reach beyond the "enterprise resource planning" (ERP) market where its 32 per cent share tops those of Baan, PeopleSoft Inc and Oracle Corp combined.

These applications --sales force automation, information warehousing and forecasting -- could make up 30 per cent of SAP sales in five years, according to co-CEO Hasso Plattner. Sales in 1997 were six billion marks ($3.58 billion), with 1998 heading towards about 8.4 billion marks even without those new products.

So what sapped Baan's momentum? A lot can be explained in three words -- management, acquisitions and execution.

As SAP focused on internal growth, Baan acquired nearly a dozen firms, and stumbled in the consolidation challenges. "It is very hard to do software acquisitions. If the companies are not completely compatible, the employees leave, and they are the assets," Plattner told Reuters.

Baan was also shaken by this year's messy ousting of founder Jan Baan. SAP, in contrast, shifted deliberately from co-founder Dietmar Hopp to co-chiefs Plattner, another co-founder, and veteran CFO Henning Kagermann.

On the product side, Baan is now paying for its focus on aerospace and manufacturing customers, while SAPextended and deepened its product line much earlier.

Background to Baan: Baan's fortunes took off in 1995 when SAP could not meet Boeing's installation schedule and the plane maker turned to a then minor player from the Netherlands.

With Boeing as a showcase, Baan's sales more than tripled to $388 million from 1994 to 1996. Its share offering was 1995's second most spectacular, eclipsed only by the meteoric rise of Netscape Communications Corp.

Many analysts believed SAP was about to lose its ERP leadership, noting it often took 18 months and millions of dollars to install R/3. Market watcher Forester Research said R/3 could become a "museum piece" in five years.

"SAP is an elephant," Jan Baan once quipped. "We can be the leopard.

Fears seemed confirmed when SAP sales growth slowed in the third quarter of 1996, and its share price plunged 25 per cent in one day, triggering an insider trading investigation of many SAP employees, including Hopp.

But robust gains returned as SAP quickly gaveR/3 Internet capabilities, broke it into smaller modules and moulded specific industry versions. Although cleared of any wrongdoing, Hopp decided to step down, and steady growth eased the hand-off.

At the same time, Baan was stoking its momentum with a buying binge, but the strategy began to break down.

Baan boosted sales by buying several firms in 1997, but integration difficulties mounted this year.

Jan Baan also came under increasing pressure after a first-quarter sales drop and concerns that aggressive accounting and unusual ties to his separate investment firm were used to inflate Baan's revenue.

He left the management board in July, and his Vanenburg Ventures reduced its stake in Baan.

The next two quarters confirmed the weaker manufacturing sector was hurting sales. Charges and layoffs to consolidate nearly a dozen acquisitions compounded its problems.

Even the prized Boeing account has soured. Although Boeing has said its commitment is strong, setbacks have marred the ramp up. Last yearBoeing posted its first ever yearly loss, citing parts shortages and production problems -- the kinds of issues ERP software is supposed to solve.