Vol. 10 No. 8
Oct./Nov1991
"MGMT
MEMO" was written by Richard Seltzer in Corporate Employee
Communication for the Office of the President. It was written
for Digital’s managers and supervisors to help them understand
and communicate business information to their employees. You can
reach Richard at seltzer@seltzerbooks.com
This issue of
MGMT MEMO focuses mainly on the commodity business and
implementation of the New Management System.
CONTENTS
How to Talk about the ACE Initiative
An industry
shakeout, with the formation of alliances and partnerships,
has happened with stunning swiftness. No single vendor can
succeed alone in this environment. Digital has been the major
driving force in development of ACE. This is where Digital
will win or lose in PC and UNIX markets.
We
need to instill in people the fact that we trust them to be
entrepreneurial. We need our business unit managers and
account managers to propose their own budgets based on the
opportunities that they see, rather than limited to the
resources allocated to them by a bureaucracy.
Message
to
Account Managers - Think
Like
Retailers and Pump up the Volume (Bob Hughes)
The Account
Business Unit represents an entirely new way of selling to and
supporting our customers. It is a very important and complex
change and comes at a time when we also have to deal with a
number of other difficult changes.
The
Importance of Alternate
Sales Channels to Digital’s Total Business (Win
Hindle)
Additional sales
from indirect channels enable us to increase our volumes and
reach the economies of scale needed to support investment in
advanced technology.
Digital's Four
Businesses from a Value-Added Perspective (Paul
Kampas)
In response to
external pressure for change, Digital has evolved from a
company that focused on one relatively homogeneous business to
being in four significantly unique but interdependent core
businesses. To succeed in these, we must understand and manage
their differences, with different core competencies, channels
of distribution and business models.
NMS and the Use of Information Technology
-- Building
a Knowledge-System
Environment (Dave Ehrman)
Today a very
important set of data is not captured — namely, the underlying
assumptions that generated the plan data. This is the
knowledge that was applied to arrive at the plans. If we are
to improve our plans, it is the assumptions we have to work
on.
The Role of
Acquisition in Gaining Competitive Advantage in
Commodity
Markets (Murv Lackey)
The New
Management System demands that we build strategic supplier
relationships and drive an "integrated acquisition process"
for the entire company. The $4.8 billion that Digital spends
externally represents a huge piece of the company’s cost
structure, and we have to leverage that buying power as much
as possible.
Driving Change through Education (Dick
Farrahar)
The New
Management System (NMS) represents a major organizational
transformation for the company. NMS education is intended to
help managers achieve the intended outcomes.
Revising
Digital’s Software Business Practices (Pat Spratt)
We intend to
significantly simplify our software license offerings, and to
do a much better job of ensuring that our offerings allow us
to closely link the price we charge with the value of the
product to the user.
Update on Software User Interface Standards
(Richard Frankosky)
Participation in
the standardization process assumes strategic significance
because it affects what products a vendor must build and sell.
Update on Business Activities in Central and
Eastern Europe
(Alberto
Fresco)
Digital now has
well-established activities in Hungary, Czechoslovakia and
Poland, and is still considering the scope of its operations
in the Soviet Union.
New Business
Unit Focuses on AI Applications and Services
Digital and
SONDA Announce Joint Venture in Latin America
Digital Opens
First African Subsidiary in Morocco
The following article, based on material
that has been used in public presentations in recent months,
is intended to help managers better understand this important
new direction for the company so they explain it to their
employees.
The Advanced
Computing Environment (ACE) initiative represents a major
extension to the way Digital does business.
Our markets have
changed more in the past two years than they changed in the
previous ten. An industry shakeout, with the formation of
dozens of alliances and partnerships, has happened with
stunning swiftness. Vendors of all stripes have become aligned
in many ways - sometimes on opposite sides, sometimes as
"partners" - and these groups will define the industry for the
1990s. No single vendor can succeed alone in this environment
- not even IBM.
Digital has been
a major driving force in development of ACE and defined much
of the ACE technology. This is where Digital will win or lose
in PC and UNIX markets.
In simplest
terms, ACE is more than 100 hardware vendors — representing
well over $55 billion in annual computing revenue - who have
agreed to build or support two hardware platforms, two
operating systems, many applications, and make them all work
together. Basically, these vendors have agreed to this
unification of the PC and RISC worlds, and the PC software and
UNIX worlds. ACE does this through two standard hardware
platforms - one Intel-based and one MIPS RISC-based. Two
operating systems, from SCO and Microsoft, will encompass the
current PC and UNIX worlds and will both run on both
platforms.
ACE was formed
to satisfy the most important needs of users and software
developers. Users say they want choice, investment protection,
and an open future - they want to be able to integrate new
technology without messing up what they already have. They
don’t want to be locked into one vendor to get these things.
Software developers want to be able to develop an application
once and sell the same version to big markets. And they want
to spend their resources on developing and adding value to
their products - not on porting to many platforms and
operating systems.
ACE is a unified
PC and UNIX environment, offering common applications that run
on two CPU architectures. One could also say that ACE is two
operating systems, two hardware platforms, and applications
that run on both of them.
Although desktop
systems will be the early volume leaders, ACE vendors will
offer Intel- and MIPS-based laptops; PCs; workstations;
servers, fault-tolerant systems; and large multi-processing
mainframes - all able to run the same software.
Through the ACE
platforms and operating systems, ACE users will share data
across all ACE systems. The ACE UNIX operating system will
unify four competing versions of UNIX into one. In addition,
all existing applications written for SCO UNIX, UNIX System V,
ULTRIX, MS-DOS, and Windows operating systems will run on one
or both of the new ACE operating systems. In other words,
while such vendors as SUN, Hewlett-Packard and IBM are moving
to new versions of UNIX, we have a head-start in delivering a
unified UNIX that works on both Intel X86 and RISC systems.
This means
customers can continue to use their current applications -
more than 40,000 different software packages. In addition,
with such an enormous installed base of systems, ACE will be
the target platform for the newest, most innovative
applications.
Digital has a
big headstart over other ACE vendors today, with
ACE-compatible Intel and MIPS systems that customers can order
today. Innovative options, upgrades and components for the ACE
market will be coming soon. We’ll offer Digital’s layered
software on other vendors’ platforms. We’ll also market our
components and software not only to end users, but also to
other ACE vendors for them to build into their systems. And
we’ll play a leading role in integrating and servicing all of
the diverse ACE systems.
Recently, Ken
Olsen, president, has explained the New Management System to a
variety of audiences. The following article is based on those
remarks.
Our goal over
the last year has been to break the company into business
units, each of which has control and responsibility and the
freedom to be entrepreneurial. But instead of the independence
and creativity we need, we’re seeing new forms of bureaucracy
and arbitrary measurements and limitations.
The New
Management System is based on trust. We need to instill in
people the fact that we trust them to be entrepreneurial, that
the system is designed for them to manage the responsibility
that they claim. We need our business unit managers and
account managers to propose their own budgets based on the
opportunities that they see, rather than limited to the
resources allocated to them by a bureaucracy.
The successful
entrepreneur sees an opportunity and drives for it.
Unfortunately, for quite a few years, we, as a company, have
been "resource-driven." Someone decides how much money we have
to spend as a company, that amount gets divided up, and
managers try to get the most out of their share. This is in
spite of the fact that I have repeatedly
emphasized that
there should be no fixed limit on resources. We should be
limited only by how many good ideas are brought forward.
