Cybergraphic turns over sales of new Genera system to SII

Rumors out of Asia-Pacific were explicit last winter: Cybergraphic Systems Pty. Ltd. of Melbourne, Australia, was going to buy System Integrators Inc. of Sacramento, Calif.

Equally adamant were the whispers around California's capital city: SII was buying Cybergraphic.

When the announcement came in late April, nobody was buying anyone. The two companies agreed to a long-term alliance under which SII will market Cybergraphic's next-generation systems in the Americas, Europe, the Middle East and South Africa.

Cyber will retain exclusive marketing rights in Asia-Pacific and will continue to run an operation in North America as well as pursue system sales in Europe.

"I'm looking forward to SII giving us more stimulus," said Bernard Grinberg, managing director of Cybergraphic.

"We represent the opportunity to turn this into an exciting product," said Steve Nilan, SII's vice president of new business development and marketing.

The products in question are what Cybergraphic has taken to calling its Genera family: Using Microsoft technologies, including Windows NT and Sqlserver, the classified and editorial front-ends will be true client/server systems.

The first release of the Genera product line will be Cyber$ell, which Cybergraphic showed at NEXPO '95 and officially unveiled at an announcement in Melbourne last November. (Conflict-of-interest alert: Cybergraphic flew the editor of this journal down to Australia to be a speaker at the announcement; aside from some nice food and wine, he was not compensated.)

Current plans are to install Cyber$ell at the Trading Post, a large group of shoppers serving Melbourne and its suburbs, in the last few months of the year.

An editorial system based on the NT/Sqlserver technologies is on the drawing board, with no time frame for release. Cybergraphic has been porting its editorial workstation software to Windows for use with the existing front-end, and these ports -- CyberNews and CyberPage -- also will run on the new system.

But why would Cybergraphic cede such large portions of the worldwide marketplace to SII? Why would SII want Cybergraphic's Genera products?

Taking a look at where both companies have been in the last decade will help to answer these questions.

SII trek: the next Genera
The trials and tribulations of System Integrators should be common knowledge in the industry.

Founded in 1973, SII was for a brief period a publicly held company in the mid-'80s. In 1989, the supplier of editorial and classified front-ends based on minicomputers made by Tandem Computers Inc. of Cupertino, Calif., went through a leveraged buy out.

In 1993 -- after the full effect of the industry's preference for nonproprietary systems had taken hold -- it became apparent that SII would not be able to repay the loans used for the buy out, and the company entered Chapter 11 protection.

Exiting the bankruptcy procedure a year later, the company downsized and went through two major reorganizations. In March, William Aaronson -- a long-time sales executive who had been the most recent chief executive -- left the company (see The Cole Papers, April 1996).

In addition to financial and management troubles, SII has had difficulty molding its Tandem-based system to the industry's current preference for products built on "standard" operating systems.

Back in 1988, SII made a commitment to build client software that would run on a personal computer and serve as an alternative to the proprietary Coyote workstation. Unfortunately, engineers picked OS/2 -- which was being co-developed by Microsoft and IBM -- as the operating system for what became MTX and AMTX.

Subsequently, Microsoft dropped out of OS/2 development, and IBM has not had the success it expected with the product. SII has said that a Windows 95 version of the MTX (editorial client) and AMTX (advertising client) software would be ready by the end of the year.

In its recent top management change, Chief Executive Erika Williams said the company would focus on the 80,000-circulation and greater marketplace. The Genera products provide SII with systems that can be easily sold into papers much smaller than 80,000-circulation.

"NT has downward scalability," said SII's Nilan. "A single Pentium server and client could run in one box."

At present, SII is less sanguine about how large an NT-based system could go -- "the reality of NT is as a workgroup solution," said Nilan -- but the company will approach Genera-based system sales with an open mind.

"This is not about religion," said Nilan, "this is about qualifying customers and what they need."

SII also will provide "localization" of the Genera products for German, Spanish and other languages as well as provide Internet and Intranet customization. SII's background in the European marketplace and its long-term effort in the on-line realm with its MediaBridge division will give the products features Cyber couldn't provide.

Further, the company has said that it will incorporate core Genera technology in the classified system SII is building for German newspaper publisher Westdeutsche Allgemeine Zeitung (WAZ). The order, announced in October 1995, is for more than 650 workstations.

"It's a schema, workbench and business objects," Nilan said of the core technology. "For example, take a business object like costing: We've saved ourselves a fair amount of time and money" by using the Genera costing object, or block of code.

Despite the fact the WAZ system would be a "custom solution," Nilan said SII "would be dumb if we allowed it to be a one-off." He said modules of the WAZ system might "flow back into the System 66 and Tandem product lines."

And Tandem is another reason why Genera makes sense for SII. Tandem has been flirting with using Windows NT as an alternative operating system (it already supports a version of UNIX as well as its own home-grown Guardian OS) for a couple of years, as the chips used in Tandem hardware are capable of running NT.

