Conference 7.286::digital

953.0. ""The trouble with Digital" (Boston Globe via VNS)" by DR::BLINN (I can give you a definite maybe) Tue Oct 10 1989 12:59

<><><><><><><><>  T h e   V O G O N   N e w s   S e r v i c e  <><><><><><><><>

 Edition : 1917              Tuesday 10-Oct-1989            Circulation :  7457 

VNS COMPUTER NEWS:                            [Tracy Talcott, VNS Computer Desk]
==================                            [Nashua, NH, USA                 ]

 Digital - "The trouble with Digital"
	Computer maker's sales force tarnishes its golden image
	By Lawrence Edelman and Jane Fitz Simon - Globe Staff
   [Accompanying the article are:
 A photo of Ken Olsen captioned: "Olsen: He wouldn't tolerate bad relations
	with Digital's customers.
 And two charts:
   1. US sale of minicomputers are sluggish...
      Value of US minicomputer shipments, 1986-1989. In billions of dollars.
      1986: $16.4    1987: $16.8    1988: $67.7    1989: $17.2*

   2. ...as are Digital's earnings
      Fiscal years 1986-1989 in billions of dollars.
      1986: $0.617   1987: $1.14    1988: $1.31    1989: $1.07

   *projected.
   Source: International Data Corp.

