Oral-History:Ottorino Beltrami

About Ottorino Beltrami

Born in Pisa, Ottorino Beltrami was injured during World War II while a submarine commander. After the war, he earned a degree in Engineering from the Scuola Normale in Pisa. He joined the Commercial Division of Olivetti in 1950 and became managing director of Olivetti General Electric in 1964 when GE bought the Computer Division. He stepped down in 1970, when GE sold the division to Honeywell, but returned to Olivetti in 1971 to oversee its transition from mechanical calculators (and similar equipment) to electronics. In the interview, he recounts the contributions of Olivetti to GE's global offerings, and he reflects on the particular challenges facing Olivetti management in Italy, from the high cost of money to the loss of engineers to the smaller companies so prevalent in the country. Though trained as an engineer, he is proudest of his ability to manage people, gained in part from his naval experience.

About the Interview

Ottorino Beltrami: An Interview Conducted by David Morton, IEEE History Center, July 30, 1996

Interview #286 for the IEEE History Center, The Institute of Electrical and Electronics Engineers, Inc.

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It is recommended that this oral history be cited as follows:

Ottorino Beltrami, an oral history conducted in 1996 by David Morton, IEEE History Center, Piscataway, NJ, USA.

Interview

Interview: Ottorino Beltrami

Interviewer: David Morton

Place: Milan, Italy

Date: July 30, 1996

Career Overview

Beltrami:

I was born in Pisa. Pisa has a school called Scuola Normale, which is like the Ecole Polytechnique in France. It was founded by Napoleon. The only reason that I chose Pisa was because it was very close to Leghorn, where I was a Navy officer. After I finished my university degree, I worked at Olivetti in Italy for about 20 years in the commercial division, and that is where I met Adriano Olivetti. He was a very interesting person, because he was the President and Chairman of the company, the Chairman of the National Institute of Architecture, and also a sociologist. I worked for him for ten years, until he died in 1960. During this period, one of my tasks was to visit the United States to study new developments in electronics and computers in the United States. We were fortunate enough to see the first installation of an IBM 705 in the period between 1952 and 1958.

Olivetti Computer Division and GE

Beltrami:

At the same time, Olivetti started working on a scientific computer not for Olivetti, but for the University of Pisa, because Professor Enrico Fermi was a professor at the Institute of Physics at the University of Pisa. He asked Mr. Olivetti to help the Institute design and manufacture its own scientific computer. Its name was CEP, which means Calcolatrice Elettronica a Programma. This group of people was composed of select engineers — not only Italians, but also British, Canadians, and Americans who were interested in coming to Pisa for staffing this venture. I was not an electronic engineer, but I was one of the men who took care of the logistics. When the computer for the University was almost completed, we started an electronic computer design for scientific and commercial applications. The first computer was named the Elea Computer, which I delivered personally in 1959. This was not very far from the scientific computer because the computer started in 1959 at an Italian company, Marzotto. Marzotto is a textile company close to Venice.

Morton:

What were they going to use it for?

Beltrami:

Mostly for planning. They started as a manufacturer of textiles and became a manufacturer of completed clothing. They had the need to have a plan for manufacturing the different qualities, size and colors and so on. We had something you can modestly call a reserve share. This is not easy to translate into English. But anyway, the computer ran the typical applications of that time, like payroll or inventory, and remained in place for many years. We delivered from 1959 until 1964 twelve computers of this size, and then we started working on a small computer in the range of the IBM 1401.

In 1964, when this segment of Olivetti had the name Computer Division, and it was sold to General Electric. With General Electric, our design, a prototype of a small computer, was named Elea 115 (the big computer had been named Elea 9000, the small was Elea 115). Elea was the name of a town in Greece where mathematics was developed. Anyway, the Elea 115, renamed by General Electric the GE100 System, was a successful computer, and during the life of this computer the company sold more than eight thousand, including sales to the United States Air Force! I was the division general manager. The computer division was a division of Olivetti after 1959. When General Electric came, they organized a separate company with the name Olivetti General Electric, and I was managing director until 1970, when General Electric sold the company to Honeywell.

Morton:

When General Electric bought the computer division, were there significant changes in the company? Did it make a difference in the level of innovation?

