As national champions go, Germany?s Siemens Nixdorf is a strong contender in the European and world IT stakes. Extremely powerful on its home turf over the past two years, the company has turned its eyes elsewhere ? to other parts of Europe, the US and beyond. It has also broadened its third-party operations, appointing three UK distributors (Ideal Hardware, Westcoast and Lantec) and two Vars (Tplc and Computacenter) as well as 70 or so dealers.
The company is an industrial conglomerate, manufacturing refrigerators, washing machines and other domestic appliances. It also makes computers, ranging from IBM plug-compatible mainframes to PCs. The company is also a leader in the supply of electronic point of sales (Epos) terminals.
Up until the late 1980s, the then Siemens Data Systems was scarcely a force to be reckoned with outside of Germany. But in 1990 the company merged with Germany?s other leading hardware supplier, Nixdorf, to become Siemens Nixdorf Information Systems (SNI).
Nixdorf had carved out a niche for itself in the Epos and banking terminal markets. Thanks to Siemens? strength in mainframe and workstation products, by 1993 the company was second only to IBM in terms of European turnover. In 1996, the company was the number three European PC supplier, according to a survey carried out by Datamation magazine. The company now claims that it is 48 per cent larger than its nearest competitor in Europe.
Like many European companies, Siemens and Nixdorf were early adopters of Unix. In the mid 90s, SNI acquired Pyramid, whose machines it had previously been selling. SNI designs and builds its own semiconductors which are incorporated into its PC motherboards, giving a uniformity from the desktop models to tower systems.
Siemens was, up until the early 90s, a largely conservative company heavily reliant on its installed base to maintain profitability. It traditionally sold its systems, PCs, workstations, mid-range systems and mainframes through its direct salesforce, concentrating on the corporate accounts. While almost every company from IBM downward recognised that the advent of the PC in 1981 meant new methods of selling through the channel, Siemens relentlessly ploughed its own furrow of direct marketing and sales.
IBM acknowledged that the profit margins on PCs and related products were not high enough to sustain the efforts of its direct salesforce. But Siemens rejected that analysis. Cushioned by its existing customer base, especially in Germany, the company did not feel the need to support the third-party channel.
The arrival of a new chief executive officer, Gerhard Schulmeyer, in 1994 signalled that it was time for a change. Examining the company?s prospects just months after Schulmeyer?s arrival, UK analyst Bloor Research said in a report: ?SNI is positioned to be a major hardware supplier of the future and has the market base and financial muscle to make that a realistic target. It is something of a sleeping giant, but if the new CEO is successful, SNI stands to be perhaps the only long-term major European hardware company.?
The move into the PC and workstation channel began in 1995, although the retail division has been working with specialised Vars for some years. Now the company?s PC unit is determined to push even further into the channel.
According to David Long, marketing manager of SNI?s PC unit, there has been a culture change across the whole company since 1995. The company plans to divide its sales into three equal portions: one-third to Germany, one-third to the rest of Europe and one-third to the rest of the world.
?We have always been a direct marketing company and now we plan to have a 100 per cent indirect strategy within the PC unit,? says Long. He adds that analysts rate SNI?s business as number three or number four in Europe.
There may have been disadvantages in being late into the channel, but Long believes there are also advantages. SNI has had plenty of time to examine the pattern of channel marketing among the other players and to learn from their mistakes. One of the lessons the company has absorbed is that the potential for conflict within the channel exists, particularly if the resellers have to compete with a direct salesforce.
Having taken 14 years to come to the conclusion that other PC vendors came to in 1981, SNI has either managed to learn from the failure of other vendors or has missed the boat completely. With Compaq and other suppliers turning back to a measure of direct sales, particularly for the corporate accounts, SNI?s move into the channel could be viewed as a mistake. But by adopting a 100 per cent reseller strategy, Long believes that the company can avoid contention within the channel.
SNI?s turnover in the UK stands at #300 million and worldwide SNI contributes #13 billion to the group as a whole. The fact that the company has a background in technology and is cash rich is a bonus, according to Long. ?The fact that we are a part of one of the world?s largest electronics companies gives a rather warm feeling to our resellers,? he says.
James Wickes, managing director of distributor Ideal Hardware, endorses this view and believes that Siemens? size gives it a certain credibility in the market. But Wickes does not underestimate the difficulties resellers face when pushing a Siemens product against those of better known rivals such as IBM and Compaq.
?It is risky territory winning over someone from Compaq. If users come in and want 15 Compaqs and a bunch of bananas, then you have to persuade them that Siemens is equally as good,? Wickes says.
