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Volume 4 Number 2                                                                          March 1985


Digital Names Two Vice Presidents


Digital Broadens OEM Marketing Role


Field Service Organization Realignment


Digital Announces Office Workstation Strategy


Protecting The Environment by Jim Rogers, manager, Corporate Energy and Environmental Affairs


U.S./Japan High-Technology Trade Relations by Bruce Holbein, manager, Government Relations


Trends In Information Management — Transparent, Distributed Access To Data


Update On Digital's U.S. Health Care Cost-Containment Efforts

Digital Names Two Vice Presidents


Bill Helm and Jack MacKeen have been named vice were effective on March 1.


Bill Helm has been named vice president of Field Finance, reporting to Jack Shields, vice president, Sales and Service, adn to Jim Osterhoff, vice president and chief financial officer.  He also continues as Treasurer.  Bill joined Digital in 1977 and has held a variety of positions within Treasury. He was the Finance and Administratino manager for Digital Europe from 1981 through 1983 and, in August of 1983, was named Treasurer of the corporation. Last October he was given the additional responsibilities of Field Finance management. Bill eearned a Bachelor of Arts degree in Psychology from Princeton University, and a Master of Business Administration degree from Harvard University.


Jack MacKeen has been name vice president of the the Original Equipment Manufacturers (OEM) Group. He will continue to be responsible for marketing Digital's computer systems and microcomponents to Digital's technical OEM base. Jack First joined Digital in 1961 as a systems engineer, but most of his positions have been in marketing. He has been heavily involve din Digital's OEM business since 1972.  In July 1979, Jack was named product group manager, Microcomputer Products group. In October 183, he was named product group manager for the Technical OEM Group and, in July of last year, assumed the position of Market Group manager for the OEM Group. Jack holds a Bachelor of Scinece degree in Electrical Engineering and a Master of Science degree in Engineering Management from Northeastern University. He also is a graduate of the Program for Senior Executives at the Massachusetts Institute of Technology.

Digital Broadens OEM Marketing Role


"Support of current OEMs and the development of relationships with new ones continues to be a top priority for Digital," said Ken Olsen, president, in announcing the appointment of Jack MacKeen as vice president of the OEM Group. "Since the range of markets served by our OEMs will always be far

broader than the markets we serve directly, we will continue to rely heavily on them, and they on us.


"With Jack's appointment, we are underscoring Digital's strong commitment to our large and growing base of OEM partners," Ken added. "Digital started the computer Original Equipment Manufacturer (OEM) business 25 years ago when Digital recognized that OEMs could help us sell specialized needs in areas of the marketplace that we couldn't reach effectively or chose not to invest in directly. The result has been the proliferation of our products across scores of application areas."


Jack MacKeen has been asked to significantly increase the scope of the Technical OEM function. This will involve taking a more strategic view of how Digital's assets can be used to the mutual advantage of Digital and its OEMs. For example, strengthening relationships with OEMs will encourage them to create additional applications for their customers based on Digi­tal's architecture.


"We expect the rapid increase in available computing power, coupled with distributed computing and decreasing prices per unit, to have an explosive effect on the need for new applications. The cost of developing and sup­porting all of these application requirements could be prohibitive to any computer company undertaking the task single-handedly," explained Jack. "We depend on OEMs for help in accessing new markets, and they depend on us to provide the full range of compatible architecture to build upon."


Given Digital's philosophy of "One Company, One Strategy, One Message" and the size of the direct sales force -- which is now approaching 7,000 world­wide -- many opportunities exist for establishing strategic, complementary relationships to make optimum use of the strengths of both Digital and its OEMs. The increased role of OEM Marketing means Digital must view OEMs and distributors as an integral part of the corporate strategy while, at the same time, protecting their legitimate requirements to operate as separate business entities. Identifying and fostering these strategic relationships will be a major focus of the OEM Group.


"Our goal is simple," says Jack. "We want end users to get the Digital-based solution that best fits their needs, regardless of whether that solution is provided by Digital, its OEMs, software partners, or complementary combina­tions of these sources. The program development work we have done is de­signed to achieve this goal worldwide. We know we have a lot to offer OEMs, particularly because of the strength of our VAX architecture, our leadership position in networking and distributed systems, and our many years of working with them.


