Jakovljevic & P. Catz
SCT Corporation provides enterprise software for a certain
number of industries and provides a range of IT services, including outsourcing,
systems implementation, systems integration and maintenance and enhancements.
Founded in 1968 with headquarters in Malvern, PA, USA, SCT Corporation
generated $436 million in revenue in fiscal 2000 (approximately 5% derived
from the international market). Approximately 85% of the company's sales
come from outsourcing, consulting, maintenance, and other support services.
Corporation, delivers solutions, through different divisions, for a number
of markets including education, energy, utilities & communications, and
government. Each division focuses exclusively on a specific industry.
One division, which is the primary subject of this research note, focuses
on the process manufacturing & distribution enterprise solutions. This
division, called Process Manufacturing & Distribution Solutions, dates
to the early 90's with the founding of an independent company, named Adage,
focused on ERP solutions for the process segment.
was founded by a group of individuals with strong application software,
services and process industry credentials. SCT Corporation acquired Adage
in 1995. SCT supplied the capital to expand both the product investment
and operations. In 1998, SCT made a strategic investment, buying an advanced
planning and scheduling solution to add to the process industry product
line. The solution, known as Fygir, was acquired from a Dutch company
by the same name and is a supply chain planning product focused exclusively
on the process segment. As such, Fygir has proven to be a successful strategy
in filling out the process industry solutions set from SCT. In addition,
SCT acquired a specialty demand-planning vendor named APSI in 1999
to further enhance the Fygir solution set.
a corporation, SCT has been a publicly traded company (NASDAQ: SCTC) since
1982. SCT does not split out financial data for the process division,
but it has stipulated in its annual report for 2000, filed with the SEC,
that 15% of its revenue was derived from the process division, which places
it at approximately $70 million, with the estimated 40%/60% split between
product license and service revenues. This division derives 100% of its
revenues from the process segment. Within the process segment, approximately
50% of revenues come from the food market with the remainder split between
chemicals (35%), pharmaceuticals and other process industries.
the Process Manufacturing & Distribution Solutions division of SCT (which
includes the iProcess.sct solution with the Adage, Fygir and Internet
Business Suite product lines among other process-focused
products) is a healthy, rapidly growing business that claims a 100% growth
in license revenue for FY 2000 over FY 1999. New customers for FY2000
included Coca-Cola Fountain, a Division of Coca-Cola North
America; FIS and Alcon Labs (divisions of Nestle);
Wayne Farms (division of Continental Grain); Foodbrands
(a division of IBP), Equilon Enterprises LLC (see
Fygir! SCT Defeats Incumbent AspenTech at Texaco, Shell Venture) and
Valvoline (see SCT
Fygir To Lubricate Valvoline's Supply Chain), plus significant new
business at Miller Breweries, Cargill, and L'Oreal.
Trajectory and Strategy
The Process Manufacturing Solutions division of SCT has demonstrated an
ability to remain focused on the process manufacturing industry space
and to expand its footprint within that space (for more information, see
Corp Previews New B2B Planning, Execution, and eProcurement Suite).
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 the 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.
expect SCT to remain with this strategy for the foreseeable future. With
the exit or weakening position of most other process-focused vendors,
SCT should thrive in this market space. SCT should benefit from the woes
of other vendors with significant process customer bases, for example
Wonderware, SSA and Ross Systems (see Process ERP
Market Loses PRISM and Protean, What
On Earth Is Going On With SSA? and Ross
Systems Continues To Slip, But Pledges to Fight Tooth And Claw ),
being an excellent upgrade choice for these users. By the end of 2000,
the company had approximately 400 installations. The company offers its
product and services primarily directly. With sales concentrated in North
America, geographic expansion, particularly in Europe and? Asia, has become
SCT's major endeavor.
expect SCT to continue its focus on mid-market opportunities (companies
with $50 million - $2 billion in revenues) and large enterprises with
plant and divisional opportunities. The product will also be enhanced
either in-house or through 3rd-party alliances in the area of customer
relationship management (CRM) and product lifecycle management (PLM).