He admits that Siemens has something of an uphill struggle in the UK, partly because it has only courted the channel for the past few years. Siemens is only slowly penetrating the UK market, Wickes says: ?It is a small blip at the moment.?
There is one other telling reason why resellers might consider offering an SNI box as opposed to a Compaq, IBM, or other PC supplier ? the profit margins are generally better, according to Wickes, although he refuses to be drawn on the differentials.
Robin Bloor, chairman and chief executive of Bloor Research, sees no reason to alter his 1995 statement that SNI will be a leading player in the IT market. ?With the return to the centralisation of computing, I think it is going to do rather well,? he says. Bloor does not believe that SNI will ever be a world class rival to IBM, but it will be a big player in Europe.
But in the past, Siemens has had its share of success both in partnership with and competing against IBM.
In 1984, IBM convinced itself that the future lay in the convergence of telecoms and computing and it bought US telecoms company Rolm for $1.3 billion. It proved to be a disaster which in the end lost IBM $1.35 billion. IBM recognised its mistake by 1988 and sold the manufacturing arm of Rolm to Siemens.
In 1992, IBM finally conceded that the fusion of telecoms and computing was never going to happen and sold its remaining half-share stake ? the marketing and services business ? to Siemens.
Paradoxically, IBM?s long-term rival, US telecoms giant AT&T, had similar ambitions to merge the two technologies. In 1992, it bought NCR to gain a foothold in the computer market. That experiment failed and NCR is once again an independent computer company.
The clear winner out of the IBM/Rolm fiasco was Siemens. Neither IBM nor SNI has ever disclosed how much was paid for the marketing and services half of the company, which in itself is an indication that it went for a low price.
The love/loath relationship between IBM and SNI continued well into the mid 90s. IBM once again chose Siemens as the manufacturer for its 64Mbit DRam chips in a half-billion dollar deal.
Siemens, IBM and ? this time as an acknowledgement that no IT company is an island ? Toshiba formed another alliance in 1992 to develop a 256Mbit chip. There was a general recognition in the early 90s that semiconductor manufacturing, Intel apart, was too expensive a development process for one company alone. Toshiba had a partnership with Motorola, Texas Instruments with Motorola and AT&T with NEC. Even Intel had an alliance with Sharp, to develop flash memory chips.
In his book The Fate of IBM, published in 1994, Bob Heller quite sensibly asks how the Toshiba, Siemens and IBM alliance could ever succeed. ?The latter is located at IBM?s East Fishkill site (at the new Advanced Semiconductor Centre) under a Toshiba manager. How the 200 engineers, drawn from all three partners, would talk (let alone work) together was left to hope rather than experience.?
Such alliances, while being sensible when considering the capital outlay on research and development, often turn out to be double-edged swords. Apple and Digital once had an alliance to develop joint software, prompted in Apple?s case by the fact that it needed to get into the corporate accounts which Digital controlled, and in Digital?s case by the fact that it had notoriously failed in producing a PC of its own. The partnership did not survive and both companies, despite having a degree of technological leadership, are now fighting to survive.
Not even the most powerful companies, such as IBM, are immune to the pendulum effect of the swinging sword. ?After seven years of joint venture with Toshiba, the latter had gone for a different small screen technology, and had outperformed and underpriced an IBM portable using the joint development,? Heller wrote. But for SNI the alliance with IBM over Rolm brought dividends. IBM paid the price and SNI picked up the pieces and the profits.
Siemens Nixdorf is not a name that springs immediately to mind when thinking about PCs, but that does not mean that it is not active in the field. In the past, SNI has sold its PCs alongside its larger systems to corporate customers on a project by project basis. Now it has adopted a more aggressive stance and is marketing its PCs through the channel to corporates and small to medium enterprises.
It will undoubtedly have an uphill struggle against the likes of Compaq, IBM, Dell and the other major vendors. But SNI is nothing if not determined. It was not caught off guard as Digital was in ignoring IBM PC compatibility in the early days and attempting to produce a box of its own.
SNI has always followed rather than led the market in technology, but it has always been within the mainstream. More aware than most companies of the demands of ecology, the company was one of the first to introduce green PCs in which most components, up to and including the plastic casing, are recyclable.
SNI?s adoption of an aggressive posture in the market may be a decade behind the other players, but that does not mean it is not a force to be reckoned with. It has survived without the help of government subsidy, as was until last year the case with Bull in France, being taken over by the Japanese as ICL was in the UK, or falling into disarray as Italy?s Olivetti has done.
Bloor Research?s report New Computer Hardware: Options and Comparisons categorises SNI as a sleeping giant. Now, it seems, the giant is about to wake from its slumbers.
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