"Digital is the leading supplier of computers to OEMs, and we have over 50 programs that currently help us build relationships with these companies. Last year, we provided a catalog of OEM programs to the Field to help them in their selling efforts. We continue to add to this catalogue, and are currently involved in a major undertaking with the Computer-Aided Engineer­ing and Manufacturing (CAEM) Group. This new effort will create a 'system cooperative marketing partner program, designed to share credit for sales made jointly by OEMs and Digital sales people. It will parallel the existing CAEM application Cooperative Marketing Program efforts, which by helping builders promote their products, position Digital as a leader in engineernig and manufacturing markets.


"The program pilot, which will involve Mechanical Computer-Aided Design (MCAD) OEMs, will be implemented this spring. We expect the pilot to be successful and plan to extend the program as quickly as possible to other marketing groups in the company.


"Digital is the only vendor in the industry to offer a single architecture from the board level through to clustered super-minicomputers. This covers a price band from several thousand to hundreds of thousands of dollars," emphasizes Jack. "We believe that this product range, coupled with our mar­keting programs, provides an excellent platform upon which OEMs can base their solutions."


Field Service Organization Realignment


Due to the increasing size and continuing changes in the Field Service business worldwide, the organization has been restructured to provide focus to various geographies. Don Zereski has been named U.S. Field SErvice Manager, reporting to Dick Poulsen, vice president, Field Service. Three U.S. Area Field Service manager will report to Don, who will begin his new assignment in July.


Joerg Rider has been appointed European Field Service manager, effective July 1, when Don Zereski is scheduled to take the new U.S. Field Service posiition. In the interim, Don and Joerg will work closely to assure smooth transition in Europe, and Don will be involved in the development of the U.S. budget and business plan for the coming fiscal year.


Don has been the European Field Service manager since April 1983. Before that, he was the General International Area Field Service manager for 10 years.  He has also held engineering and product supoort positions during his 22-year career with Digital.


Joerg has been the German Field Service and Peripherals and Supplies Group (PSG) manager since July 1982. He has also held various other management positions in Germany.


Digital Announces Office Workstation Strategy


Earlier this month, Digital announced its office workstation strategy along with supporting products, including the new Rainbow 190. At the press conference, Ken Olsen, president, reaffirmed Digital's commitment to per­sonal computing as part of this overall strategy.


A top-of-the-1ine office workstation for personal computing, the Rainbow 190 combines the best features of the DECmate and the Rainbow. It provides word processing software (WPS-PLUS) that is compatible with that on the VAX and DECmate families and is fully integrated with the VAX family for full office functionality, including DECnet networking capabilities.


Digital now has a family of office workstations ranging from VT200 terminals to the Pro Office Workstation. When purchased in quantity:

o for around $1000, the VT200 series provides connection to all office software on the VAX;

o for around $2000, the DECmate III provides compatible word processing and connection to VAX for mail and documents;

o for around $5000, the Rainbow 190 provides all of the above, plus industry standard computing;

o for around $7000, the Pro Office Workstation provides all of the above, plus Application Development Environment.


They all have a common user interface (ALL-IN-1) and a common word processor (WPS), and all allow off-line mail editing and automatic mail pickup and delivery.


Personal computing


Last month, external press reports suggested that Digital was leaving the personal computing business. At that time, in a statement to employees, Ken Olsen said that "contrary to these reports, Digital is committed to personal computers as a vital part of our total product strategy."


Personal computers, especially those which integrate easily with Digital's other computer systems, are of vital importance to the company's product strategy. Digital will continue to market and promote Rainbows in all channels within the strategy, and will support existing and future Rainbow customers. Digital's policy of preserving and enhancing customer invest­ments continues to be a key element of the product development with personal computers as with all products.


In the manufacture of personal computers, Digital is improving efficiencies through major new technologies like LSI. In addition, the company is reducing overhead costs by simplifying the organization and structure, improving inventory management techniques and continuing to increase the quality and reliability of products.


In general, Digital is committed to a goal of reducing manufacturing costs, particularly overhead costs. This issue is being addressed by reducing the complexity of the manufacturing organization, which will allow us to down­size our indirect labor force to bring it more in line with our direct labor force. To facilitate this, a training and reassignment program for affected employees is being put in place. Other manufacturing efficiencies will be achieved by reliance on lower-cost, higher-functionality components and a program of "designing to manufacturability" which results in higher quality and faster time to market. Ken noted that Digital's "success in these areas has allowed us to nearly double our sales without increasing our manufac­turing population over the last three years."


