Conference 7.286::digital

    Could anyone (such as .0) please post the referenced Ed Lucente memo?
    
    THX
    bill

    
    Well, your interpretation of his words squares with mine.  I think he
    feels strongly about it, too.  He said that the notion that we are a
    solutions vendor is "absurd".  He also said that the field is mistaken
    if they believe our products are commodities.  I beleive the message is
    to get back to selling those boxes.  
    
    

    
    	I am/was under the impression that there is little money to be made
    in hardware sales (margins are too thin). And that the good dollars are
    in software (Systems Integration, custom projects, maybe even compilers
    and operating systems). Isn't that how Microsoft got rich ... make 1 of
    them, sell a million of them. Where is the money to be made? 

    My opinion FWIW.... Today we are growing into a world class solutions
    provider as evidenced by the growth you reference from the Digital
    Consulting organization.  However, at the same time this is going on,
    and we can only grow in this area at a certain pace and build a quality
    reputation in the industry, we still need to remember we are a world
    class manufacturer of desktop to complex computing systems.  Otherwise
    known as hardware/software, or product for short.
    
    This is one of our core capabilities and today engineering and
    manufacturing are giving us the best products ever.  We are not selling
    enough and should be selling more by getting in the competition's face
    with our story.  It is an absolute requirement we be successful in this
    space if we are to survive long enough to build a true industry force
    in the SI and consulting business.  If not, then I ask the question how
    many folks does it take to become a Consulting only company.  Probably
    less than the 30,000 referenced in .0 to be a hardware only company.
    
    Product sales, hardware and software that is, are deliverable and
    turned into cash more quickly than SI projects or longterm engagements.
    We need to continue building our consulting capability, and we already
    have a great start, but Lucente's message to the sales force is to get off
    our butts and move some gear NOW!  Why?  Because we have competitive
    advantage and should be winning more than we do, we need to move our
    installed cusotmer base before HP and others, we need to get new
    customers, and most importantly we
    need to generate revenue, A/R, collections and cash to get our return
    from the product side of the business.
    
    Is Lucente focused on product?  You bet and glad he is.  All we need is
    a little help from marketing that helps to generate demand pull in the
    market.  
    
    To net it out Digital can do it all, product, service, consulting, and we
    need to start doing it.  That's the message I get from Lucente.
    
    Good Selling!
     

Unfortunately DEC is measured by Wall Street on the "numbers".  To
be considered healthy we have to enjoy *revenue* growth and *profit*.

Hardware margins (and profits) are thin, but hardware generates 
huge revenues.  By far the largest computer companies are the systems
companies which generate most revenue from hardware.  The top 5 PC
companies, according to Datamation are IBM/Apple/Compaq/NEC/Fujitsu
generate $23.5B.  Remember that this is just PCs and not Mainframes,
Midrange, Workstations, Networks & Peripherals.

SI margins (and profits) are large, but they don't generate as much
revenue (yet).  The top 5 Services companies, according to Datamation
are IBM/EDS/ComputerSciences/AndersonConsulting/ADP, which between them
generate "only" $17.5B.

I have a theory that "messages" travels very quickly in DEC due to our
network (a topic for another note perhaps).  Thus when senior management
say we need to get into services due to margins, people changed direction
fairly quickly.  Perhaps too quickly.  Unless we continue to "sell boxes"
our revenues will plummet even if we are more profitable due to the 
increase in services.  According to Wall Street we will have failed.

The solution is to do *both* as aggressively as possible.

    As Ed points out,Wall stret doesn't think much of our fabulous business
    in SI and frankly,nor do I.I am sure our partners think it is great
    since most of it,apart from consulting,goes to them and they hold the
    key to differentation,not Digital.If this is our idea of SI then we
    need to become a hardware company and fast.If the CBUs decide to try to
    own some critical applications such that they have industry knowledge
    diiferentiation,then they had also better get a move on.
    Kidding ourselves about consulting reminds me of Ross Perot-he said
    that in Texas,when you see a snake,you shoot it.When he was in GM he
    said that when GM saw a snake,they hired a consultant on snakes.Think
    about it and then decide if being a snake consultant is better than a
    snake killer.
    The sooner we either split into two companies or remove some of the
    millions of layers of management which confuse us,the better.
    IMHO of course

        I was going to submit the mail I got with Ed's message 
        until...
        
        I saw that it was marked DIGITAL CONFIDENTIAL.
        
        FWIW, my interpretation is that he wants us to sell both 
        projects and products.  The difficulty at the moment is that 
        projects tend to have a long sales cycle, with the attendant 
        problem of maintaining the cash flow (i.e. NOR and margin).
        
        Products may have a lower margin, but do maintain cash flow if 
        sold in sufficient volume.  To make the same absolute $ margin 
        we have to sell more product by value than is the case with 
        projects.
        
        In essence he asked us to pull the pendulum back a modest 
        amount and strike a different balance between projects and 
        products.
        
        nh
         
        

    .2�                                He said that the notion that we are a
    .2� solutions vendor is "absurd".  He also said that the field is mistaken
    .2� if they believe our products are commodities.
    
       I tend to think that in most cases that he's right here but that
    it's not an absolute and there are going to be market sectors where
    this isn't true.  In those cases, if Digital can address them
    profitably, then we ought to be in those sectors, as indeed we are in 
    some that I know of, by way of seperate(ish) companies such as
    ourselves and BASYS Automation Systems...
    