Beltrami:

Yes and no. Innovation was in the managerial technique. We learned a lot from General Electric for anything regarding budget and control and auditing, because the Olivetti managerial system was good enough, but not as advanced as General Electric in 1964. We learned that the balance sheet could be made each month and the result could be ready not later than the third working day of the succeeding month. For an Italian company this was a big success, because at that time monthly balance sheets were very rare. Most of the companies had only a six month balance sheet; some, very few, had only a three month balance sheet. We had the monthly balance sheet, and at the end of the year we were able to close accurately on the twelfth day of January, because we were one of the first companies in Italy of this kind.

From the point of view of technical improvement we had access to the General Electric laboratory, and vice versa, because the Italian group had a lot of patents resulting from the fruits of our work. The cooperation between the Italian group and General Electric was very close and it was a very happy experience. I can say the integration was realized when in 1968 or ’69 General Electric and the group of engineers developed the new line of computers in an area close to Hollywood, Florida. The location was called Shangri-La. There were three groups of people. It was an integrated group with people of different nationalities, because there were Italian, French, and Americans. The group was, of course — the leader for the small computer was Italian, managed by an Italian. Incidentally, a lady named Marisa Bellisario.

Mechanical Calculators to Electronics

Morton:

Interesting. This is going back a little bit, but you were a manager at Olivetti when they were making I think a transition from mechanical calculators to electronics.

Beltrami:

Yes. In effect, when General Electric sold the company I had managed for so many years to Honeywell, I left General Electric. And after a short period at Finmeccanica, when I was involved in an agreement with General Electric again for the nuclear plant close to Milano and close to Rome, I came back to Olivetti again. In this case, it was just for the transition from a mechanical company, as it was one hundred percent mechanical in 1971. When I left as managing director seven years later, the company had completely abandoned all mechanical products, and the entire company was completely electronic.

Morton:

Were there special problems doing that from a management perspective?

Beltrami:

A lot of problems, mainly because Olivetti had very advanced mechanical technology. When I canceled some mechanical projects, my old friends came to me and said, “Mr. Beltrami, you are creating a disaster because this is the 'University of Mechanics,' and you are ignoring that ours is the best mechanical product.” In effect it was, but I tried to explain to my fellows that these jewels of mechanics cannot be sold because the cost of this product to us was twice the commercial price of a Japanese electronic computer. The constant maintenance was our main problem, because the main product of Olivetti was the Divisumma, a mechanical printing calculator. The cost of maintenance for two years was the same as the cost of a new Japanese computer.

Even from an economic point of view, I was very much criticized by my collaborators because at that time we sold a mechanical calculator for 320,000 lira when the factory cost was only 27,000. It means the commercial price was more than ten times the cost. What I explained, with some success, but not much, was that we could not continue to sell this kind of computer where Olivetti has a lot of profit because the market was changing. In effect, we realized that some product had lasted for many years after I abandoned the leadership of the company. The vice president is not vice president in the way that the American vice president is; the vice president is the vice chairman. We don’t connect chairman and president. We have president and managing director. The managing director is the president. The managing director is the chief operating officer, and the president is the chief executive officer.

Role of Italian Government

Morton:

I see. In the United States the computer industry was helped, I think, very much by the government and the military. Was that the case with Olivetti?

Beltrami:

Certainly not.

Morton:

No.

Beltrami:

Certainly not, for two reasons. First, because the government was so involved in the more, I could say trivial, but I would rather say day-to-day problems and they could not think in terms of the future. In addition, the investment in the military is, even now, very, very modest. Space research was never done at this time. Now recently, they are developing satellites for commercial use, for television, four or five of them.

ET-101 Electronic Typewriter

Morton:

So without that assistance, without that market, was Olivetti able to create entirely new products, or were they studying what other companies were doing and trying produce a very similar product to other companies? What was the strategy?

Beltrami:

The difficulty of the market was just because many of the Olivetti products were not compatible with the products of our competitors, just because the development was original, and it was very difficult to explain to my colleagues involved in the design and engineering that we would take much more profit adding computers that can replace IBM computers, for instance. Only in the later years of my stay at Olivetti did we have the possibility of compatibility, but not full compatibility. The compatibility was reached through some adjustment after the product was finished. Some development was very original, for instance we started the first in the field of the electronic typewriter, the ET-101. We called it a "writing system" because it was not a typewriter, but something very similar to the personal word processors that we have now. The ET-101 was the first of this configuration, and Olivetti had fifty percent of the total profit, not revenue, but total profit from this electronic typewriter for many years after I left Olivetti.