Protecting The Environment by Jim Rogers, manager, Corporate Energy and Environmental Affairs


Our goal is to deal with environmental issues before they become problems. It costs a lot to correct such problems once you have them, and it's much better to anticipate and take steps to make sure a problem doesn't happen.


Our policy is to comply voluntarily with all environmental regulations and do so in a sensible, cost-effective way. Digital's standards related to public health and protecting water supplies and the environment apply to our operations around the world. Even if local laws and regulations do not deal with these issues, we want to apply proper standards in all of our facilities.


We have handled our wastes very differently than electronics and computer companies in the Silicon Valley. Most of their problems were caused either by improper disposal of waste or by leaking underground tanks. The only tanks we store underground are fuel tanks, and we test those tanks and have a program to make sure they are sound. We do not store hazardous chemicals or wastes underground. We store them above ground, in tanks constructed so any leak would be contained and could not seep into the ground. We use such tanks for temporary storage of raw materials we purchase in bulk and also for waste materials accumulated prior to disposal.


In other words, we try to design our facilities so they don't have features that cause environmental problems. One of the reasons we probably have fewer problems than some of our competitors is that we're newer. Most of our manufacturing facilities were built after 1970 and were designed with environmental concerns in mind. And Digital has invested millions in treatment facilities to assure that any water leaving our facilities does not contain toxic materials.


People who are knowledgeable about environmental issues can help prevent problems. Therefore, we want to make our employees aware of areas of potential concern. At present, we have over 35 facilities worldwide that use some chemicals and generate some hazardous wastes. But environmental issues are not confined to manufacturing operations. They could arise in engineering, field service, even a sales office. For instance, at any facility, we could have chillers, boilers and air compressors and use oils, cleaners and solvents. Even though most of us use the same materials in our own homes, at Digital we must handle and dispose of them as hazardous wastes and comply with strict regulations.


Most Digital employees want to do the right thing. If you explain to them why a process could create an environmental problem and show them how to

change it, they'll take care of it. So our real job is to educate managers and employees as to why they should do things a certain way -- why it's better for them, better for the community and better for Digital. For instance, we hav a video tape on hazardous waste awareness that explains Digital's hazardous waste activities, and how these wastes should be managed and controlled. (People interested in showing this tape should contact their plant's environmental coordinator or call our office, DTN 223-2837).


Many of the issues that we're dealing with now relate to substances that were not even known to be hazardous 10 years ago. Today, we know a lot more about the ttoxicity of certain materials and talk about contaminants at parts-per-billion levels. Ten years ago you could hardly emasure parts per billion.


Every company has to deal with these issues. And it's not just industry, but hospitals, universities, dry-cleaners, beauty parlors — everybody that uses chemicals.


In the mid-70s, some licensed disposal firms that we paid to properly dispose of our hazardous wastes did not do what they had been hired to do. When one, for example, went bankrupt, all of its customers were held liable to clean up that company's mistakes. We've already spent twice as much in clean-up as we originally spent for disposal and we'll probably spend at least as much again. In other words, complying with the laws that are on the books today is not enough — we have to look at potential future effects and take preventive measures now.


One major effort regarding hazardous waste is "source reduction" -- looking at ways of manufacturing which produce less waste. We keep asking: Are there things that we can change in our processes that produce less waste? Can we use different chemicals which are not hazardous?


Environmental, Safety and Health Advisory Board


An advisory board (ESHAB) coordinates Digital's compliance with the growing web of local, state and national laws and regulations relating to environmental, safety and health matters.


The board consists of

o Laura Goldin, Law Department;

o George Hynes, Semiconductor Manufacturing; .

o Jack Kane, Systems Manufacturing (including modules);

o Tom Mathias, Printed Wiring Board Manufacturing;

o Harry Murphy, Corporate Safety (worker safety);

o Dick Porter, Corporate Health Services (occupational health);

o Jim Rogers, Corporate Energy and Environmental Affairs (air and water pollution control and hazardous waste

o Jim Stewart, Corporate Industrial Hygiene and Toxicology (worker exposure and hazard assessment) ;

o Polly Strife, Corporate Hazardous Materials Transportation (packaging, labeling and shipping of hazardous materials).


The board meets monthly and reviews Digital's compliance activities and identifies areas where more resources should be applied to solve actual or anticipated environmental, safety or health problems.


