January 27, 1997

SII lets go 3 executives, ups Cybergraphic's role

COO, VPs of marketing, R&D leave posts

System Integrators has announced a refocusing of its business strategy to make it more of a system integrator and less of a product developer. As part of the strategy, it has cut 14 R&D jobs and reduced the number of top executives running the company. Among the executives giving up their posts are Jack Pritchard, chief operating officer; Rick Sanders, VP of R&D; and Steve Nilan, VP of marketing and business development. Sanders and Nilan will continue with the company in a consulting capacity. Pritchard has already left.

A key ingredient of the plan is to increase the company's reliance on software developed by Cybergraphic, in a partnership begun last April, as well as other third parties. This move enables SII to reduce its R&D significantly. Over the long run, it now appears, SII will gradually move away from its own product line and facilitate the migration of its customers to Cybergraphic products. Cybergraphic has been actively developing software running on NT hardware.

SII emphasized that this change in its business model is really only a continuation of the implementation of the plan put in motion last April when SII formed a worldwide partnership with Cybergraphic and announced that the company's future publishing systems would be based on NT and Cybergraphic's core publishing technology. "Expanding our relationship with Cybergraphic makes it possible for SII to benefit where Cybergraphic has greater strengths, such as pure R&D," SII said.

Customer service, SII says, won't be affected. The strategy will focus on three main areas:

• Technical support and continuing improvements for current products and current customers.
• Cybergraphic co-development and integration projects.
• Contractual fulfillment, including Year 2000 compliance and the WAZ project.

Executive decisions. The company was top heavy, Nilan said, in reporting the decision to cut three executives, including himself, from the management team. Nilan has been with SII for 13 years, starting in 1982. Sanders has been a key member of the WAZ R&D effort. Both will stay on as consultants, on an indefinite basis, starting at the end of January.

Executives still active include Washington, CEO; Jim Williams, chief financial officer; Ann Markle, VP of customer services; Al Marshall, the new director of sales and marketing, coming over from customer service; David Page, heading European marketing; Mike Lee, head of European operations; Bill Marian, director of R&D; and Glenn Rynamind, director of U.S. sales.

In addition, Mike Reisenweber, the company's former CEO, who had been serving in an ongoing consulting role to Washington, will continue to consult as needed.

Layoffs. In addition to the 14 cut from R&D (from a total of 50 in R&D) there were reductions in administrative positions serving both clerical and senior management operations. The total number of these reductions was ten.

Prior to the cuts, there were 148 employees in the U.S. Under the new plan, there are 124. The company's international staffing is unaffected by these changes.

US Organization	Before	After	# Reduction
Executive	5%	2%	5
Administration	12%	12%	3
R & D (incl. WAZ)	25%	19%	14
Sales and marketing	13%	15%	1
Customer services	45%	52%	1
Total	100%	100%	24

SII said it foresees no further reductions in 1997.

Product cuts. In the initial phase of the strategy, SII has halted development of new-generation software for pagination, where instead it will use software developed with Cybergraphic. For output management, where SII has offered its Scoop product, it will license a product from an unidentified third party.

SII said the layoffs and the directional changes will not affect its SIIGlobalNet customer-service operation or its R&D support of its current product line, including the development for WAZ in Germany (see further discussion below). It also said it will complete the developments of its Coyote/3 terminal for NT, its System 77 and some other current products.

Marketing cooperation. The two companies also announced an expanded marketing arrangement under which SII becomes the exclusive Cybergraphic sales representative in the UK and gains increased roles in some other areas. SII already had nonexclusive marketing rights outside Australia, New Zealand and Asia.

What it means

SII, one of the major players in the newspaper market in the 1980s, has been through many ups and downs since that time. Following Nexpo in 1996, it began restructuring its mode of operation, driven by its new CEO, Frank Washington.

Since that time Washington has been evaluating SII's role in a world of systems radically different from the world that existed when SII was, with Atex, the driver of the newspaper market. (To understand the kinds of changes now under way, we refer readers to the article on the State of the Prepress Industry by Michael Gold of CNI, also in this issue.)

Washington's findings &emdash; and what he obviously believes is the future role for SII &emdash; have resulted in the recent announcements of changes within the company.

The key changes are threefold:

• A closer working relationship with Cybergraphic, the Australian newspaper system developer.
• A downsizing of some SII operations.
• A fundamentally changed role for the company.

The WAZ order. The Cybergraphic relationship dates back to last spring, when SII announced that it would sell some elements of the Cybergraphic product range as parts of future SII systems. This agreement really came about because SII needed to be able to provide NT software modules for a large contract for a custom-built, next-generation ad system for the German newspaper publisher WAZ.

In an announcement dated Jan. 6 this year, the relationship with Cybergraphic was extended substantially as SII set up a new business model in which it would serve as a true system integrator. The expanded SII-Cybergraphic relationship would include the joint development of a new generation of NT publishing software, as well as cooperative sales, marketing and support activities. In this Jan. 6 announcement, it was stated that the goal was to provide a migration path for current SII customers to the new, jointly developed Cybergraphic publishing products.

