Conference 7.286::digital

    re -.1
    
    We spin all the time, where have you been for the last eight years.
    
    Services has been particularly active in the last two.
    
    -Mike Z.
    

    re basenote-way things are going,maybe MCS is going to spin off Digital
    ;-}

    
    considering MCS brings in 35% of Digital's revenue, I think it highly
    unlikely we are going anywhere. hth
    
    Mark

>  considering MCS brings in 35% of Digital's revenue, I think it highly
>  unlikely we are going anywhere. hth
    
.... and considering that MCS's profit margins are very healthy (without which, 
the rest of Digital most likely be in the red), I would think that the investment 
community would not sympathize with the notion.

I have heard Rando personally saying that MCS is not for sale. But we all know 
that everything in business has a price. If someone is willing to pay big money, 
I am sure that the BOD will at least look into it (In no way I am saying that this is 
the case.)

/OLD
MCS Availability Svcs

    
    
    I have heard that MCS "profits" are realized at the expense of the rest
    of Digital who pay MCS a basic monthly charge for each system they
    ship.  Also customer trouble calls to MCS are also charged back to
    the business units. If this is true, then how profitable are they
    really?
    
    Inquiring minds would like to know
    
     
    

We've got to be nuts...

(famous last words)

    RE: .5
    
    MCS Gets 1/12 of the "warranty attribute" assigned to any given product
    per month, i.e., if a 8400 is sold, "someone" has identified what the
    warranty cost is and 1/12 of that or 1/24, or 1/36, (you get my drift,
    depending on the length of the warranty) is JV'd to the appropriate
    service delivery cost center.  Repairs on warranty items then come out
    of that cost center's "bucket".  NOTHING gets back to sales once the
    system is shipped (unles sales FORGETS something and BEGS service
    delivery to help them out, THEN a charge goes back to the sales cost
    center.
    
    MCS is profitable only because those of us that sell and service the
    "field"  are the best in the industry (in my opinion, and Yes, I'm one of
    'em).  
    
    Just my $.02.....
    
    Toodles.....JPs
    

    >I have heard that MCS "profits" are realized at the expense of the rest
    >of Digital who pay MCS a basic monthly charge for each system they
    
    Who pays for the cost of service under warranty?  The manufacturer,
    natch.  This is basically how the cost of warranty service gets billed
    back to the manufacturer, not a gimmick to make MCS look profitable. 
    If the system turns out to be a turkey (reliability worse than
    predicted), MCS would take it on the chin.

        Re .5

    >I have heard that MCS "profits" are realized at the expense of the rest
    >of Digital who pay MCS a basic monthly charge for each system they
    >ship. 

    	Digital is not the only Customer of MCS.  In fact, Internal 
    Customers are a small fraction of MCS business.  Yes! MCS does get money
    for servicing Equipment Internally (and you can call if funny money),
    but MCS has to pay for the parts and the people and support staff to
    do the job.  If you think MCS is over charging then go to a 3rd party
    vendor.  They'll also charge for the service.  Hey!  It's part of doing
    business.

    >        Also customer trouble calls to MCS are also charged back to
    >the business units.

       Not completely true.  Warranty calls use to be charged back to the
    product line (before business units), now I think the warranty does go
    back to the Business units.  But WARRANTY WORK is for a short duration
    (like the first 3 months or the first year or 2) and not the bulk 
    of MCS business.  Warranty is for new systems (usually only infant 
    mortality, or design issues) and account for very few calls.  The 
    Majority of Trouble Calls are Either paid by the customer by CONTRACTS
    (via a basic monthly charge, and possibly an uplift for special contracts)
    or by PER CALL.  DIGITAL DOES NOT PAY MCS TO FIX THE CUSTOMERS EQUIPMENT.

    >                    If this is true, then how profitable are they
    >really?

    MCS is very profitable...  We have very good and skilled people... 
    When we loose contracts, it is ALMOST always because we were undercut,
    and not because of our service.  Usually we regain those lost accounts
    because NO ONE ELSE can fix DIGITAL SYSTEMS like MCS can.

    Jim Morton
    Remote Support  (now called MVHS)

    
    You might want to check the financials.  MCSD's profit margins are
    starting to slip, and likely to slip further.  That happens we you
    take anything on contract (regardless of actual cost to repair, IF
    it can be repaired), overcommit limited resources, etc, etc.
    

        Thats expected since most of the TPL products are going away and High
    volume products such as PC's are being taken under contract.  As we
    sell more Alpha Products the profit margins will stabilize.

    IMO, if we wanted to have a more consistent profit, we'd spin off the
    PC maintenance to a group with appropriate skills and salaries with the
    commodity market.  As it stands, we use Highly trained and High paid Low
    volume Engineers to service the PC's.  Not good business sense IMO.

    Jim Morton

    .-1: the USA isn't the only country where MCS services PCs. In the UK,
    the story I hear is that Desktop Fixit Services are already contracted
    out and the folks who do it largely aren't Digital Classic employees. 

RE: Last few

    Exactly so: MCS (not MCSD, the D is the Delivery piece, albeit it has
    2/3 of the MCS people) is seeing what the products people went through.
    So now *we* must redesign our processes (business, "manufacturing", 
    change management, operations and so on) and align them to higher volumes,
    higher speed of new product introductions, increasing connectivity (and
    increasing complexity of it). And lower margins. As indicated, and this
    is my own opinion also, we are behind. We can discuss why this is, while
    we had plenty of knowledge that it *would* happen, but it does not help.