U.S./Japan High-Technology Trade Relations by Bruce Holbein, manager, Government Relations


Three issues of importance to Digital involve high-technology trade rela­tions between the U.S. and Japan. The issues are:

o negotiations to eliminate U.S. duties on parts of computers,

o enactment by Japan of legislation similar to the U.S. Semiconductor Chip Protection Act, and

o commitment by Japan to preserve copyright protection for software.


The issues are related and indicate that, although Digital supports open trade with Japan, we are also serious about protecting intellectual property rights. Our present litigation with C. Itoh illustrates this seriousness.


Computer Parts Tariff Negotiations


U.S. duties on imported semiconductors were 4.2 percent and are 4.3 percent on parts of computers. Duties at these levels do not protect U.S. industry but instead impose manufacturing costs on U.S. high-technology companies which integrate these components into products and systems. Digital’s goal is to have the U.S. government negotiate an agreement with Japan, and perhaps other trading partners, to provide for the mutual elimination of duties on these components.


The U.S. electronics industry was pleased with a 1984 U.S.-Japan agreement to eliminate duties on semiconductors, effective March 1. Digital actively supported legislation last year to grant the President authority to carry out this agreement. Digital also played a key role in legislation which included the authority to negotiate elimination of duties on parts of computers. In addition, we are urging U.S. trade negotiators to include an agreement on parts of computers in the follow-up to the recent Reagan- Nakasone understanding on high-technology trade.


Japanese Semiconductor Chip Protection Legislation


The U.S. Congress enacted the Semiconductor Chip Protection Act of 1984 to provide intellectual property protection for semiconductor designs. Digital actively supported this legislation because we have our own proprietary semiconductor designs we want to protect, and, as a major consumer of semi­conductors, we want to strengthen incentives to innovation.


The U.S. government is encouraging the government of Japan to enact similar legislation. Digital supports this step with the expectation that the Japanese law would support the U.S. model and would not provide for govern­ment-imposed compulsory licensing.


Copyright Protection For Software


Digital strongly believes that all nations should protect software under copyright law. This is the case with most nations that have strong high- technology industries. As a result, we oppose the software protection law proposed to the Japanese Diet by MITI (Ministry of International Trade and Industry) last year. It would weaken the international consensus that soft­ware should be protected under copyright law. It would permit the government of Japan to force the licensing of software to Japanese companies, and it would impose a degree of standardization on the content of software pro­grams. The latter would impede the dissemination of information, be anti­competitive, and stifle creativity.


The U.S. government and trade associations such as CBEMA (Computer and Business Equipment Manufacturers Association) have emphatically urged the government of Japan not to reintroduce similar legislation in 1985.


Trends In Information Management — Transparent, Distributed Access To Data

Bill (B.J.) Johnson, vice president, Networks and Communications Engineering, recently spoke on "Information Trends for the '90s at the National Database Symposium in Boston, sponsored by the Software Institute of America. The audience consisted of EDP and MIS managers, systems managers, database administrators and software consultants. B.J. described the past, present and what he foresees as the future of information management. The follo9wing article summarizes his comments.


The Digital Style of Computing allows customers to start as small as they want and grow as large as they need. Using our standard architectures, we plan on evolving our information systems to meet the information requirements of the 90s. These include a common architecture which will allow us to run on mciro-systems of clusters and also interconnect with IBM and other hosts.


In the future, usesrs should be able to update different data structures on any processor, regardless of who the manufacturer may be. Distributed databases will also provide a user with a global view of the underlying database. This woudl allow data to be rolled up for corporate query and reporting, even if it is physically stored in another department. The data could also be partitioned either vertically of horizontally and distributed on various processors. In additino, a distributed database could contain only certain fields from the underlying databases. The entire underlying structures need not be used. This approach would provide the most flexible local access and use of data while still maintaining a contralized focus for analysis and reporting.


In the pasat, pockets of information were stored in different departments. It was almost impossible to merge there individual "islands of information" to get the complete picture.


First attempts to bring these islands together were extremely time-consum­ing. Data either had to be rekeyed into the other system or the entire file had to be transported on a magnetic tape from one machine to another. In either case, the user received the entire file, not just the portion needed to get the job done. And, depending on the time required to re-input the data from one machine to the other, the information was often inaccurate and out-of-date.


