Epicor and Scala complete merger

Enterprise resource planning (ERP) vendors Epicor and Scala have join forces to boost product lines and compete more effectively in the ultra-competitive midmarket space.

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By  Maddy Reddy Published  August 26, 2004

|~|ziad_a.jpg|~|Ziad Aqrawabi, regional managing director at Epicor Middle East & Africa.|~|Epicor has become the world’s largest independent mid-market provider of enterprise resource planning (ERP), customer relationship management (CRM) and supply chain management (SCM) applications following its merger with Scala. The deal, which was first announced last November, is now complete and the merged company’s estimated annual revenue stands at US$250 million, pushing it into the top 15 ERP vendor category. “Now we are one company. The product lines and the operations of the two organisations have merged as well, and we will be known as Epicor-Scala business solutions. Legally, we had to change to Epicor Corporation back in January, but we haven’t changed the name during the transition period to avoid losing the branding we did for Scala. As for the products, we will continue to use the Scala brand and support the product line,” says Ziad Aqrawabi, regional managing director at Epicor Middle East & Africa. The biggest benefactor of the merger will be Scala, which has annual revenue of US$74 million and 6000 customers compared to Scala US, which has annual revenue of US$143 million and 15,000 customers. But Aqrawabi says Scala’s customers will also benefit. “The merged company is stronger both in terms of revenue and product lines. This means there will be more investments in research and development and better products with faster delivery cycles. We are a truly global company with operations across all major markets — this will benefit large multi-nationals who operate in global markets,” he says. As for Epicor, which draws 52% of its revenues from the saturated US market, the merger will help it gain access to emerging markets such as the Middle East, Scandinavia, Russia, Asia, Central and Eastern Europe, and China. “Epicor didn’t have any presence in the region before. Our experience is mostly in mature markets such as US, Australia and the UK,” says Aqrawabi. In terms of verticals, the vendor is excited at the new prospects the merger will provide, as the duo complement each other in distribution, industrial, manufacturing, services and hospitality markets. “We have more products to offer to our clients now. [Prior to the merger], Scala didn’t have any presence in the food and beverage market but now we can service this segment of the market as well. Even our manufacturing vertical products have increased, helping us cater to more verticals than before,” he says. Typically, when competing companies merge, there is an overlap of products and staff, which results in the weaker products getting shelved and employees made redundant. Aqrawabi says Epicor and Scala have avoided such issues. “We had a minimal product overlap, it was more of a geographic clash. Scala Middle East was one of three regions where operations weren’t affected, but instead had approvals to expand. However, some jobs were lost in Western Europe, US, and Asia Pacific,” he explains. The merged company is planning to recruit 12 new staff and move to new premises. Epicor hopes to expand its existing 450 customer references in the Middle East and convince Epicor’s 40 customers to sign up for the expanded product portfolio. However, it is not going to be an easy task. The ERP vendor has yet to make a mark in the mind share of regional customers. “It’s a big challenge. It is [difficult] to convince clients when you have new products. Also, it’s hard for our team members because they are yet to come to grips with Epicor’s product line. The Epicor products are yet to be Arabised for the local market,” says Aqrawabi. Furthermore, adding to the aggressive competition in the US$24 billion midmarket ERP sector are tier-one ERP vendors such as SAP, PeopleSoft and Oracle, which are targeting small-to- medium sized businesses. “The competition has become tough. A lot of ERP vendors are killing the market with cutthroat licensing prices. In spite of all this competition, having an experienced implementation team, strong customer references and products means you can still get new businesses. There is enough room in the market place,” says Aqrawabi.||**||

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