Vol. 11, No. 1____________________________________________________________
Jan./Feb. 1992
"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
CONTENTS
Manufacturing
Successes
and Challenges (Bob Palmer)
A year ago, the Manufacturing Management
Committee determined that Digital Manufacturing was not cost
competitive and decided what must be done to reduce the costs
associated with the manufacture and delivery of products and
services to achieve a leadership position. This article
reviews progress made over the last year and looks at upcoming
challenges.
Investing
in Future Growth through Strategic Alliances in Europe
(Wolfgang Jaeger)
In the past
eighteen months, Digital has acquired the computer system
business of Mannesman Kienzle, the Information Systems
Division of Philips and total or partial equity of specialist
companies in Germany, France, Sweden, Italy and the UK. Behind
this variety of acquisitions, alliances and agreements is a
set of common aims — to deliver to Digital’s customers what
they need, in the way that they need it, and to focus on
growth markets and increased presence of Digital in Europe.
New
Generation Processors Make the Timing Right for Renewed
Emphasis on TQEM Business
(Dick Heaton)
In the 1980s,
Digital shifted its emphasis from OEM to end-user markets. We
received some short-term benefit in the systems business from
that choice, but we left the Technical OEM market open for
such semiconductor makers as Intel and Motorola. Now to
re-establish ourselves in the Technical OEM market we have to
make a fresh start. As a starting point, we are focusing on
the eight countries where we now get nearly 90% of our TOEM
business.
Television
Advertising
Will Reinforce Open Message in US (Henry Heisler)
Last year,
Digital began a multi-year campaign to position itself as an
"open" company. Our goal is to be perceived as the industry
leader in open technology services and business practices.
Now we’re ready to give the campaign a "kicker" to keep it
fresh in the eyes of customers and the media. In the U.S.,
we’ll do that with television advertising that visually and
memorably emphasizes our theme.
An Overview of Digital’s Products
and Services, Today and Tomorrow (Ken Olsen)
This article is
a summary of a speech Ken Olsen prepared for the Annual
Shareholders Meeting in November. It provides a summary of
Digital’s product and service offerings.
Advances in
Image/Voice/Video Open New Customer Opportunities (Rod
Tuttle)
For years,
corporate databases have contained only machine-entered
information. Much valuable information comes in other forms
and is filed in other ways, or is simply remembered or lost.
It is time to begin to think in terms of making
"people-literate computers" rather than training
"computer-literate people."
An Open
Systems Vision (Jean-Claude Monney)
Many companies
are re-thinking their information technology strategies,
looking for the ability to respond quickly to changing markets
and organizational needs. Many use the term "Open Systems" to
express their objective. Digital emphasizes that industry
standard interfaces should be the building blocks of Open
Systems.
Digital’s Life
Balance Strategy (Laurie Margolies)
Digital wishes
to provide appropriate opportunities and flexibility (on
Dependent Care and Alternative Work) to enable employees to
reach their full potential at work and in their personal
goals. We believe that when employees are performing to their
full potential, the corporation will as well.
Update on
HIV/AIDS (Paul Ross)
Medical advances
have dramatically changed our approach to AIDS in the
workplace. We now see AIDS more as a chronic, manageable
disease. People are living longer; they’re working longer; and
they’re staying in the work force longer. Still, ultimately,
it is fatal 80% of the time, but lives are being extended
significantly, especially when treatment is started early.
Open for
Business in Russia and Ukraine
Digital
is entering Russia and Ukraine with sales and service offices,
an education center, and a long-term commitment to providing
information technology and related services.
Thomas
Gerrity Elected to Digital’s Board of Directors
"New Directions
for Digital Manufacturing," published in the May 1991 issue of
MGMT MEMO, highlighted the issues, challenges and
opportunities facing Digital Manufacturing and described
objectives and strategies to deal with them.
The following
article reviews progress made over the last year and looks at
upcoming challenges.
A year ago, the
Manufacturing Management Committee (MMC) determined that
Digital Manufacturing was not cost competitive. We
benchmarked ourselves against the best competitors in our
industry and determined that we must significantly reduce the
costs associated with the manufacture and delivery of our
products and services in order to achieve a leadership
position. In response to this challenge, we established three
primary objectives for the Manufacturing organization:
o to get competitive,
o to stay competitive, and
o to preserve our most important core
values in doing so.
To support the
achievement of these objectives, we put the following
strategies in place: o Simplify our business management
processes and organizations, o Reduce or eliminate
redundancies and duplications, o Design for manufacturability
and quality.
o Purchase our materials more
efficiently.
o Utilize our assets more effectively.
At that time^
Digital was beginning to implement the New Management System,
with the business and account units as the primary focus in
leading our business in the future. The New Management System
helped us identify current activities that did not provide
adequate value-added for our customers. It also helped us more
accurately understand our costs, as well as our contributions
to the company’s profit.
Managing our
business more closely forced us to look at and eliminate
redundancies. Our employees made major contributions to this
effort. People closest to the work know best how to spot the
overlaps and duplication and how to simplify and rationalize
the process.
We also examined
our business practices and changed them, where appropriate. We
made decisions that enable us to better utilize our assets; we
focused on purchasing more effectively; and we set for
ourselves a clear set of goals, which were described in the
May 1991 MGMT MEMO. A major goal was to reduce total
Manufacturing spending by $500 million in FY92, as a first
milestone to world-class competitiveness. During the first
half of FY92, spending was reduced by over $400 million. By
the end of FY92, we are projecting to reduce spending from
the time these programs began by more than $750 million, of
which $400 million is non-material spending. In addition, the
FY92 population will be
reduced to
22,000 from 32,500 in FY90. Finally, a $160 million reduction
in Manufacturing inventory is being achieved with 4.4 turns in
FY92 versus 3.4 turns in FY91.
These results
could not have been accomplished without the leadership of the
Manufacturing Management Team and the individual efforts of
all Digital Manufacturing employees, with support from our
partners in the wider Digital community, all working toward a
common goal— to ensure Digital’s long-term success and
profitability.
