Without a 100,000 square foot office space and a polished marble foyer to pay for each month, Toronto-based Scalar Decisions has been able to maintain what it calls a cost-effective bottom line since its start in 1994.
Company president Paul Kerr said it was important to take the cost out of the system and eliminate a lot of the head count early on “because we think the industry is top heavy.”
With a staff size of 20, Scalar Decisions is focused on value-based reselling as opposed to volume sales, said Kerr.
“We like to solve difficult problems because that’s on the value side of the reseller model. We don’t compete with the NexInnovations or the Xwaves.”
The company’s three practice areas are access and security, enterprise systems optimization (including server consolidation and grid computing) and data management.
“We have under 10 vendors, and we typically pick them based on their product set and the value that we see in combination with our three practice areas,” said Kerr. “We don’t try to be a one-stop shop for every one, we try to pick niche products.”
In the area of grid computing, for example, Scalar Decisions has had a long relationship with Sun Microsystems, dating back to the first company Paul Kerr, Roger Singh (chief technology officer) and Edward Wong (VP of sales), formed in 1991 called Enterprise Technology Group (ETG).
“We did a lot of direct business with Sun and we recognized that there was a broader opportunity in the marketplace for things like virtualization and grid,” said Kerr.
So in 1994, the three managing partners went after that opportunity and started Scalar Decisions.
“Things like the growth of AMD and open source with Red Hat presented limitations by our ETG business because we were under an exclusive contract with Sun,” he said.
ETG represented Sun as an ISO (independent sales organization) and was under an exclusive arrangement to be its partner in the Greater Toronto Area. “We actually had Sun business cards and Sun badges, so from a customer perspective, we were Sun employees,” he said. But, “that allowed us to get this large industry experience.”
Horizontal solutions
Scalar Decisions doesn’t specialize in verticals, said Kerr. “We cross horizontal solutions, like grid computing, virtualization and server consolidation.”
He added that the company generates great margins not only into product sales but by also providing consulting and integration services into every transaction.
Kerr characterized the company’s customer base as high revenue ($100 million and up) organizations that invest heavily in technology.
“So long as technology is core to their business, then that’s a customer focus for us,” he said.
Commoditization
Kerr feels the biggest challenge in the market today is customer budgets.
“A key requirement is that a customer reduce their overall cost — that is number one, two and three in their priority list on what a solution can deliver,” he said.
Kerr added that the firm saw that as an opportunity. “The reason why we created Scalar was because the IT industry changed significantly and its really about commoditization and lower cost. Our business was built on that model.”
The company earned $15 million for fiscal year just ended. Kerr said the goal is to double that figure next year.