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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
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.
"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
DigiÂtal'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 supÂporting 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 worldÂwide -- 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 combinaÂtions of
these sources. The program development work we have done is
deÂsigned 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
EngineerÂing 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
marÂketing programs, provides an excellent platform upon which
OEMs can base their solutions."
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.
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 perÂsonal 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 investÂments
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 downÂsize 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 manufacÂturing population over the last three
years."
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.
Three issues of importance to Digital involve
high-technology trade relaÂtions 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
semiÂconductors, 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 governÂment-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 softÂware 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 proÂgrams. The latter
would impede the dissemination of information, be
antiÂcompetitive, 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.
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-consumÂing. 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 informaÂtion
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 producÂtivity. 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.
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
asÂsessment 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 reducÂtions 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 apÂproach
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 initiÂative 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 partiÂcipating in the survey
continue to indicate their satisfaction with DigiÂtal's benefits
at levels that exceed industry norms.
In 1985, Digital will continue to address the
long-term challenge of conÂtaining health-care costs by
encouraging employees to live healthy lifeÂstyles 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.