We want our
business unit managers to propose their best ideas, not to box
themselves in based on some fixed allocation that someone
assigned them. For each market, we need to ask the academic
question, "If we had enough resources to become number one,
how would we go about it?"
We need to
emphasize entrepreneurial business management rather than just
arbitrary measurements. The New Management System (NMS) is
not a measurement system for rewarding business units. It is
not a set of constraints and rules. Rather it is a statement
of the freedoms and responsibilities of business unit
managers.
The New
Management System is not a statement of how business units are
to be organized, nor is it a statement of rights of control
groups and functions who can tell business units what they can
and cannot do.
Basically, it is
an accounting system designed to supply the information each
business unit needs to run its business in a optimum way. It
is intended to help business unit managers.
Some businesses
and accounts have one goal, and others have completely
different goals. The New Management System does not force
common goals and common ways of doing things.
Rather, it
allows freedom. However, it does contain the reporting system
to ensure every business unit reports in exactly the same
format.
The account team
has to feel it is their budget, and they are responsible for
it. If something goes wrong, they learn. If the economy drops
off and they don’t sell or their customer loses out, they have
to cut back their expenses. They run their account like a
business. If someone else tells them what to do, they’ve lost
all responsibility and they learn nothing.
Leadership now
comes from the business unit managers. There is nobody higher.
People without responsibility don’t make decisions anymore. We
have to trust them to make commitments and manage and budget.
We had a great
experience in Europe about ten years ago. All of the
individual country budgets for Europe used to go through
Geneva, where they were reworked and sent back. As of the day
we changed that and said the budgets would not get reworked,
the growth curve for Europe went up a different steeper slope.
Today, in Europe, every country is run like a business. Europe
is now bigger in revenue than the U.S. and growing faster than
the U.S.
When we started
Digital, we decided not to have a centralized planning group.
We believed that central planning limits the breadth of
activity and interest of a company to the breadth and interest
of the person or persons in charge of planning.
At one time, we
had 33 business units — called product lines — each
concentrating on a market, industry or product. Often these
business units were frustratingly independent. But they were
all expert in their market and clearly saw their
responsibility in understanding customers’ needs. Their clear
goal was to offer what customers needed, and what sales people
needed to take care of customers, and to ensure Digital had
the technology necessary to accomplish that.
Having many
entrepreneurial groups within one company means we have to
strive to be very clear where the freedoms are in those areas
in which we want to be entrepreneurial and creative. It also
takes enormous discipline to have them all work as one
organization.
The freedoms and
responsibilities have to be spelled out and thoroughly
understood by management and staff.
The company’s
management will concentrate on supporting the independence,
freedom and entrepreneurial spirit of the business units. They
also will maintain the standards and discipline to ensure the
various pieces of the company work together as one
organization.
Successful new
companies usually have a vision or dream of how they will make
unique, innovative, entrepreneurial contributions to the
market. They put enormous effort into accomplishing their
dream, and because they are a new company, they have the
freedom to do so.
Very few
successful small companies get to be large companies because
the same forces that drove these leaders to single-mindedly
make their organizations a success limit the expansion beyond
one person’s dreams. Also, in time, bureaucracy stifles
innovation.
Large companies,
with enormous budgets, just do not keep up with small
companies in the development of new ideas and new products.
Yes, they have programs for generating innovation. But these
programs usually wind up controlling innovation rather than
fostering it.
Digital was
founded to exploit techniques and attitudes we had seen at
MIT, which allow individuals the freedom and independence to
create and to take responsibility for what they’ve created,
without overwhelming staff or functional and management
controls.
Digital has had
many great years with many significant contributions to the
industry. We introduced computers into many applications where
computers had never been seen before. We also have had poor
years. The great years were when many groups had the freedom
to
create,
innovate and take responsibility. The poor years came when
staff and functional control stifled creativity and
innovation, or when managers who were great successes
themselves in innovating did not pass along that freedom and
responsibility to others as their own organization became
large.
Today,
we have the best people in the industry and plenty of assets.
We, therefore, should be a much bigger company and
significantly more profitable than we are today. The goal of
the New Management System is to exploit the assets we have and
not stifle them with constraints that organizations impose on
themselves.
To
resolve issues related to the new account structure in U.S.,
Bob Hughes recently fielded questions in a live telecast over
the Digital Video Network - the latest in a series of Sales
Focus programs. The following article is based on his remarks.
The
New Management System is a way to separate and clearly define
roles and responsibilities. The Field implementation of that
plan is called the "Account Business Unit." This represents an
entirely new way of selling to and supporting our customers.
It is a very important and complex change and comes at a time
when we also have to deal with a number of other difficult
changes:
o
We have just put a new budget system in place. The first
go-around on that was primitive and took a lot of time and
effort on the part of account managers. We will fix that.
o
In addition, many account managers are learning how to manage
a profit and loss statement (P&L) for the first time.
o On top of all
that, the economy is weak, which makes it very difficult to
sell, o And, we have to meet our goals with fewer resources
than we had just four months ago. o We also must retrain and
specialize to make sure our customers get timely responses to
basic questions about Digital’s products and directions, o
And, in addition, once account managers determine the amount
of resources they can
afford and need in their business plans,
we must complete a final round of downsizing to get to an
expense and revenue plan that is just break-even for us.
In
a normal year, one of these changes would be enough. It would
take all our energy. But we’re doing them all, and we must.
The
question is — how can you win in times like these?
You
have to know your account very well. Analyze it. Figure out
what products and services that customer is willing to buy.
Learn those products. Learn how to use them and sell them. And
sell them with minimum support if you can.
If
you wait for long-term visions, if you feel you have to sell
grand schemes, if you believe that each and every transaction
must be profitable, you won’t succeed in this environment.
Some
account managers seem to have misunderstood the intention of
our emphasis on profit in the New Management Systems. I’ve
heard that many are trying to make the same profit number on
every transaction so they can meet their annual profit goals.
That’s not the way to run a business. Work on volume and on
reducing your costs.
Imagine
you are the manager of a retail store. You have to think early
on about pumping up the volume, increasing traffic into your
store.
Today,
there are sales reps who are bringing opportunities to account
managers and are being told, "We don’t want to do that
business because it’s not profitable." The sales rep who
brings an opportunity to the table, and gets that kind of an
answer, should push back and escalate the decision if it
represents a good chance to win and increase volume. Remember,
we’re all learning together how to run our accounts like
businesses. Let’s not cut off volume just because we don’t
make profit on an individual transaction.
Remember
how retailers make a profit. In weeks 1-3, they have a
pre-season sale to generate demand. In weeks 4-10, the peak
buying period, they sell at list price. And in weeks 11-13,
they have a post-sales season — like our allowances — to move
the product. They never allowance new merchandise, and they
remember the old adage - winning is 90% attitude; the other
50% is hard work.
We
have a difficult implementation period ahead of us. Each and
every one of us will make mistakes along the way. That’s okay,
as long as we learn from our mistakes and keep moving forward.
I want you to learn to take the risks and learn from them.
This company has always gotten ahead because its best people
have been willing to take risks to improve the company.
You
are doing the right things. I see positive change now that
P&Ls are at the account- manager level. I see positive
attitudes in most of you. We are doing the things we need to
do to turn this company around, and we will succeed.
