“People ask me: ‘What is going on? Are you sleeping with the enemy?'” says Patrick Pando, vice president for sales and marketing at Scala Business Systems, one of Europe’s largest suppliers of enterprise resource planning software.
It is a good question. As Information Age reported earlier in 2003, the entry of Microsoft into the midrange business applications software market has put almost every supplier on the defensive. But if Scala is trembling with fear, it has a strange way of showing it. In September, it finalised an agreement to embed Microsoft’s newly developed customer relationship management (CRM) package into its flagship iScala software suite.
And in the coming years, the co-operation is likely to get closer.
Scala, which already bases its software on Microsoft’s SQL database, will not only develop and enhance Microsoft CRM, but has signed a letter of intent saying it will use the emerging Microsoft Business Framework (MBF), an integrated framework of packaged components and business services, as the basis for future products. To observers, that is not just sleeping with the enemy, it is co-habitation. And with Microsoft already having acquired financial software supplier Great Plains, and Danish midrange software supplier Navision, there will be speculation that a formal marriage is somewhere on the horizon.
Pando denies emphatically that is the plan and stresses Microsoft has no financial interest in Scala. Even so, in becoming a closer ally and a reseller of Microsoft technology, Scala will be increasingly dependent on its technology and on its goodwill. And there are many examples where, for one reason or another, partnerships with Microsoft have turned sour.
In this case, there is certainly the potential for conflict. By combining the Navision and Great Plains packages with a huge investment in new software development, Microsoft is lining up a formidable suite of software, ranging from low-level plug-and-play components and services, up to complete, out-of-the-box packages. Scala’s challenge is to ensure that its products, its channels and positioning are clearly differentiated from those of Microsoft/Navision.
Pando argues that while Navision concentrates on the classic SME market, Scala is aiming at the higher end, offering products that compliment those of SAP and other ERP suppliers. And, he stresses, Scala provides a comprehensive, localised suite through a small number of partners, rather than through the dealer network that Microsoft favours.
Scala plays down the commercial, customer-facing side of the co-operation. Rather, Pando likens the use of the MBF to the way that application developers today use operating systems and databases. It is a technology decision, he says, also dismissing suggestions that Scala will take other Microsoft products (such as Great Plains), or that it has been forced to take this decision because of competition from companies such as SAP. Investors in Scala are likely to be pleased by the strategy. With its 7,500 customers, revenues of E77 million and strong technology, Scala should be a favoured Microsoft partner. And should Scala’s recent descent into losses – caused by delays shipping its web services enabled iScala suite – prove more permanent, there is a clear exit route for investors and a way forward for customers.