Our interpretation of that statement is that most future client applications sold by SII will be developed by Cybergraphic. SII states that it will complete some key current developments, but most new client software will be bought from Cybergraphic. In reality, these will be the standard CyberNews, CyberPage and CyberSell applications, running on a standard Cybergraphic NT server or modified to link with SII's server technology running in Tandem Serverware and ServerNet architectures.

We believe that this new software development strategy &emdash; sticking to system integration rather than development of client software &emdash; applies to all areas. For example, SII appears to be planning for the WAZ development to be built largely around standard Cybergraphic modules, rather than custom developed according to the joint specification produced in association with WAZ by SII's Special Services division. It is our understanding that this specification is still being negotiated with WAZ.

Bridges. Beyond WAZ, the new strategy suggests that existing customers migrate to the new SII-Cybergraphic product line via a series of bridge products under the label of SIIberBridge. The intention is to make it easier for current SII System 55 and 66 customers to migrate to the Cybergraphic-designed Genera publishing systems. (Genera is the family name for the products based on NT and SQL Server.)

The first SIIberBridge product will be SIIberPage, which is the SII integration version of CyberPage for editorial pagination. We imagine this will replace the SII INL and MTX Layout products, which currently run under OS/2 and which were due to be ported to NT.

SII also plans to port the Genera line to Tandem Serverware and ServerNet architectures to provide a logical migration path to NT for SII's current Tandem customers.

Distribution and support. There is another whole angle to this strategy &emdash; an area in which Cybergraphic gains marketing and distribution muscle through the veteran SII operation. Besides shifting its focus to system integration, SII is also forging a role as Cybergraphic's worldwide distribution channel, at least where Cyber products meet the needs of SII customers.

SII also will continue its customer service network (SIIGlobalNet) and its R&D department's support for the existing product line.

Integrator. In its role as a global publishing system integrator &emdash; sourcing its components from outside the company &emdash; SII will be competing with other major system integrators, such as EDS and IBM System Solutions Corp., both of which are supplying large-scale systems for newspapers. It is also competing with small companies, such as CNI, whose entire business is integration.

The big picture

In Part II of our State of the Prepress Industry article (coming next week), we are incorporating opinions on the current situation from experts around the industry. One of these is Brian Lacey, who has held positions as CEO with both Atex and Cybergraphic. His comments include the following.

"SII ran a global business and has, in my opinion, neither the skill set nor size to maintain a global presence in competition with companies like EDS, DEC and IBM, or more importantly, the self integrator or the regional expert. This is particularly the case as the legacy vendor's demise was largely associated with the inability to stay current in computer technology."

Lacey continues, stating that Cybergraphic's installed base of customers all are using Cybergraphic's legacy systems with DOS or Unix clients, and the new software to be handled by SII is hardly used anywhere in production. He then states:

"If, as a customer, I wanted to buy a system that was based upon current technology, say NT or Unix server environments, Windows NT, 95 or 3.11 on the desktop, and an RDB such as Oracle or Sybase, would I be happy to buy from a company that had read the book on these technologies but has limited or zero deployment experience? It is like saying, 'I am good at golf, but I have only just read a book on the sport!' A skilled vendor of these technologies is one who has successfully deployed substantially over a period."

Huge challenge. Lacey's comments may be viewed as harsh, and perhaps based on his competitive instinct. But they do point out the huge challenge that faces SII. Should its customers stay with a company that bears little resemblance to the company that earlier sold it a System 55? What is the likelihood of real compatibility between the old and new applications?

Does it mean that now there will be no difference, for example, between linking the Cybergraphic client applications to an existing SII system and linking the already proven CCI editorial systems tightly to SII systems, as is being done in a number of sites around the world?

Why, we might ask, should SII's customers wait for the Genera software to be ported to the Tandem architecture in an NT environment when, as Mike Gold points out in his article, by that time we should have multiple NT servers with up to eight 300-MHz Pentium Pro processors, operating on NT Advanced Server or Novell network operating systems. Such systems would also be substantially cheaper than those from Tandem.

Loyal users. SII faces a huge challenge. It is lucky that it has a very loyal user base, and also that it has supported them well through its SIIGlobalNet operation. However, it has failed to keep its customers supplied with modern computing systems, and many of them have had to look elsewhere to find elements to add to their older System 55s. Now SII has abandoned further development of the client software for Systems 55 and 66, and is stating that the System 77 client applications will come from Cybergraphic.

SII is in open competition with all other vendors to keep its user base. In this task it has taken a somewhat similar approach to Atex Media Solutions, where future systems are not compatible with legacy systems.

Advertising and editorial. SII's customers now face the real challenge. There no longer will be an advertising system that is based upon the superb established SII ad system. The future editorial system also will have no resemblance to the old, but very powerful, SII editorial effort in Systems 55 and 66.

The new advertising and editorial systems have been developed, at this stage, with almost no input from SII. Whether it will satisfy the needs of the large SII users who are still reliant on their existing, but aging, systems is a key question.

Washington has made some very brave decisions to try to move the company forward with new strategies, but these decisions should really have been taken some years ago by the previous management. With the rapidly changing world of newspaper systems today, Washington will have to use all his skill to establish the new role of SII in an increasingly competitive marketplace.

-- Andrew Tribute