The information
technology industry is going through major dislocations. In
the early 1970s, the top five computer companies represented
about 75% of all computer sales. By the early 1980s, their
share had declined to 60%. And by 1990, these top five
computer companies only represented about 38% of all computer
sales. In other words, while the marketplace is much larger
today, many more competitors are participating than in the
past.
Vendors are
converging around standards that make it much easier to enter
the business - particularly in the desktop arena. There’s also
a growing number of companies in systems integration that
provide solutions, but do not manufacture technology. Software
and services are growing faster than other market segments.
For Digital to
succeed in this transformed industry, we need to continue our
strong support for standards. In addition, we must use our
technology to implement these standards faster than our
competitors to stay "best in class." Then we must find ways to
make those technologies and standards pay off by reaching the
total marketplace.
In this new
environment, it is particularly important that we use multiple
sales channels. This is because additional sales from indirect
channels enable us to increase our volumes and reach the
economies of scale needed to support investment in advanced
technology. Today, it might cost hundreds of millions of
dollars to develop the technology for a new architecture and
get independent software developers to accept it, and an
equivalent amount for plant and equipment to manufacture that
technology. You have to sell a lot of product to justify that
kind of investment.
Due in part to
these substantial development costs, a polarization is
occurring in the industry. Some companies, such as Wang, have
elected to withdraw from developing technology and to be
solutions providers, creating software for targeted
marketplaces. They will base their systems on
industry-standard technology that others have built. Others,
such as Apple, have decided to be technology companies and are
basing their strategies on the use of indirect selling
channels.
Digital has
decided to be both: to be a technology leader with all the
costs associated with development and manufacturing, and also
to be a solutions company focusing on specific segments of
the market, selling industry-standard technology and
integrating it. That’s a challenging strategy which requires
the use of multiple channels to the market.
A year ago,
Digital formed a Corporate Channels or CSO (Complementary
Solution Organizations) Group to give renewed focus to this
important part of our business. This group helps the company
formulate strategy and develop a framework to reduce potential
conflict among channels, to manage the existing channels and
create new channels to the marketplace (Cont’d on page 10)
that maximize our total opportunity for
reaching the market. They also look beyond Digital at the
market as a whole, to understand how our competitors are doing
business, so we can plan and react appropriately.
In particular, two business units - the
Components Group headed by Jim Willis and the Technical OEM
(Original Equipment Manufacturer) Group headed by Dick Heaton
— have been formed to take advantage of important
opportunities that are opening up. Their customers design
Digital products into new products for sale to another set of
customers under a new logo.
The Components Group sells such products
as thin film technology for storage devices, power supplies,
terminals and specialized software. They target several
hundred manufacturing companies that, like Digital, have to
decide which parts of their products to make themselves and
which to buy from outside suppliers. Where we have unique
leadership technology that we’re investing heavily in, we want
to market that technology in whatever ways we can to recoup
the development costs, to reduce our manufacturing costs
through higher volume, and also as a true test of our
competitive leadership in that base technology. In other
words, we generate profitable revenue and at the same time
reduce manufacturing costs, and allow ourselves the
flexibility and competitive advantage of having that
capability in-house.
The Technical OEM Group focuses on
companies that use computers in the products they make, for
example, manufacturers of flight simulators or process control
systems. This used to be a very large piece of Digital’s
business. But in the 1980s, Digital decided to focus more on
end-user solutions. Although that shift was very successful
for Digital at the time, it meant that we didn’t participate
in the rapid growth of the OEM business over the same decade.
In the 1980s, we dropped from a significant market share to a
small share of what is today a very important part of the
computer industry. Now we’re putting corporate focus on this
business once again, and providing engineer-to-engineer
support for these customers.
These OEM projects take a long time to
sell. But once sold, they last typically for many years. We
are still generating revenue from projects that we sold five
and ten years ago. This is a particularly opportune moment to
rebuild this business, because we now have two new
architectures to sell. We’re now selling both the ACE and
Alpha strategies to get new design wins for the future decade.
Most of us at Digital are aware that
Alpha is a code name for a new computing architecture and
family of products that will replace and be totally compatible
with Digital’s current VAX systems. And ACE (the Advanced
Computing Environment initiative) defines two operating
systems and two hardware platforms and applications that run
on both of them - unifying the PC and UNIX environments. The
ACE initiative allows Digital to be viewed as
a partner in an industry-wide effort to
promote standards, and we also can sell technology and
components to the other 100 hardware vendors who have joined.
In
addition to the components and OEM businesses, we continue to
work successfully with our Cooperative Marketing Program (CMP)
participants. These are independent software companies that
are strategically important to us and with which we have joint
agreements. Our direct sales force works in cooperation with
the CMPs to deliver solutions to end customers. These CMPs are
application-focused. They are identified and recruited by the
marketing organizations in each of the countries. The Channels
organization is responsible for the overall framework in
which we serve our CMPs.
Value-Added
Resellers (VARs) represent another alternative channel that
Digital plans to use more heavily in the future. These are
companies that put together commodity computer products - both
hardware and software - into customized solutions and also
provide service to their end-user customers. Many of them
resell PC and workstation platforms to both large and small
customers. They are application-focused and specialize in such
areas as computer-aided design (CAD), computer-aided
manufacturing (CAM) and in desktop publishing. Their
"value-added" is their ability to solve problems quickly and
efficiently.
Digital
recently adopted a volume business strategy that includes the
use of a set of VARs and value-added dealers to sell commodity
products. Approved and supported by Digital, they will have
the right to carry the Digital logo and will become part of
the Digital family. They will be an important element in our
effort to go after the two-thirds of the information
technology market that is in the commodities arena. We need to
turn that sales channel on very hard and drive it very fast to
gain market share with PCs, workstations, local area
networking and other peripheral products.
We
will target VARs by application or by market segment. Channels
organizations within each country will recruit them, support
them, authorize them as Digital resellers and market with
them. This approach should significantly increase our sales
coverage in accounts we already deal with as well as those
that we don’t.
Under
the New Management System, we want our account managers to
look at all the opportunities and to focus their direct sales
resources on those opportunities where they add tremendous
value, such as systems integration and large projects and
departmental solutions. We want commodity products such as
workstations and personal computers to move principally
through reseller channels.
The
account manager gets all of the credit for what’s sold into
the account, regardless of the channel. Success for Digital is
in terms of account share, not transaction control. The role
of the account manager is to leverage those channels that
exist to help penetrate the account — to increase revenue
without adding to fixed costs — and to focus their direct
sales resources in areas that are strategically important for
the long-term.
It’s very important that we keep abreast
of the changing nature of channels in the marketplace, that
we recognize that the way we operate today is different from
ten years ago when the first computer dealers were being set
up for PCs. These channels are in evolution just as our
industry is; and our ability to build a strong channel program
and to continue to evolve it over time will be important for
our ability to go after markets and expand our share and
continue to grow our business. It’s a very exciting part of
the changes that are going on in the industry.
Over the last ten years, the expanding
industry in which Digital competes has come to be called the
Information Technology or IT industry. This industry is
experiencing an exciting, though tumultuous, evolution from
being driven by computing and centered on data, to being
driven by pervasive networking and centered on multi-media,
which includes data, text, graphics, voice, audio, image and
full-motion video. For Digital and other IT vendors, these
changes bring many opportunities to enter new markets as well
as expand in existing ones. They also bring risks — the
leading IT vendors and customers 10 to 20 years from now will
bear little resemblance to the ones we know today. Success in
this increasingly diversified industry demands increased
internal diversification.
