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Volume 5, Number 7 ________________________________ September/October 1986
Digital Active In Development Of Corporation For Open Systems
Digital Acquires Technology, Assets And People Of Trilogy Technology Corp.
Admiral Grace Hopper Joins Digital
Butler Lampson Named Corporate Consulting Engineer
Four Of Digital’s FY87 Goals Emphasized On 'Between The Lines’
Digital In U.S. Begins Exempt Job Evaluation/Classification Project
Major Steps In The JEC Project
Nearly 5,000 Employees Add Optional Life Insurance, Improving The Plan's Financial Base
As part of its continuing effort to support industry standards, Digital has been instrumental in the development of an international standards organization called the Corporation for Open Systems (COS). Incorporated in March, 1986, COS has approximately 60 member companies, and is in the midst of a major membership drive.
"The goal of COS is to get users and vendors at the senior executive level involved in the definition and introduction of interoperable products that meet industry and international standards. Members who are users state what they need from a strategic perspective, and members who are vendors focus on the interconnectivity standards that will expedite solutions for these needs," explains Bill (BJ) Johnson, Digital's vice president of the Networks and Communications Group, and a member of COS' Executive Committee and chairman of its Membership Committee. Bill hopes 40 additional companies will join by January.
"With COS, we expect to expedite the acceptance and implementation of industry interconnectivity standards. Typical approaches to this have focused on technical or marketing people who work on various committees of different standards organizations. COS involves senior officers of companies who, as a result of their positions, can make things happen more easily and quickly," says BJ, who has been involved with COS from almost the beginning.
There are three kinds of members. Each requires a certain level of financial commitment as well as a commitment to implement the standards decided upon by the corporation. The membership level of Digital and other companies with revenues exceeding $125 million requires a commitment of $200,000. Fees for smaller companies are less.
The fees support a central staff, the work required to determine what standard protocols to support, and the development of test beds that are used by member companies to verify interoperabilities against the standards. In addition, publications activities and other programs are supported by COS .
"Digital has long had a commitment to international standards for networking. COS is the most recent way we are expressing this commitment. Some time ago we made a commitment to OSI standards and moved DECnet towards OSI since it is very close to what we have. We have already announced OSI compatible products such as OSI mail and transport products," states B J. Digital Engineering operations in Reading, England, and the International Standards group in Geneva, Switzerland, were instrumental in establishing Digital's position because of the many geographies and political relationships international companies must deal with in Europe.
The Executive Committee of COS functions as a general operating body. It consists of seven members in addition to the chairperson and vice chair. Membership rotates every few years.
A Strategy Forum works with the president to direct the research and development activities associated with COS. Mahendra Patel, a corporate consulting engineer at Digital, is a member of this forum. He attends each meeting, as does Digital's Lynne Kershaw, senior engineering manager/OSI Program manager, who is the alternate for Mahendra. She also headed a subcommittee that looked at the relationships among the SPAG-Special Promotion and Application Group (a group set up in Europe to promote OSI standards), the Manufacturing Applications Protocol, the Technical Office Protocol-MAP/TOP, and the National Bureau of Standards. Tony Lauck, a corporate consulting engineer at Digital, is a member of the Strategy Forum's subcommittee for architecture, and Gary Robinson, manager, Corporate Standards, was involved in the development of the Standards subcommittee of the Strategy Forum.
Digital was involved in the development of COS as early as last summer. Win Hindle, senior vice president of Corporate Operations, attended the initial start-up meetings, and Al Mullin, vice president of Corporate Relations, provided organizational advice.
Digital has acquired copper/polyimide interconnect and packaging technology from Trilogy Technology Corporation for $12.75 million in cash. Digital will lease fabrication and office space in facilities in Cupertino, Calif., and has acquired certain assets from Trilogy.
In addition, approximately 100 employees from Trilogy Technology Corporation have joined Digital. This new Digital operation is managed by Paul McEnroe, who had been President of Trilogy Technology Corporation prior to the acquisition. Paul reports to Bob Glorioso, vice president, High Performance Systems.