Morton:

When was that made? The dates when the electronic typewriter was made?

Beltrami:

The first electronic typewriter ET-101 was introduced in the market in 1978 and then it was produced for ten years.

Numerical Controls and Small Companies

Morton:

Was Olivetti involved in making industrial computers, what they call in the United States programmable controllers? Was Italian industry shifting to automatically controlled machine tools and things like that?

Beltrami:

At that time, Olivetti had something in the field of numerical control. The numerical control in Olivetti was done under the computer division, before General Electric came along.

Morton:

When was that?

Beltrami:

The numerical control? The numerical control started in 1958.

Morton:

But in cooperation with General Electric?

Beltrami:

No. Six years before General Electric arrived.

Morton:

I see. That’s interesting. Was that out on the market at that time?

Beltrami:

Sure, sure. Olivetti was, to a certain extent, a competitor with General Electric in the field of numerical control, even after the sale by General Electric to Honeywell, because Olivetti remained in this field until a few years ago.

Morton:

Who were the customers for this product?

Beltrami:

Mainly in Italy, of course, and in Europe. The Olivetti numerical control could be applied to any kind of machine tool, like a milling machine.

Morton:

A milling machine, yes. Who was using these in Italy?

Beltrami:

The major mechanical industries.

Morton:

Automobiles?

Beltrami:

Not automobiles, because they use bigger machine tools. But even in the field of automobile products, some used small milling machines. But the core of Italian industry is not FIAT or Pirelli or Falck or Olivetti. The core is thousands and thousands of small and medium companies that mean the success of our economy. Because if you look at the large companies, all these companies are losing money, even though they are getting money from the government for some development now. Or they can get money from the government when they have an excess of people and the government pays what we call cassa integrazione. It means that through this "cassa" we pay eighty-five percent of the salary of these people that are not at work. But to give you an idea, I was chairman for six years of Assolombarda. Assolombarda is the association of the industries of Milan, only Milan. If you look at the composition of the companies that are associated with Assolombarda you see that out of five thousand companies, only nineteen had more than one thousand people in the company, and only fifty eight had more than five hundred people. Again, out of five thousand companies, only about one hundred fifty had more than two hundred fifty people.

The others that have less than two hundred fifty people are companies that have from ten to one hundred people. Only three hundred have from one hundred to two hundred fifty people. And these companies had milling machines for producing even smaller machine tools. The major market for small and medium machine tools manufactured in Lombardy is Germany, even now. And they are producing many kinds of product in the field of this kind of desk, or file, or office equipment. And not only office equipment, but even small electrical motors. There are for instance companies that are in the field of video, phono, ceramics, and chemicals. One market segment that is very popular is leather. Shoes. Fiber. Electrical staples. Rubber. Dresses. Fashion. Food. Drinking. Energy. Plastic material. Transportation. These are the main activities. Many of these companies need different kinds of machine tools, because there are even machine tools for working on wood.

Morton:

That’s interesting. Some of the early products in the United States from General Electric and others were very expensive, large machine tools to do very complicated work, the automatic machine tools. It was thought that the automatic machine tools would be the market. So Olivetti made products that were less expensive, you’re saying.

Beltrami:

Sure.

Morton:

For smaller companies. That’s interesting. Do you remember what kind of numerical control it was? Do you know any of the details of the technology?

Beltrami:

The technology was very advanced at that time, and continues because the numerical control remained separate from Olivetti and General Electric. General Electric had its own. They said that they didn’t care. Olivetti could go ahead alone. The technology was advanced compared to the technology at the time, of course. They started the first microprocessor.

Morton:

So the Olivetti machine tools were always computer controlled, or did they have tape?

Beltrami:

Oh, no, no. The first numerical control of Olivetti had its own computer.

Morton:

An electronic computer?

Beltrami:

Of course, of course.

Navy and World War II

Morton:

Oh. Could we go back a little bit? I’d like to hear something about your earlier career, where you studied Mechanical Engineering at Pisa. Did you have an interest in mechanical things before you entered the University? How did you decide to study Engineering?