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In response to this external pressure for
change, Digital has evolved from a company that focused on one
relatively homogeneous business - departmental computing
products and services — to being in four significantly unique
but interdependent core businesses. These businesses are:
Commodity Products, Production Systems, Systems Integration/-
Consulting and Product/Support Services.
To succeed in these businesses, we must understand and manage
their differences, with different core competencies, channels
of distribution and business models. And we must do so in a
large, global firm with capabilities that range, for example,
from silicon and magneto-optics to strategy and management
education.
One method to
help characterize and manage these evolving business
differences is to organize the many individual IT product and
service business segments into a "value-added framework," as
shown in Figure 2.
-
IT Strategy & Architecture Consulting
& Education Services
-
-
Business Strategy & Process
Architecture Consulting & Education Services
-
-
Human Systems Strategy & Architecture
Consulting & Education Services
-
Packaged Applications
- Application/Database Development Services
Customized Packaged
Applications - Configuration & Product Support Services
Full Custom Applications
- Program Management & Training Services
xtoxxsxwx>x«"X«xwxox<;«X";w;«;wx«x«xox"?xw»:wc«x
User interface -
Database Management
- Configuration
Services
CASE Tools -
Networks/Distributed Services - Product Support Services
Office Platform - Transaction Processing Platform - Training
& Operations Services
VAWAW.W.V.W.WAVAW.W.V.
•
Kernel Systems
- Kernel Servers - Configuration & Product Support
Services
•
•
Personal Computers -
Workstations
- Training & Operations Services
•
Configuration & Product Support
Services • Training & Operations Services
Figure 2.
Five-Level Information Technology Value-Added Framework.
As the IT industry develops, customers
are increasingly viewing the lower three levels of this
value-added framework as a pervasive utility on which they can
build applications and strategies (the upper two levels) that
directly impact their business. In addition, advancing
technology is making the supply of products and services in
the lower levels abundant. But in the middle and upper levels,
dominated by software and knowledge technologies, there is
noticeably less progress in increasing the supply of products
and services. The result is that there are significant
high-profit opportunities in the middle and upper levels of
this framework.
Positioning
Digital’s four businesses within this framework provides some
interesting insights. For example, the Production Systems and
Systems Integration/Consulting businesses are high
value-added businesses that should be well-differentiated from
competitors. On the other hand, the Commodity Products and
Product and Support Services businesses are aligned with a
low-cost, high-quality business model, and will be more like
the consumer electronics and telephone utility service
businesses respectively.
This
same framework can help show the key strategic trends and
industry forces that should shape these four businesses in the
coming years:
Commodity
Products: Fueled by shrink-wrap software and fast yet
inexpensive microprocessors, memory chips and small hard
disks, this market has experienced explosive growth in the
last ten years. The battle for success in the next ten years
will be centered around multi-media, network-based
computer-supported cooperative work (CSCW). Also important
are object-oriented software and user interfaces based on
voice and handwriting. Convergence with the consumer
electronics industry will occur as audio and video media
(including gloves, joysticks and animation) become integrated
into business applications.
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decreasing.
Large networks are increasingly managed by fewer individuals.
Customers are choosing to out-source system management
services as information systems and networks become more
utility-oriented, much like telephone services. Major
opportunities in this business lie in remote
artificial-intelligence-assisted system and network management
services across multi-vendor products.
Production
Systems: As companies move toward supply-chain integration,
where all purchas- ing/production/distribution activities
become part of a unified enterprise infrastructure,
traditional islands of automation will disappear. Advances in
distributed database and distributed transaction management
will migrate much of production computing off traditional
mainframes. In addition, advances in multi-media will create
many new production system applications, particularly in
image-intensive applications (e.g., medical imaging, on-line
libraries, high-definition television back-end systems, etc.)
Systems
Integration and Consulting: Implementing supply-chain
integration and its supporting IT infrastructure requires
significant investment in business strategy development,
IT architecture
design, human systems design, software development, complex
program management and education. Systems Integration and
Consulting provides the high levels of multi-disciplinary
expertise that are needed to accomplish that task.
Opportunities in the 1990s include development of
sophisticated application software to support complex IT and
human systems design, as well as the development of robust
object-oriented libraries of reusable application software
modules.
In summary,
today’s IT industry is complex and rapdily evolving. Success
in this environment requires differentiated business
strategies and practices in combination with strategic
coordination and synergy. With the New Management System in
place to support increased business differentiation and the
integrated functions in place to support increased business
synergy, the job at hand is planning, creating and delivering,
at many levels, value added that delights our customers and
dismays our competitors.
In the current
environment, information systems are used mainly to capture,
collect and output data that is generated by day-to-day
operations. The systems collect information as to how we did
yesterday, last week, last month, last quarter and so on. The
data collected is sometimes Inconsistent and often there are
difficulties in aggregating it, especially if it is worldwide
in scope.
Historically, we
have sought to improve our information processes by optimizing
at the level of plants, countries or individual businesses,
with the result that there are very few common processes and
very little shareable data. Stand-alone efforts to develop
common definitions for data have been very difficult since the
root cause (dissimilar business practices) has not been
addressed on a company-wide basis.
By providing
profit and loss reporting at the business unit level, the New
Management System (NMS) makes it clear that we cannot afford
to continue these practices. Digital needs one worldwide,
consistent and integrated business planning process. But the
current information systems environment will not be easily
changed to address this need because the installed base is
large and will be very costly to replace.
We have a number
of different processes for planning and management of plans,
including long range plans (LRPs), budgets, forecasts,
business plans, and the monitoring of actuals against plans.
All this information is captured in computers and, in many
cases, captured as unconnected activities. This, however, is
only one aspect of the problem.
A second aspect
is that a very important set of data is not captured - namely,
the underlying assumptions that generated the plan data.
Assumptions are important to capture and track because this is
the knowledge that was applied to arrive at the plans. If we
are to improve our plans, it is the assumptions we have to
work on - in essence, the knowledge.
A "Knowledge
Environment" differs from an "Information Environment" because
the data is placed in a context of involvement. We really want
to know why data comes out the way it does rather than just
observing the outcomes themselves. The kind of questions we
want to answer are:
o
Why should we do this product now?
o
Why is the window of opportunity this short?
o
Why is the sales volume this much?
o
Why are these the customers for this product?
We all want to
be able to predict the future with 100% accuracy, 100% of the
time. Since this is highly unlikely, the challenge becomes how
close can we come? To improve we need to:
o improve our ability to manage risk,
respond quickly and in concert to the unexpected; and
o improve our ability to predict external
events that may impact Digital and explore how we might
respond to them.
To improve our
skills at making predictions, we first need to understand how
good our previous efforts were, so we can learn from the past.
For example, it is one thing to capture the expected sales
volume for a new product; yet it is entirely different matter
to capture the
assumptions made in predicting that sales volume. To do this
means capturing both the assumptions we made and how those
assumptions actually turned out. Not all assumptions are
numeric; however, the computer has the ability to capture and
analyze text as well as numeric data.
Next, we need to
link the data that is generated each time we do LRPs, business
plans, budgets, forecasts, and report on the actuals. The
business processes must produce common data since this is the
only way data can be aggregated meaningfully. If we use the
approach of rewriting the transaction systems first, we will
wait a very long time. However, converters can be built to
help bridge the time gap until the existing systems can be
replaced or eliminated. In the case of assumption data, we
have no such legacy of existing systems and so work can begin
immediately to capture this data in a uniform manner.