        Gwyn at DESISCo
    		(Digital Equipment Service Industries Solutions Company)
    		 =       =         =       =          =         ==

    The Ed L. message, and previous replies, get specifically to the issue
    which has been discussed at some length by observers of the 'computer
    industry'. The problem is that there is no such thing as a homogenous
    computer or IT market. People that tried to address it as one market
    had, and are having, a very tough time. IBM tried, and it caused them
    to sub-optimize product development in order to minimize impact on
    certain products or families. Digital tried to address the world as a
    homogenous minicomputer market. Look at what happened.
    
    There are multiple computer markets. The PC market. The SI market. The
    commodity market. The workstation market. The systems market. And
    success requires either picking one, and betting the ranch on it, or by
    deciding to do business in different ways and optimizing to meet the
    needs of that market. Which is why we have, for example, a PC business
    which sells Pentium based PC's (in 'competition' with Alpha PC's!!
    horror!) and we have a storage business which sells storage stuff to
    anyone who will buy it at a profit to Digital (like IBM and HP!).
    
    The Ed L. message simply indicates that we need to recognize that our
    customers often bridge multiple markets. Sometimes they need to buy
    products - and we should not be afraid to sell them products. Sometimes
    those same customers need a fully integrated SI solution, and we should
    be prepared to sell that also. The point is, don't try to sell SI when
    products are more appropriate, and recognize when the customer needs an
    integrated si solution which implies don't try to throw products at
    them.
    
    It is grossly unfair to say we make no money selling products. We can
    make lots of money selling products, just as we can make lots of money
    selling si solutions, BUT, they need to be sold differently. We can not
    afford to apply a ton of selling effort, lots of sales support which is
    really only free consulting, and then sell a box. Then we lose. Sell
    products as products. Sell solutions as solutions. And always
    understand the differences in how they are sold.

	I agree with most of the analysis in .1-.9.....I'd just thought
	that I'd add that, having read the memo and having seen Ed L.
	speak, I believe there was probably some extra emphasis thrown
	in for effect...the use of the word "absurd" for example...Ed's
	style seems to be from the kick-%ss-and-take-no-prisoners school...
	as such, the bruntness of the memo may have been intended to
	spur the sales folks into motion all that more abrubtly....

>
    As Ed points out,Wall stret doesn't think much of our fabulous business
    in SI and frankly,nor do I.I am sure our partners think it is great
    since most of it,apart from consulting,goes to them and they hold the
    key to differentation,not Digital.If this is our idea of SI then we
    need to become a hardware company and fast.If the CBUs decide to try to
    own some critical applications such that they have industry knowledge
    diiferentiation,then they had also better get a move on. 
>

SI sales have large margins, but they have longer sales cycles, hence you 
can't generate the instant numbers as if they were lots of wafers coming out 
of a semiconductor fab (intentional analogy...).  But we do have many people 
with good consulting skills, and not just "black bag magicians" working on 
operating system problems or configuring customer LANs, etc.  The problem is 
the framework under which they should work.

>
    Kidding ourselves about consulting reminds me of Ross Perot-he said
    that in Texas,when you see a snake,you shoot it.When he was in GM he
    said that when GM saw a snake,they hired a consultant on snakes.Think
    about it and then decide if being a snake consultant is better than a
    snake killer.
>

As usual Perot is full of as much hot air as the amount of money he has.  
What did Perot and EDS get rich on?  Snakes?  

>
   The sooner we either split into two companies or remove some of the
    millions of layers of management which confuse us,the better.
    IMHO of course
>

All I can say to this is AMEN.  The faster we get spun off into a sub, the 
happier I'll be.  But there are two things we should address here:

1. Bob Palmer has resisted the idea of spinning off divisions, and Gresham 
Brebach has publicly objected to the idea of being spun off, what will change 
their minds now?

2.Sales -- Our sales reps are asked to sell everything under the sun, from 
consulting to "commodities".  This is clearly an untenable situation.  In 
order to sell SI and consulting we need those people who possess such skills, 
and can deliver.  They should be compensated for these efforts, and not with 
$60k and a Taurus... So if you're going to have a separate SI business you 
need the sales end so that the skilled people will have a continuous 
pipeline of work.  And I'm not talking about large amounts of resources, a 
small cadr� of sales reps/partners can do the job nicely, thank you.

/d.c.

    Hmmmm -- As a street peddler, it seems to me that you go where the
    business is.  Further, one has to strike a balance on their opportunity
    mix.  Too heavily loaded S/I and you have the opportunity to go big, or
    go home -- The cycles are very long.  Too heavily loaded systems stuff
    means that you have to do lots of deals.  I have two examples.
    
    Example 1:
    
    In one opportunity, a $330K A/I project, I have been hounding the
    customer to get an order out for three months -- It involved the S/I
    group in their cast of thousands, the sales organization, and
    operations.  Standard systems stuff is on the order of $50K.
    
    If I miss on this one, whoosh - there it went.  Not nice.
    
    Example 2:
    
    Working 3 deals -- Systems stuff only.
    
    Deal 1:  $140K  -  In - Cycle time: 2 months
    Deal 2:  $130K  -  In - Cycle time: 3 weeks
    Deal 3:  $180K  -  Being threatened with an order - Cycle time 4 weeks
    
    Deals involved Sales folks ONLY.
    
    Sooooo, 'bout the same number  -- The systems stuff took less effort.
    
    If I lose the $180K deal, I'm 'bout the same as the S/I deal.  On the
    other hand, f I lose the S/I deal, I'm in a world of hurt!  That's why
    U need balance.
    
