Conference 7.286::digital

2536.0. "Computer Industry Article - Fortune Mag. 6/14/93" by SOJU::SLATER (Synchronicity - It's Everywhere!) Fri Jun 11 1993 09:11

    
    
                           "The New Computer Revolution"
    
                               By Stratford Sherman
    
                Article In Fortune Magazine, June 14, 1993 Issue
    
    
    This article is required reading if you want to know more about some of
    the predominant trends in the computer industry and how Fortune
    (Sherman) sees the major computer vendors faring in the future.
    
    Below are some comments, quotes, and a synopsis of the article: 
    
    SOME OF THE LEADERS OF OUR INDUSTRY
    
    Very interesting profiles and full page portraits are displayed for the
    following industry leaders:
    
                          Bill Gates      Microsoft
                          Andy Grove      Intel
                          Lou Gerstner    IBM
                          Bob Palmer      Digital
                          Charles Wang    Computer Associates
                          Ben Rosen       Compaq
                          John Sculley    Apple Computer
                          Scott McNealy   Sun Microsystems      
                          Ray Noorda      Novell
                          Michael Dell    Dell Computer
    
    
    While all of the profiled industry leaders except three are known for
    their hardware, I think the article would have had substance if it
    covered three other industry software leaders: Philippe Kahn (Borland 
    International), Alan Ashton (WordPerfect Corp.), and Mitch Kapor
    (Lotus Corporation).
    
    WHAT'S DRIVING THE COMPUTER INDUSTRY?
    
    The article is really an in depth look at how PCs, technology advances, 
    decreasing prices, client/server, fierce competition, successes, and
    failures are all driving the industry.
    
    FIVE PRINCIPLES
    
    The first part of the article gives five principles which emerge from
    the economic changes in computing (quoted from page 56):
    
      1)  You can't say it often enough: Don't lose touch with the customer.
    
      2)  Even in a high-tech industry, management skills are more important
          than technology.
    
      3)  Today's successes often obsure the first signs of tomorrow's 
          failure.
    
      4)  The company with the highest unit volume almost always wins.
    
      5)  The place to find unit volume is the bottom of the market, where
          low prices create new customers.
    
    
    QUOTE FROM CHARLES WANG (p. 66):
    
    My favorite industry leader's quote from the article:
    
            "There are CEOs who brag about never having touched a PC.
             I say to them, 'Get your head out of the sand, kid.' " 
    
                                            Charles Wang, CEO
                                            Computer Associates
    
    MY COMMENTS:
    
    Interesting, but you should also know that Wang spent 12 years as a
    technical software guy, before he got into management.  It's worth
    noting here that CA is reportedly the world's largest mainframe
    software company, but that they have been busy in recent years
    acquiring such PC software development packages as Clipper. 
    Personally, I think the message could be restated at Digital,
    substituting the term "Digital employees" for "CEOs".
    
    
    DIGITAL & ALPHA; INTEL AND PENTIUM
    
    Sadly, even though the article seemed to give Bob Palmer good marks for
    his efforts to return Digital to profitablity, the following quote
    about Intel, PENTIUM, ALPHA and Digital and where we fit in the industry 
    should give us all a little concern (see page 74):
    
         "Once again, volume is the key.  Intel estimates that it will 
          produce 40 million 486 chips this year, plus a relatively small
          but growing number of PENTIUMs.  That volume makes it possible
          for Intel to invest $2.5 billion annually in R&D and new plant
          capacity while still earning enviable profits.  For almost
          everyone else, the economics of chipmaking seems dauting.  It
          costs nearly $1 billion to build a state-of-the-art
          microprocessor plat, and with each new generation of technology
          the cost doubles.
    
          How then can Digital Equipment, which has produced just a few
          tens of thousands of its technologically impressive ALPHA chips,
          possibly hope to make money at this game?  Striking as he is a 
          corporate revolutionary, Palmer doesn't have a convincing answer.
          Since ALPHA chips can be plugged into neweer VAX minicomputers,
          they surely will help Digital milk revenues from its old 
          customers for a few more years.  But ALPHA seems unlikely to win
          millions of converts from the outside world."
    
    
    MY COMMENTS:
    
    I hope for all our sakes, that the author is mostly wrong in his
    assessment of Digital's potential for success with ALPHA.  But just in
    case he is right, I would recommend three strategies:
    
        1)  Retain Customers:  A new campaign to convince all the 
            customers we presently have on VAXs, PDPs, etc.
    