As noted in the
previous MGMT MEMO, competitive pressures within the computer
industry are increasing significantly. To maintain our
competitive position, we must continue to invest carefully in
critical core technologies and to disinvest in those
activities that do not provide Digital with a competitive
edge. To survive in a competitive global market, we have to
understand and respond to total customer needs with effective
solutions. Our continued success is predicated on our ability
to respond rapidly to customers, to resolve their business
problems and to service them, thus enabling them, in turn, to
achieve a competitive advantage within their industry.
In response to
these challenges, the Manufacturing Management Committee has
committed to lead the re-design of Digital’s customer supply
and delivery system — also known as the "Supply Chain." We
intend to support accounts and business units by understanding
and responding to customer requirements. We are going to
implement a system that will establish the benchmark for the
industry. It will delight customers, by making it easy to do
business with us and by delivering quality and reliable
products, processes and services at competitive costs within
established, aggressive and predictable timeframes.
At the November
meeting of the International Management Committee (IMC), it
was agreed that we would lead the design and implementation of
this state-of-the-art Supply Chain system. This complex
re-design effort is currently being led by five change
management teams, which include senior managers and individual
contributors from throughout the organization. It is supported
by more than 100 senior people, a number that will continue to
grow as we move towards implementation. The global integrated
system we are designing must be able to respond rapidly to any
and all customer requirements, regardless of geographic
location and the uniqueness of the request. This system will
require changes in our current delivery model which we will be
implementing by the Accounts, Business Units, Manufacturing,
Logistics and Administration organizations working together
towards achieving what is best for our customers and the
corporation. To be successful, it will require the active
support of all elements of the company.
Time is not on
our side. We have been able to sustain ourselves through our
financial strength, flexibility and the relative loyalty of
our installed customer base; but our overall costs as a
company have been too high to provide profitability, and we
need to change if we wish to remain in business for the long
term. We can, however, turn this
situation
around. The potential for improvements in customer
responsiveness, overall cost and asset utilization is
extraordinary.
A major
challenge will be in keeping balance between our urgency to
reduce costs and the thoroughness needed for implementation.
Our success can be achieved only through the continued
commitment and collaboration of all employees working toward
the common goal to provide the most value for the customer for
the least cost and highest quality in the least elapsed time.
This is how we will achieve the leadership position that we
owe to our customers, shareholders, employees, and suppliers.
This is how Digital will not only survive, but flourish.
Our alliance
strategy aims to stimulate the future growth and development
of Digital in Europe. It will do so by building a network of
companies that will result in : o a greater market share,
o
more widespread distribution channels,
o
competitive products, and
o
a larger customer base.
In the past
eighteen months, Digital has acquired the computer systems
business of Mannesman Kienzle, the Information Systems
Division of Philips and the total or partial equity of
specialist companies in Germany, France, Sweden, Italy and the
UK.
Behind this
variety of acquisitions, alliances and agreements is a set of
common aims - to deliver to Digital’s customers what they
need, in the way that they need it and to focus on growth
markets and increased presence of Digital in Europe.
Both Kienzle and
Philips, for example, are highly-experienced in two important
areas of the European marketplace: banking and the small and
medium enterprise market sector. Furthermore, they offer
significant added value to strengthening our organization in
terms of service capabilities to the multivendor desktop
market.
The banking
expertise from Philips with their totally-integrated
front-office solutions will be combined with Digital’s
’back-office’ skills in networking and client-server
technology that tie together multivendor platforms.
The
ability to offer a much wider choice to our banking customers
is very important in a
market where we
have systems in nine out of ten banks and in most of the 2,000
member banks of SWIFT.
Two-thirds of
retail banking expenditure worldwide is made in Europe and
with this acquisition, Digital will have major share of the
European retail banking market.
A new company for the SME-markets
While overall IT
industry growth is slowing down to less than 5%, small and
medium enterprises (SMEs) are growing at about three times
that rate. To gain marketshare in this thriving $50 billion
market in Europe, we felt a new strategy was needed to reach
the SMEs faster and more effectively with a wider range of
offerings.
This high growth
market segment is a totally different business environment,
with different business practices and where solutions are the
critical success factor. The most appropriate was to form a
new dynamic organization, a new powerful legal entity —
Digital Equipment Enterprise — which will spearhead our
approach to the European small and medium enterprise market.
In principle,
this entity combines the SME expertise of Kienzle and Philips
into one dedicated organization geared to the particular needs
of this sector. More than 60% of Digital-Kienzle’s $500
million business portfolio is based in the small and medium
enterprise sector with particular emphasis in Germany,
Austria and Switzerland. Philips Information Systems Division
gains 40% of its $1.1 billion revenue from the SME market
spread throughout Europe.
In the UK,
Germany, France, Spain, Austria, Switzerland, the Netherlands,
Belgium, and Italy, separate Digital Equipment Enterprise
organisations are now operating alongside Digital’s existing
subsidiaries.
The streamlined
DEE companies sell directly with their own application
portfolio into vertical markets such as local authorities,
printing and publishing, trade and professional services
where we have major market shares. Complementary to this, DEE
will work with value-added resellers (VARs) to deliver
products and multivendor desktop services targeted to small
and medium sized customers. Digital Equipment Enterprise
anticipates that over time a majority of its business will be
coming through indirect, value-added channels. Furthermore,
DEE will focus very aggressively into the multivendor desktop
service market since this represents high growth opportunity.
Over the last
ten years, our company and the industry have gone through
dramatic changes — not only in products, but also in how those
products are sold. In 1980 we did about 40% of our business
through indirect channels — which includes OEMs (Original
Equipment Manufacturers), as well as selling through stores,
distributors and dealers. Today we move only about 30% of our
business through indirect channels. That’s happened at a time
when, industry-wide, the percentage of overall business going
through channels has been increasing sharply. Some of our
competitors have been increasing their use of indirect
channels and taking advantage of that growing market. For
instance, IBM went from a 2% market share of the overall
indirect business in 1979 to almost 18% share in 1990, while
Digital’s share was declining.