    The problem I have with S/I is that it is a finite resource as compared
    to an essentially infinite manufacturing resource.   AND, while we talk
    a good game, I'm not sure we're ready for prime time.  I believe, as
    does our competition, that S/I business is where we need to end up -- I
    think it should be evolutionary, rather than revolutionary -- Perhaps
    Mr. L. is leaning towards evolution -- It's nice to see that he agrees
    with me --- 'cause there ain't no way that I'm gonna have a pure S/I
    pipeline.  I just don't need the grief!
    
    Regarding pushing products -- I think we have a good suite of products
    these days -- The problem we have is availability of applications on
    our platforms (ALPHA). 
    
    Alpha is a winner and we should pound the hell out of our competition
    with it.  My feeling is that the competition is afraid of it.  Geee,
    ain't that too bad!
    
    Having said that, I also need to say that we need a concerted effort to
    get applications onto the platform quickly.  
    
    I would believe the word "absurd" was used.  I don't know Mr. L.  --
    BUT -- one only has to look at his eyes and U know that the word
    "Absurd" is on his list of frequently used NICE words -- In contrast to
    other word lists he uses.
    
    Bottom line -- No quarell with the idea
    
    Dennis
    
      

    Re: .12
    
    The fact that you can do systems sales without humpteen resources and
    within a specified period of time only underscores my point that the
    mainline Digital sales force should not have to be involved in the
    "complicated stuff" sales effort.
    
    I forgot to add to my reply in .11 that was is also needed for success
    in the "complicated stuff" category is a complete purge of those
    individuals who are mired in the PSS way of doing business.  This is
    usually typified by the stockpiling of billable hours as an indicator
    of "success", etc.  This methodology (and I use that term loosely) has
    no place in the consulting business.
    
    /d.c.

	Just to add my note. It takes a lot of specialized knowldege to sell
things well, in MHO. To expect the sales force to to sell all the varied
products we make plus all the third parties AND qualify and sell SI is a
rather tall order. I think that the sales force as we know it should sell
product out the yazoo, but be trained to sniff out SI possibilities. After
that the Digital Services CBU should go in and do the SI selling, throwing
any hardware requirements back to the traditional sales group. This means
in effect two sales forces, but I think that is where the company is going 
anyway. The SI "sales" people should really be trained as project managers, 
and follow the project from prospect to production. 

jd 

    
    See me note Re: Delivery Training.  Currently DPM is not being offered
    Grrr....!!
    
    -Ed
    

	RE: -1

	Actually DPM may not be the way to go. The big push today is 
	client/server and rapid application development. This is not
	the same as taught in DPM. In fact we lost a project just
	recently because we use DPM and not RAD. So maybe the training
	folks are rethinking our project methodoligy. You can always hope.

jd    

>the Digital Services CBU should go in and do the SI selling, throwing
>any hardware requirements back to the traditional sales group
    
    There is NO special "CBU sales force" for SI.  The only thing that
    exists as of now is a two-person operation that is dotted line to us in
    DMD CBU.  But they are from the traditional Digital sales force, not
    "heavies" that came from a big 8 background.  
    
    We don't need a "force", 3-4 "heavies", i.e., big 8 partner types, will
    do very well. And how can we afford to pay them you may ask?  Easy, if
    you eliminate training (a very loose term) extravaganzas for the
    traditional sales force on SI, etc. then we could pay these people what
    they're used to getting (6 figures).  E.G., the ADEG training that was
    put on last year cost the company $500k, and ADEG doesn't even exist
    anymore.  So if people are going to whine about costly trips, etc. in
    this conference then I'd suggest that they whine only in regard to
    where we have lost potential investments.
    
    re: .15
    
    Don't moan over lost DPM training, be concerned over business
    development.
    
    /d.c.

    
    I'm totally lost.
    
    I've been doing sales support for 4 years and now have been told do
    do 20% delivery.  I've never done delivery before.  I'm looking for
    training. Il N'existe Pas!
    
    I can write C & C++ code.  I know UNIX.  What do I deliver?
    
    -Ed
    

    >  I can write C & C++ code.  I know UNIX.  What do I deliver?
    
    if you can do C and C++ and also know u*x then you GOT it !! so don't
    worry, be happy !
    
    hope this helps.
    have a good weekend every one.
    \bye
    \nasser

    re .18 - you want to come to Mobile, AL and do some C++ & MOTIF
    programming for a large paper co.?  THey've asked us to come
    up with someone to do just that, and we haven't found anyone
    yet.  - send me mail and I'll get specific!

    Ed Lucente's memo has me confused. How can any of the following
    be interpreted as absurd?
    
    	1.  Three of our four "Product Business Units" have significant
    focus on the commodity market.
    
    	2. All five of our "Customer Business Units" are chartered to
    provide information technology-based solutions to their respective
    industry markets.
    
    	3. Customers want more than hardware and software. They want
    and desperately need total solutions, and we are customer-focused.
    
    	4. In an increasing number of sales opportunities, customers want
    ( no, demand) standardized and common products easily available in the
     open market, ie. "commodities". 

    could it be that lucente is goaled and compensated on 
    'product' revenue???
    

    Re: .22
    
    >     could it be that lucente is goaled and compensated on 
    >     'product' revenue???
    
    That would imply that Bob Palmer had given him this goal. The
    alternative is that he has decided on the goal himself.
    
    Mike

    Re: programming skills
    
    This will sound weird to some people, but coding skills are not a rare
    substance that their aren't many of.  We have the often-used term of
    "body shops" which refer to contract houses which supply $50 (or less)
    programmers.  Supply and demand indicates that there are far more
    programmers out there than needed.  
    
    In any event coding is not what we're talking about here.  That's a
    small part of it.  And coders don't and shouldn't write specs, the
    business problem should drive that , and the ones who understand that
    should be the authors of the specs.
    
