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Scala Shows Far More Than A Bit Of A Backbone Part 2: Market Impact

Written By: Predrag Jakovljevic
Published On: August 7 2002

Scala Shows Far More Than A Bit Of A Backbone

Part 2: Market Impact

P.J. Jakovljevic - August 7, 2002

Market Impact

At the beginning of July, Scala Business Solutions (ASE: SCALA; www.scala.net ), an Amsterdam, the Netherlands-based provider of collaborative ERP software for mid-size enterprises and subsidiaries of global corporations, launched a number of initiatives to defend its turf by providing a counter value proposition to users of its larger competitors, especially SAP. Part One of this note covers these initiatives.

Scala, although being another vendor that could partly settle SAP's and Microsoft's hash in their conquest for the mid-market, is often overlooked by the industry pundits, despite a number of trumps in its hand. Although the market turbulence during last few years has also taken its toll in the company's restructuring and cost-containment exercise, still, with estimated revenue of ~$70 million in 2001, Scala remains a prominent mid-market enterprise applications provider.

Another factor that may bode well for its future is its vast international coverage, and a broad geographic revenue mix (over 7,500 of customers in over 140 countries), which not many (if any) vendors of its stature can tout. Scala has close to 700 employees based in offices in over 30 countries and with local distributors increasingly handling the rest. As for the overall picture, the estimate is that more than two thirds of revenue comes from existing customers, with new business accounting for the rest. The above facts have promoted Scala into a serious challenger in the SME market, especially in emerging markets like Central and Eastern Europe, Middle East and China (possibly the local market leader therein), given that the company reported growth and stable financial performance in 2001 while many of its peers have seen corresponding decline. Also, the company continues to offer its products and services through the reseller channel/VARs, which has also expanded lately.

The flagship Scala 5.1 system has traditionally covered the full spread of core ERP modules, including logistics, manufacturing, financials, project management and service management, with the indication of high levels of customer satisfaction. Like Syspro, Epicor Software, Exact Software and Best Software, Scala's functionality is equitably solid in accounting, manufacturing and material management areas. This an advantage compared to competitive products that are either mainly strong in accounting (e.g, Microsoft Great Plains, ACCPAC, Coda, SunSystems, Agresso, etc.) or in manufacturing/distribution (e.g., Lilly Software, Softbrands, Frontstep, QAD, and ROI Systems). However, in contrast to most of its above competitors, Scala has long relied on only one almost completely natively developed product and technology combination stack. It does not have to figure out how to deal with and position a myriad of disparate products with overlapping functionalities on diverse platforms.

This is Part Two of a three-part note covering recent initiatives by Scala. Part One covered the initiatives. Part Three will discuss the Challenges faced by Scala and make User Recommendations.

Tough Strategic Decisions

Still, its current offering is also partly the result of tough strategic decisions. First of all, in 1998 Scala decided to discontinue support for Unix, and to focus solely on Microsoft technology. Although regarded by some as a risky and dubious decision at the time, it has proven beneficial and giving Scala the best of both worlds the expertise to cater to global upper mid-market companies owing to its strong multi-national and financial consolidation functional features, and the low total cost of ownership (TCO) attractive to it target market. The low TCO is the result of focusing increasingly on the proven Microsoft platform. By leveraging the capabilities of the Microsoft platform only, Scala seems to be also in a better position to be responsive to delivering new functional features that its customers may demand.

Additionally, owing to the proverbial dot-com bubble burst, last year the company had to give up on once high-flying prospects of its separate e-commerce application division, called iScala. Nevertheless, the iScala e-business functionality has come in handy, as the iScala platform is an extension of the company's back-office capability, thereby rounding out a next-generation solution set in which there is much tighter integration of collaborative e-commerce applications with ERP functionality. Collaborating with business partners via web-based portal solutions has often cited as the highest priority by manufacturing companies, with customer-focused portal solutions and internal staff productivity intranets next items on the agenda, as the means to improve productivity, reduce costs and increase revenue as the most likely benefits, followed by service level enhancements and increasing the share of a customer's business.

To that end, iScala 2.1 software was devised to enable real collaboration between a company's different operations, regardless of their locations, and whether they are subsidiaries or divisions of the same company, or with the company's customers, partners and suppliers. In other words, Scala has defined the term "Genuine collaboration" as the ability to have automated business processes work across systems both inside and outside a company enabling all the parties to gain measurable benefits from e.g., trading electronically, building a private trading exchange (PTX) or optimizing a supply chain.

