Microbee Systems

WHEN OWEN HILL STOOD STILL

Owen Hill, founder and now managing director of Microbee Systems, has always been a hard man to pin down. Matt Whelan and Natalie Filatoff cornered him one afternoon at the company's new offices in North Ryde, whipped out the tape recorder and captured a jumble of his philosophies and ideas.

Owen Hill carries the biggest briefcase you've ever seen — triple-decker-type. We have a theory that it's packed with Microbee power supplies (because they're the heaviest component around), and that Owen actually uses it as a kind of drag net, to slow him down to the normal frenetic pace of the people he deals with. It would be too convenient to say he buzzes around. No, his mind just seems to operate at something like 100 MHz, which one can see is sometimes distressing for the rest of him trying to keep up with.

As an output device, his voice would probably do better with a bigger buffer; the way it is, it generally has to defer finishing the thought it just started, to make way for the other seven ideas the man wants to express right away. Thank goodness (or, more likely, people like Owen Hill) for tape-recorders and cut-and-paste word processing.

Unscrambling all the juicy bits still wasn't easy. Nevertheless, it eventually emerged that Owen Hill's circuitry kept returning to certain logical paths: his belief in a policy of upgradability of machines; his concern with positioning the company's new releases; his pride in the fact that his all-Australian firm is successful in so many ways; and his determination to keep all of the company's approximately 164 feet firmly on the ground, and not succumb to "worshipping the machine".

Not getting carried away with what Hill describes as "silicon sandcastles" is an important part of the Microbee Systems philosophy. It means not losing touch with what the customer wants, and it means hanging back a little from the leading edge technology until you can package it cost-effectively.

Owen Hill himself uses a Computer-in-a-Book, currently the company's most popular product. "The problem," he says, "is that once people get a Porsche, they never drive their VWs."

"So I sat with a cassette-based machine on my desk for a long while and did what many of our customers were doing. Now I'm using the Computer-in-a-Book and it's fantastic — I can do everything I want to. Everyone in this company, even when they've got PCs and Olivettis, still uses Microbees."

The Gamma machine described on the previous pages was conceived two years ago, but, says Hill, "We were holding it off the market because it would have been no good releasing it before it was ready. Why go to the real leading edge, and spend $50 million on releasing a product. We'd rather wait politely a little way behind. The pricing of machines in Australia is probably the biggest thing. Around one million dollars has gone into developing Gamma, and that's all paid for and written off. We don't have to say, 'Because we spent so much money the first ones will cost $10,000 each.'

"I don't think we should go too far up in computer technology," he continued (thanks to cut and paste), "because we're now looking at applying the power. Things will happen throughout the year. The Gamma will run a 68[0]10, but you're going to see things like the 68[0]20 and the 32032. I don't think we should worship those advances. We should apply ourselves to knowing what the customers want and delivering it."

Plain Vanilla — With the Extras

According to Owen Hill, what the customer wants is a "plain vanilla" machine with the lot, which you can bite into right away without getting egg on your face, and which you never have to throw out — a kind of self-saucing, dripless, bottomless vanilla sundae.

"Customers aren't so silly anymore," says Hill. "There is a fundamental need to use computer power. We're selling information. Our product isn't a product, it's technology transfer. What we're doing is making the technology available to people. That doesn't necessarily come in the form of the keyboard, or just the diskettes, it's a combination of a lot of things."

"Otherwise," he asks, "why do people, say from Sweden (around 20 per cent of computers installed in Swedish schools are Microbees), fly over Korea, Hong Kong, Singapore and Japan to Australia to buy computers? The price they pay is a lot more than they'd pay in those countries. It appears people want more, and that's what Microbee somehow represents.

"You have to try to make a thing valuable. Customers will no longer tolerate getting a computer home to find it doesn't have all the bits you need. What we've tended to do with Microbee is put a fair bit there when you turn the machine on — that's Osborne's strategy."

Learning from the Opposition

Hill spends much of his thought-processing time analysing other computer companies and their products. He doesn't seem to be driven by a desire to beat them, as to learn from their strengths and mistakes, and thereby be one of those that wind up on top in the long run. It seems a good strategy for a small company to take.