    The people who are telling you to do "delivery" are acting out of
    "numbers panic", and will define anything as delivery as long as they
    get credit for it.  This is a symptom of the larger problem at hand.
    
    /d.c.

    Exactly, metrics, or lack thereof, drive behaviour.  As I titled
    earlier, follow the dollar$.  

re .24
 
> "Goaled"?   ... *sigh*

Simple typo - it should have read "gaoled".

    
    I urge you to read the latest issue of Fortune magazine.  There's
    an excellent, though long, article on Anderson Consulting.
    DEC (that's what they called us, not Digital), is listed as
    one of the top 5 or 6 SI/consulting vendors, along with 
    Anderson, EDS, IBM, and one or two others.  I don't have the
    issue with me today, but if I remember right, they quoted us
    at about $740M in revenue from those sources.
    
    If anyone has the magazine with them, or has easy access to a
    library, you might check me out on that revenue number (it's
    from memory.)
    
    Glenn

    As a delivery person for Digital for the last 5 years, I have coded and
    spec'd lots of projects.  Now I'm expected to to presentations.  Did
    one Friday, boy am I rusty..  Anyway, how do you expect to keep the
    people we have when you are paying the consultants who code, more than
    you are paying the salaried employees who specs the system.  I'm asking
    someone who reads this. DO YOU EXPECT US TO BE HAPPY ABOUT THIS. 
    I'm tired of having to go in where an outside consultant is and do their
    job.  And it even irks me more when their making 50 to 60 bucks an hour.
    
    		Whats your opinion!  I'd like to know?
    
    
    - Mike

    re: .28
    
    Articles such as that have appeared in the other business mags such as
    Business Week.  To re-emphasize a point, talk about numbers only
    reinforces a broken system.  And the term systems integration can get a
    very broad definition.
    
    re: .29
    
    >And it even irks me more when their making 50 to 60 bucks an hour.
    
    Is this $50 straight to the coder, or to his/her agency?  Don't forget
    that independent contractors are only working on a per project basis,
    once it's over, you're "over".
    
    But I don't see what this has to do with the overall theme of the note,
    i.e., our position in SI/consulting.
    
    /d.c.

    
    re: .30
    
    It wasn't my intent to only talk about numbers.  The key question,
    of course, is this: is it profitable revenue?
    
    I thought the article was interesting because it discussed in 
    detail (to the extent that any business magazine does) some
    of Anderson's operational issues, such as: coverage of the methodology,
    philosphical questions about whether there was too much emphasis
    on it; training - how they do it, what its value to them is; the
    partnership track with estimated salaries; the use of Lotus notes
    as a training and information sharing medium; the average age
    and education of their consultants; how they determine who has
    what skills and how they staff a project.
    
    I thought it was an interesting overview, so I thought I'd
    pass along the reference.
    
    FWIW,
    
    Glenn

    RE .30
    
    Well if we don't have the talent, are we to hire everyone from the
    outside?  How do you plan to do these project all with consultants.
    Fixed Price..  I better sell my stock now!
    
    - Mike

    
    >Well if we don't have the talent, are we to hire everyone from the
    >outside?  How do you plan to do these project all with consultants.
    
    Consultants have specific roles, and they shouldn't overlap with the
    programmers, although a consultant can also have those skills.  The
    contract programming help is done on per needed basis, this is standard
    operating procedure.  I'm on a project right now where we have Digital
    consultants and Digital contracted programmers.  It's no big deal.
    
    Projects can be sold either on time and materials (per hour) basis or
    fixed price.  The former is preferable, but sometimes fixed price works
    fine.  You have other reasons for which to sell your stock...
    
    Re: Andersen.  Their tried and true method was/is to hire freckle-faced
    "younguns" out of college, work them to death with a promise that
    someday they'll make partner.  There was some talk of they're being
    restructured, etc.
    
    /d.c.

    This week's Business Week cover story is about IBM's Gerstner's first
    six months on the job.  There is an extensive analysis about product
    vs. SI at IBM, and several negative assessments (customer and Wall
    Street) of IBM's ability to offer "vendor-neutral" product
    recommendations as part of SI consulting services.  One customer CEO was
    quoted as saying "I wouldn't trust them to do that." 
    
Carter

    
    re: .33
    
    The comment about Andersen.  That's one of the things they're
    discussing -- that maybe they should be hiring more "gray heads".
    
    It just seems to make sense to me to pay attention to the people
    who are having certain successes in an endeavor in which you 
    apparently would like to enagage.  The article's worth reading.
    
    Glenn

	>The comment about Andersen.  That's one of the things they're
    	>discussing -- that maybe they should be hiring more "gray heads".
    
    Well I haven't got much hair on my head...but seriously, it's a choice
    of using people who have experience in and have a good understanding of
    the customer's environment (I hate that word!).
    
    Re: .34
    
    The "mistrust" of a product vendor to do consulting because you fear
    that the bottom line is to sell you a "box", is a known problem out
    here.  But it's more of problem with "packaging" than substance, and
    like everything else is related to the sales/business pipeline issue.
    
    Well I've had enough of this office noting experience, it's back out to
    the world at large tomorrow.
    
    /d.c.

    Packaging -- That's it!!  It is unclear to me the bsuiness benefit of
    having a DIGITAL S/I organization as compared to a Digital Subsidiary
    pursuing S/I business -- The name could be changed -- The metrics could
    be changed -- The overhead costs couldbe changed -- The net is that if
    U have a group of folks out on their own, trying to make a buck -- some
    wonderous things will happen -- The organization will flatten -- The
    per hour costs  will be reduced -- The S/I organization can get credit
    for systems sales -- They can sell any platform based solution they
    want -- Sort of "read the customer's lips and give'em what they want!"
    