Another Scala minted term would be a "Seamless matrix" to depict the infrastructure that businesses of all types and sizes need today for the ability to connect any point within a matrix (the infrastructure) with any other point in a way that is seamless and transparent, and that automates the predictable, simple and frequently-repetitive steps of doing business. iScala 2.1's collaborative abilities come from closely integrating the following three building blocks of collaboration:

  1. Back Office Functionality to provide the above-mentioned key business processes delivered, preferably but not solely by Scala 5.1 that provide an enterprise the ability to run a business.

  2. Connectivity -- the ability to connect to other applications both intra-company and to other companies, and

  3. User Experience the ability to make software amenable to people, thereby automating tasks and providing an experience' of the software through any device they may need (e.g., personal digital assistant (PDA), Citrix Terminal, Microsoft Terminal Server (MTS), mobile devices, etc.)

As mentioned in Part One, iScala 2.1 comes in two flavors to satisfy needs of both local mid-size business and of smaller global corporations (and their subsidiaries, divisions and suppliers). The iScala Business Server is an entry-level product a collaborative ERP package for the medium-size stand-alone business needing core ERP functionality without a need for high scalability and advanced security, and as a first step towards automating business processes across applications and with customers or suppliers systems.

Some of its more nifty features are Global ID (a unique identifier to be assigned in all of client's enterprises worldwide) and available-to-promise inventory (ATPI) order line check. iScala Enterprise Server, on the other hand, is designed as a more complete collaborative ERP package for medium-size multinational companies or for the subsidiaries and divisions of larger enterprises. It has all the functionality of the iScala Business Server but adds scalability, business centralization capabilities and support for working across and supporting multiple sites and subsidiaries. In addition to these, there is iScala Developer (consisting of iScala VBA Developer and iScala Workflow Designer), a development tool to let both internal and external developers take the basic iScala products and deliver specific solutions to meet customers' additional needs.

Scala Connectivity Solutions

The iScala 2.1 currently also offers seven built-in Scala Connectivity Solutions, tackling the following three groups of tasks:

  1. XML-EDI Solutions - designed to provide a way for iScala 2.1 sites to facilitate e-business through electronic data interchange (EDI)-type activity. These solutions are:

    • XML-EDI for Sales

    • XML-EDI for Purchases

    • XML-EDI Value Pack -- to connect two XML-EDI solutions where one is purchasing from the other, and also adds support for automated drop shipment.



  2. Barcode Solutions - designed to integrate Scala software with a third-party barcode or other data-capture system. Currently, one solution is released, while other solutions that add support for manufacturing will be released later.

    • Barcode for Distribution - links to barcode systems for issuing and receiving stock based on sales or purchase orders



  3. Application Integration Solutions - designed to make it simple to connect iScala 2.1 with local third-party applications. They focus on sharing core data with other systems, whereby core data is the data within Scala software that is normally set up once per stock item/customer/partner, and does not include dynamic data that can change regularly such as customer-specific price lists.

    • Core Data In -- enables an iScala ERP system to receive in core data that is created or maintained in another application.

    • Core Data Out -- enables an iScala ERP system to publish core data that is created or maintained within the back office to another application.

    • Financial Ledgers In -- to connect iScala 2.1 Financials with third-party front-office systems and to enable the front-office system to update the transactions within iScala General Ledger, Sales Ledger and Purchase Ledger.

Demonstrated Market Dynamics

Having long focused on the upper-end of the ERP mid-market, Scala has apparently demonstrated an understanding of this market's dynamics and its pragmatic requirements of robust multi-national corporate functionality and intra-enterprise visibility within an inexpensive product, fast and simple implementations, and reliable service and support. The company has struck the value proposition of balancing business processes standardization with flexibility and autonomy of remote subsidiaries. To that end, the company has also achieved good local coverage and expertise of its indirect channel, which is an important criterion for long-term success in the SME market segment.

The above native ERP extensions and the product openness promote it as one of the few of the Tier 2 ERP vendors with the ability to embrace customer and supplier activities tied to a core transactional back-office system. Also positively impacting the sales of its offering are its strong multi-site and multi-national (languages, currencies, local business practices, taxation, etc.) product capabilities.