In the 1980s, we
shifted our emphasis from OEM to end-user markets, and were
immensely successful in that arena. The company’s business
increased by a factor of three, and we were very profitable.
But because of that success, we neglected the technical OEM
market, which had been the mainstay of our business, and
allowed our marketshare to dwindle. If we had just maintained
our technical OEM marketshare, that would represent an
addition $2 billion a year for Digital today.
Also in the
1980s, technology made it possible to put a computer on a
single chip. Digital, with the Micro VAX II design, was one
of the first to make full use of that technology. But we made
the strategic decision not to sell the chip to TOEMs, but
rather to focus on the needs of end users.
We received some
short-term benefit in the systems business from that choice,
but we left the TOEM market open for such semiconductor makers
as Intel and Motorola. Now to reestablish ourselves in the
Technical OEM market we have to make a fresh start.
Today, the
company’s strategy is to go after both end-user and indirect
business. The New Management System plays into this well. Many
separate, unique business strategies such as ours can flourish
at the same time.
In TOEM, we have
put together a worldwide plan to coordinate TOEM activities in
the various countries and to provide the overall direction we
need to rebuild this business. As a starting point, we are
focusing on the eight countries where we now get nearly 90% of
our TOEM business.
For instance,
our TOEM business in Italy is nearly as large as that in the
U.S. When the U.S. shifted its focus to end-user markets,
Italy maintained its OEM focus with an independent group of
dedicated sales people. As a result, Italy grew its TOEM
business by a factor of five over the last ten years. They
stayed close to their customers, knew what they wanted, and
worked to provide those customers with the right product.
Similarly.
Germany and
Switzerland tripled their Technical OEM business, and Japan
doubled theirs, in that same time frame; while the U.S.
decreased by a factor of three.
The
opportunities here are tremendous. The countries that kept
their TOEM focus have told us there is about a $12 billion
opportunity here, and we are only doing about $500 million
with these customers today.
Those countries
and our TOEM customers told us there are four things we need
to change. Our plan, approved by the Executive Committee,
addresses all of them.
First, we have
to change our business practices. Customers want to feel that
we are dealing with them on an individual basis and not as a
statistic. Pre-printed contracts are seen by many as an
example of that kind of arrogance.
Second, we have
to put in place a technical sales organization. To do this we
have created the "Design Win Program" which puts engineering
people in the Field who can deal directly with the customer’s
engineers and help them design our products into their
products. These are technical sales and sales support people
with systems engineering skills similar to those of Digital’s
sales people in the early days of the company. In fact, many
people are coming back into this part of the business because
they love to deal with technical customers and products. Right
now we have about two hundred of these people worldwide.
Like the rest of
the sales force, they report to account managers. In addition,
in each of the eight target countries, they also report to a
TOEM manager, who provides training and support and makes sure
their unique and global issues get the appropriate level of
attention. These TOEM managers report directly to the country
and dotted line to me. Each of them has a country plan, which
identifies the customers and outlines the investments the
countries should make, the products they’re going to sell, and
what help they need from me. Basically, I work for the country
teams to help them implement their plans.
TOEM business
requires a far-sighted approach. Initial costs are high, and
it can take years to win a new design. But then the revenue
benefits keep coming for years after, just like an annuity.
While the
country people manage the business within any fiscal year, we
also have "segment" managers who are responsible for finding
new business in particular industries. They tend to look out
two years and work very closely with the country people. They
often have to manage cross-country issues, where a sale signed
in one country brings in revenue elsewhere in the world.
The four segments we are focusing on now
are:
o process control and SCADA (Supervisory
Control And Data Acquisition);
o
discrete manufacturing; and automatic test equipment;
o
telecommunications (switching equipment); and
o
laboratory and medical equipment.
We
work very closely with the related end-user marketing
organizations.
This
business is "first-in, last-out." It’s "first-in" because it
takes about two years to get designed into a customer’s
application, so these customers want to know about the newest
technology we have as soon as they can. And we have to get
them that information before our competitors do. It’s "last
out" because a customer who designs our product in their
equipment is going to use it for five to ten years.
These
customers
are still buying PDP-11 systems, making that a very profitable
business 22 years after the product family was first
introduced.
Longevity
makes
this business profitable. That’s why the New Management System
is important to this business. It allows us to operate with a
different kind of business plan in which we make major
investments today to win designs and recover that investment
and make profits over time.
The
New Management System gives us the freedom to look at any
piece of OEM business in which we can make a profit. It also
empowers us to negotiate with Engineering, Services and other
internal organizations to create the right mix of products and
services to meet our customers’ unique needs. It is not
uncommon for $200,000 investment in special design work to
yield a multi-year $10 million piece of business.
With
the launch of a new generation of base products built around
"Alpha," the timing is perfect for this renewed emphasis on
TOEM business. We’ve been talking to a number of companies
about our Alpha technology. Some have already made tentative
commitments to us that they will design our products into
their products.
Because
we have made the strategic decision to allow other companies
to design our Alpha processor into their computer systems, we
see unique challenges and opportunities ahead. The companies
who buy those chips from us will be designing them into
computer systems that could compete head-on with our own in
end user markets. Under the New Management System, we see that
kind of competitive pressure as goodness. It will force us to
constantly improve the efficiency and quality of our
operations. Also, the external price we charge volume
customers for these chips will give us a realistic measure of
what internal transfer charges should be.
Our
goal is to be the best in the business at all levels — from
the chip all the way up to global systems. Our goal is to be
competitive and profitable at all levels of integration. With
this strategy, we have the opportunity for our
Digital-designed computer
architecture to
become a de facto industry standard. This fits in with the
Open Advantage campaign - our overall thrust as an "open"
rather than a "proprietary" company.
Last year,
Digital began a multi-year campaign to position itself as an
"open" company. Our goal is to be perceived as the industry
leader in open technology services and business practices. We
have consistently emphasized this theme in print advertising,
product announcements, sales training and briefings with
industry analysts.