    The new S/I subsidiary would be a PARTNER to the existing Digital
    PRODUCT sales force -- Obviously there are some head count adjstments
    that would be made.
    
    Of course, Digital's Stealth Marketing would rename the subsidiary "XYZ
    Consulting, A subsidiary of Digital Equipment Corporation."
    
    

	A valid approach is to use the SI and other services businesses to
raise capital for the core area of hardware. Basically since SI and service are
now typically divorced from the manufacturers it might make sense for the
following:

	1) Drive the service and SI as hard as possible... some of the targets
	we are seeing are indicative. This is to raise the possible 		
	attractiveness to buyers!!

	2) On a country by country basis sell off the services and SI for cash
	This may be on a part basis i.e. sell 40% of F.S. in the Uk. to granada.
	or total.
	
	3) use the capital raised to fund H/w development and mktg


	4) Sell this approach as being "open" to the customer base. I.e DEc is 	
	being like everyone else (except big blue).

If I was BP I would be sorely tempted to do this.

    It's interesting to read the suggestions about splitting off SI into a
    separate Digital company or even selling it off. The Digital Germany
    holding company Digital Equipment Deutschland GmbH has in fact
    announced plans to set up a new company called Digital Equipment
    System-Integration GmbH. Is this a move that other countries are going
    to follow? What does Ed Lucente think about this?
    
    Mike
    

    The push back to product sales is very ironic.  For the last year the
    sales force has been beaten about the head and shoulders, ordered to
    let our channels partners (distributors) handle the product sales --
    everything from terminals up to and including VAX 7000's.
    
    The DECreps were supposed to go sell complex solutions.  If product was
    involved, fine -- but we are "high cost channels" and our real value
    was to go after the big, complex opportunities.  
    
    Then they scrambled the sales force:  80% of us call on new accounts
    this year, 90% of us have new bosses, and 100% are working on a salary
    plan of dubious workability.  OK, now that none of you know your
    customer, go develop a relationship and sell a couple million in
    complex solutions.  And LET GO of those day-to-day product sales!!
    
    O-K! Says the sales force.  And they let go.  The distributors have
    been banging on the door, wanting to be our low cost channel...our
    internal sales folks who handle the distributors have been talking
    about the phase-out of the Digital rep -- too ineffective.
    
    But then when things go sour, and product sales drop, what happens? 
    They tell the direct reps to go sell printers, or cables, or anything
    that will ship this quarter!  Where are those distributors, the ones
    who were going to save us?
    
    And what happens to our stated direction of concentrating on the
    complex solutions?  What the heck did those guys THINK would happen? 
    Did they think that the sales force would be able to start bringing in
    complex opportunities overnight?
    
    There are a lot of issues around our product line, application
    availability, our ability to deliver SI solutions, and all that.  But
    mainly, I would like to get the impression that our leaders have a
    clear idea of what they think they should be doing.

Apparently we do 50% of our business in SI in Europe. 

My notion of SI is creating a solution to a customer's business challenge
htrough the integration of hardware and software. This integration may
require any degree of new code, command procedures and general consulting etc.
The project should be run professionally, with acceptance procedures and support
structures.

I do not see any way how this activity contributes 50% of Digital's European
business.

In fact, every customer I visit are doing SI, every day. They are experienced
at it. What they don't do is build computers and write OSI networking
software or implement the OSF DCE software. They don't write operating systems.

The only way we can kid ourselves we do this amount of SI business in Europe is
if we count as SI a sale that involves perhaps the 3270 TE kit and a VAX.

Us trying to sell SI to customers is like a Bank for example (big SI capability)
trying to sell us computers on the basis we can't make good enough computers for 
our own purposes.

That said, SI is profitable, systems leverage SI and vice versa. Some 
organisations will be receptive to outside offers of SI and we can do it as well
as anyone else so we should be in that game.

Mike Collins

Recently, I attended a three day course, entitled Selling Systems
Integration - A Business Workshop.  It is the best sales training
I've had in all of my almost five years with Digital.  (Digital's the
only employer from whom I've received sales training.)

The instructors, Dave Gorka and Lou Liberio, were excellent!

Dave Gorka is very entertaining but far more talented as a teacher and,
I suspect, as a salesman.

He told us about the "techniques" used by EDS and Andersen and about
how much better we are than they are at finishing projects and
providing solutions, but how much better they are at engaging the
customer and keeping 'em hooked forever.

We heard about some fundamental techniques for "getting billable on
the first call," having delivery do your sales support for you while
maintaining a satisfied customer, how to establish a "beachhead" in
an account an break out new business.

He showed us how to disarm customers' attempts to accuse us of being
biased toward our own hardware and therefore not objective about
helping them solve their business problems:

    "What makes you think hardware will solve your problems. I AM
     UNCONVINCED."  or

    "Absolutely! and let me tell you why that's good..."

He showed us how to counter the claim that "IBM will do the study for
free and you (Digital) want to charge us $30,000."

    Suggest that IBM may be employing the "cookie-cutter" approach:
    "IBM may have done the study before and are giving you the answer
    to somebody else's problem."

    "Where's IBM gonna make up the cost?  You think they're in the
    charity business?"

    "IBM lost $6 billion last quarter and $26 billion the last
    several years.  Are you willing to take advice from a desparate
    advisor?"

    "The way I see it, you should accept *both* offers..."  IBM will
    withdraw.