Global companies should appreciate iScala's features such as simultaneous support for multiple accounting standards, enhanced security and usability features, and remote administration tools to manage distributed or local installation, which can often match or exceed the Tier 1 vendors' capabilities. Many other peer vendors require their customers to operate in a single language at each location because their applications are based on the technology unable hold more than one language in the same system

Contrary to these, Scala's core philosophy of being one truly global product for doing business in over 140 countries has been maintained throughout the iScala products. This is because Scala has support for international legislation, multiple languages and currencies built into its product from scratch, and an extensive world-wide network of partners for local support to booth. The company complements its major product lines with its Signature implementation methodology that stipulates how an implementation project should be organized, planned, and carried through to completion. Consequently, Scala can be installed and maintained with locally available skills and will often meet all the business needs at a significantly lower TCO.

Thus, the company has been striving to espouse two levels of differentiation:

  1. Against the Tier 2 vendors by offering highly functional ERP capabilities closer to Tier 1 in terms of both the typical ERP processes and especially in the collaborative area, as well as functionality specifically designed to enable a large global enterprise with widely distributed operating units work as a single entity, something that can only otherwise be achieved by a single installation of a Tier 1 product.

  2. Against the Tier 1 product which could provide this level of capability by offering equal or even a wider variety of languages and localized business processes, sufficient ERP process capability to work with a Tier 1 product installed in the corporate HQ and/or larger operating units, but with typically a lower TCO, faster implementation time, and most crucially the ability to quickly and inexpensively change processes to suit the changing nature of a developing market or economy. Scala's argument would be that it is simply to expensive and time consuming to keep changing a rigid Tier 1 product to suite a changing market, even if it could be deployed in a location where often the poor telecommunications infrastructure capability would prevent a web-deployed system from being used.

Administrative Features

The company also offers a wealth of administrative features like workflow & event management, document processing and fast adaptation to rapidly changing legislative environments. Although it has not long been committed to the Microsoft technology, the product is quite on par with the latest commercially available technologies, which are well attuned for its target market.

With the support for XML and Microsoft BizTalk Server, Scala offers e-commerce applications tightly integrated to the Scala back-office, as well as the interconnectivity to third-party products. The above-mentioned connectivity solutions architecture (that includes iScala Data Exchange Server and the iScala Manager) should provide a way of directly remotely accessing the functionality within the ERP system, and in such a way that does not compromise its business rules and security. The framework, which delivers the system's functionality as discrete objects of code, supports capabilities such as integrated e-commerce Web storefronts, enterprise portals, access to ERP or CRM data via wireless devices, and integration with best-of-breed applications.

Scala, like many other advanced ERP systems, has a well-defined interface to send and receive business documents, administered via the iScala Data Exchange Server (DES), which can be thought of as a powerful XML-based sorting engine and message gateway. Any business document that is received is inspected to identify what it is (e.g., a sales order or an invoice) and then passed to the correct piece of business logic (called an iScala Manager) to process that document. Similarly, when Scala needs to send a message to another system the appropriate iScala Manager creates the business document in XML format and then passes it to DES for onward delivery.

Scala has already released support for the 50 most common business documents (including orders, delivery documents, invoices etc) and is regularly releasing more. Any business document from any Connectivity Solution can be connected and the same will apply when connecting Scala to many other ERP systems.

Vertical Specialization

Scala's endeavor at some vertical specialization, operating with a wide range of specialist channel partners around the world, many of whom target specific application areas, such as the pharmaceuticals business (over 500 sites) and the hospitality industry (over 300 customers), is also commendable. Also, a number of Scala customers work in discrete engineer-to-order (ETO) and make-to-order (MTO) manufacturing. In many cases these are complex projects and require full project based accounting capabilities. Because one of the main businesses of these global companies is to manufacture and to manufacture in lower cost geographic locations the company has made attempts to ensure that the iScala's capabilities at least match the demands of the medium to small manufacturing subsidiary, whether it be for to stock' or to order manufacturing environment.

iScala 2.1 presents an opportunity for third party specialists to create add-on modules providing functionality geared to a targeted market and meet the specific needs of a group of users. Moreover, this would allow individual divisions within a global company to select the functions best suited to their specific requirements and business, while still being able to integrate with ease to an existing global back-office system. Look for Scala to develop ever-deeper and more vertically-oriented functionality via its partner network and based on the latest Microsoft .NET technology framework.

This concludes Part Two of a three-part note covering recent initiatives by Scala. Part One covered the initiatives. Part Three will discuss the Challenges faced by Scala and make User Recommendations.

 
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