To improve our
ability to predict and manage events and risks, we need to
capture the events outside our company that impact us. The
data needs to be manageable and having it in computer form
would allow us to interrogate and search large volumes.
We also need to
use tools that will put this data into a context. Great
strides have been made through the use of simulation tools.
For example, with collected assumption and results data,
simulation tools can process this data and determine which
elements impact the actual results. From this we learn what
are the key variables and how to make better predictions about
the future and possible courses of action.
Another
important factor is communication. Once having captured the
data about assumptions, we need to let people know about
them. Only through the use of computers do we gain the ability
to communicate with the breadth and timeliness it takes to be
"Best in Class."
The following is
a sampling of progress and plans for IM&T support of the
New Management System:
o Each of the
business units now has the ability to produce P&L actuals
systemi- cally. Worldwide P&Ls will be available for a
limited number of international accounts.
o Supporting
tools, such as the USA Account Managers Workbench, Account
Planning, Profitability Models and Effort Tracking, are being
used.
o
Account Budgeting and Forecast systems are in place.
o Data
Warehouses that will assist in NMS reporting, such as the GIA
Data Warehouse, are being built.
o Reference
tools, such as the Dunn and Bradstreet Worldfile, are in place
to support account aggregation and are used to roll up
supplier information as well.
o An interim
data set for the storage and distribution of Worldwide
Business Unit Pricing information is available.
o Data modeling
in support of the various business unit organization
structures is underway to provide consistent data.
o The foundation
for simplifying the access and sharing of worldwide NMS
related data is being built. Design and initial development of
a distributed data warehouse application is in progress.
o The first
stage in the development of a worldwide video conferencing and
information management ability that will support NMS goals
for consistent business planning has been completed.
o
Design and development of an integrated planning environment
is underway.
These
accomplishments and plans are only the beginning of the effort
to build the information environment to support NMS, as a
start to define Digital’s business and planning architecture.
In the coming phases the most important ingredient for success
will be teamwork across the businesses, functions and
geographies.
Digital has
added new dimensions to its business and is now competing in
the commodity arena, with open systems products and services.
Success in that highly competitive arena depends on low cost
as well as speed and flexibility of response to changing
technology and market conditions. Under the New Management
System, the business units are expected to provide speed and
flexibility of response. And the functions must provide
coordination and integration, promoting the company-wide
teamwork necessary to drive down costs and help the business
units gain strategic advantage.
Increasingly, we
are buying products and services that we resell or put
together with other parts, products and services for resale.
In this environment, we have to do everything we can to
leverage our suppliers’ assets and improve our own operating
asset performance. Basically, we must start looking at our
suppliers as an extension of our company.
A few years ago,
we emphasized getting suppliers to deliver "just in time" and
at extremely high levels of quality, so we could drive our
inventories down. Now we’ve advanced to a higher stage. We
still have high expectations regarding delivery and quality,
but we also expect our suppliers to be our "partners," in a
broad sense of the term - in our efforts to achieve customer
satisfaction and business success.
We need to build
strategic supplier relationships and drive an "integrated
acquisition process" for the entire company. The $4.8 billion
that Digital spends externally represents a huge piece (38%)
of the company’s cost structure, and we have to leverage that
buying power as much as possible.
We have to get
our suppliers involved earlier in our strategic thinking to
help us better understand the technology choices and trends
that exist externally. We want to focus our efforts on our
core competencies. We do not want to duplicate unnecessarily
the development efforts of our suppliers or to invest in
technology that already exists in the supply base and would
not bring strategic value added to Digital. As part of this
effort, we also have to do a better job of concurrent
engineering of products with our supply base and coordinating
the efforts among our suppliers. Getting suppliers involved
earlier and doing concurrent engineering with them will speed
up the design cycle and improve our time to market.
We’re working
closely with Manufacturing and the Product Creation Units to
understand our products relative to those of the competition.
And, at the same time, we’re giving better information to our
suppliers about what we’re going to need and when we’re going
to need it. This information can help them plan their
technology strategies and manufacturing processes and keep
their inventories lower while meeting our requirements. That
helps them get better return on assets, and, in the long run,
we will benefit from their success.
With the New
Management System, functions like Purchasing must integrate
the entrepreneurial efforts of dozens of business units. The
person in Purchasing that one business unit is dealing with is
also aware of what the other business units are doing. We have
to ask the right questions. We have to understand the
multitude of procurement decisions that are being made across
the company and recognize common and shared work that can and
should be integrated to achieve higher levels of efficiency,
price/performance and customer satisfaction.
Although there
are many decision makers in the business units, when they make
decisions, we want to make sure they’re getting the benefit of
what everybody else is doing in the company. Their link with
the acquisition process should not only provide them with
lower costs from volume discounts, but also provide them value
in terms of the knowledge base that we’re building about
what’s going on across the company and throughout the
industry. That value should translate into improved margins
for their businesses and for the company as a whole.
Much of the
benefit of our strategic work on the acquisition process will
show up in other groups — Engineering, or Manufacturing or
business units. On the hardware side, it will impact the
company’s development and manufacturing costs. And on the
software side, we are moving towards consolidating
negotiations with major third-party application providers to
establish company-wide contracts. These contracts will
leverage the cost of providing solutions and at the same time
reduce the royalties which we pay our software suppliers for
those solutions.
As we move
through the restructuring of Manufacturing and as our systems
integration and service strategies continue to unfold, we need
clearer definitions for how we’re going to do business with
those suppliers we deem critical to our future over the next
decade. Our one hundred most critical suppliers are as
important to us as our hundred best customers. We need to view
those relationships on a long-term basis. Over the next year,
we will complete development of our key supplier program. This
program is similar to how the company runs executive partner
and key customer programs.
The new
integrated acquisition strategy changes how different people
touch the acquisition process. For example:
o Business
partners in an engineering or services organization work with
Purchasing from pre-phase zero or pre-project definition to
ensure maximum benefits from early supplier involvement.
o End-users
place their orders for approved supplies through an electronic
data interchange (EDI) application,
o Professionals
in Purchasing are able to re-focus from routine order
processing to focus on strategic acquisition issues in a
collaborative relationship with internal business partners and
external suppliers.
o
And suppliers become a true extension of the company through
strategic partnerships.
Basically, the
Purchasing function is required to play a very different and
strategic role. And we’re asking everyone who touches the
acquisition process to understand their own role and the
impact of the decisions they make on the overall opportunities
available to the corporation. We need to move away from an
individual function or business approach to a fully integrated
approach to our supply base.
For this
strategy to become a reality across Digital, we all must
understand fully Digital’s new acquisition strategy and show
it supports the New Management System. In addition, we each
need to understand our roles in the acquisition process and
acquire knowledge and skills to effectively leverage it
across our company.
Without
effective communication and education, the effort to leverage
the acquisition process for financial and business improvement
would fall short of expectations. Therefore, we have created
a School of Acquisition Management that is developing
curricula to educate everyone involved in the acquisition
process - people within Purchasing, managers in functions,
geographies and business units across Digital, and also key
suppliers.
In summary,
there are three major ways in which our work is important to
success in the commodity business. One is having the right
suppliers involved early in the decision process. Another is
speed of response to changing markets and changing customer
demands in world markets. And third is keeping costs low to
enable us to keep prices low so the company can succeed in
markets where price is critical and customer satisfaction is a
must.