    This is the "in your face" business. Have your resources with you
    and say, "These are my resources, we're ready to start today."


He talked a lot about the roles of sales, sales support, and
delivery, how everyone should have several different business cards,
how reps can work together and be "billable business consultants" by
providing added value to each other's accounts.

He showed how to create an engagement with a customer that becomes
a "money machine," increasing the customer's profit and generating
renewable business for Digital by instilling confidence in our
customers for our ability to help them identify and solve their
business problems.

He ended by telling telling us ten things we can do to start selling
systems integration effectively, including "always maintain your
honesty and integrity."

I could not be more convinced that, if every member of the field sales,
support, and delivery, including all levels of management, attended
this training, we would outgrow every other SI provider very quickly,
with a lot of very satisfied clients.

Bruce

    I keep hearing about the success of our SI business.  Just what is
    getting counted as SI?  I work for a geographic PSC.  Over the past 4
    years I've worked on 1 real SI project; the rest has been simple custom
    software or advisory consulting (e.g., Rdb performance tuning). 
    (Moreover, as far as I can tell, the SI project is making little, if
    any, profit.)  Most of my cohorts are likewise employed as resident
    consultants.
    
    If we're calling all this SI, then we really need to wake up, face
    reality and plan an organization whose purpose is to deliver the
    services that our customers actually want.
    
    \dave
    

    re: .42
    
    I know about Dave Gorka and Lou Liberio.  In my opinion these guys
    should be out selling us NOW instead of training the product sales
    force.  Create the market share and the rest will follow.  Dave and Lou
    can create the kernal of the sales cadre that I have mentioned in
    earlier replies.
    
    /d.c.

    re: .42
    
    I've also attended Dave Gorka's class. It violates a lot of "rules"
    and "conventional wisdom" (at least for DEC). But it was the best
    training class I'd ever been to at Digital. That class really made
    me understand what we would have to be truly successful at SI, and
    I came away from it really pumped up. I then spent the next six
    months watching our organization disintegrate, miss opportunities,
    and generally commit every sin that Gorka preached against.
    
    The final straw for me was to see a sale that consisted of $600K
    worth of hardware upgrades and $25K worth of network consulting
    paraded as a "major SI win". The experience taught me that Gorka
    can teach all the classes he wants, but until the metrics change,
    our chances are slim that we might ever be truly profitable in SI.
    
    Geoff

Note 2685.45 by DPDMAI::UNLAND 
    
    >a "major SI win". The experience taught me that Gorka
    >can teach all the classes he wants, but until the metrics change,
    >our chances are slim that we might ever be truly profitable in SI.
    
    bingo. it's been a massively growing problem for years. it's strangling
    us now.

    re: this entire note and it's replies
    
    While it's sometimes useful to discuss the company's business and other
    problems in this notesfile, a resolution to business problems can never
    be achieved here.  Since I consider this particular problem to be a
    VERY serious one, it's resolution is impossible in a forum such as
    this.  So I see no point in my continued replies.  But I do invite
    anyone to contact me where we can discuss it offline.  Of course if
    I'll be in my office is another story...
    
    Regarding metrics and how/why they should change, well it's all part of
    the same ball of wax.  I haven't been talking just about a tune-up, but
    a complete engine overhaul.
    
    /d.c. 

Note 2685.47  by 36417::CHERSON 
    
    >While it's sometimes useful to discuss the company's business and other
    >problems in this notesfile, a resolution to business problems can never
    >be achieved here.  Since I consider this particular problem to be a
    
    your wrong. discussion of the company's business problems here
    sometimes leads to, or contribute's to, resolutions.
    
    >Regarding metrics and how/why they should change, well it's all part of
    >the same ball of wax.  I haven't been talking just about a tune-up, but
    >a complete engine overhaul.
  
    the metrics are destroying this company. if you care to discuss it i
    can be found in ELF.  

    Can Digital be !seriously! in the Systems Integration business with its
    current business model ?  The nature of Systems Integration is a team
    of professionals acting as a prime contractor for a client, buying
    hardware-software-applications from the market at large (not just
    Digital products).
    
    This means that Digital buys the components, integrates them and
    provides the client with a working solution. The cost of the components
    flows through Digital�s books.  That passage collects an expected
    margin of nn%. 
    
    Here is the dichotomy.  If the expected margin of nn% is NOT added to
    the component cost, Digital�s overall profit to sales ratio suffers.
    If the expected margin IS added to the component cost, the client
    thinks he is being ripped off.
    
    The TRUE added value of an SI contract to the client is the knowledge,
    skill and expertise that Digital people provide to help solve the
    client�s problem.  This is a set of skills in very short supply in the
    market.  Digital�s track record in solving complex problems means that
    a substantial premium can be loaded on providing those services. 
    
    (IMHO) for Digital to succeed in the SI business, we
    need to price the TRUE added value highly.   We should not be forced 
    by the ratios measuring an  inappropriate business model to load the
    bought-in sold-on components with a supernormal margin.
    
    Clients are not naive and naturally wish to understand the make-up of
    multi-million $ SI deals. Let�s concentrate on making profit out of the
    thing the clients really wants- Digital�s added-value.  If the Digital
    products are truly best-in-class then their profit margins will be
    protected by their natural selection in SI deals.
    
    John

    re: .49
    
    The business model I have seen, does not seem to expect that system
    integration projects need to buy software, it only deals with hardware
    and subcontractors supplying labour.
    
    Hardware (purchased parts) are expected to make a margin contribution of
    12% which means a mark-up of 14%.
    