The next step in the evolution of information management involved the use of networking techniques. Although this process was not as time-consuming as


the the previous two methods, it had its drawbacks as well. The transfer of information from system to system often took a long time to complete due to the speed of the network link or to the size of the file, and the informa­tion could still be out-of-date.


Today, technology has progressed to the point where network links allow an end user to transparently query data that resides on similar systems. "Transparent" means that the user accesses the data as though it were stored locally. The request is processed where the data is stored and only the data requested is sent across the network.


Transparent, distributed access to data allows the user to access current, accurate data which results in quality decision-making and improved produc­tivity. This access is made possible by use of a data dictionary. The dictionary knows whether the data is stored locally or remotely. It also knows the underlying database structures, regardless of the specific format.


For example, to determine how many VAX 8600s are available for shipment, a sales representative would request this information on the sales system. The sales system would route the request to the manufacturing system. The manufacturing system would process the request and send back the quantity of 8600s available for shipment. The fact that only the data requested is sent across the network link limits the traffic on the link. Unlike many other vendors, Digital offers this capability today.


Update On Digital's U.S. Health Care Cost-Containment Efforts


January 1, 1985, marked the first anniversary of Digital's major initiative to curb rising medical care costs. This initiative, which was outlined in the October 1983 MGMT MEMO, included changes in the John Hancock Medical Plan and the phased introduction of a national hospital review program to reduce inappropriate hospitalizations. This update is a preliminary as­sessment of these efforts. The year-end evidence suggests that Digital's 1984 health care cost initiative is having the desired impact and the delivery of accessible, quality health care has not been adversely affected.


Based on date available through December 1984, cost escalation of the John Hancock Medical Plan has subsided. While overall plan costs increased because of Digital's growing workforce, the plan's average monthly cost per employee remained relatively constant in 1984, from January through December.


Most importantly, Digital saved $5.3 million in 1984 over what the plan was projected to cost. Complete costs for the John Hancock Medical Plan would have been $61.3 million without plan changes. With the changes, actual company costs were $56.0 million.


The downturn in cost escalation was due to many factors, including reduc­tions in the nation's inflation rate and lower medical cost increases. However, changes made in the John Hancock Medical Plan's deductibles and copayments also had an impact. Additionally, Digital's hospital review program involving pre-admission and concurrent review of hospitalizations helped to reduce medical plan costs.


Digital's hospital review program reduces costs and improves the quality of health care by eliminating inappropriate hospital admissions and days of care. The program's thrust is to contain medical expenses generated by health-care providers — not to shift costs to employees, which is an ap­proach some employers have used to control escalating health plan costs.


The hospital review program eventually will be nationwide in coverage. Originally started in Massachusetts and in Maricopa County, Arizona, in early 1984, it was expanded to cover Colorado and Digital's Mid-Atlantic region. By year end, approximately 60 percent of Digital's U.S. workforce was covered by the program. More areas are scheduled for coverage in 1985.


Last year, approximately 1,588 hospitalizations were reviewed in Massachusetts, Arizona and Colorado. In Massachusetts, where the majority of Digital employees are enrolled, 863 days of hospitalization were avoided.


Other less measurable savings have been achieved through the "sentinel" effect of the review program. The "sentinel" effect refers to the tendency for health-care providers to be less inclined to prescribe inappropriate hospital care as they realize Digital has a hospital review program. Digital encourages this effect by informing providers about the program.


It is important to stress that employee support and conscientious use of medical benefits were essential in making Digital's cost-containment initi­ative successful. At the same time, the review program seems to be meeting employees' needs and approval. There has been no evidence that the review t program has restricted employees and their dependents from accessing needed quality health care. Further, the Field organization's 1984 INTERACT employee opinion survey supports this conclusion. Digital employees parti­cipating in the survey continue to indicate their satisfaction with Digi­tal's benefits at levels that exceed industry norms.


In 1985, Digital will continue to address the long-term challenge of con­taining health-care costs by encouraging employees to live healthy life­styles and to use medical benefits conscientiously. Digital will also closely follow public policies which impact the private sector's delivery of health care. Finally, Digital will continue to encourage competition among health-care providers and offer employees alternatives for meeting their medical needs as these become available. For example, in 1985, Digital increased its offerings of HMOs from 46 to 59. As new forms of health delivery become available, Digital will consider making them available provided they enable the company to offer accessible, cost-effective, quality health care.

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