   This is the complete article - TT]
   Eugene Freedman isn't happy with Digital Equipment Corp. these days. The
 vice president at Chase Manhattan Bank, a big Digital customer, is putting
 together a complex five-year computer plan for the bank. But he's finding it
 hard to get information from Digital that's crucial to the project. Such as
 when the company plans to make important products available and if they'll
 work with computers Freedman already has installed.
   That problem is so bad, Freedman says, that Chase recently summoned some of
 Digital's top brass to New York for an explanation.
   Chase isn't alone with its dissatisfaction with Digital's sales force. Last
 spring representatives from about 50 university computer centers held an
 impromptu meeting to discuss the troubles they were having getting straight
 answers about products from their Digital sales representatives.
   "There was an extremely high level of frustration in that room," recalls
 Robert Gallagher, director of information technology services at Rensselaer
 Polytechnic Institute in Troy, N.Y. "And these were DEC advocates."
   There's nothing unusual about computer customers complaining. But the chorus
 of criticism about Digital's sales and service organization is growing much
 louder, a troubled trend for a company that for most of its 30 years could do
 no wrong.
   It's timing couldn't be worse. As Maynard-based Digital's earnings continue
 to slump, aggressive rivals such as California's Hewlett-Packard Co. are
 closing in fast. International Business Machines Corp., after being trounced
 by Digital for several years, is fighting back with a new minicomputer line
 and steep price discounts. And the advent of new hardware and software
 standards are changing the way businesses buy and use computers.
   This much is sure: Digital must adapt to a brave new world of competition if
 it is to remain the world's No. 2 computer company. And the changes are
 beginning: Borrowing a page from IBM, it is moving thousands of employees out
 of administrative and manufacturing positions and into jobs dealing directly
 with customers. Digital is also centralizing control of its account teams,
 retraining its salespeople and expanding its ability to bring other companies'
 products into Digital networks.
   The resignation last week of John J. Shields, the Digital executive in
 charge of worldwide sales and marketing, suggests that this new environment
 clashes with what Digital veterans were accustomed to and that more changes
 are on the way.
   Here are some common customer complaints about Digital sales reps: They
 don't understand enough about the products they sell, they're out of touch
 with their customers' computer requirements and salespeople take too long
 answering questions.
   Annette Hawk, a manager at SmithKline Beecham in Philadelphia, for example,
 was approached by a Digital salesperson earlier this year. "I asked them to
 put together a [list] of things we could do to have our computers interact.
 We wanted to try to integrate out [Digital] Microvax with our Wang system to
 see what kind of communication was possible. I never heard anything back,"
   Some analysts say Digital salespeople aren't aggressive enough because they
 aren't paid commissions. (President Kenneth H. Olsen believes commissions
 encourage salespeople to put their wallet ahead of customers' requirements.)
 They also say that Digital sales reps aren't accustomed to fighting for
 business - because for years they could sit back and take orders for products
 that were considered unparalleled in the industry.
   "DEC's products have been outstanding, but they have not been matched with a
 sales team with the professional caliber of IBM," says Jack Falvey, a
 consultant who teaches sales management at the University of
 Massachusetts-Boston.
   To be fair, Digital's sales force can't be blamed for all the problems
 plaguing the company. The overcrowded minicomputer market is in a wrenching
 transition; sales growth rates are slowing dramatically as customers switch to
 newer technologies, such as smaller, powerful computer workstations and larger
 machines known as superminicomputers.
   Digital - along with many of its troubled competitors such as Wang
 Laboratories of Lowell - has been hurt by the trend away from proprietary, or
 exclusive, computer designs such as its best-selling Vax line. The switch has
 been to common standards such as those based on Unix software and RISC
 (reduced instruction-set computing) hardware.
   This not only hurts earnings - proprietary systems carry much higher profit
 margins - but confuses customers, many of whom have delayed purchases while
 they sort out the dizzying array of options.
   A bloated cost structure also has contributed to Digital's woes. The company
 hired about 4,000 people a quarter in 1988, analysts estimate. Another
 problem: Digital's product line has been without a mainframe computer, which
 many of its largest customers have been begging for. (That long-awaited
 mainframe will be unveiled Oct. 24.)
   Given these circumstances, "I'm hard put to think of anyone who is doing a
 lot better than DEC," figures analyst John Adams of Adams Harkness & Hill in
 Boston.
   Nevertheless, even Digital concedes that the sales organization built by
 Jack Shields must be revamped to keep the company ahead of its aggressive
 competitors.
   Digital's sales force has always been somewhat problematic. Originally, it
 was staffed by engineers who spoke the same language as the engineers and
 scientists who were the primary buyers of its minicomputers. It  hardly
 mattered that they weren't polished salespeople because Digital's products
 largely sold themselves to this market.
   But in 1985 the company decided to challenge IBM in the business
 marketplace. It hired thousands of people with experience selling in the
 boardroom rather than in the computer room, including former IBMers. Although
 the push into IBM territory was successful, Digital alienated many of its
 technical clients, who felt these new salespeople didn't have the technical
 know-how of their predecessors.
   Digital also discovered that as it moved into workstations, networking and
 other new areas, many salespeople found it impossible to have a deep
 understanding of all the products they were peddling.
   By the beginning of the year, Olsen had had enough. He removed Shields from
 day-to-day responsibility for the sales force and started shaking things up.
 Last summer he sent 6,000 salespeople to Brown University for a week of
 product training.
   But analysts question some of the steps he's taken. For example, the wonder
 how effective former administrators and factory workers will be as product
 peddlers. Besides, the Brown sessions were just a "Band-Aid," says John Logan,
 an analyst with the Aberdeen Group in Boston.
   "What we had was not bad, but it did not meet the needs of the future,"
 explains David W. Grainger, Digital's vice president for US sales and
 services.
   But he insists that the new salespeople are performing well and the Brown
 courses were just the beginning.
   The biggest problem Grainger says, was that the structure of the sales
 organization wasn't suited to meet the demands of its large multinational
 customers. Different sales teams scattered around the country and the globe
 would service the same account; customers were besieged by several sales reps
 at the same time.
   Two months ago Grainger changed all that. Now Digital's 100 biggest accounts
 will be serviced by a team headed by a single account executive, who will
 coordinate efforts across all borders. This account leader has also been moved
 up in the Digital hierarchy and given more power to get things done quickly
 and better access to top executives.
   Digital even says it is working hard to address the complaints of
 disgruntled customers like Chase's Freedman. (A Digital spokesman says the
 company's Chase account team was unaware of the problems described by
 Freedman, but is meeting soon with Chase executives on their five-year
 project).
   Stephen Smith, who follows the company for PaineWebber in New York, credits
 Digital with coming a long was in the past five years, but he says it must
 push for more change.
   "The DEC sales force and DEC as a whole must become much more of an
 integrator, selling not just their products, but those of other companies.
 There is a tremendous market opportunity if they could do that," he says.
   Grainger says this is exactly what Digital is doing, moving away from
 selling single "boxes" to implementing complete systems, including equipment
 from other vendors. (The switch reportedly started back in 1986 after Digital
 lost a $500 million contract to integrate departments at Ford Motor Co. -
 despite the fact that Olsen sits on Ford's board.)
   Some analysts say problems with the sales force won't be fixed until Digital
 begins paying commissions and hiring aggressive salespeople. "They need an
 entirely new approach," says Falvey, the consultant.
   "Under Olsen's view of the company, the sales force's task was distribution,
 not sales. A real salesperson knows how to sell through a slump when they
 don't have the products. This is what IBM has mastered, selling promises of
 great things to come during the shifts in technology," Falvey says.
   But it takes a long time to turn around an organization as large as Digital.
   "There is an old joke at Digital," says Logan, the Aberdeen Group analyst.
 "When Olsen said he wanted a more professional sales force, his salespersons
 went out and bought blue suits, the tradition attire of the IBMer. The problem
 was, they all bought polyester blue suits."

<><><><><><><><>   VNS Edition : 1917     Tuesday 10-Oct-1989   <><><><><><><><>

�   1. US sale of minicomputers are sluggish...
�      Value of US minicomputer shipments, 1986-1989. In billions of dollars.
�      1986: $16.4    1987: $16.8    1988: $67.7    1989: $17.2*
                                            ^^^^
    Is the 1988 value really $67.7 or $17.7 sounds more like it.

    Yup. It's a typo. Good help is hard to find these days... Oops. That's
    me! The actual 1988 number is $16.7 billion. I'm always amazed (and
    thankful) that even with 7500 readers plus an additional couple of
    thousand who read VNS via VTX, that there's never more than 2 or 3 who
    point out typos. The last thing I need is 8,000 or so mail messages...
    
    							Trace