We also expect the company to pursue alliances for business-to-business
(B2B) e-procurement and supply chain collaboration within its industries
Functionality: Rating SCT's product against the needs of process
manufacturers yields the following analysis:
to Medium Enterprises
Chain Planning (SCP)
Chain Execution (SCE)
- sell side
- buy side
Relationship Management (CRM)
company's major product introduction was the recent launch of its iProcess.sct
solution, a business-to-business (B2B) e-commerce suite designed for process
manufacturers and distributors. iProcess.sct binds together SCT's Adage
ERP/Supply Chain Execution (SCE) software, the advanced planning features
of the Fygir Supply Chain Planning (SCP) suite and the Internet Business
Suite, including standard trading exchange integration, such as ecFoods'
Internet Trading Exchange. SCT claims the tight integration of these components
although each individual component can be deployed stand-alone as a point
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.
is subsequently handled by Fygir, which consists of modules for advanced
planning, advanced scheduling, and demand planning. The Fygir Supply Chain
Planning product is especially strong. 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. Fygir provides specific and required process functionality, for
example, tank scheduling, quality control (QC) specs considered as part
of available-to-promise (ATP), etc. SCT is selling Fygir both as a part
of its integrated product suite and standalone, often co-residing with
SAP, J.D. Edwards and other non-pure process manufacturing
vendors. 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.
early 2000, SCT introduced its e-business solution, iOrder.sct,
a part of the Internet Business Suite. This product addresses the sell
side applications with many of the unique features required by the process
enterprise, including collaborative promotions execution for consumer
packaged goods (CPG). It also provides self-service order management,
order status and process industry-specific parameters (e.g., catch weights,
lot tracing) visibility, and 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.
Focus: A competitive advantage for SCT is its strong focus. The executives
are committed to being successful exclusively in the process market with
no hint of longing for different markets. SCT is currently one of the
few financially strong ERP vendors focusing exclusively on the process
market. This focus has resulted in both product and people, which deliver
a high degree of functional fit and value within its defined process target
Satisfaction: SCT has an impressive record in the area of customer
satisfaction. Discussion with SCT customers yields a high degree of satisfaction
with both products and services. The rate of customers gaining value from
the investment in application products is among the highest in the industry.
SCT has been successful with creating satisfied customers in both the
Small to Medium Enterprises or SMEs (Furman Foods, Tennessee
Pride, etc.) and large companies (Cargill, Smith Kline,
Coke, etc.) The company claims that 8 of the top 16 food processors in
North America as clients.
to Execute: The parent company (SCT Corporation) is financially strong
(see Figures 1 & 2) and has shown willingness to spend it on this market.
SCT has a sizable research & development staff plus it has demonstrated
both willingness and wisdom in acquiring other companies to fill out the
product offering. SCT has invested appropriately in both people and technology
to integrate these acquired products. The process division might also
be able to leverage the parent organization's ability to provide outsourced
services and operations.
Technology: Adage displays a very compelling and intuitive graphical
user interface (GUI) in terms of ease of navigation and analysis. It also
runs on a broad set of the most popular platforms and databases. Further,
since SCT products originate in the 1990s, they have been based on object
oriented programming (OOP)/component-based architecture concepts. Although
a component-based architecture is not an explicit requirement for flexibility,
component-based applications generally provide greater flexibility than
their traditional monolithic counterparts. Furthermore, delivering functionality
aligned with business processes rather than in the traditional stovepipe
manner is the next enterprise applications market trend and SCT is thus
the thought leader in that regard.
Bland Marketing Effort: The Process Manufacturing
Solutions division of SCT Corporation is challenged to establish itself
as a name brand in the process segment owing to its late market entry
and a small client base. Its marketing efforts are, however, both limited
by and over shadowed by a traditionally conservative parent company that
manages a plethora of other businesses within diverse industries.
International Presence: Today, SCT's relatively small client
base is predominantly North American, resulting in insignificant brand
awareness and an undeveloped channel outside of the North American market
despite the company's recent more aggressive marketing campaign and wins
in Europe. This is further aggravated by the fact that its product exhibits
limited multi-national capabilities and supports only a few languages
other than English. A result may be a number of missed opportunities as
companies are increasingly seeking global providers for its supply chain
management and collaboration requirements. Since the process manufacturing
market is highly global, SCT must therefore expand its global coverage
to address the needs of its current and intended customers.
of Functionality: Despite its breadth, iProcess.sct does
not cover all the bases. International financials, business intelligence,
warehousing management, e-procurement, product lifecycle management (PLM),
laboratory information management systems (LIMS), and plant maintenance
are some of functionality that competitors, like Ross Systems, Wonderware,
and Infinium may tout as superior.
SCT has not moved into the CRM market and this lack of functionality will
limit its marketability in some situations. However, we expect SCT to
address this weakness in the short to medium term through either internal
development or acquisition. Also, SCT has not adequately addressed the
buy side of its e-business applications by moving aggressively in the
area of e-procurement. While SCT has formed a partnership with ecFood.com,
a leading food ingredient exchange, as part of their buy side e-business
efforts, it has not yet added similar partnerships for the remaining segments
(chemical, life sciences, etc.) of their targeted process markets. The
market should expect SCT's remedial actions in that regard.