Beltrami:

I can say that I was pushed to study Engineering because I was wounded when I was a Navy officer. I understood at that time that I could not continue in the Navy after my accident, and I decided to make an application to Pisa because Pisa was very close to Leghorn, where I was on duty. I passed most of the examinations in the Naval Academy because the Professor of Pisa used to teach in the Naval Academy. This was the reason for which I continued in some field, as it was very close to what I had already studied. At this time there were two kinds of education for industrial engineering: electrical — not electronic because electronics was not yet invented — and mechanical. I chose mechanical because I had some interest in the mechanical part of the ship on which I had been for fifteen, years. That was the only reason. There were a lot of mechanical devices used for any kind of application, not only for the movement or the sailing of the ship, but even for moving the guns or any kind of artillery, or the other devices that existed in the ships at that time, even at that time were very complicated.

Morton:

So I see you were a submarine commander, but that was before you studied Engineering.

Beltrami:

Before.

Morton:

Yes. Before the war, so you were not in the Navy during the war.

Beltrami:

I spent all the war on the submarine. The war in Italy was from 1940, 1941, 1942, and 1943, before the Armistice in September, 1943. I was wounded in February, 1943.

Morton:

I see, I see.

Beltrami:

From February 1943, not immediately, but when I was released from the hospital, I went to the University of Pisa.

Morton:

I see, I see. So when you were fighting in the war, were there any close calls? Did you see a lot of combat, that sort of thing?

Beltrami:

Before I was wounded, I did not seek any way to leave the Navy. The decision happened just after when I was wounded, and I decided that I cannot remain in the Navy, and that meant for me to find a way to have a civil job, and I chose Engineering.

Morton:

Did your military experience help you in your later career? For instance, was that good training for management or good training for engineering?

Beltrami:

Sure, sure. First, the capability to manage people. This was essential in the Navy, just because the Navy is like a small or medium size factory. When you are on a cruiser with one thousand people you have the opportunity to demonstrate that you are able to manage people, to promote the people, to inspire your people even in very heavy situations and difficulties and so on. But in addition, some of the conditions that you have on the ship — like for instance, repair after an enemy attack, or even maintenance and so on — sheds some light on what life was like in the mechanical environment.

Financial Management in Italy

Morton:

In the United States it’s common for people who are very successful as engineers to move into management. Most of your career has been in management. Is that common in Italy? Are the financial people usually in charge of companies, or are the engineers usually in charge?

Beltrami:

I can say, generally speaking, financial people represent the majority, and technical people are very few.

Morton:

What’s your opinion about that? Is that bad?

Beltrami:

I think that the financial approach is very important in a company where the cost of money is very important, because if the company doesn’t have help from the government for reserves or through purchases of some product that permit the company to have some fixed cost paid, then managing the relation with the banks is very, very tough. With the cost of money in Italy, even with the reductions adopted a few days ago, the cost of money is from 11% to 16.5%. It is very high compared to other countries. It is true that when we look at the cost of money we can even consider the rate of inflation. The rate of inflation, as you know, in Italy is in the range of three or four percent. Now closer to four than three. The government says that at the end of the year we’ll be below 2.5, and I hope that is correct. But even at three percent, the net cost of money theoretically is 8.25. And, again in theory, the cost of money without the three percent is, in any case, five or six percent. This is enormous compared with the rates in the States or in Germany. In Japan it’s 0.5%. This can give an idea that the company has real difficulties to make investments when the cost of the money is so high. Or the money may come from the share owner, but in this case you should pay to the share owner the dividend because the share owner doesn’t give the money for nothing. It means that business in Italy have some problems that don’t exist in other states.

Differences between US & Italy

Morton:

You were saying you worked with several Italian companies, and also had close contact with General Electric and American companies. How would you contrast technical companies in these two countries? Are there big differences that you noticed?

Beltrami:

Of course, of course, but the main difference is in the market. My feeling about managers in the United States is that they have a different personality from management here. They start with a vision and build the company. There are, of course, some exceptions. In Italy we start in general looking to the thousands and thousands of small industries. The Confindustria is the association of all the Italian industries. There are more than 125,000 companies associated, of which less than seven hundred have more than one thousand people. It means that there are one hundred twenty thousand that are very small or medium companies. In this case, the companies start not from a professional vision and some in-depth examination, but from the ingenuity of people who are, at the same time, owner, manager, and technician. They start with their own idea. In many cases the idea is successful, but they are not looking at the financial aspect.