How does he rate the Gamma against the Amiga and the Atari?

"I think we've got an excellent chance against them. The Amiga has better graphics use because it has dedicated chips, at this point in time, but we've got more flexibility. The Atari has a few brilliant techniques; for example, I love the metallic finish on graphics, giving you a three-dimensional look, and a few things like that which we've got the technology to do. I'm very pleased with our position in relation to both these machines. They will build the market for us. They both put a lot of work into that marketing."

And Hill does enjoy winning against IBM on small but significant fronts. Take the self-saucing factor, for instance.

Hill recently bought an IBM JX: "I think we've done things with the Computer-in-a-Book that are a long way ahead of that, especially in terms of its usability. To back up a disk you hit a couple of buttons and it formats, copies, reads, verifies, reads, verifies and so on — all automatically. My little JX has a beautifully written manual, but to back up a disk you have to go right through MS-DOS, blow by blow. Why not have had someone spend an hour writing a shell, a collection of routines which do all that?"

Then there's BMW. Long an IBM customer, BMW Australia is using Microbees to link the parts divisions of its car and motorcycle dealer networks to the head office computer for interactive order entry.

Owen Hill is justifiably proud. He says, "It would have cost them $3000 to $4000 for the IBM solution, and even though BMW uses IBM gear worldwide, they looked at the IBM PC and said, 'If we're going to need 160 of them, we just can't do it.' So at $1000 a throw, they're putting in Microbees.

"Now Yamaha, Jaguar, Alpha and Volvo are putting them in, and BMW Spain is saying, 'Well, how about Microbees in Spain?' And that's a plain vanilla machine. Not only is it going into dealer's offices, the dealers are saying, 'These things seem okay. BMW thinks they're okay. I'll get another one for the wife and kids.' We're probably getting as many dollars as IBM would have got out of this sale because the customer decided to drop its allegiance to that supplier's range."

An Upgradable Queen Bee Deserves Loyalty

It's on a slightly different level, but you probably wouldn't drop your allegiance to Microbee Systems if you'd started out with Applied Technology. Hill and his design team are determined to maintain the Bee as a bottomless sundae — you'll never have to throw it out because the nuts and cherries and extra flavouring of new models will always fit on top.

Hill compares his company's development of machines with Commodore strategy: "If you traced the Commodore, you would have bought a VIC-20 in those days, and you would have thrown it out and bought a 64, and you might have thrown that out to buy a 128, and now you'd be looking sadly at the Amiga. So that's a 100 per cent write-off, each year, over four years. Now, if people feel a computer's got a longer-term value than that...

"Our policy adds value to the machines. The government, for example, doesn't have to depreciate the Microbees it has in schools. We upgrade the machines. If the schools followed Commodore, their first machines would be almost useless, but we just give them the latest model as an upgrade throughout the state and the machines are worth it again. A company that does that maintains the value of the product in the owner's hands, even if he or she doesn't elect to upgrade."

So the joke (the yoke?) isn't on the customer every time Microbee Systems brings out a more advanced computer.

"One of our strongest points," says Hill, "is that we control our distribution. We're not exactly the heroes of the distribution channels, but it's meant we've been able to watch the trends. On my way here today I checked out retail sales for last week; they were on target at $100,000 — and that's with the plain vanilla Microbee. So the predicament is bringing out new computers — you must make sure they're at an increment to previous models, and the customer who bought one of the older ones yesterday feels like he or she is still an intelligent person. That customer is more important to us than the new person we might attract with a new machine.

"All the ordinary software will still run on the Gamma, it's totally compatible with the existing machine, so people can take all their software across, and it will run in a Macintosh-like world.

"In positioning a new product we have to make sure it will be an enhancement, an opportunity for you, our old customer You should be able to say 'Look what I can get now', not feel silly for buying a machine that's outdated. And you should be able to upgrade at a reasonable price."

With around 60,000 Microbees currently in the hands of users, we wondered out loud how the company would manage upgrading them all, and what it would do with the trade-ins.