In all of these
areas, the knowledge base is very important - knowing enough
about our business and who the suppliers are, who the people
are internally so that when something changes you can push the
buttons rather than having to go out and build a relationship.
Relationships with other functions, geographies and business
units across the company and with suppliers become critical.
That’s an opportunity and a piece of savings that we hadn’t
really addressed before. For this to succeed, it is important
that other pieces of the company understand the process and
the reasons behind the changes.
The New
Management System (NMS) represents a major organizational
transformation for the company. The New Management System is
intended to foster the following outcomes for Digital:
o
profit growth for the company as a whole;
o
renewal of the company;
o identification
of profitable businesses, and withdrawal from businesses that
cannot be made profitable;
o
enthusiastic customers;
o a leadership
position with customers based on partnerships that demonstrate
our ability to solve complex solutions through excellent
systems integration;
o a global
environment, structure and system that empowers managers to be
truly entrepreneurial;
o an open, high
productivity environment that encourages interdependence,
integration and teamwork company-wide to achieve customer
satisfaction; and
o a clear and
consistent company strategy that is articulated by senior
managers, understood by employees, embraced by customers,
supported by strategic partners and determines the direction
and goals of the company’s entrepreneurs.
The general NMS
concepts have been explained at numerous meetings held by
managers throughout the company. We are now dealing with the
larger issues of fostering behavior and mindset changes, as
well as skills needed for the smooth functioning and success
of this new way of doing business.
NMS education is
intended to provide managers with an understanding of the
concepts and skills they will need to help achieve the
identified NMS outcomes. Our most senior management wants to:
o empower managers to think and act as
entrepreneurs;
o provide a framework for understanding
the relationships between the value produced for the customer
and our costs;
o instill knowledge required to plan,
budget, report and develop action plans using the NMS;
o enable each
participant to take responsibility for delighting our
stakeholders (customers, stockholders, employees and
suppliers); and
o provide a dynamic forum for change.
Because of the
breadth of the material, and the number of employees to be
empowered, it is important for everyone to hear the New
Management System message from their own management. Each
manager can work with her or his staff to interpret the NMS
messages and how they will best serve their, and Digital’s
needs. We have prepared a manager’s briefing packet (including
tape, workbook and overheads) designed to help managers
integrate that information through their organizations. This
will also help management ensure an understanding of the New
Management System and how it applies to them. The intention is
that managers will transfer that information and personalize
it for their direct reports, who would then transfer it to
their organizations, once again tailoring and targeting it for
their people. Organization Development Consultants have worked
with a number of business unit managers to assist them in
developing NMS understanding within their organizations.
At the same
time, we are working with a number of other training and
education organizations, to ensure consistency of content
about the New Management System as they incorporate its
concepts in their courses. This is particularly important
because the New Management System is dynamic and evolving.
There will be continuous refinement and improvement as
details of implementation are worked out. It is important that
training related to this subject be accurate and current,
wherever and whenever it is given.
In the last
year, a Development and Education Board of Directors (DEBOD)
was formed, chaired by Win Hindle, senior vice president. The
overall mission of DEBOD is to formulate, implement and fund
an integrated development and education strategy for the
company. Its members include: Bonnie Bedell, Pier Carlo
Falotti, Dick Farrahar, Susan George, Bob Glorioso, Win
Hindle, Marty Hoffmann, Bob Hughes, Bob Palmer, Dick Poulsen,
John Sims, Peter Smith, David Stone and Don Zereski.
DEBOD approved a
Senior Management Education Program which was recently
announced by Ken Olsen. The goals of the Senior Management
Education Program are:
o to implement
the outcomes that the New Management System is intended to
encourage throughout the company, and
o
to foster growth of new profitable business.
Managers of
Product Creation Units, Service Creation Units, Customer
Account Units, Marketing Business Unit and Functions all have
integration needs. These 400 managers will experience a week
of "action learning," with follow-up teamwork over a six month
period developing plans to implement the desired outcomes.
This will be followed by another week of "Action Learning" to
work company-wide integration and synergy needs. "Action
Learning" uses real work to develop skills with "just-in-time"
faculty support. For example, you learn international
management skills by doing international management work. It
is designed to help managers build their skills tailored to
the company’s needs. Digital executives will serve as "inside
faculty." Many of these processes were successfully used in
the Advanced International Management Seminar (AIMS) Program.
Our senior
managers need to work together to meet the company’s business
needs and profitability goals. This program will bring them
together for intensive learning in a way that they’ve probably
never interacted before. In this kind of experience,
information is only a part of the benefit. The building of
personal relationships and networks, while driving business
solutions, is a critical part of this program. It is important
to get these people to interact and learn to work together and
teach one another. As program manager for the Senior
Management Education initiative, George Mann, Europe HRD&T
manager, and his team (Sharon Brownfield, Education Programs
Manager; Libby Finn, US Management Education
manager;MarshaCormier,MarketingHRD&EManager;SusieRheault,T&NHRD&Emanager;and
John
Fisher, Finance Training consultant) will be working to insure
these goals are met.
These
initiatives will provide opportunities to encourage
entrepreneurship, enthusiasm, leadership, teamwork,
creativity, courage, accountability and responsibility. Every
single manager in this company must treat their responsibility
as if it were their own profit-oriented business. At the same
time, they must drive toward leveraging Digital’s company-wide
capability toward providing solutions to customers and
returning maximum profitability to the company.
Across
the computer industry, software licensing practices are being
widely debated. Customers say that the price they pay for
software often doesn’t reflect the value they receive and
unnecessarily influences their choice of hardware
configurations. For instance, a customer who already owns a
VAX 6000 Model 510 might want to run a new application. A
hardware upgrade to a Model 520 would provide the necessary
capacity. But the way we license software today, that customer
would have to upgrade all existing software licenses at
considerable cost, even though the additional capacity would
only be used for the new application. Because of that
artificial constraint, the customer might well opt to buy
several workstations instead of upgrading the existing VAX
system, which would have been the more natural solution had it
not been for the added cost of software.
Over
the next two years, we intend to significantly simplify our
software license offerings, and to do a much better job of
ensuring that our offerings allow us to closely link the price
we charge with the value of the product to the user.
We
believe that as customers implement heterogeneous networks of
servers, computing will become a resource, very similar to a
utility. Over time, we want to move our licensing model toward
a utility model, in which customers pay for software based on
use rather than based on the capacity of the hardware on which
it resides.
Today,
the customer buys a capacity license for an application, which
means that anybody who is authorized to log onto a specific
system can use that particular piece of software. This
capacity pricing is based on the assumption that everyone with
access to the system can and will use a new application. We
will offer the alternative of "user licenses." This pricing
strategy recognizes that in many cases the new application is
being purchased for the use of one or a few individuals. This
approach should make software from Digital far more affordable
than in the past, competitive with the cost of workstation
software, and more competitive than software on multi-user
systems.
There
are two types of user license. A "Personal Use License" gives
the right to use a particular piece of software to the named
individual. A "Concurrent Use License" allows use of the
software by any user, on a first-come-first-served basis.
Concurrent Use is like checking a book out of a library: if a
copy is available, it can be checked out; and once a book is
checked in, another user is able to check it out. That might
be the most economical approach when a number of people
occasionally use the application.
We’re
bringing the advantages of workstation and PC software
licenses to multi-user systems. We believe that this style of
licensing is also appropropriate for client-server computing
environments and equally appropriate on timesharing systems
and that it will spread rapidly.