The reactions to
this Open Advantage campaign have been very positive. Analysts
say we’re on the right track, taking the lead in redefining
and broadening the meaning of the word "open." They say we’re
putting other companies on the defensive. Customers say that
they’ve been waiting for us to take a strong position like
this. And sales people indicate that Digital’s newly stated
position has opened opportunities for them to present our
whole story to customers and to bid on new business.
When the
campaign began. Digital was perceived by customers and
prospects as one of the most "closed" companies. Starting from
that low point, we’ve made significant progress in just six
months.
At DECWORLD in
Boston this spring, Digital will tangibly present "proof
points," demonstrating the multi-faceted openness of the
company and the advantages of this approach in a wide variety
of industries and applications.
Now we’re ready
to give the campaign a "kicker" to keep it fresh in the eyes
of customers and the media. In the U.S., we’ll do that with
television advertising that visually and memorably emphasizes
our theme. These television commercials will help us reach our
partners, customers and prospects, as well as our sales force
and employees.
At both ten and
twenty years ago, computer purchases were mainly decided by a
relatively small number of technically knowledgeable people.
We could deliver our messages to many of them with print
advertising in narrowly-targeted technical magazines. Today,
computers aren’t just tucked away in labs. The market has
matured, and computers are pervasive throughout business. Many
people who do not read technical magazines are affected by,
use and depend on computers every day. They make their voice
heard when purchase decisions are being made. Image and brand
recognition have become very important factors in
computer-related sales.
Media research
indicates that in the U.S. there are 30 million professionals
and managers, many of whom have influence over the purchase of
computer products and services. With print advertising in
about a hundred different publications, we reach an audience
of about 10 million of them. We need to reach the other 20
million, but to do so through print would be prohibitively
expensive.
By selecting
television programs that attract the audience we want to
reach, we can reach cost-effectively about 80% of our 30
million target audience — with the sight, sound, motion and
memorable impact that television offers. We want to
dramatically present clear, concise, consistent, and
competitive messages that address customers’ needs.
To test our
commercials prior to shooting, we tried the story-boards on
our sales force and on customers and prospects from a variety
of industries. We wanted to know, "What’s the message you
receive?" Customers answered, "Digital works with the
customers as a team player... Digital enhances your existing
products and capabilities... Digital is no longer
proprietary... Digital is doing business in a different way...
Open Advantage means that Digital allows access to multiple
users’ products, software packages and tools." Digital sales
people said, "It has good impact... I’d like to see it as an
ongoing campaign... It says we’re not stodgy, like IBM. It’s
you and me working together. It shows we have a sense of
humor... Let’s do it!"
We have a
multi-year plan for investing in television advertising. We’ll
be using mainly sports, news and special programming that is
very cost effective for reaching the audience we want to
reach. These will include broadcasts of NCAA basketball
playoffs and seniors golf tournaments. We’ll use both cable
and network TV. The first ads are scheduled to appear in early
March.
The following
article is a summary of a speech Ken Olsen prepared for the
Annual Shareholders Meeting in November.
His actual
remarks on that occasion differed from the script, as he
responded to the immediate needs of the audience. This text
provides a clear summary of Digital’s product and service
offerings.
The world is in
a recession that affects most industries. It is not clear when
it will end, but we have a strategy which takes this into
account.
Our business is
roughly half services and half products. Our services strategy
is one reason we’ve been able to increase our revenues in the
face of the recession and cutthroat product pricing.
The services
side of our business is split roughly fifty-fifty between
supporting new and existing Digital and competitive systems,
and integrating new and existing systems from Digital and
other manufacturers.
Services is an
exciting business because we do so many different things for
so many interesting customers. Building services capabilities
requires significant capital investment. It involves a large
investment in people. It takes time to train people and give
them experience. But services makes Digital unique in that we
can do the whole job for the customer. Our services business
includes nine different offerings.
Hardware Product
Services provide the customer with a single source of support
for all Digital hardware and most competitive products. We do
the whole job.
Software Product
Services provide a single source of support for remedial,
advisory and distribution services for both Digital and
hundreds of non-Digital operating systems, layered software
and applications.
Desktop Services
supply and support solutions for Digital and non-Digital
desktop environ- mentsc including personal computers and
workstations from different manufacturers, applications from
different software developers, and local area networks.
Customer
Training trains 330,000 students each year. The number of
classroom hours that we teach places Digital on a par with any
of our largest universities. Education is an important
business for Digital, in part because we make money on it, but
mainly because it is our way to teach our customers what they
need to know about our systems, and what it takes to put
systems together to get a job done.
Consulting
Services consult on technology, management, applications and
information systems. They sometimes even get involved in
architecture and construction.
Network
Integration Services tie everything together for a customer.
We will dig holes and bury cable. We will string lines on
poles. We will build fiber optic and microwave links.
Operations
Support Services provide customized single-source service
solutions to help customers integrate and operate their
multivendor information solutions, focusing mainly on service
management, operations management and logistics management. We
use a tool we call NAS — Network Application Support - to
customize multivendor systems so that they all work together.
Application
Project Services provides the industry’s most advanced custom
application and hardware project services, to custom fit
technology solutions to our customers’ operations.
Systems
Integration is different from our services business. Systems
Integration is where Digital, acting as the single point of
contact and responsibility, will plan, design, implement and
manage the whole job for the customer. We can automate a whole
factory or integrate all the desktops in a small office. We do
that very quickly for a low price.
We also supply
products to and work with other systems integrators including
a half dozen of the most significant companies in the market.
They like our NAS software for the same reasons we do, and
they like to work with us.
Together,
Systems Integration and Services amount to about 40,000 people
— a very large part of our operation.
One reason we’re
so successful in both Service and Systems Integration is that
we sell both standard computers and computers that meet
standards.
Standard
computers are computers built by different manufacturers.
These systems are almost identical from manufacturer to
manufacturer. So customers buy them from the manufacturer who
can give them the best quality and the best service. We
support UNIX* on all our platforms and all our computers. UNIX
has historically been an important part of the VAX offering.