    Subcontractor purchases are expected to make a margin contribution of
    25% which means a mark-up of 33%.
    
    I'd be interested to know how other people in Digital decide what the
    selling-price is for something bought in from outside Digital and what
    pricing rules Digital's competition in systems integration use. In
    other words are we consistent within Digital and are we competitive?
    
    I see a danger that by using a mark-up which is too high, we lose a
    project. This repeats itself, because of using the same business model
    and perhaps because some decision makers on project-pricing are
    insensitive to competitive pressures. The sum total of investments in
    quote generation for systems integration projects lost (typically a
    significant amount) means we raise the goals on the margin expected
    from the increasingly rare number of projects won, which means we
    become even less competitive. Obviously this is a downwards spiral.
    Finally Digital says System Integration projects are unprofitable and
    decides to get out of the business and reassigns systems integration
    people to supporting product sales or TFSO's them. Fact or fiction? Is
    Digital heading this way? Does Digital have its systems integration
    business under control?
    
    Mike
                           

    Extracted from Digital annual report, 1993 (available on VTX IS), which
    comments "Our systems integration business is growing more than 20
    percent a year and now represents more than $2 billion a year in
    revenue."                   
    
    Mike
    -------------------------

This annual report shows how we are transforming Digital into a leaner, more 
responsive, more competitive corporation with a new organization, new 
technology and - most important - a new focus on the customer. 

This focus wasn't just imposed by management; it bubbled up through the entire 
company. Digital sales representatives and marketing specialists, systems 
analysts and service technicians, software developers and hardware engineers 
recognized the need for change. They wanted to be empowered to do what's right 
for the customer. Digital's new organizational structure provides that 
empowerment. It lets the corporation focus on the things it does well, while 
eliminating unnecessary organizational overhead. 

It recognizes that the business of selling a personal computer to a financial 
analyst is very different from winning the contract to automate an entire plant 
for Boeing, that selling components and peripherals through distributors is 
very different from selling a trading room system to Bankers Trust. 

Customers buy from the computer company that works with them to provide the 
most practical and cost-effective solution to their particular problem. 

There is no one right computer architecture or software system. Different 
applications require different solutions. As a result, most customers have 
multivendor computing environments. 

This is creating a tremendous opportunity for Digital in the systems 
integration business. The very fact that we support multiple computing 
environments - including OpenVMS, UNIX, and Windows NT - and have developed the 
technologies to link disparate systems together gives us the technical 
capabilities needed to undertake major systems integration programs. Our 
systems integration business is growing more than 20 percent a year and now 
represents more than $2 billion a year in revenue.                   

Customers want their present systems to work together, and they have an 
insatiable demand for ever faster systems that deliver better 
price/performance. They demand open systems, systems that are not tied to a 
particular software environment. Digital is responding to these demands. 


"By working with Engineering and concentrating on our core competencies, we've 
been able to reduce time-to-market while slashing manufacturing costs. This 
gives us a real competitive advantage in an industry where product life cycles 
are often just a matter of months." 

                                

Re: Margins on pass-through components

Remember that Digital, as a leading integrator, is able to negotiate 
significant discounts on the material we buy as part of our systems 
integration business.

For example, in the network space, we typically buy products at 40-50%
off the list price.

So if we mark it up 30%, we still make money, and the customer still sees
value in buying from Digital.  (ie. doesn't have to pay list price)

Digital is capable of obtaining significantly greater discounts than even
our largest customers, because the material only passes through our books.

To the vendor, Digital may represent a $5M channel, for example, whereas the
largest CONSUMER may only represent $1M in business to the same vendor.

Now, there are some "model builders" in Digital that think we should be 
selling everything at list price... these folks need to spend a year or 
so in the field with their paycheck riding on their success.

My humble $.02...    8^)

Bob

    
    
    I don't know, Bob.  What you say sounds good in theory, but when I see
    notes like the Cook travel note, I wonder about our negotiation
    capabilities.
    
    
    Mike

    re -2, -1
    
    Just a note "from the field"...if we are pursuing what is TRULY an SI
    project, there is some validity IF the client never sees individual
    prices.  If, on the other hand, we are simply combining some 3rd party
    products w/ Digital products & services, our negotiating skills or
    volume purchases DONT RESULT IN A LOWER PRICE IN MOST CASES. 
    Sometimes, if were lucky, we're "competitive" (within 5 or 10%).
    
    Reason...someone (a reseller) is always (well, almost always) willing
    do business at a lower gross margin than Digital.  PArticularly if the
    reselling company has lower overhead than Digital does. :-(  

    Re: my own base note
    
>    Is Digital going to turn the clock back ten years and concentrate on
>    selling hardware? Why do we need industry oriented CBU's if this is the
>    only market we are targeting? 
    
    I really had no inkling when I wrote this question, that the CBU's
    would end up reporting to Ed Lucente!
    
    Mike
    

    I just received a memo purporting to be a translation of a presentation
    Ed Lucente made to employees of Digital France. In the memo Mr. Lucente
    states that Digital is a products company, and we do consulting services
    in order to sell products. It was blunt and to the point. 
    
    To me, it's the end of seven years of hard work attempting to establish
    credibility with my customers that I could provide them with world-class
    solutions and be justified in making a good profit thereby. The statement
    completely discounted the wide variance between consulting profit margins
    and product profit margins. In my mind, Digital Consulting has simply
    been reduced to another marketing function.
    
    I don't believe that the comments were made in a public forum, but when
    they become public (and they will), I think it will kill our consulting
    business just as effectively as KO's "Snake Oil" comments damaged our
    UNIX prospects back in the 1980's.
    