Should Tandem develop server hardware specifically to run NT (an announcement to that effect may have been made by the time you read this), these machines would likely be sold by SII, which has marketed Tandem hardware since 1981.

Nonetheless, SII plans to sell AlphaServers made by Digital Equipment Corp. of Merrimack, N.H., as well as servers from NEC (which are resold, coincidentally, by Tandem).

Selling Cyber
Founded about the same time as SII, Cybergraphic has dominated the Australian newspaper systems marketplace since its inception.

Today, the company's products handle full-page negative film output at dozens of papers in the Asia-Pacific area, including Rupert Murdoch's Herald and Weekly Times in Melbourne (with more than 400 editorial and classified workstations producing more than 1000 pages a week) and his Daily Mirror and Daily Telegraph in Sydney.

The company built its products using UNIX as a workstation operating system and DEC's VAX/VMS as a server environment.

With more than 150 installations worldwide, the company has had limited success in North America. The National, the sports daily that started and died early in the decade, used Cybergraphic products; Southam Newspaper Group of Canada has installed Cybergraphic's classified system at its properties; the Spokesman-Review in Spokane, Wash., has a 70-terminal classified and 120-terminal editorial system from the company.

In addition, the company had a poor reputation for support in North America, following a practice of creating customized versions of its software for each of its sites.

Over the last four years, Cybergraphic -- with U.S. offices in Burlington, Mass. -- has reorganized its North American operation and standardized all its sites on the same release of software.

And the company has been busily creating Cyber$ell, the first incarnation of the Genera product line.

"We think we have a fairly good climate for research and development down here," Cybergraphic Managing Director Grinberg said in a telephone conversation from Melbourne.

"There's a reasonably good government environment that encourages R&D," Grinberg said. Cybergraphic has said that because of the cost of living, tax incentives and salary levels, the company's overhead costs are much lower than those in the United States or Europe.

The key to the Genera product line has been Cybergraphic's long-time relationship with Digital Equipment Corp. As one of the biggest software development companies in the country, Cybergraphic gets a lot of attention from DEC Australia, which helped Cyber learn about Windows NT and Sqlserver, and how to create clients for that world.

DEC's interest in NT stems from the fact that it is one of the two operating systems that will run on its AlphaServer series of products (VMS is the other).

Cyber$ell initially was built with PowerBuilder, a rapid-development toolkit. Some functions, Grinberg said, performed slowly, so those have been rewritten in lower-level languages.

The product, which was to have been installed at the Trading Post by this summer, has been held back while Cyber incorporates DEC's "clustering" technology, which will provide a degree of "fail-over" (also known as "fault-tolerance" or "high-availability").

Despite Cyber$ell's good qualities, there's little question that the Genera products would have been difficult to sell in the Americas. Enough current or former Cybergraphic American customers have a bad attitude about the company to limit referrals.

And though the company has 10 employees in its Burlington office, it would be difficult to support a large roll-out of the products with those limited resources (there are 100 employees today in Australia; three years ago, there were 22).

What's it all mean?
As Grinberg said in the press release announcing the alliance, SII has had "significant experience and a successful track record" in the United States and Europe.

With the Genera products in their portfolios, SII sales people will have the opportunity to call on many potential customers who otherwise would not have been interested.

Some publishers inclined toward an SII-Tandem solution might have been scared off by SII's reliance on selling only to larger newspapers; the Genera products, while not what the publishers themselves need, might soothe jitters about the company in general.

In working with larger publishing companies, such as Gannett and Knight-Ridder, SII now has a story to tell for the entire range of papers such chains own.

And though Tandem has worldwide support, SII's reliance on those minicomputers has probably locked it out of certain markets, especially in Central and South America and South Africa.

By using NT, a variety of server hardware technologies can be offered -- ranging from Pentium Pro products sold by Compaq and other clone makers, to the high-end AlphaServer. If a particular market prefers one type of server hardware over another, it's easy to accommodate that preference.

The only downside to this relationship -- which developed over a six-month negotiation -- is history.

Apple Computer and IBM entered into an alliance in 1991 to build chips, develop a new operating system and create a new way of handling multimedia. Only the chip development (which produced the PowerPC) came to anything.

Atex, which was involved in alliances with IBM and CText Inc. of Ann Arbor, Mich., in the early part of the decade, never really accomplished anything by virtue of those relationships.

And SII had a three-year alliance with Digital Technology International of Orem, Utah, that never achieved the intended goal, which was to deliver DT's Macintosh-based systems into large newspapers.

The result of the SII-Cyber alliance will depend upon each company's willingness to subsume its ego to the other, as well as working as hard on the alliance as they do on making, marketing and selling their own products.

-- dmc

Cybergraphic Inc.,
(617) 221-0077,
e-mail: 0004484910@mcimail.com;
System Integrators Inc.,
(916) 929-9481,
e-mail: sii@sii.com.

From THE COLE PAPERS, May 1996, Copyright © 1996, All Rights Reserved.