    To drive the point home that we are in a new business - this was shocking
    to me, being of a helpful and customer-satisfaction mind: On User-level
    telephone support calls, we need to come down to a total delivery
    cost per call that allows us only a few minutes time per call. Thus:
    If the Customer starts to talk about how's-the-weather-where you-are,
    he has you losing money within a time-span of 2 or 3 minutes. The strategy
    *has* to be to get rid of him if has not told you what his problem is
    within the first couple minutes. Do what you have to do, but get *rid*
    of this Customer. There are ways to do this in a nice way, but if you
    loose this type of Customer to the competition, you won and they lost.

    BTW: Lower margins are only a problem if you can not figure out how to 
    turn over your money faster. Compare the textbook case: The margins
    of the supermarket and those of the jewelry store. Your grocery store
    has around 1/25th of the margin of the jewelry business. Who makes more
    money? 

    Al

    MCS Product Service Management group performs all service pricing
    on Digital Supported products at the corporate level.
    
    Digital products covered under warranty are serviced by MCS at cost
    which sometimes may initially include risk. The warranty transfer
    is re-evaluated periodically to make sure neither MCS nor the
    business unit is losing.
    
    Now with products that are sold with 3 and 5 year warranties i.e.
    storage products and pc's, not to mention some other products like
    Sables, MCS takes a hit on the bottom line because the service support
    is at warranty transfer price not DECservice Monthly Charge or Basic
    Monthly Charge (List Prices for service).
    
    Warranty uplifts can be sold and often are at list prices thereby
    giving back some of the service revenue and margin to MCS.
    
    By the way the cost factors used are MCS Fully Loaded Costs, not the
    cost for the service engineer alone.
    
    This has been my understanding FWIW.

I was thinking about entering a new note on this topic but this may be a
reasonable place...

I recently got a HiNote Ultra - wonderful piece of engineering.  However I had
a number of problems setting it up and/of using various functions.  Just as a
couple of examples:

	o	I couldn't get the IR port to work and spent over an hour on the
		support line to get it going

	o	I spent multiple hours trying to get the ethernet card working
		(on my own) and finally found out through NOTES that the card I
		was shipped didn't run under Windows 95

	o	Although I got my system well after august 24th, it came with
		WWW installed and no free upgrade coupon for Win95.

	o	There was a disk with a new BIOS upgrade for 1.37 (the current
		version is 1.41)

	o	When I called in for service I needed the serial number.  To
		read it you have to remove the battery or reboot and watch the
		start up message

These are just some of the problems I had.  If I were a REAL customer my
satifcation ratings would have been VERY LOW!  Also, for Digital, we would 
probably have to seel a dozen more systems just to recover all the money we just
lost.

I guess my point of all this is we feel like 2 separate companies.  There seems
to be is no incentive for product engineering to ensure their products are easy
to use, install or get service on.  I'm not saying they don't worry about this,
but it ain't working...

How may other people have had similar problems?

-mark

    Just to pick a nit, if you spin out, you're out of control, but
    if you're spun off, you get sold to someone else or are recreated
    as a separate business entity. Come to think of it, you may be out of
    control this way as well. So you could say, "We've been spun off, and
    we spun out as a result!"
    Bruce

    We *would* be more credible as *Multi-vendor* Customer services. On the
    other hand, do we need it? See MS, COMPAQ, Dell, Borland agreements.
    
    Al
    

re: .0

IMO...

The MCS business unit (or at least the captive arm of it) is one of the few
large cash cows left in the company, and it's being milked to support the
losses of Digital Semicondcutor and the non-profitable arms of the Computer
Systems Division (which, last I looked, included both the SBU and the PCBU).  

If Digital gets rid of MCS today, then Digital will post a fiscal loss for
FY1996.  When and if both DS and the CSD are stand-alone profitable business
units, then MCS will be at risk for being sold off for investment-cash.  DS
won't be profitable as a stand-alone business unit until late FY1997 or early
FY1998 as far as I can tell... so MCS is "safe" for another year at least :-)

But as long as MCS retains a reasonably stable profitability and comparable
growth relative to their competition, then I doubt that Digital would ever
"spin them off" (i.e. sell MCS to another company).

There are lots of folks out there with plenty of cash in pocket from the nice
fat 1995 stock market performance... ...and I bet these folks would LOVE to
invest in a hot new company IPO.  So as for the idea of spinning off MCS as a
stand alone public company, with Digital Equipment Corporation holding a
controlling share and all the employees getting nice fat stock options...
that's an entirely new rumor -- and you're welcome :-)

Same thing goes for Digital Semicondcutor. :-)


- jeff_rumor_starter_wannabe

    With the recent combination of GECS, and <part of> IBM Field Service
    and some Kodak types into "TSS", the Largest Field Service company Ever
    I expect we'll be seeing some real pressure in the future. If <when?>
    these guys get their act together, this will get interesting.
    
    As to the "Low volume" MCS types fixing "high volume" product, well,
    that's pretty much what worries the hell out of a whole lot of people.
    For those who decided to make a career out of satisfying customers,
    it's still a constant source of pressure. Now you aren't supposed to
    make customers happy so much as fix the hardware and get the hell out
    of there, because you have more calls to do. And don't be using parts
    either, even if you can get them, they cost lots of bucks.
    
    .mike.

Adding to Mike's comments. We can't run commodity PC support the way
we run support for VMS and UNIX. It's just not going to make money.
The "low volume" engineers (that's a joke if you've worked CSC phones)
can't be profitable and provide the same level of service for free on
a PC waranty that is provided on a full service contract for a VAX.

Certainly this new Compaq contract is going to bring things to a head.
Perhaps it will be handled the way we do Microsoft support. We have
a small group of highly technical Deccies and a large group of contactors.
I don't know what level the contractors are at. We are also pushing 
electronic support and "read only" access to our technical data. liesl