This acquisition provides a technology base which will help Digital provide its customers with high-performance computer systems in the future.
Dr. Grace Murray Hopper, the Rear Admiral who last month retired as the U.S. Navy's oldest officer on active duty, has begun a new career with Digital as a senior consultant working out of the Washington, D.C., office.
Her duties will include representing Digital at industry forums and symposia, making speeches that focus on government issues and ADP environments, serving as a representative on computer industry committees and at engineering forums, writing and publishing computer systems/engineering papers on selected subjects, and participating in Digital's liaison programs with educational institutions.
"We are very pleased Admiral Hopper has accepted a position at Digital," Harvey Weiss, vice president, U.S. Sales Operations, said. "She is a remarkable woman and a true pioneer in the computer field. Although well past normal retirement age (79 years old), she has accomplished so much and experienced so much that younger people who associate with her will have the opportunity to learn at a rapid pace."
Since 1952, Admiral Hopper has published more than 50 papers and articles on computer software and programming languages. She is a leader in the development of the COBOL computer language and has served on the ANSI X3.4 Committee on the standardization of computer languages. She is a member of the CODASYL Executive Committee.
Butler Lampson has been promoted to Corporate Consulting Engineer, reporting to Bob Taylor, director, Systems Research Center (SRC), Palo Alto, Calif.
As one of the first employees of the SRC, Butler helped to establish and develop the Center and has since served as a consultant to various engineering organizations, contributing to product development and enhancement. Butler has played a key role in continuing research to support the company's strategy in distributed personal computing and accompanying software development . He has been a leader in the design and development of personal distributed computing, including Ethernet, Alto (the first high-performance personal computer) and BRAVO (the first what-you-see-is-what-you-get editor).
Butler is a member of the Association for Computing Machinery, the National Academy of Engineering and the International Federation for Information Processing.
"We want to be successful and we want to survive. It is said that one of our large competitors has a goal, a theme which says, 'Deck DEC'. You can be sure that all our competitors are out to do what we are doing and to beat us. The way we can solidify our position — win this contest — is to be successful in our goals. They include improving customer satisfaction,
increasing our profitability, increasing our market share, and improving and implementing our product strategy," stated Ken Olsen, president, at the beginning of the fourth edition of "Between the Lines," Digital's quarterly satellite communications program, which was broadcast live on August 19. Other program guests were Jim Osterhoff, vice president, Finance; Jack Smith, senior vice president of Manufacturing, Engineering and Marketing; and Jerry Witmore, vice president of Industry Marketing.
"To understand customers, you simply have to understand yourself," explained Jack Smith. "Selling to a customer involves understanding what the customer needs and certainly providing the customer with the solution to his or her problem. The customer wants the solution and wants to be sure the salesperson understands the problem well enough to provide the solution. The customer also wants the product to be delivered when it was promised, and wants the product to be reliable.
"Customer satisfaction isn't much more complicated than these things: understand the customer's need, provide the solution if you have it (if you don't have the solution, don't sell it), deliver a product when you promise it, and make sure it doesn't break. And, if it does break, make sure you have the resources to fix it.
"A good part of that reliability issue is in the design of the product itself, as well as the specifications for the components. So, the close coupling between Engineering and Manufacturing means getting our product development people to better understand how they can design reliability into the product and at the same time, getting our manufacturing people to understand the specs of the components as well as helping our engineers spec components so we end up with a higher-reliability product."
In response to a question about Digital's marketing goals, Jerry Witmore explained, "We want to increase our market share. We have a stronger product portfolio than ever before, and now is the time to deliver what we believe are the strategic, important products for the long-term and to increase our position with those customers. I discovered one of my favorite marketing slogans many years ago in Northern California. It was written on the side of a pink cement truck: 'Find a need and fill it'. That's what marketing is all about — to focus on those needs that Digital can fill, then carry it out. We're spending a lot of time working on the strategic side of it, defining which customers, applications, industries, and geographies to target. That portfolio will enable us to focus on increasing our market share."