        2)  Major Software Messages:  A new campaign to demonstrate 
            to the market we are producing software that is open, 
            priced to sell, and technologically the best in the industry.
    
        3)  Major Service Messages:  A new campaign to let the market
            know that we intend to be major players in client/server
            systems integration and other service opportunities 
            involving software and hardware systems integration and
            services delivery.  And because we are Digital, nobody
            can do it better than us.
    
    
    The entire article is about 24 pages and should be read by every
    computer industry professional who wants to understand the big picture 
    of what's going on in the computer industry.  Consider: the facts in this
    article are rapidly shaping the industry in which you earn your living!
    
    
    
    Bill Slater 
    Software Specialist
    Worldwide Application Migration Center 
    Merrimack, NH

    I saw the magazine and read some of the articles.  It was very
    interesting.  However, I was particularly struck by the picture of Bob
    Palmer.  Take a look at it and you'll see what I mean.
    
    First, he is pictured, outside, standing in the corner of a building.  
    One of the walls is brick, the other is painted cider block.  Looks
    like it could be the Mill.  The visual impression was that BP was
    "backed into a corner."  Not a strong image.
    
    Second, (for the Dress For Success folks in the crowd), BP is wearing a
    great looking suit, shirt and tie.  Nice European cut double-breasted
    suit.  Nice silk tie.  But look at his shoes!  _Old_ wingtips that look
    scuffed and unpolished.  Doesn't look like they have steel toes so they
    aren't hand-me-downs from Ken.  What happened to his Gucci's?
    
    Chet 

    re: 5 principles
    
    2) ...management skills are more important than technology.
    
    What company has been consistently touted as the best managed company
    for the past 10-15 years....IBM.  Where are they today??  Is this a
    condemnation of our ability to tell what really is a well managed
    company??  At the same time, we all recognize certain management
    failures within our own company that have contributed to our problems.
    
    4)  The company with the highest unit volume ....wins.
    
    Again, why didn't IBM win??  They certainly had the highest unit
    volumes in all categories until they botched the PC business.
    
    5) The place to find unit volume is the bottom of the market...
    
    Wrong.  The place to find volume is the bottom of the commodity product
    market.  And, being the leader there is no guarantee of success over
    the long haul.

    
    re:.2
    
    I disagreed also with some of the principles laid down in the
    Fortune magazine piece.  I did not, however, disagree
    with the comments about starting at the bottom of the market.
    
    Every successful competitior in this industry in the past
    30 years, beginning with Digital, has started at the "bottom"
    of the market, sucked new customers in on price, then started
    chewing its way up the food chain.
    
    If IBM had done its job right, there would have been no Digital.
    If Digital had done its job right, there would have been no
    Sun Microsystems.  If Compaq had done its job right, there
    would have been no Dell.  Microsoft didn't start by trying
    to sell high "value-added" software to the server market -- it
    started with a trashy low-end offering that cost < US$100.  
    Apple succeeded by going for the low-end as well.
    
    All together now:
    
     You can't leave the commodity businesses to your competitors.
     You can't leave the commodity businesses to your competitors.
     You can't leave the commodity businesses to your competitors.
    
   Glenn

re Note 2536.0 by SOJU::SLATER:

>     I hope for all our sakes, that the author is mostly wrong in his
>     assessment of Digital's potential for success with ALPHA.  But just in
>     case he is right, I would recommend three strategies:
  
        I believe the author is right, if we are merely "as good as"
        the competition.

        Establishing Alpha as the industry's architecture for the
        next century, and not just Digital's, is and always should
        have been seen as a tremendous uphill battle.

        It is a battle that can't be won on Alpha's technical merits
        alone.  It must be won with the best marketing, and the best
        promotion, and the best advertising, and the best selling,
        and the best software (system AND application), and the best
        alliances.

        Without all (or most) of the above, the author's prediction
        is right on.

        Bob

   About the bottom not being important, that's all there is to the computer
   industry these days. What you get for $500,000 isn't too much more capable
   than what you can buy for $5000. What software we custom-designed for 
   millions of dollars are all getting shrink-wrapped for a couple of 
   hundred dollars. If we are fast-footed like CA we can survive; otherwise
   join IBM in "Jurassic Park II - The Saga of the Recent Dinosaurs".

   Nari

    1)  I believe the [Fortune] author was right about Alpha - another 
    "quick fix" bandwagon aboard which the 'good-news-gang' (formerly 'KO 
    and the sunshine band') leaps - nay, 'have themselves lifted'.
    
    2)  The title of 2536.5 says it all...