Lack of quality players is the reason. I think they're on the verge of improving. Ryan Grant, Richie Gray, Jim Hamilton, Josh Strauss (once he qualifies), Kelly Brown, Greig Laidlaw, Mark Bennett, Stuart Hogg, Sean Maitland and Tim Visser is the guts of a very strong starting XV.
This is another problem for Scottish rugby, these players have not been primarily developed in Scotland and some of them are..... shall I say....very loosely associated with the country. I'm not turning this into an eleigibility ******* match, but Scotland have pretty much come out and said this will be their strategy in getting a better team. I think it's risky to assume the IRB won't ever tighten some of the eligibility rules(lot's of people in the know want the grandparent rule changed to just parents and residency upped to five years instead of three.)
Their 7's side is also struggling, and has been fighting to keep core status it seems in the last couple of years, I can't see the Glasgow leg of the tour being kept for too much longer not when there are more attractive options on the table.
Glasgow had a good season this year but Edinburgh struggled and it still seems as though Scotland can only get one of the two franchises at any kind of strength at any given time. These two franchises are what's essentially keeping them ahead of Canada, U.S.A., Georgia and in touch with the Pacific Islands. If North America and other Tier Two countries get pro leagues it will make the Scottish clubs less attractive and may hurt their player project plans, along with adding to the rising punch of the Tier Two's.
Likewise even at the macro level, the Scots have two seats on the IRB council, with countries like Argentina and Italy heading to two seats and surely some other rising powers likely to gain more sway, Scotland will be less able to make the rules in their favour, lets face it they are part of the Home Nations old boys club that had dominated the IRB for years, until Lappaset became chairman, you can see that in the last IRB election where all the old six unions(OZ and NZ included) voted for their own guy while every other country in the world voted for Lappaset.
I'm not sure where Scotland goes from here, they have a decent national team possibly on the horizon but I'm not sure if that answers some of the existential questions about Scottish rugby. I don't think any sort of collapse is imminent in any way, but with other lower ranked countries getting better the gap between Scotland and what are now the Tier Two's may be almost gone in a couple of RWC's.