Indirect Channel and 3rd-Party Implementation Partners Network: SCT
still relies mainly on its direct sales and consulting force, which we
consider as a cost ineffective (and possibly insufficient) sales and service
and support approach within the SME market segment. The company will have
to demonstrate substantial progress in developing an indirect channel
to supplement its strong direct sales and product implementation force.
Without it, we believe the company's growth and international expansion
will be hampered.
SCT Process Manufacturing Solutions division will continue to grow at
greater than market rates over the next 3 to 5 years. It will increase
its penetration into the process industries with significant success in
the food segment. With a focused strategy to remain within the process
segment and to offer a complete product line, it will have significant
success in mid-market process companies.
will continue to face competition from less focused vendors (SAP, J.D.
Edwards, QAD, Intentia, etc.) who are attempting to sell into the process
market with more generalized products. These non-process vendors will
gain some measure of success when the lead buying criteria are in the
non-operational applications areas, for example financials or HRMS. However,
when the buying criterion is focused on the operational areas, for example
supply chain planning, production control, etc., SCT will win in the majority
of engagements. Therefore, despite a competitive environment, we predict
that SCT process manufacturing division will reach $160 million in revenues
within the next three years (60% probability), assuming also its successful
believe that, within the next 6 -12 months, the company will have to officially
announce an alliance with a vendor whose products would provide it B2B
e-procurement and vertical marketplaces capabilities other than for the
food industry (70% probability). The potential alliance candidates are
the likes of Clarus and Elcom. We also believe that, within
the next 12 months, the company will have to partner with vendors whose
products would significantly enhance its customer relationship management
(CRM) capabilities (70% probability). The potential alliance candidates
for eCRM functionality are GoldMine, Pivotal, or SalesLogix.
Process Manufacturing & Distribution Division's license revenue will contribute
more than 35% of its total revenue within the next three fiscal years
(60% probability). Within the same period of time, we believe more than
30% of its new customers will be companies with more than $500 million
in revenues (70% probability). Within the next two years, not more than
25% of SCT's revenues will come from outside the North American market
a larger parent company (SCT corporate) the Process Manufacturing Solutions
division of SCT could change its form in the next few years. A spin-off
into a free standing company or a divestiture by the parent is possible
(30% probability) as this portion of SCT continues to gain in investor
value. Although these options will change the nature of the Process Manufacturing
Solutions division, negative impacts on its future success or ability
to invest are not seen as significant. In fact, it would offer the Process
Manufacturing Solutions division SCT direct access to market capital and
greater visibility in the marketplace.
SCT should expand its visibility within the global ERP mid-market in the
business in its existing customer base, primarily by offering new extended
ERP components. Also target disconcerted customers of struggling competitors
aggressively expand its global presence, both by opening new offices
and developing new affiliate partnerships in Europe and in the Asia-Pacific
region. Consider acquiring or partnering with affiliates of languishing
competitors, e.g., SSA, Ross Systems and Wonderware/Baan.
more focused and pre-configured vertical solutions for industries, and
leverage more vigorously application outsourcing to make iProcess.sct
attractive to resource-constrained enterprises.
promptly address its above-mentioned product functionality needs, particularly
in the areas of CRM and buy-side e-business/e-procurement.
should launch much more vigorous marketing and market awareness creation
than has been done so far. SCT needs to leverage their successful mid-marketing
and large enterprise client base in their marketing efforts.
continue to bolster its product interconnectivity to other products. It
should also selectively target the higher end of the market, preferably
through alliances with Tier 1 ERP vendors (e.g., SAP and PeopleSoft)
that would benefit from SCT's strong process plant-level functionality
in specific proposal situations.
SCT deserves consideration by all process manufacturing and distribution
companies since it is one of the few vendors who focus exclusively on
that market segment. As such, users can expect a greater depth of functions
in those areas that require specific process functionality, for example
supply chain management (SCM) and production control.
target market, process manufacturing companies in the $50 million - $2
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. For process companies, SCT should be placed on the short
list for most functional areas of the business. Mid-sized companies should
view SCT as a single source vendor for all ERP, SCM and significant portions
of their e-commerce needs. Large companies should consider SCT as a single
source vendor for divisional level systems and as a SCM and plant level
provider to corporate level systems.
requirements differ significantly among different types of process manufacturing
companies, users should focus on those functions that make their kind
of process industry unique. From SCT and any vendor, get in-depth demonstrations
of those functional areas. 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.
should also 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.
general recommendations pertinent to process manufacturing & distribution
software selections can be found in What
Makes Process Process? and Supply
Chain Planning - Issues for Continuous Chemical Companies.