Part of Digital's strength is reflected in the financial results reported for FY86. According to Jim Osterhoff, "We set some fairly aggressive goals for ourselves. We said we wanted to improve our profit margins, which meant breaking a four-year declining trend, and we needed to do that in a period when industry growth rates were low. We succeeded very well. We beat the budget in revenue for the first time in seven years, and we met our cost budget. So our profit margins improved from 6.7% to 10.9% in one year, which is a major accomplishment.
"This doesn't mean our profit margins are where we need them to be. It’s tremendous progress in one year, but historically we have been in the 16-18% range. We should not take our eye off IBM's typical range of 20-24%. But first, let's get to 16-18% and then we'll start looking at 20-24%," added J im.
"I think that one of the most important factors from a marketing point of view as well as a profit point of view is bringing your products into the market, which means bringing them in on time and at a point when you can demand a higher price and make a higher profit," said Jerry. "We have significantly improved our ability to design products to meet the needs of our customers and then get them into the market. This has given us the ability to manage and drive prices to get the return. That's a credit to our engineering organization."
Jack Smith added that, "Three or four years ago, we set one priority for ourselves. At that time, as we all remember, we had tired products; and we knew that in the coming years the major portion of our revenue would depend on the introduction of new products into the marketplace. So getting those products to market was our number one priority. It's important to pick only one priority, because if you pick two priorities, people start questioning which is the main priority.
"As we look out over the next couple of years, it is important that we complete what we have started. Our current emphasis, which is layered on basic product strategy, is to develop the applications that meet the customer needs. That's why I think Pete Smith's marketing group and the industry marketing groups are going to be so key to our success in the next couple of years. They are the conduit between the customer and the product development groups. It's their job to make sure we are developing the complete solution for the customer, that we are not missing a piece of software here, or a particular interconnect there," emphasized Jack.
In terms of targeting markets, Jerry explained that the first thing Digital has to do is determine how the market is divided in terms of industries, applications and products. "We're still in the process of reviewing industries in terms of where we want to be strategically in five to ten years," he noted.
"As an example, life insurance companies and food companies represent a new industry focus. Within service industries, which are Bob Hughes' focus, sits the life insurance companies. The food companies are in my area of responsibility — basic industries. The insurance and food industries are extremely large in terms of potential revenue for computers, and we have virtually no presence in either. About a year ago we started analyzing them. Then we started calling on executives in those industries to first tell them who we were, what we thought we had to offer and why we thought we ought to be part of their long-term plan in information technology. Win Hindle was heavily involved in making calls on insurance companies and helping us develop our strategy. I have been doing the same thing with food companies. Now we’re already piloting projects in a half-dozen insurance companies and a halfdozen food companies as a direct result of this focus. Over time, I'm confident we will do millions of dollars of business with those two industries.
We're trying to take this same systematic approach -- analyze and understand the market; find a need and fill it — with the other industries," continued Jerry.
A caller from Houston, Texas, requested information about Digital's long-term strategy for the UNIX operating system. In response, Ken Olsen said, Digital's long-term strategy is to support UNIX. "For those people who want the best proprietary system, we offer VMS. For those who want an industry standard, we offer UNIX through ULTRIX. We offer additional features for ULTRIX, and we'll keep offering more because it’s easy to offer some of the things that we developed for VMS.
"Part of the reason for going to ULTRIX was that some people want an industry-standard system. To our surprise, offering ULTRIX turned out to be an effective way to market VMS because by using this industry-standard entry point, we are able to encourage people to look at both systems, and they are able to see the values of our rich VMS environment."
An employee from the Mid-Atlantic states asked Jack Smith about the importance of maintaining high level up-time when, in fact, there is a shortage of some VAX 8000-series computer parts. Jack explained that the 8000-series products have been selling beyond Digital's expectations and that the problem of spare parts for the field was already being addressed by Logistics Operations.
In response to a question about where our ability to interconnect our products falls in the current product strategy, Jack said, "It's the name of the game. I think it's our competitive advantage relative to the rest of the industry. This isn't something new that we recently decided to develop. When we first became involved in the concept of distributed processing, we knew that distributed processing was going to depend on our ability to interconnect whatever pieces of the product strategy we would develop over time. Interconnectivity or networking is the glue which holds our whole product strategy together."
