It is three years now since Omron Corp surprised the industry in Japan with the decision to purchase, in its entirety, and for $45m, the Japanese subsidiary of Data General Corp. In the subsequent re-structuring of its acquisition, Omron decided to keep the name of Data General in the new corporate name, in order to reassure customers that Omron, which had its own line of proprietary computers, did not plan a total change of strategy and product line for the business. Omron Data General is now ahead of schedule in its three-year restructuring plan, breaking even in the year to March 1994 and looking to a profit in the one just started. Anita Byrnes had the opportunity to speak with Tatsuro Ichihara, the president of Omron Data General, who gave her some of the inside story. Omron Corp, headquartered in Kyoto, is a low profile $4,450m a year company: 65% of its revenue stems from control components such as relay switch timer devices, while the remaining 35% is from systems of one sort or another: the variety is quite astounding. Aside from its most consumer-oriented range of health maintenance devices such as blood pressure monitors and thermometers, most of its systems revenue is from factory automation systems, office and retail automation, and devices such as electronic funds transfer systems and the automated ticket wickets that are being installed in many railway stations in Japan (Omron has 50% of the automated ticket wicket business in Tokyo). Omron Data General represented less than 10% of the total revenue of Omron, with sales of $85m in fiscal 1993, growing to $100m last fiscal. The company aims to continue its growth rate of 30% per annum and aims for revenues of $130m as well as a net profit, in the fiscal year just started. Omron’s foray into the workstation business begun over 10 years ago, with the development of a Motorola Inc 68000-based workstation called Supermate for internal use.

Ed de Castro

After a few years of technological advance with consequent effect on workstation prices, the decision to manufacture for in-house use looked less practicable, and Ichihara was sent on a mission to approach the yet-to-be-restructured Data General about the possibility of OEM sales. According to Mr Ichihara, Ed de Castro had no intention of buying outside, and the interview lasted a mere 10 minutes. Ironically, four years ago, Omron was approached by an American bank on behalf of Data General, which wanted to sell its Japanese operation. The decision to acquire surprised many at that time, and in fact there was much speculation about the aims of Omron’s acquisition – whether in fact the motive was to acquire a source of trained systems people, in order to increase its systems and networking capabilities for its own businesses. Even Mr Ichihara says that Omron was not entirely clear in its aim of purchase, but that after the acquisition, the customers and employees of the acquired operation resisted change and it was decided to keep the character of the business as it was. Omron Data General has four major business units: Business Systems, Engineering Systems, Open Business Systems and Customer Service. The Business Systems unit sells document control and other business-related systems and represents 65% of the total revenue, while the Engineering Systems unit’s technical solutions represent 30% of the business. The Open Business division’s mission is to sell primarily OEM products into multivendor environments – however currently these are primarily Data General products, including RAID disks and tape arrays. Its greatest strength is perceived by its president to stem from its position as a minor player in the computer business transparent communications has been demanded right from the start. In fact, he says, it is easier to connect Omron Data General products to IBM Corp mainframes than for IBM to connect its own proprietary mid-range systems and workstations to its mainframes. Nippon Telegraph & Telephone Corp is a major client: the Japanese phone giant is in the midst of a systems development contract calle

d Custom, moving its telephone contract reservation and billing systems from the proprietary DIPS mainframes developed especially for NTT from the 1970s by the major Japanese computer companies, to client server systems. Omron Data General is currently the sole supplier of server systems, although in subsequent rounds of procurement, other vendors will be considered. For Omron Data General the value of the contract is $300m, spread over several years. This year, revenues from the Custom contract will be in the region of $50m and the company is supplying a combination of high- and medium end AViiON servers with RAID disk arrays, for linkage with mainframe hosts, also procured under open contract from three companies including IBM. Mr Ichihara says that Omron Data General’s strategy is to focus on being a systems provider – it has no interest in being an applications provider. In an attempt to add a business software offering, at the end of last year it signed an exclusive distributor agreement for the enterpriseware product onGO from UK company Uniplex Ltd. Despite a corporate culture in Japan that has not encouraged the growth of electronic mail systems – according to Ichihara, there are only three or four companies that really need such systems in Japan – Ichihara’s doubts abut the suitability of this product were overcome by customer interest in Business Process Re engineering. He hopes that Omron can use onGO to spearhead the re-engineering movement in Japan, a move that he recognises may have some risk since imported concepts such as Management and Strategic Information Systems have not necessarily succeeded in Japan. Development of onGO is still under way in co-operation with Omron Data General, with announcement of the first version due next month and the completed version available next spring. Omron Data General will be looking for new channels, including systems integrators, through which to sell the product. Already three or four end users are ready to sign up, he says, and the product certainly has potential for a company such as NTT. In terms of directions for the future, President Ichihara hopes to achieve the same high name-brand recognition for Omron Data General products – based on their high-availability, high redundancy features – as Data General has achieved for its products in the US. It has also just begun using Omron channels for sales – for example the retail systems division of Omron which previously used other manufacturers’ cluster controllers, has now switched to use AViiONs. The company can take advantage of its Luna workstation manufacturing capabilities in Japan – a division that nonetheless contains only 40 of Omron Data General’s 500 employees – to add value to its standard product. It is this ability to add value which, says Ichihara, distinguishes it from companies such as Sun Microsystems Inc and Hewlett-Packard Co, which despite, perhaps because of, superior price-performance, are either unwilling or unable to answer the special requests of their Japanese customers.

Still exists

Regarding possible moves away from Motorola 88100 chip, Mr Ichihara says he relies on the judgement of Tom West, Data General vice-president, for design of products such as AViiONs, but his preference is for a chip, such as Motorola or Intel Corp parts that – unlike Sparc or Alpha – is used in fields other than workstations, in other words has synergy for use within other divisions of Omron. While there are no longer any mutual financial holdings, there is a strong technical relationship between parent and former child – under the Co-operative Technological Agreement both sides have free access to each other’s computer and networking technology. Nippon Data General still exists as a company, just four people in an office inside Omron Data General, who are devoting themselves to the creation of new OEM relationships – such as a recently signed deal with Sun distributor Nippon Steel Corp, for CLARiiON RAID disks. However, president Ichihara believes that Data General has been burned by its experience in the

Japanese market and will rather have Omron as a distributor than attempt to re-enter the market. It is still not clear how quickly Japan can or will adopt to open systems, but Mr Ichihara believes that for the next five to 10 years, installing and running multivendor computer environments will need excellent high-reliability hardware and some expertise in networking and office automation software. Omron Data General stands ready to provide that manufacturing and systems building expertise.