    Geoff

    I guess this string is going to jump to note 2785.

    Oddly enough, this subject was discussed in notes 2685.
    

re: .0

Last i checked, the VP of consulting services was Gresh Brebach, not Lucente.

								- paul

    Re .0
    
    How about sending a copy of the translation to Gresh Brebach and ask
    him to clarify what his goals are for "Digital Consulting".
    
    Comparitively I've heard quite a lot from Ed Lucente. By comparitively
    I mean I've actually heard of at least ONE statement he has made. Since
    1 is infinitely better than 0 I guess that is good! I'd really like to
    understand Gresh's plans.
    
    From the slides Palmer put up the company seems to be organizd as
    follows:
    
    Area			VP			% of Revenue
    
    Core Products		Ed Lucente		40%
    PCs		       		Enrico Pessatori        10%
    Storage	       		Charlie Christ		 9%
    Compponents and Peripherals	Larry Cabrinetty	 9%
    Digital Consulting		Gresh Brebach		14%
    Multi Vendor Customer Svcs	John Rando		30%
    Elimination of inter BU transfer		       (12%)
    
    My apologies for VPs names I have misspelt. I get the distinct
    impression that this is how the company is now organized. The 5 old
    Customer CBUs now seem to be little less than the result of "Account
    Mapping" ie an accounting entity. Seems like all "manufacturing
    Accounts" get wrapped up and the revenue from that is a CBU. It seems
    to be that the real "businesses" are what are laid out above. Given
    that I'd sure like to hear what Gresh's goals and processes to get to
    those goals are.
    
    Better yet let's lear Lucente and Brebach on the same platform saying
    how they are separate but complement each other. It is very bad for
    the organization to get the impression that Lucente's area is any more
    or less important than Brebach's area. But Brebach sure is silent.
    
    Even better yet how about the organization of the compny being CLEARLY
    communicated rather than having us try and piece it together from the
    odd slide here, the odd snippet of a talk there.
    
    This area was touched on in the Mill meetings with Bill Steul. His
    explanation seemed rationale. And that is there is a focus at the
    moment on selling products (ie Lucente's area) because that is where we
    are hurting. MCS and Consulting are doing OK. But he emphasised that
    just because the current SLT focus was on shifting product it didn't
    mean that was to the exclusion of the other things we are doing.
    Unfortunately that hasn't been clearly communicated to employees at
    large. I wish it was. Hence I think Lucente and Brebach should do a
    joint DVN.
    
    I'm really pleased Palmer does a quarterly DVN. A step in the right
    direction. Pity he ruined his last one by making himself the laughing
    stock of the whole company with his comments on his pay raise. He could
    learn a thing or two from Gullotti whose recent DVN I thought was
    excellent. He didn't dodge the issues and he really sounded sincere.
    I'll judge exactly how sincere when I hear what's happened in
    Piscataway New Jersey around managers preaching metrics. He sounded
    like he weas going to get something done. We can wait and see.
    
    Dave	

Re: Mr. Unland's note a few back...

What are "world-class solutions", and how do they differ from ordinary
"solutions"?

Lee

World class solutions cost more ?

    "world class" is probably an abbreviation for "world traveller
    class", which means travelling in the cheap seats (previously referred
    to as "coach", which was itself a euphemism) on, I think,
    Northwest Airlines.  Or maybe it's British Airways.  
    
    Hope this helps.
    

    re: .16  "world-class solutions"
    
    Perhaps I get caught up in hyperbole, but when we deliver a solution to
    one of the world's largest corporations that includes features not to
    be found anywhere else, I consider that "world-class". When we deliver
    solutions to customers that are put into use on five continents, I 
    consider that to be "world-class". When we can compete on an equal
    footing with literally any other systems integrator in the world, I
    consider that "world-class". 'Nuff said.
    
    One of the major knock-offs that competitors like Andersen Consulting
    and EDS use against us is our bias towards Digital products. There are
    a couple of real horror stories that have floated around for years
    where Digital cobbled together a terrible hardware solution when a
    competing product from IBM or Unisys would have fit perfectly. Now,
    after years of proclaiming our tools and services are "open", and
    years of trying to get consulting practices in place to turn a good
    profit, we are being told that the primary reason we are in the 
    Systems Integration business is to sell more VAXes or whatever.
    
    There is a story (perhaps apocryphal) about a Sales Rep in LA who was
    trying to get a customer to buy a VAX. To come up with an application
    solution, the Sales Rep teamed up with his neighbor, a partner at
    Arthur Andersen, and jointly they sold it to the customer. The Sales
    Rep was overjoyed, because he had actually sold *two* VAXes, one to
    the customer, and one to the AA delivery team. After it was all said
    and done, he got $400K revenue for DECand a trip to DEC100. The AA guy
    got a seven million dollar progam that was extended twice over 3 years,
    a new Mercedes, and several hundred thousand dollars in bonuses. But
    hey, we're a product company, so I guess it was okay after all ...
    
    Geoff

    well that last note really had me !
    
    $7M against $ 400K...
    Ed Lucente should read that one....
    
    Paul

    re:.64
    
    Keep in mind that when that LA deal went down there was a policy of
    "anything that sells a VAX..." from corporate marketing.  Those kind of
    policies only reinforced the staus quo.
    
    All of this discussion and examples keep underscoring the fact that the
    product sales force should sell product, and that we need a *small*,
    but capable cadre of consultative sales reps to sell consulting. 
    Unless someone focuses in on SALES, discards the numbers metrics and
    PSS approach to the business we will never be successful.
    
    'nuff said...here, that is.
    
    /d.c.