In fact, much of the development of UNIX was done on VAX
systems.
We support UNIX
on our workstation and server products built to ACE standards.
This software is based on Digital’s ULTRIX operating system
and The Open Desktop* from the Santa Cruz Operation, and will
conform to the Open Software Foundation specifications. We
also offer UNIX System V and support SCO* UNIX as well as
MS-DOS* on our network PCs.
The extent of
our commitment to UNIX may come as a surprise. Our competitors
like to say that Digital and IBM locked the user into
proprietary operating systems so software would not be
transportable. That's not true at all. We always had
applications that ran on different systems. Transportable
software is not new. In the past, if you wrote software in a
standard language — FORTRAN, COBOL. C, ADA, there were about
17 standard languages in all — you could move it from one
system to another because each language had a standards group
that maintained a set of rules that, if you followed them
carefully, let an application run on any computer that
supported that language.
An important
part of our commitment to UNIX is the Advanced Computing
Environment (ACE) initiative. ACE started with 21 companies
who laid out standards for PCs and workstations — UNIX and
MS-DOS on the PC. and UNIX and Microsoft NT (the equivalent of
MS-DOS) on the
workstation. These standards mean that
the same software will run on both PCs and workstations. ACE
also standardized on Intel computer chips for the PC and the
MIPS chip for workstations. Since the initiative started, over
200 companies have joined. This is a major step towards
developing standard computers that are truly compatible, in
the same sense that PC software is compatible.
In talking about standard systems, it is
important to remember that the customer buys from the computer
manufacturer who offers the best service, the lowest price,
and the best installation and integration.
Our VAX VMS systems also meet standards
while providing capabilities not found on standard systems.
That’s why VAX VMS systems are still the popular solution in
critical applications — because of the discipline that has
gone into the VAX VMS architecture. This position is not being
challenged by our competitors.
VAX VMS is the newest computer operating
system in the industry. It’s just 15 years old. UNIX and
mainframe operating systems are a lot older.
VMS software was written to do everything
our customers ever wanted in an operating system. The same
VMS software works on a machine that's small enough to hold in
your hands, and up to a mainframe costing a million-and-a-half
dollars. This means that you can start small and grow. It
means that if you have a two-person office in one place and a
giant office somewhere else, both offices can use the same
software. And same software you wrote years ago will run on a
new VAX computer you buy today and on the VAX system you buy
ten years
from now.
Also designed into the VAX architecture
is the ability to cluster. This means that almost any number
of VAX systems, almost any number of disks could be put
together in a single system. Business applications lend
themselves to this arrangement. You can buy a small cluster
and grow it as your applications grow.
The VAX family is the paradigm against
which all computers are measured. It does more. It’s planned
to do more. It is the most modern computer you can buy. It
provides the highest level of data integrity so you won't lose
data once you put it into the system. You get out what you put
in.
VAX systems did have one drawback — they
were not as fast as simpler RISC computers. On October 30.
that changed. We incorporated a new chip and our VAX systems
instantly became faster than almost all RISC/UNIX machines.
They also became became price competitive. Today we’re faster
and cheaper per unit of computation than the competition.
This new chip is very interesting. We put
1.3 million transistors on a chip the size of
my thumbnail.
With this chip. VAX VMS systems provide better performance and
better price performance than RISC systems from IBM, HP. and
Sun.
And we have
another chip coming, code named "ALPHA." It is very important
to understand where ALPHA fits in Digital's strategy.
We’re developing
both OSF/1 (UNIX) and VMS systems that will use the ALPHA
chip. The ALPHA chip will go into both standard systems and
systems that meet standards.
People were a
little worried when I said I wanted to show ALPHA to you
today. They were worried that I would try to sell it. But I'm
not going to sell ALPHA today. Let me tell you why.
Until
now, the fastest chip you could buy had a 50 MHz clock rate
and that chip had to be recalled because it didn’t work
properly. Here you see ALPHA working at twice that speed — 100
mHz. And if you gave ALPHA its head (you'd have to pay the
price for fast memory), it would go twice that fast — 200 mHz.
ALPHA will run
both OSF/1 (UNIX) and VMS software. The ALPHA here on the
stage is using UNIX to create the pattern being generated on
its screen.
Why
am I telling you not to buy ALPHA today? An operating system
like OSF/1 (UNIX) or VMS or MS-DOS or NT is not something you
buy and just put on a computer. An operating system has to
convert the language you write your program into all the
peculiarities of the computer. A mature operating system does
all the chores, cuts through all the red tape, and provides
all the aids you need to get your work done. An operating
system is very complex, very expensive to develop. Every
operating system is unique to the architecture it runs on.
That’s one reason every UNIX is different. And while every VAX
computer is the same from the customer’s viewpoint, we have to
adjust the VMS operating system every time we develop new VAX
technology. Fortunately, we’re getting pretty good at this but
introducing a new VAX computer was a big chore.
The
ALPHA operating systems — both VMS and OSF/1 (UNIX) - are
particularly complicated. The ALPHA instruction set is
different enough so that it will be a year before the new
operating systems are ready.
It
cost hundreds of millions of dollars to develop and make the
ALPHA chip. The cost of making future generations of ALPHA
will be hundreds of millions of dollars more. But that's the
nature of the business we're in. It is a business where you
have to do many things well.
As
I said earlier, one of Digital’s great strengths is that we do
the whole job. We are not a one product company. We’re not
simply selling standard products at commodity prices. We add
value to standard systems. And we invest heavily in developing
systems that meet standards while providing capabilities not
found in standard systems. And we provide the services and the
system integration our customers need to be competitive in a
changing economy.
Times
are also tough for our investors. In this economy we’re not
doing what we should for our stockholders. They're unhappy and
we’re unhappy for them. But inside the company we’re more
excited about our products than ever before. The job we are
doing for our customers is more satisfying, more exciting, and
in general so much better than ever before. So, even though
the economy is not letting us be as profitable as you would
like, the things that will count in the long run are in better
shape than ever.