It
makes hardware upgrades to existing systems and clusters much
more attractive for handling new applications, rather than the
alternative of purchasing a new workstations, local area
network (LAN) or a smaller timesharing system. This is becuase
the number of licenses (and, therefore, the cost) is a
function of the number of people who are actually using the
application, and is completely independent of the size of the
system.
Today,
every time you make a hardware purchase decision, you have to
make an equivalent software decision with it. We want
customers to be able to make those two decisions independent
of one another.
Basically,
we will provide a set of business practices that supports
profitable growth of our software business by providing
fairness and choice to customers. Fairness relates to the
relationship between price and value, as perceived by the
customer. Choice gives them the flexibility to configure and
reconfigure their information systems to best meet their
changing business needs, to add capacity and redeploy hardware
and software independent of one another and at competitive
cost.
Activity
on standardization of software interfaces has reached dramatic
levels and is playing an increasingly important role in
defining the software marketplace.
Presently
14 different international groups and committees are working
in this area. These standards efforts fall into two
categories: standards for software portability across
platforms and standards which specify human-computer
interaction.
In
software portability the major effort is towards standardizing
a window manager system for use across vendor platforms (X
Windows seems to be the de facto standard here).
The
second category includes the largest number of participants
and the greatest amount of activity. Standards in this
category focus on such areas as standards for the use of
interaction dialog, use of colors, icons and other graphic
elements, screen design, content and operation of on-line
help and error message facilities (user guidance) and related
items of screen-based user interfaces.
What
motivates all this effort on user interface standards? Through
the 1970s and 1980s the human computer interface received
relatively scant industry attention. Except in such
professional groups like the Human Factors Society, the
software user interface was of secondary importance to other
features and functions of the application software. Two
significant changes in the industry have given rise to the
importance of standardization in user interfaces.
Vendors
of software applications are now conscious of the significant
costs involved in developing software applications. The user
interface for these applications often accounts for as much as
50% of the total code. Costs increase when, in seeking larger
market share, developers port applications and user interfaces
to run on the variety of platforms in the market place (DOS
PCs with Windows, OS/2 PCs with Presentation Manager, Apple
Macintoshes, UNIX workstations, and a host of
minicomputer-based operating systems). In some cases
applications and user interfaces have to be totally rewritten.
Vendors see standards as a means to achieve cost-effective
software application portability across many platforms.
The
cost of platform diversity is also evident to the users of
software applications. In order to maintain independence from
a single hardware vendor many large customers became
multi-vendor houses. Users are now aware of a hidden
consequence of this independence. Support and training costs
for the different applications are high and fixed. Training is
not a one time cost. It must be done on an on-going basis to
keep up with employee turnover rates and revisions to the
applications. Productivity and cost savings have never
materialized for those users who neglected a commitment to
training employees to use the different tools and user
interfaces. Users view standards as a means to human
portability - allowing users to move from platform to platform
and application to application without having to go through
expensive periods of learning and retraining.
The
second important development in the software industry has been
changes in the process of technology standardization. In
particular, the standards development process for Information
Technology has changed dramatically. In the past, standards
were developed around existing products in common use.
Standards were thus an abstraction of concrete products. Since
the mid-1970s we have seen a shift to standards that
anticipate the creation of products and help define markets.
This
evolution is clearly evident in the software user interface
standards arena. Participants are made up of vendors, vendor
consortia, user groups, professionals and regula- tory/safety
bodies. Each has a unique strategic business or market
interest to advance or defend.
Vendors
and consortia see user interface standards as a way to
software portability and reduced costs. A vendor would also
benefit in terms of market share if their particular
architecture became an industry standard.
From
a customer viewpoint, standardization is a means to user
portability and productivity.
For
Japan’s software industry, software standards provide a clear
set of product guidelines and the quickest path to a
competitive position in software markets.
In
addition, groups such as the Human Factors Society, labor
unions, insurance companies and governmental health and safety
agencies anticipate a variety of potentially adverse
consequences unless user interfaces are standardized to
optimal human requirements. They see standards as a means of
protecting jobs and the health of workers who must use the
technology.
In
the past, an existing technology with significant market share
became the industry standard. In the future, standards will be
forged largely by the standards committee process, and in so
doing will determine the market. For examples of this we have
only to witness standards such as Open Systems Interconnect
(OSI), which had no product antecedent; UNIX, which started
out as only a small niche market product; and, X
Windows-Motif, which began as a hybrid of academic and
industry design labs with no customer base at all.
Participation
in the standardization process assumes strategic significance
because it affects which products a vendor must build and
sell. For participation to make sense for us, Digital must
have a plan for the role it intends to play in the software
industry. Competitors are aware of the emerging role of
standards and are actively participating in various user
interface standards groups. Japanese companies, in particular,
are taking a highly visible and active role in developing
software user interface standards. And nationally, companies
such as IBM and Apple are jointly pursuing arrangements to
secure their strategic goals in the software marketplace.
Currently,
Digital pursues business objectives through participation in
the Open Software Foundation (OSF). This, however, is only a
workstation-oriented market and does not account for
Digital’s position on other platforms and user interfaces in
its product lines. If Digital is to become "best in class" in
software and interfaces, it must develop a plan for the
direction and role it intends to play. In addition, it must
begin to advance and defend that plan not only in the
marketplace but also in the standards arena.
In summary, by
playing an active role in software user interface standards,
Digital could: o gain insight into the position and strategy
of competitors,
o obtain
information on the research efforts of other participants,
thus leveraging research dollars;
o keep informed
about the direction and trends in standards development as a
means of predicting market direction and product requirements;
and
o convey a message of leadership in
technology and support for standards to customers.
Finally,
since standards development helps shape software markets,
Digital can use its participation in the International
Standard Organization (ISO), the American National Standards
Institute (ANSI), and the European Computer Manufacturer’s
Association (ECMA) to advance and defend its strategies for
growth.
Digital
has been moving purposefully to participate in the emerging
markets of Central and Eastern Europe since the beginning of
1990. It now has well-established activities in Hungary,
Czechoslovakia and Poland, and is still considering the scope
of its operations in the Soviet Union. The West Berlin
operations center, established in March 1990 to meet the needs
of customers seeking opportunities created by the unified
German marketplace, is now fully integrated into the German
subsidiary.
Digital’s
operations in Hungary have been very successful. The joint
venture, formed in February 1990, has now become a fully owned
subsidiary of Digital, employing 75 people. Results for the
first full fiscal year make Digital the leading computer
vendor in Hungary, showing about $16 million of revenue.
In
March, Digital established a fully-owned subsidiary in
Czechoslovakia with offices in Prague and Bratislava.
Simultaneously, Digital began working with three local
companies: Kancelarske Stroje in Prague, Datasystem SOFT in
Bratislava and VUVT in Zilina. Many opportunities have been
presented by the installed-base of "Digital-like" systems;
Digital has offered a special upgrade package to customers
looking for more reliable and up-to- date technology.
Digital
now has about 40 employees in Czechoslovakia and is expecting
to double this number before the end of the fiscal year. The
company is already involved with several large projects,
including a $7.5 million contract to create the network
infrastructure for an information system that will play a key
role in Czechoslovakia’s effort to privatize its economy.
The
first steps towards participation in Poland were taken at the
beginning of this year. In June, Digital opened its own office
and started hiring people. There are now 30 employees in this
new subsidiary and several contracts are under way.