In this case it is surprising that many of these companies are successful, even if they start with any consideration of the financial problems, or the problems related to the distribution. They start with an idea maybe in a small town, because a lot of small companies are in small towns. They have an idea, but not a professional vision of what the cost of distribution is, or transportation, to have a location where you can have a warehouse with a small inventory for help with the distribution. Because you cannot ship small electrical equipment from Milano to Sicily if there is a need for a replacement and so on. For lamps, for instance, electrical lamps, you have a local warehouse for distribution that can respond quickly to the needs of the market. And it means cost, it means organization. This kind of approach is typical in the United States. In the case of these thousands and thousands of small and medium Italian industries, they have some geniuses, but genius cannot cover everything. It means the turnover of the companies is relatively high. It means we have many new companies, and we have many companies that disappear. But the sum is positive because the economy grows mostly due to the small medium company.

Morton:

What about in the case of engineers? Do you know of differences, sort of general national differences between Italian engineers and elsewhere?

Beltrami:

No, I can give you an answer that I received from a former colleague of mine that worked under me at Olivetti. He left Olivetti and had a company that dealt only with electronic components in Silicon Valley in California . He was successful and he made a fortune, then he sold his interest to a friend, and came back to Italy. He bought a medium-size company from an owner who was not happy with his company. And he told me that Silicon Valley was not in California, but was in Lombardy, because he had a lot of suppliers that gave him products that were the best that he could expect from this kind of supplies. It was true that he gave the supplier machine tools and he trained the supplier, but he was surprised and very happy to tell me that after ten years in the Silicon Valley, he had found hundreds and hundreds of suppliers in Lombardi, companies that had ten or twelve people, that can meet the expectations of this company. This is not the same all over the country, of course, but I believe that when the possibility exists and with the acknowledgment of what an organization needs, not only in the field of finance and management, but even in the technological field, there is the possibility of success. Most of the lack of success is due to the artisan approach of somebody.

Turnover of Engineers at Olivetti

Morton:

Did that make it difficult at Olivetti? Were engineers that you hired well prepared to work in a big company like that, with big projects?

Beltrami:

It cost the company very much because each year I hired one hundred engineers from the best Italian Universities. That means Milano, Torino, Padova and Rome, and even Pisa. But the number of graduates in Pisa is very small, and they are, in many cases, so interested in science that they continue the academic life. But on average, for at least ten years, of having 100 engineers, the main cost was the training of these engineers. Because before the newly hired engineers can help the company, they required between two and three years of internal training. It costs the company a lot. And after three years the engineers left the jobs for more attractive jobs in medium or small companies, in locations that were more pleasant to them.

Morton:

That’s interesting.

Beltrami:

It meant that an average of only thirty-five to forty engineers out of the 100 remain in the company. These engineers do very good work not only because were trained on the technological and organizational points, but also because they demonstrated solidity in choosing to remain in the company.

Morton:

Do you think the high number of people leaving is a result of the expectations that they have? Why do you think they leave, so many of them leave? Why do you think it is that so many of the people you hired later left? Were they not satisfied with the company? Was that kind of company not what they expected to be doing as engineers?

Beltrami:

Not at my time. When I was at Olivetti it was a period of very great development just because during the change from mechanical to electronics, the first one or two years, was regarded with suspicion. But after the first two years, they understood what it could do, and the contribution of these people was very important. Many of the successes of the company in those years were just due to personal contributions in each field. Of course, they had some problems due to location , because the a quarter of the company was in Ivrea, a very small town in a small area close to the mountains. But I believe that our place was very good for our job, because if you live in Rome, you don’t have any interest in working seriously because there are many attractions outside of the company. If you live in the company all day and then you live with your family or reading your books, this is something that I can say is not the life of a young person in the company.

Proudest Achievement

Morton:

One last question. What achievements are you most proud of in your career?

Beltrami:

Managing the people.

Morton:

Is there any particular example?

Beltrami:

I am very proud that many of my subordinates are in key positions in this country. For instance, the managing director of ENEL, which is the electric authority that is becoming privatized, is one of my favorite collaborators. Another is chairman of some companies that the banks ask to help reorganize. I cannot claim that it is due to me, but I have a lot of friends that spent some part of their early lives in my organization and have now reached very key positions in the country. This is something that I can say is something for which I am very proud.

Morton:

Good. Thank you very much.