SCT Comes Back With a Vengeance

Event Summary

According to a July press release, SCT Corporation, an IT solutions provider for a number of disparate industries, announced that the quarter which ended June 30, 2000, was a record quarter for license fee revenue within SCT's process industry solutions business. Total license fee revenue for the third quarter represented a 59 percent increase from the previous quarter, and nearly 100 percent increase over the third quarter of 1999. License fees for the quarter were 22 percent higher than the previous record high.

"We are experiencing a tremendous interest in our iProcess.sct solution as a direct result of an increase in e-business initiatives," said Roy Zatcoff, president of SCT's process industry solutions business. "Process manufacturers are not only looking to SCT for its sell-side e-business applications, but also for supply chain solutions that ensure that Internet commitments are executed as promised, and supply chain relationships are strengthened. SCT's supply chain solutions are a fundamental component of the e-business vision for the food, beverage, chemical, pharmaceutical, and consumer packaged goods industries."

SCT, which claims experiencing continued success with enterprise-wide, global accounts in the process industries, now has eight out of the top 16 food processors in North America as clients. Some of the new license fees contributing to the record quarter include agreements with Valvoline (a division of Ashland), Miller Brewing, Foodbrands (a division of IBP), FIS North America (a subsidiary of Nestle), Wayne Farms (a division of Continental Grain), and Coca-Cola North America Fountain. In addition, SCT signed distribution agreements with TRW Integrated Supply Chain Solutions in Spain, Portugal, and Italy, and DSQ Information Technology Limited in India and Sri Lanka to resell iProcess.sct.

Earlier, on July 17, SCT announced its financial results for the third quarter and first nine months of fiscal 2000, which ended June 30, 2000. Third quarter 2000 diluted earnings per share (EPS) were a record $.32, which included $.10 resulting from the sale of the Company's eFile Management middleware and SCT Learning Suite products. Without the sales, diluted earnings per share would have been $.22. For the same quarter last year, diluted earnings per share were $.20.

Revenue for the quarter was $119,941,000, which included a gain of $6,430,000 from the aforementioned sale, compared to $120,245,000 in the same quarter of fiscal 1999. Income before taxes was $19,292,000, which would have been $12,862,000 without the sale of the assets, compared with $11,886,000 for the third quarter of 1999. Net income for the period was $11,298,000, which would have been $7,532,000 without the sale of the assets, versus a net income of $6,442,000 for the same period last year, an increase of 75% (17% without the sale of the assets).

Figure 1.

"We are extremely pleased with the turnaround we achieved in our second and third quarters of fiscal 2000," said Michael J. Emmi, SCT's Chairman and CEO. "We are encouraged by the acceptance of our e-business solutions by our clients especially Tier 1 global process manufacturers. Also, we appreciate our partners' recognition that SCT's solid relationships enable us to successfully deliver their e-business solutions to our clients and their customers."

SCT's global energy, utility and communications unit achieved its second highest quarterly revenue, with license fees increasing 37% over the third quarter of 1999. SCT signed significant licenses with IBM Global Services for The New Power Company and Vectren Resources LLC, a subsidiary of Vectren Corporation. With three more utilities going live, SCT's European clients now support over one million customers with Banner CIS, its flagship vertical industry product.

SCT's global government solutions unit signed significant court licenses in Ohio and Tennessee, and its second international court license agreement. SCT's global education solutions unit signed several new international licenses, and signed major licenses in West Virginia, Oklahoma, Massachusetts, Colorado, and Nevada. SCT and WebCT announced their exclusive arrangement to extend market leadership in e-Learning to the higher education market.

Market Impact

SCT has been thriving mostly due to its sharp focus within underserved industries, process manufacturing being one. While being a traditionally well-run company (See Figure 2), SCT's process industry division has significantly repositioned and extended itself over the last year. When the company first entered the process manufacturing scene a few years ago, it provided only Adage, its flagship ERP suite. Through 1998 acquisition of Fygir Logistic Information Systems B.V., it subsequently became involved in supply-chain applications, and most recently developed and introduced e-business components.

Figure 2.

The company's major product introduction was the recent launch of its iProcess.sct solution, a business-to-business e-commerce suite designed to enable process manufacturers and distributors to leverage the Internet to strengthen existing supply-chain relationships and/or utilize new channels of distribution. iProcess.sct binds together SCT's Adage Supply Chain Execution software, the advanced planning features of the Fygir SCM suite and ecFoods' Internet Trading Exchange. SCT claims the tight integration of these components although each individual component can be deployed stand-alone as a point solution. The company cites a significant penetration within SAP's customer base in process industries, where its product complements traditionally strong SAP's back-office functionality.

The flagship ERP product, Adage, serves as the transactional backbone for the iProcess.sct solution and its functionality is laid down from a business process perspective. It supports the following major business processes: Design to Deploy, Plan to Produce, Order to Cash, Procure to Pay, and Manage the Enterprise. Optimization is subsequently handled by Fygir, which consists of modules for advanced planning, advanced scheduling, and demand planning. It enables users to improve their supply chain management performance and make their manufacturing process more efficient by applying mathematical techniques to optimize the supply chain.

SCT Internet Business Suite's first component is iOrder.sct, a Web-based sell-side application that provides self-service order management, and relevant order status and process industry-specific parameters (e.g., catch weights, lot tracing) visibility. It also provides customer service functionality such as rebate promotion tracking and account management. Collaboration with ecFoods represents SCT's first step in developing trading exchange partnerships for multiple verticals, including consumer-packaged goods (CPG), chemicals and pharmaceutical industries.

However, despite its breadth, iProcess.sct does not cover all the bases. International financials, distribution requirements planning & transportation, warehousing, e-procurement, product life cycle (PLC), and plant maintenance are some of functionality that competitors, like Ross Systems, Wonderware, and Infinium may tout as superior. The market should expect SCT's remedial actions in that regard. The company also plans to shortly launch two new components, Customer Relationship Management (CRM) and Analytics.

User Recommendations

SCT's target market, process manufacturing companies in the $50 million - $1 billion-a-year revenue range, should certainly consider the company's latest product offering, both as an integrated bundle and on a component base, but avoid selecting it without looking at what the other vendors have to offer. We generally recommend including SCT in a long list of an enterprise application selection to medium-complexity process manufacturers and consumer-oriented distributors where order entry and fulfillment functionality are of main importance. Users needing more complex process manufacturing and distribution functionality may benefit from either considering other, more comprehensive products or from contemplating 3rd-party complementary components.

Customers should insist on a contractual timeframe for delivery of a solution, and seek reference sites (preferably in their vertical market space), which have been successful with the product suite. Each e-business component should be put through its paces using a well-documented set of requirements, scripted scenario demonstrations, and rigorous reference checking. Users will want to provide detailed scripted scenarios that mimic real business processes encompassing all segments in the supply chain to SCT during vendor evaluation and then expect a demonstration that addresses each step in the scenarios. Though time consuming, the preparation demanded by a diligent selection will invariably produce better results - and less headaches.