Digital
has taken a more cautious approach to a start-up in the Soviet
Union, and is now finalizing the scope and focus of its
operations there. We attended the COMTEK exhibition in April
this year and saw an extremely high level of interest from
potential customers, government officials and the media. We
have an office in Moscow and have received an accreditation to
establish a wholly-owned subsidiary. The initial focus will be
on Russia, Ukraine and the Baltic States.
Digital
has long been committed to a policy of introducing information
technology into new markets, and has been encouraged by
agencies of the US and a number of European Governments to
respond to the rapid changes taking place across Eastern
Europe. We support the development of new and more appropriate
export regulations for most Western personal computers and
other commonly available technology products and the reduction
of restrictions on sales of mainframes, telephone exchanges,
machine tools and other more sophisticated products. We
believe that information technology can often be the lubricant
of change and, along with the open exchange of ideas and
information, computers will play an important long-term role
in restructuring the economies of Central and Eastern Europe.
The
Knowledge-based Applications and Services (DKAS) business unit
has been created as part of the Corporate Artificial
Intelligence Technology Center (AITC) in Marlboro. Dennis
O’Connor, director of the AITC, is the DKAS business unit
manager reporting to Dan Infante, vice president, Information
Management & Technology.
DKAS
generates revenue on a worldwide basis by delivering products,
consulting services, and training to external customers that
have complex information technology requirements. To meet
those requirements, the DKAS uses knowledge-based systems,
traditional technologies, third party products and emerging
technologies such as imaging and object-oriented systems.
The
DKAS consulting and training services are jointly managed by
Frank Lanza and Jack Rahaim. Frank is responsible for the
consulting/training, delivery, and operations functions. Jack
is responsible for the marketing and business development
functions.
DKAS
has two groups in Europe. The European AI Technology Center in
Valbonne, France, managed by Ed Orciuch, provides training and
consulting services to customers and solutions to internal
Digital organizations. The Knowledge Systems Development Group
in Galway, Ireland, is developing Digital’s Knowledge-based
Advanced Resource Management Architecture (KARMA) for internal
use and provides consulting services to customers. The Galway
group is managed by John Harhen under the auspices of the
Management Strategic Systems Program directed by Neill
McCormack at the AI Technology Center in Marlboro.
Digital and
SONDA (Sociedad Nacional de Procesamiento de Datos Limitada),
its most successful distributor in Latin America, have
announced their participation in a joint venture. Within the
framework of this new relationship, the two companies also are
creating a new entity — DEAL (Digital Equipment America
Latina). DEAL will be responsible for marketing and logistics
support in all 14 of the Latin American countries where
Digital has distributors. The formation of DEAL is the latest
step in Digital’s accelerating investment in the markets of
Latin America.
"Through
this partnership, Digital’s Latin American customers gain a
leading solutions supplier in DEAL, which will be a key
distribution arm for solutions running on Digital platforms
throughout Latin America" said Dick Poulsen, vice president,
GIA. "Distributors will now have the resources needed to
develop the vitally important systems integration business in
their countries. Working jointly with a distributor, we can
now broaden that distributor’s market access."
Headquartered
in Santiago, Chile, DEAL will continue to offer SONDA’s
leadership solutions — such as STF, a financial transactional
system — on Digital platforms to an established base of over
400 clients in a wide range of industries. In addition, this
new partnership puts SONDA in a position to expand its
applications focus and provide systems integration to
customers on a worldwide basis.
SONDA
was incorporated in 1974 and has achieved success in providing
systems integration products in the Latin American market. In
its 16 years as a Digital distributor, SONDA has grown to
become a company with annual revenues of $50 million and a 20%
market share in Chile. In addition, the company has expanded
its reach and now does business in nine countries outside of
South America.
Digital’s
first African subsidiary recently opened in Casablanca,
Morocco. The subsidiary enables Digital to offer Moroccan
customers technical resources and a support structure more
closely adapted to their needs.
An
office in Rabat will be entirely devoted to commercial
activities and customer support. The future calls for a
network of service centers. Digital Morocco is also supported
by exlusive contracts with a network of marketing partners,
each one recognized for its competence in specific sectors.
Digital
technology is used by several government agencies including
the Foreign Affairs Ministry, the Finance Ministry and the
National Electricity office.
Lyn Benton has been promoted to vice president. In
this capacity, she will be responsible for the integration of
the business unit plans, implementation of the New Management
System, and corporate financial planning and analysis. Lyn has
been with Digital since 1979 and has held positions as
Manufacturing plant controller in Westminster, group
controller Small Systems Manufacturing, and
Finance/Operations manager Low End Systems. Before joining
Digital, she was manager of operations analysis at the Foxboro
Company. Prior to that, she held senior management positions
at several other manufacturing companies.
Jean Bonney has been appointed director of the
External Research Program (ERP) within Corporate Research,
reporting to Sam Fuller, vice president, Corporate Research
and Architecture. ERP is a program that sponsors academic
researchers worldwide to work on problems of strategic
importance to Digital. Jean has been manager of Strategic
University Research in ERP for the past four years. She has
also held markting management positions at Digital since
joining the company in 1984.
Barry Braunstein has been appointed DECathena Marketing
manager, reporting directly to Dick Crosby in the NAS Systems
Management Group, and "dotted-line" to Jim Neumann in Digital
Network Services. Barry was involved with Project Athena at
MIT in his previous job as Marketing manager for Engineering
Education and Research in the Education Industry Marketing
group. DECathena evolved from Project Athena, a development
project created to provide a high quality workstation-based
distributed computing environment for research and education
at MIT. DECathena is a software product developed to help
solve the problems of managing large numbers of distributed
heterogeneous workstations.
Mike Kalagher has been appointed to the newly created
position of Marketing Operations manager. In this role, Mike
will assist Bill (B.J.) Johnson, vice president of Corporate
Marketing Planning, in the creation and implementation of
processes for improving marketing across the company. The
first 14 of Mike’s 22 years at Digital were spent in the
Services Organization, where he established many of the
market-focused support groups and ultimately became Corporate
Support manager. In the early 1980s, Mike was Product Line
manager for the Computer Service Business. Later, he took
leadership roles in Order Processing and became U.S.
Administration manager.
Jack MacKeen, vice president, has been appointed to
head the Government Systems Business Unit. Jack will lead
Digital’s Government Team, with responsibility as a business
unit for Marketing, Sales and Service to the U.S. Federal
Government. He will also manage the development and support of
unique Government solutions on a worldwide basis. Jack joined
Digital in 1961 as an engineer. Progressing through a variety
of increasing engineering, marketing and product line
management responsibilities, he was named corporate vice
president, OEM Group, in 1985; vice president, Corporate
Channels, in 1987; and vice president, International Accounts
Marketing, in 1989.
Deb Nicholls has been appointed chairperson for the
DECworld 92 program. Deb has been with Digital for thirteen
years and has held senior management positions in the Field,
Marketing and Engineering. She currently reports to Bill
Strecker, vice president of Engineering, where she manages the
overall Engineering product planning process. In her role as
DECworld chairperson, Deb will work closely with the
geographies and the business units to ensure a coordinated,
quality program. Peter Zotto and his team will continue to
provide the infrastructure and support for DECworld events.
These events will begin in Boston (April 27-May 15) and
culminate with DECworld Japan in November 1992.
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