Rentabee

"Microbee Rentals," said Hill, laughingly. But he wasn't having us on: "Seriously, we're going to set up an entire rental company to rent to schools and other things. We believe, under the restricted trade practices act and other things, that we can actually take the entire number of machines coming back and make commercial decisions with them.

"No-one has done it right across the range, but with the need schools have for plain computing horsepower... It's not offered to them as new; it'll be totally factory refurbished, guaranteed, warranteed, covered. We can take a large number of trade-in machine from our customers, at quite reasonable commercial prices for them and us, giving them newer technology, and immediately giving us the market share we want in schools.

The customers have a good feeling in their tummies that they're with the right crowd. And then going to schools and others with quite a... Have you looked at just trying to buy a Viatel terminal? Sony or something like that?... Yet we can issue anyone... One of the funniest things was ..." (cut and paste is momentarily overwhelmed).

While Hill is setting up a trade in refurbished Bees, other countries want to build their own from scratch. It's not quite a return to the old 'kit' Bee days — the request came from Singapore, for 20,000 Microbes in "knocked-down" form. Hill laughs at the idea and says, "I don't know how long the thing would last if we got into a contract like that. Our approach and philosophy is to make them in Australia. All the Microbees are made here — we're showing that Australia is doing it.

"My goal in three or four years," he continues, "is to become a nett exporter of technology. So we'll be bringing in disk drives, power supplies and those sorts of things, but we'll be exporting so much that the nett value of our exports exceeds that of the original components we brought in."

Untangling another corner of the conversation, we found "If companies in Australia only make computers in small volumes, they never get out of the critical mass, so if we can ramp up successfully to make, say, 5000 computers a month, then we're really getting up to US production rates (proportionally). And if we do that profitably ... well, our big thing is we're survivors — we can take a loss of half that market and adapt.

With an average annual compound growth rate in sales of 122 per cent, and no slackening in the number of plain vanilla Bees going out the door, even on the eve of several new releases, Microbee Systems' goals don't look as though they'll end up melting on the pavement.

To Bee or Not to Bee
There was no Question!

Would-bee investors were obviously of the same opinion when the company went public late last year.

Says Hill, "When we were going to the float, Microbee was so popular that our advisors and the stock brokers came to us and said 'We're going to raise the price of issue', which means we got an extra $600,000. They were sold on the computer and the company.

"What we've also found," he adds, "is there is an overseas interest in Australian technology which looks like it can succeed. We have investors from Germany, New York, London and Hong Kong. If we're seen as more successful than the other companies in Australia, then we will get more investment.

"The shareholders are getting out of it what they want, and it gives us the money to grow into those countries. It won't be long before there's a Microbee UK, because the UK is where I'd like to start. We're always ready to expand, if we're careful about it."

Right now, Hill is being especially cautious. Although he enjoys the looks on bank tellers' faces when he comes in to deposit million-dollar cheques, he says: "It's very easy, once you go public, from having no money in the bank to plenty of money there, to just lash out and end up bearing the brunt of that. So we've been particularly careful in our use of funds, to try to position ourselves first, and then we'll turn on the fire power when we need to."

Hill believes the success of the Gamma machine will depend largely on the software development it inspires in users, and is targeting early machines towards the people he thinks can help:

"Our real problem is to position this product just right. We need the help of the refined hacker. The product won't take off with a company pushing hardware down someone's throat. We have to foster the 'friends of Microbee' cult we had originally among hackers, in a more refined way. The idea is to create user groups: take good management, users and the people we think are top programmers, open the door, almost examine them and get rid of the riff-raff, give them good discounts, major support and, later, marketing resources — almost like a record company. Maybe we'll give them an advance, and market the programs on a royalties basis on their behalf."

"There are some very clever people in Australia. The refinement of the hackers you run into is amazing. Our success so far has been attributable to a little bit of their help, your help, the readers' (YC and Online) help. Honestly, the letters, the comments, the refinements. It's not just a one-way street, it's been an incredible input. That's the phenomenon. It doesn't belong to any one company, as such."    n