Olivetti Completes Evolution From Manufacturing To Service

Mike Chard remember’s the days when the sprawling main building at ISC Systems Corp.’s campus was alive with the sights, sounds and smells of assembly lines.

As many as 600 of the company’s 1,000 employees were devoted to assembling computers and keyboards for banking customers.

“I can remember our cabling shop back in those days,” says Chard, the company’s director of business planning. “We employed 60 to 80 people just making cables that were either internal to the boxes, or external cables to hook up the keyboards to the processors.”

Much has changed at ISC since then, and the company’s story provides insight into the local economy’s evolution from manufacturing to services.

Gary Norton founded ISC in his kitchen when he came up with an idea in the mid-‘70s for computerizing the operations of bank branches. What Norton built, essentially, was one of the earliest versions of a personal computer, and then wrote the software to run it.

In 1977, the company employed 10 people. Five years later, its work force topped 500 and it sold $64 million worth of Norton’s banking computers and programs annually.

“In the early years, the company basically did everything to create the turnkey solution that we’re selling,” Chard says. That included engineering, manufacturing and maintenance functions, as well as software development, he said.

In those days, the cost of the system was based purely on the hardware.

“No software charge, no operating system charge,” Chard says. “There wasn’t even a customization charge.”

People understood what they were buying when they were paying for a piece of machinery. They assigned no value on all the mysterious, invisible little things that made it work.

But evolution of the computer industry forced everyone to change. Personal computers evolved rapidly. Other companies began to specialize in the manufacture of monitors, electronic boards, keyboards, cable and printers.

“We realized that we couldn’t afford the research and development investment to keep up with the technology,” Chard says.

It made a lot more sense for ISC to start buying the components of its systems from other companies rather than building those components itself. So the company concentrated its creative efforts on the software to make that equipment operate better than their competitors’ could.

“Internally, at least for 10 years now, we have viewed ourselves as a software company,” Chard says. “The industry is beginning to accept that.”

Norton sold ISC in the late 1980s, and it has become Olivetti North America Inc. Today, the very things that the company essentially gave away with the hardware are the things from which it derives most of its annual revenues.

Olivetti buys its hardware from someone else, buys some of its software from somewhere else, writes some of its own software, customizes the whole package to meet the specific needs of each customer, and provides ongoing service and support to see that it all works the way it’s supposed to.

The sprawling manufacturing floor has become a vast bank of desks and telephones where service experts handle calls from customers on 800 lines, and dispatch an army of maintenance engineers.

“In today’s world, you have to lead with where your value is,” says Chard, “so we lead with our software applications. We sell our 15 years of experience and knowledge. We sell our ability to tailor that, and help the customer institution to greater productivity. And we sell our ability to maintain that on an ongoing basis.”

The next step in the evolution is to move Olivetti’s maintenance operation “beyond just being a break and fix operation” to a pro-active service that constantly monitors the performance of systems Olivetti has installed, and warns customers when productivity declines, or system performance falls off.

“The value of whatever anyone builds,” says Chard, “comes from people’s ability to use it.”

The people who build the machines struggle to stay afloat in an industry where the price of the hardware is constantly being driven down.

“The people who can actually build software, and put it all together in a way that makes the customers operation more efficient,” Chard says, “are the people who are making money.”

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