Stratus Computer Inc., ratcheting up long-standing plans to diversify its hardware-driven business, has set up a new software unit and hired a well-known banking systems specialist to run it.
Following the lead of other hardware vendors that have sought to expand their horizons, the Marlboro, Mass.-based maker of fault-tolerant computers has been gradually moving deeper into the areas of software sales and consulting work - primarily through acquisitions - for the past year and a half.
Now, Stratus has taken the next logical step, with the formation of S2 Systems Inc., a new wholly owned subsidiary dedicated solely to catering to existing customers' software needs, and hopefully forging into areas beyond its bread-and-butter banking business. Banks, which use Stratus computers for online transaction processing, account for about 70% of the customer base for the new software business.
To smooth the passage for this unit into new territory, the computer maker tapped Robert E. Lund to lead the way.
Mr. Lund was most recently chief operating officer of the Newtrend Group, a banking systems and software firm that was recently acquired by Computer Associates International Inc.
He is charged with building S2 into a comprehensive and diverse business, complementary to Stratus' more conventional markets and products.
"The marketplace for S2 is expanding out from banking to health care . . . we're using the switching technology toward that expansion," he said.
The two companies that compose Dallas-based S2 - Shared Systems Inc. and Softcom Systems Inc. - were acquired by Stratus in late 1993. Both companies had close ties with Stratus before being taken into the fold.
Shared Systems, formerly known as Shared Financial Systems Inc., makes software designed to run on Stratus' fault-tolerant computers.
Softcom Systems, formerly BellSouth Systems Integration Inc. and previous to that as Scientific Software Inc., produces the networking software to link personal computers to legacy mainframes.
The acquisition of Softcom also speaks to another issue that Stratus is tackling: moving to more open systems. Softcom's flagship product, called Network Express, enables banks to collect information from disparate systems, networks, and data bases to share over a PC-based network, while still running on Stratus-made computers. This gives Stratus entry into a new and broader market, while still leveraging the vendor's traditional mainstay systems.
On the hardware front, the company has also been broadening its product line. In 1993, before it bought the two software companies, Stratus introduced a new line of cheaper fault-tolerant system servers to complement its usual large-scale offerings.
Stratus has not moved into software business cheaply - judging by the high premiums it paid. It shelled out $15 million in cash for Shared Systems, 10 to 20 times the software company's earnings. Stratus also paid $15 million for the former BellSouth unit, whose clients include Bank of Boston Corp., Citicorp, and First Interstate Bancorp.
Although the acquisitions caused a sharp drop in earnings for Stratus last year, Mr. Lund sees this approach as more effective than the alliance strategies espoused by other hardware-dominated companies seeking to diversify. By acquiring rather than partnering, Stratus can build stronger, more controlled ties with its customers.