"It is also a key part of our business strategy," added Ken. "Before we did networking, we built every peripheral for every central processor. That led to an enormous amount of engineering work, and inventory and spare parts. Today we build everything for Ethernet and each computer ties to Ethernet. This means we need only one of each peripheral, and we cut down the inventory, the engineering, and the maintenance. Everything is easier. So, one of the reasons for this improvement is our interconnect strategy."
"I think that there are an awful lot of things that are responsible for the market success we are having. One is all the favorable press that we are getting. It’s introducing us to some new customers and opening doors that aren’t normally open," emphasized Jerry. "The two unique features you read about with respect to Digital are our communication capability and our financial progress."
Added Ken, "There is another interesting thing about strategy, and it's something we don't say enough. For any organization, for any person, there is a normal tendency to try to be like everyone else and, every time we've done that, we've gotten into trouble. Every time we’ve been successful, it’s when we set about to do something we believed in even though the rest of the world didn't do it. When we introduced the minicomputer, it was so unique it was very difficult to sell, and we were ridiculed and laughed at. As you remember, three or four years aao we were ridiculed because we didn't say that the personal computer could do everything for the world, we said that networking was the important thing. That was a hard time, but I would much rather be selling networking today than personal computers. The important thing is that we know what is best and stick with it."
Responding to a question about Digital's workstation strategy, Jack Smith said, "We are committed to the workstation area. We have been saying for some time that we will have a VAX on a desk and we will. We intend to improve our current graphics relative to a new introduction and indeed, we will have products that will cover the total spectrum — the low end, the mid-range and the high end. We intend to be a force in the workstation market within this fiscal year."
Ken added that Digital was slow in getting into the workstation market because our strategy was to make workstations based on VAX. "We didn't start until we had the VAX microprocessor. Our machines are those based on VAX, because it's so easy to do the software and because it does the computation so well. This is our contribution."
Jay Atlas has been appointed U.S. Volume Sales manager, reporting to Chick Shue, vice president, U.S. Sales. Jay is responsible for the overall performance of the U.S. Sales Organization in achieving its volume certifications and ships for all of the Digital Reseller Channels. He joined Digital in 1972, served as European Marketing Manager for Field Service from 1974 to 1977, and has had sales management responsibilities since 1984.
Dileep Bhandarkar has been promoted to senior consulting engineer, reporting to John Gilbert, manager, Systems Engineering. As technical director of Mid-Range Systems, Dileep has overall responsibility for management and control of the VAX architecture, as well as for major aspects and elements of the VAXBI and CI architectures. He has been with Digital for eight years.
George Borrero has been named group Personnel manager of Semiconductor Operations (SCO), reporting to Bob Palmer, vice president, SCO, and Les Koch, group Personnel manager, Low End Systems and Technologies. George, who joined Digital in 1976 , has been the group Personnel manager for GIA Manufacturing and Engineering for over seven years.
Doug Clark has been promoted to senior consulting engineer for the Advanced VAX Systems Engineering group, reporting to Don McInnis, Advanced VAX Engineering Group manager. Doug joined Digital in 1980 as a member of the System Architecture group. From 1982 he worked with the Nautilus group as part of the effort that led to the VAX 8800, 8700, 8550 and 8500 products.
Peter Hawker has been named Corporate Employee Benefits manager, reporting to Carol Burke, manager, Corporate Personnel and F&A Personnel. [eter previously worked in the Treasury organization, where he was Compensation and manager. Prior to taht, he was the European Benefits manager.
Paul Kampas has joined Corporate Marketing Communications as manager, Corporate Competitive Analysis, reporting to Peter Jancourtz, manager, Corporate marketing Services. Paul joined Digital in 1976 as a performance analyst, coordinating IBM equipment bench-marking and tear-downs. He has been the corporate IBM competitive "watcher," and has wroked as a strategic planning manager in Engineering and Marketing.