*
UNIX is a trademark of UNIX Systems Laboratories. The Open
Desktop and SCO are trademarks of Santa Cruz Operations, Inc.
MS-DOS is a trademark of Microsoft Corporation.
For
years our corporate databases have contained only
machine-entered information. If it didn’t come from a punch
card, tape, keyboard or wand, it didn't make it into the
database. Graphics came later; but even with that addition,
the typical corporate database only contains less than five
percent of the data that the corporation really needs to run
its business. Much valuable information comes in other forms
and is filed in other ways, or is simply remembered or lost.
For
example, picture a hospital room with a patient on the
operating table. At the same time, a pathologist in a lab
elsewhere in the hospital (or perhaps even in another city) is
examining a tissue specimen from this patient and the image of
that specimen can be seen on a TV monitor in the operating
room. In this state-of-the-art scenario, the physician does
real-time analysis using that image to determine the
appropriateness of surgery. Yet, today, that real-time
information is not captured as part of the patient’s record.
All that is kept is a simple freeze-frame video image and a
voice.
Often
in business, we wish we could retrieve and forward information
that was passed on during a conversation in a meeting or over
the phone. Often, too. we need to convey or save a personal
signature that serves as confirmation of approval. Those
capabilities are here or are coming soon. It is time to begin
to think in terms of making "people-literate computers" rather
than training "computer-literate people."
The
charter of the Image/Voice/Video Product Creation Unit is to
generate system level products that empower our customers to
index, file, and retrieve all of their meaningful data in
image, voice or video form.
We
have announced our first wave of products. DECimage EXpress
V2.0 is our significant entry into document imaging. Our voice
mail is the first mail product in the industry that is truly
information-based. Running on VAX computers, it is primarily
sold to information systems (IS) people rather than to
telecom managers.
These
products offer a higher level of functionality than the
competition, at a cost that is at or below competition for
popular configurations.
Our
first multimedia announcements will come later this fiscal
year. And next year we expect to integrate all media types
into distributed databases. This will be accomplished through
the new Distributed Media Services Architecture, which permits
accessing any media type of information, anywhere in the
network, by whoever has a right to it and needs it.
To
provide the highest level of system functionality and
performance in the industry, we sometimes go outside of
Digital to obtain leading-edge hardware and software to add to
our basic image, voice and video capabilities. One addition is
a content-based retrieval capability based on a "fuzzy logic"
search. ("Fuzzy logic" is the ability to make a precise and
correct determination based on imprecise data.) Another
addition is the ability to remove fixed text from forms so
that only the variable data is picked up by Optical Character
Readers (OCRs) and stored. This greatly reduces the amount of
storage and network resources and, at the same time reduces
optical recognition errors.
Another
product
being offered with DECimage EXpress software is Image Now,
intended for customers who have a need use images with
existing IBM forms-based applications. Image Now allows this
to happen and without changing any of the application code.
This capability can result in savings of hundreds of thousands
of dollars when compared to rewriting applications.
The
support for these products is in place now. Sales training has
been held in the U.S., Europe and GIA. Also, sales and sales
support people have attended a two-week training session on
imaging technologies. And an Image Partners Program has been
formed, with over fifty sales support partners from around the
world.
Our customers and potential customers
face the difficult challenge of responding to waves of change.
One third of the companies that were on the 1970 FORTUNE 500
list aren’t in business anymore, and many more will probably
fall by the wayside in the coming decade. Acquisitions,
re-organizations and alliances are all part of today's
business climate.
In reaction, many companies are
re-thinking their information technology strategies, looking
for the ability to respond quickly to changing markets and
organizational needs. Many use the term "Open Systems" to
express their objective.
Some vendors try to give this term a
narrow meaning, tailored to what they have to offer, equating
it to the UNIX* operating system, or hardware systems that can
be licensed, or just volume products. But customers are not
really looking for any single operating system, or hardware
platform or vendor. They want multiple technologies from
multiple vendors because they are well aware that no one
vendor who can solve all of the business problems they are
likely to face.
Some people believe that the best way to
achieve the goals of Open Systems is with standardized
products. Instead, Digital emphasizes that industry standard
interfaces should be the building blocks of Open Systems. A
consistent and disciplined implementation of industry standard
interfaces is the best way to protect a customer’s investment
in technology and to achieve the connectivity, portability
and interoperability that customers want today. At Digital,
the strategy for building such open systems is called Network
Application Support (NAS).
Enterprises need systems that offer more
that just wire connections and file sharing. They need
applications that work together ("interoperability")
throughout a global network of hardware and operating systems
from many different vendors. Enterprises want to be able to
incorporate technologies, and Open Systems into their
computing environments, without discarding existing
investments and disrupting users. They want the flexibility to
change in the future, and the freedom to make their own
choices, with the security of knowing that any new elements
they introduce will work with existing components. They want
applications to be available on all the systems they use and
independent of the vendor platform being used.
They want to be able to combine the
cost/performance, gradual growth, geographic proximity,
availability, and reliability advantages of distributed
computing with the coherence and functionality of centralized
systems. They want integrated distributed computing that makes
it possible for everyone in the enterprise to get all the
information they need, wherever they need it, from whatever
kind of system it is on. whenever they need it, and in
addition, they want innovation without losing flexibility.
To
create this level of coherence and functionality in a world of
heterogeneous, multivendor, distributed computing requires a
standard way of doing things and a standard set of services,
such as NAS. NAS adheres to a well-thought-out, inclusive
architecture that incorporates vendor-independent industry
standards.
NAS carries an architectural approach to
problem-solving and a dedication to standards into the
multivendor computing environment. As a result of this
approach, NAS is able to provide services that enable
application interoperability and portability across hardware
and software platforms from multiple vendors.
Today, we define "Open Systems" as "a
vendor-neutral computing environment compliant with
established and emerging industry standard interfaces." In
other words, Open Systems are a way of delivering products,
services and business practices.