George Shea has been appointed as Digital's first Director of General Ser- vices Industry Marketing. George will be responsible for marketing Digital's products and services to the data services, airlines, retail/whole- sale, consultants, and legal industries. He will report to Bob Hughes, vice president, Service Industry Marketing. Since joining Digital in February, ^985, George has been Director of the Telecommunications Industry Marketing Group. John Hart will be the acting director of this organization until a successor to George is named.
Kevin Sullivan has has been appointed to the new position responsible for Personnel in the Corporate Operations, Corporate Finance and Corporate Administration organizations. Kevin will report to Win Hindle, senior vice president, Corporate Operations; Jim Osterhoff, vice president, Corporate Finance; and John Sims, vice president, Personnel and Administration. He will represent the Personnel needs of the departments to the Personnel Management Committee, on which he will serve as a full member. Kevin has held a variety of management assignments in Personnel since joining Digital in* January 1976. These positions include Personnel manager for Europe, manager of Corporate Compensation and Benefits as well as his most recent job as the U.S. Field Personnel manager.
Rebecca Warshawsky has joined Digital Video Network, reporting to Don Elias, Media Communications Group Manager. Rebecca will be responsibel for all program activities, including the development of new programming. She comes to Digital from Wang Laboratories, where she was manager of the Wang Television Network, which serves more than 90 sites worldwide.
As one of its efforts to remain competitive for its people as well as for its products, Digital has initiated a project known as Job Evaluation and Classification (JEC). Being implemented in the U.S., this project is targeted for completion by the end of calendar year 1987.
JEC's objective is to make certain Digital maintains a consistent, credible, and responsive method of evaluating jobs based on content and responsibilities — independent of the performance of the individual currently filling the job. It will culminate in a new method -- evaluation system -- for objectively analyzing employee work. This new system will give managers the tools needed to appropriately assign — classify — employee work into a position that fits within an overall framework of jobs.
The U.S. Compensation/Benefits Committee (USCBC), representing line management across the U.S., chartered the project after management studies indicated a need for improvement in the effectiveness and credibility of Digital's current job evaluation and classification processes.
"Our goal is to have a method that consistently delivers externally competitive and internally equitable salaries," explains Harvey Weiss, chairman of the USCBC and vice president of U.S. Sales Operations. He notes that JEC will primarily focus on the U.S. exempt population (Wage Class 4 employees). "By targeting this population, we will be dealing with the largest portion of the work force and the group that has experienced the most rapid growth. When JEC has been completed and the new model implemented, we will examine whether such a project is appropriate for non-exempt jobs," he adds.
The Current Situation
Digital's rapid growth and organizational changes have resulted in the need for more consistent methods of evaluating jobs. JEC will minimize confusion, support inter-department transfers, and facilitate the assignment of employees to jobs.
The implementation of a new job evaluation and classification model will enable Digital to:
o maintain an ongoing and consistent method for evaluating jobs based on an objective analysis of work responsibilities;
o improve employee and management confidence in the appropriateness of internal job-to-job pay relationships;
o improve the process of classifying employees into appropriate jobs;
o facilitate the transfer of employees between organizations;
o identify when work differences are significant enough to justify different salary ranges;
o make better use of market comparisons to determine appropriate salary ranges, and
o establish more consistent information for use in job descriptions.
JEC will address these issues while establishing a new method for evaluating work that is consistent across Digital organizations. Since the final tools from the project won't be available until after December 1987, JEC isn't expected to have any effect on employees before that time.
Line Management Role
Line management's direct support and involvement is needed in order to make certain the new Job Evaluation and Classification process is objective and consistent. As a result, the project process has been specifically designed to include the close involvement of line managers.
"To remain useful and credible over the long run, a process for job evaluation and classification has to reflect Digital’s culture and business needs," says John Sims, vice president, Personnel and Administration. "That's why line managers are involved in each critical step. Their perspectives will make a better end product; one that all managers will have confidence in and be able to support. Personnel is responsible for the development process and technical support for the new system and for ensuring its ongoing integrity."