But Open Systems require much more than
just the technology, although that is a very important piece.
In a sense, Open Systems are more a process than a product.
The fact is that Open Systems are "built, not bought." This
means that whoever wants to build Open Systems must have a
well-defined process and architecture. Open Systems also
require an information technology vendor to provide services,
support and business practices that can help users move, at
their own pace, to the desired degree of Openness they want to
build. At Digital, we have extended the concept of Open
Systems to the willingness to do whatever it takes to solve
the user’s problem with Open technologies, Open Services and
Open business practices. Digital’s term for this is the Open
Advantage - the freedom to choose and the power to use the
best solutions available from Digital and its partners, or
from other suppliers, while enhancing user’s existing and
future investments.
In the future, we expect Open Systems to
take on an even broader definition, reflecting how companies
structure themselves to communicate within their own
organizations, with their customers and with their suppliers.
It will focus on how a company is able to anticipate, respond
to and embrace change.
*
UNIX is a trademark of UNIX Systems Laboratories.
The U.S. Personnel Policies and Procedures
Manual now includes a statement of the company’s "Life
Balance Philosophy:"
"Digital
Equipment Corporation, in keeping with our philosophy of
valuing our employees and meeting our business objectives,
wishes to provide appropriate opportunities and flexibility
(on Dependent Care and Alternative Work) to enable our
employees to reach their full potential at work and in their
personal goals. We believe that when employees are performing
to their full potential, the corporation will as well.
"In order to meet our business objectives,
we believe Digital must provide an environment in which an
employee can join the company and, throughout his/her career,
encounter systems that support and encourage personal and
professional growth."
This statement is intended to serve as the
foundation for related programs and practices which will
differ from country to country throughout the world, in
response to local needs and consistent with local laws and
practice.
One of the cornerstones necessary for
developing flexible alternative work programs, "headcount
equivalency" has already been adopted worldwide. This means
that, for accounting and budgeting purposes, the number of
people working for the company is based on the full-time
equivalent of the number of hours worked. Previously, all
employees — even those who worked only a few hours a week —
were counted equally. This inhibited managers from allowing
job sharing or hiring people on a part-time basis. For
instance, if they had 40 hours of work that needed to be done,
they probably wouldn’t hire two people to work 20 hours each,
since that would give them a higher headcount than if the work
were done by one employee. Now managers have much greater
flexibility in making the appropriate match between employee
preferred schedules and the skills needed. The company as a
whole switched to the new accounting scheme in the first
quarter of this year, resulting in a one-time lowering of the
total headcount by about 1,700 people.
There are a variety of other ways in which
managers can help employees balance the demands of home and
work. In some cases, it is possible to adjust the starting and
ending hours even though the employee works the same total
amount of time. This can be helpful in avoiding rush-hour
traffic jams, and juggling day-care schedules.
Some groups have also experimented with
alternative work places — either working at home or setting up
a satellite office at a Digital building closer to the
individual's home. These kinds of arrangements are a natural
outgrowth of the cultural environment in Engineering from the
start of the company. Digital has long acknowledged the
creativity of individuals and the fact that their productivity
should not necessarily be limited to the hours they are
sitting at a desk in the office. For years, many Digital
people have had systems at home so if they have a brilliant
idea at four in the morning, they can connect to the network
immediately. It’s natural for people who have worked that way
to integrate their work life and their personal life and
arrive at the unique work arrangements that are most
appropriate for them. Those kinds of arrangements are simply a
matter of the manager and the employee agreeing on the best
way to get the work done.
There are a number of other related ideas
that the company is considering but has not yet approved or
turned into programs. For example, we are looking at the
possibility of adding to or expanding our leave of absence
policies to provide for needs that might not now be met.
Basically, in response to the New
Management Systems, and the company-wide drive for greater
business flexibility, we are trying to provide managers with
tools they need to make changes in traditional work patterns,
to empower them to do what’s best for the company and best for
the employee, rather then constraining them with unnecessary
limitations.
At the same time, we’re responding to
changes that are affecting society as a whole — the fact that
in the U.S. so many households consist of working couples or
single parents, and the fact that more and more employees not
only have to care for children but also for older relatives.
We want to give employees the flexibility they need to avoid
burn-out due to the stress of non-work commitments and
responsibilities. There are also valid non-family reasons for
personal leaves of absence. Some employees would like to take
time on their own to do volunteer work to help with social
issues — such as helping the homeless. We believe that the
more successful and fulfilled employees are in their lives in
general, the better prepared they will be to meet the
challenges of the workplace.
Medical advances have dramatically changed
our approach to AIDS in the workplace.
When we first started our AIDS Program
Office, early in 1988, our main thrust was to educate people
on what AIDS is and what it isn’t - the myths, the realities
and how to protect yourself. We wanted to get across the
message that this illness is not contracted casually, and
hence all employees should feel safe in the workplace. We
still need to reinforce that message because AIDS only becomes
real to people when they are directly confronted with it. It’s
one thing to know about AIDS at an intellectual level, to have
read about it or even attended a seminar on the subject; but
when it hits home, through knowing someone who is afflicted,
people can easily be overwhelmed and react irrationally. We
need to be available with another level of education and
counseling when that happens.
Today, in addition to that education work,
we try to encourage people to find out if they have contracted
the HIV virus (Human Immunodeficiency Virus) and, if so, to
seek health care early. A few years ago, AIDS was seen as an
acute fatal disease. There was little hope for treatment, and
death came within a short period of time. Now, due to medical
progress, we see AIDS more as a chronic,
manageable disease. People are living longer; they’re working
longer; and they’re staying in the work force longer. Still,
ultimately, it is fatal 80% of the time, but lives are being
extended significantly, especially when treatment is started
early.
In the early 1980s, 90% of people who
developed AIDS died within two years. Now, the use of drugs
such as AZT and ddi can act as a barrier to slow the disease
and prolong life. Today, 67% of people who develop AIDS die
within 12 years. The statistics are still horrifying, but the
progress is significant.
When we started our AIDS Program Office,
there was little that could be done medically for people who
had the HIV virus, and people chose to be tested for the virus
mainly to relieve their personal anxiety of uncertainty when
they thought they might be at risk; and so they could have
some assurance that they had not infected others with whom
they had been sexually intimate. Part of our role was to help
those who wished to be tested to identify a credible resource
- one that ensured confidentiality of test records, and that
had pre- and post-test counseling to help a person fully
understand the results.
Today, we know that the virus can remain
dormant and not produce any noticeable symptoms for as long as
twelve years, and we strongly advise anyone who has been at
risk at any time in the last twelve years to be tested. This
is important because the earlier the virus is detected, the
more effective the latest treatments are and the better
prepared your body will be to accept them. In addition, there
is some hope of surviving long enough for medical science to
develop a cure.
Recent data from the U.S. Centers for
Disease Control indicate that AIDS is not just confined to
large urban areas, but rather is spreading rapidly in smaller
cities — places where people don’t expect it and hence might
not take the same precautions.
While information regarding AIDS is kept
strictly confidential when the employee so wishes, I know of
well over a hundred Digital employees who have died of the
disease or who have lost family members to it in the last five
years. And we can be sure that the number of people today with
the HIV virus who work for Digital, or for any other global
company of comparable size, is far greater than that. They are
scattered through many different geographies and functions.
AIDS in the workplace is not a theoretical matter, but rather
an actuality that everyone, and especially managers, have to
be prepared to deal with.
Part of my role is to advise managers and
help them understand the unique characteristics of this
disease, with its recurrent episodic bouts of illness followed
by recovery, as well as the effects of the medication used to
control the illness. We also help them work through the
intricacies of managing performance around the disease and to
help them understand Digital’s commitment to accommodation.
This includes the same steps we would take
for any person who is seriously ill,
including restructuring the job, shortening the work week, and
perhaps providing for working at home. Such accommodations are
tricky to manage in any case, but are particularly so today,
with all the stress of changes in our business and the general
economic downturn.
We try to keep people in the work place as
long as it makes sense for them and for us, in partnership. We
have employees who are healthy and productive, but who are HIV
positive, who may be on medication, and for whom the "secrecy"
of the condition is a source of counter-productive anxiety. We
want to create a supportive workplace in which they feel
comfortable about informing their co-workers and friends. We
have examples where that has worked very well.
On the other hand, afflicted individuals
have to recognize that even though we want to keep them
working, there will come a time when it’s not in their best
interests to do so. That’s a very painful decision.
Basically, we have three AIDS-related
messages for employees today:
o If you believe you might be at risk, get
tested; and if you have the virus, seek medical help as early
as possible.
o Remember that everyone is vulnerable.
AIDS knows no discrimination.
o Understand that you are probably going
to know somebody with AIDS, and that you may be working with
someone with AIDS; so try to educate yourself and to prepare
yourself to act appropriately, with sensitivity and
consideration.
AIDS education is a process — it does not
happen easily or quickly. We have made a significant start by
getting into the fight early and the results have been very
encouraging.
(For further information, contact Paul
Ross at the HIV/AIDS Program Office. DTN 223-9580)
Digital is entering Russia and Ukraine
with sales and service offices, an education center, and a
long-term commitment to providing information technology and
related services. The company plans to establish a leadership
position in these potentially large computer markets,
expanding into other neighboring former Soviet republics as
their requirements become clear.
Digital will market, sell and service a
wide range of products, in full compliance with all applicable
export laws. Contracts have already been signed with several
new customers for projects in the automotive, aviation, hotel,
finance, and natural resources areas. Digital has identified
nearly 50 projects for which proposals are under
consideration. Digital also supports a number of
multi-national customers that operate in these countries.
In addition, Digital signed an agreement
with the Academy of National Economy to open a Digital
Education Center in Moscow, equipped with Digital computers
and applications to be used for training. The center will
house a demonstration center and will feature visiting Digital
lecturers from various countries. The Academy of National
Economy is Russia's leading training center for senior
managers, offering courses on business, technical, and
economic subjects to over 3,000 people per year.
Russian headquarters is in Moscow, with an
additional office to open soon in St. Petersburg. The
Ukrainian office will open soon in Kiev.
Peter Sipos, the general manager
responsible for the republics, has been working to establish
Digital’s entry into these markets for the past year. "Digital
has taken a long-term view, and we intend to invest
accordingly as we build our new organization," he notes. "In
the early stages, at the COMTEK exhibition in Moscow last
April, we saw high interest from potential customers,
government officials, and the news media. In addition to sales
opportunities, we see tremendous technical talent in the
republics. In particular, we are seriously considering ways to
utilize the significant local software development
capabilities to work on projects in areas such as telecom,
banking and finance, manufacturing, aviation, energy, health
care, education, and public administration."
This is the latest in a series of Digital
investments over the past two years toward establishing a
lasting presence in the emerging markets of Central and
Eastern Europe. Digital had previously opened wholly owned
subsidiaries in Hungary, Czechoslovakia, and Poland.
Dr. Thomas P. Gerrity, dean of the Wharton
School of the University of Pennsylvania, has been elected to
Digital’s Board of Directors. He founded The Index Group, Inc.
— one of the world’s leading consulting firms in information
technology management — and served as its chief executive
officer from 1969 to 1988. In 1988, Index Group became part of
Computer Sciences Corporation, for which he served as
president of CSC Consulting, the commercial professional
services group of Computer Sciences Corporation.
A Rhodes Scholar in industrial economics
at Oxford University, Dean Gerrity received his doctorate in
management from the Sloan School of Management at the
Massachusetts Institute of Technology (MIT). He also served on
the Sloan School’s faculty for four years, between 1968 and
1972. He is a director of the Federal National Mortgage
Association (Fannie Mae), Sun Company, Inc., and Technology
Leaders L.P. His other business and scientific affiliations
include the Society for Information Management, Data
Processing Management Association and the Institute of
Management Sciences.
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