JEC, which is being introduced to all employees, has received the endorsement of senior management teams, including the Executive Committee. Many presentations have been made and others are scheduled to make certain the program is understood.
Various committees have been established to make certain the project is objective, thorough and represents the cross-functional needs of the company:
o The U.S. Compensation/Benefits Committee chartered JEC and, in partnership with the Personnel Management Committee, is overseeing all of its major components and progress.
o 19 management committees, representing all job functions,•have been assembled to evaluate approximately 300 representative — benchmark — jobs using Digital-specific standards called evaluation factors. To provide these committees with sufficient job knowledge, approximately 2,000 employees in these benchmark jobs will complete a questionnaire in October.
o A committee of the chairpeople of the 19 management teams will then merge their data cross-functionally.
o Personnel task forces have been identified to address market analysis, systems, communications, training, and policies and procedures issues.
o Outside consulting resources are in place for technical guidance throughout the project.
Personnel will integrate JEC with existing management systems such as the ^Salary Management System and the Total Employment Staffing System. They will monitor EEO and Affirmative Action goals to ensure that the company's commitment and values in these areas are preserved as JEC progresses. Personnel will also automate appropriate steps for ease of use, information handling, and maintenance.
This October about 2,000 employees representing 300 U.S. jobs will be asked to complete a questionnaire that will elicit information about the work they do. The jobs have been selected because they can be priced in the external marketplace and/or they are filled by large numbers of Digital employees, often from different organizations. Employees doing these jobs were selected, with the assistance of their managers, to make certain they and have been in their positions sufficiently long to understand the work.
In December, the 19 functional management teams, which will receive formal training, will review the questionnaires completed by the employees. From the information in the quetionnaires, they will evaluate the work being done by using Digital-specific standdards -- evaluation factors -- such as effect on financial results, complexity of decison making, the qualifications for the job, etc.
After the standard requirements and work for the jobs ahve been determined functionally, and the teams have organized the jobs according to each evaluation factor, team chairpeople will meet in Q3 to integrate their work. As the final step in JEC's development phase, job hierarchies and salary ranges will be establilshed and an evaluation and classification model will be built and automated.
The implementation phase of JEC will include a multiple-choice, job-profile questionnaire that will be designed after the evaluation and classification model has been completed. A large number of the remaining U.S. exempt population will complete this questionnaire, which will provide the information needed for classification.
Ongoing Communication Is Planned
To help make certain that all U.S. employees know about JEC, within the next couple weeks, local internal newsletters will publish articles, and DECWORLD will include information about the project. But, it is the responsibility of managers and supervisors to make certain that employees are informed.
As the project progresses, additional information will be communicated through presentations to management adn articles in newsletters. Local Personnel departments will give periodic updates to their management teams.
By involving line management in the development effort, and increasing the communnication of compensation information, Digital expects to improve manager and emplyee awareness and, in turn, increase confidence in the way Digital evaluates work and classifies employees.
Participation among eligible U.S. employees increased from 53% to 61% during the Optinonal Life Insurance open enrollment held in June. The plan now has more younger members and more members with higher coverage options. These changes, and the new age-based rate scale, have brought the cost of insuring Digital's work force in line with the expense.
Since the Optional Life Insurance plan is self-supporting, it pays claims from funds accumulated through payroll deductions. For several years the plan paid more in claims than it collected in premiums. Now, with a new membership and coverage mix, the program should remain financially secure for the foreseeable future.
During open enrollment, younger employees who may have greater family responsibilities increased coverage more than older employees. People who traditionally neglect to have life insurance (women and employees under age 35) added or increased coverage in greater numbers than employees in the other groups combined. Over 11,000 people took maximum coverage (5x salary) making that choice the most popular coverage option.
In addition, over 14,000 families enrolled in the Dependent Life Insurance program introduced during open enrollment. This means that about half of Digital's employees who have»dependents chose group coverage for their spouse and children. More than 10,000 of those families chose the highest benefit option—$30,000 coverage for a spouse and $9,000 for each child. Offered to employees at no charge until October, this coverage has already provided insurance proceeds to several families.