by Richard Seltzer, seltzer@seltzerbooks.com,
from DECWORLD the company newspaper, July 1983
DEC started its European operations in
Munich, Germany in 1963, and soon after opened offices in
Reading, England, and Paris, France. By February 1967, when
Jean-Claude Peterschmitt, vice president, Europe, joined the
company, there was also an office in Cologne. That year Digital
Europe, with a total of about 70 people, made about $8 million.
"When I joined, the French office had just
moved to an unfinished apartment -- just 1500 square feet -- on
the periphery of Paris. From that office I covered all of
France, Switzerland and Italy.
Jean-Claude
Peterschmitt,
vice president, Europe
"In July of 1968, John Leng called to tell me
that I had been appointed European manager and German manager
because he was moving back to the U.
S. as Western Region manager and Gerry Moore, the German
manager, had been appointed Central Region manager in Chicago.
This news was totally unexpected," Jean-Claude recalls. "In
fact, my wife and I had just the week before bought a house
outside Paris.
"For the first year after I became European
manager, I lived out of a suitcase. The biggest piece was the
UK, so I typically went for a day to Reading. Then, as German
manager, I would spend about two days in Cologne. The rest of
the time I would travel through the rest of Europe, including
Italy and Scandinavia."
One of the tasks was finding a site for
European Headquarters. "The company already had a heavy focus on
the UK, which was our largest base, and everybody spoke
English," explains Jean-Claude. "We wanted to balance that by
locating European Headquarters on the continent. Paris was not a
convenient base. We wanted somewhere centrally located, with
good telecommunications, from which it would be easy to operate.
"Geneva is very small -- only 250,000
inhabitants. But it has all the conveniences of an international
city. It has one of the best telephone systems in Europe, and
while their airport doesn't have the best direct connections,
you spend very little time on ground transportation. It's also
easy to adapt to living in Geneva."
DEC formally established headquarters in
Geneva in 1969. That year (FY69), Digital Europe made about $17
million dollars.
At that time Geoff Shingles (now vice
president, European
Country Group) was UK manager. DEC had a small Stockholm office
covering Scandinavia. And Bobby Choonavala had just established
an office in The Hague, covering Holland and Belgium. (Bobby is
an Indian who studied in Germany and later learned Dutch and
French. He's now manager of Europe's International Sales
Office).
"Once we reached a certain volume in a
country it became necessary to establish a support base. We
first based some Field Service engineers there; and soon, when
there was sufficient market, we established an office. We opened
in Italy in 1969, in Zurich in 1970, and so on.
"our decisions were guided by where we saw
markets developing, where we saw potential, rather than single
major sales," says Jean-Claude. "Israel was an exception. The
Hadassah Medical School of Hebrew University in Jerusalem placed
an order for 3 PDP-15s, and asked us to establish an office in
Israel."
At the beginning, most European customers
were universities involved in research. They were purchasing
DEC's systems modules even before the company had an office in
Europe. There was a lot of exchange between the European and
U.S. research laboratories. Many people in the scientific
community who had been in the U.S. knew DEC's products and
wanted to use them. The very first customer in Europe was CERN,
the European Center for Nuclear Research in Geneva. It is a
joint research organization of all European nations, working on
high energy physics, research on matter and atom.
In general, the European market was very
similar to that in the U.S. because of these close ties between
European and U.S. customers in the scientific community.
"The PDP-8 remained a key machine in our
business for a long time," says Jean-Claude. "At one time the
biggest PDP-8 in the world was a three-CPU system in Morocco
that was built by Olivetti for weather reporting and analysis. Casablanca is a major
weather center for airlines.
"We also had what was probably the first
timesharing PDP-8 in the world. The Applied Mathematics
Institute at the University of Grenoble bought a very large
PDP-8 and built a timesharing system on it."
Historically, in mature markets, like the
scientific market, Europe has represented about 40 percent of
total worldwide business in the computer industry. "In emerging,
new markets, Europe tends always to be a little slower," he
says. "This varies by country, but typically for the first two
or three years of a new business like office automation or
personal computers, Europe tends to be 10 to 20 percent of the
business; then it moves up toward 30 to 40 percent. In other
words, the development curve is a little bit slower at the
beginning than in the U.S."
Until recently, Europe followed the district
and region structure used int he U.S. In 1968, all of Europe
(including North Africa and the Middle East) was managed as one
region.
Around 1972 it split into three regions:
- UK, Ireland and Nordic Region;
- Central European Region (Germany, Austria,
and Eastern countries); and
- Southwest European Region (Belgium,
Switzerland, France, Holland and Italy).
Then in 1978, it changed to five geographies:
- UK and Ireland;
- German and Austria and Israel;
- France (a district);
- Italy (a district); and
- a region of everything else -- the General
European Region (Norway, Sweden, Denmark, Holland, Belgium,
Spain).
That configuration lasted until last July,
when, with the exception of SEENA and the Middle East, Europe
was reorganized by countries.
Southeast Europe and North Africa (SEENA) --
basically Greece, Turkey, and North Africa -- is managed
together as a single district, rather than country by country.
The Middle East -- Egypt, Saudi Arabia, and
Kuwait -- is handled out of the UK. "We have distributors in
Saudi Arabia and Egypt and Kuwait," explains Jean-Claude. "We
have a heavy service activity there because of OEMs who are
installing systems in those countries. So the biggest activity
is really servicing equipment, which has been supplied by OEMs.
"IT's handled out of the UK because of the
strong British cultural ties and the activity of British OEMs in
that area. Some of the biggest systems we've installed in the
Middle East were supplied by British OEMs. Also you are more
likely to find people in the UK who are willing to go for a tour
of duty of a year or two int hose countries than people from
elsewhere. It's a natural tie."
Protectionism has been an important an
continuing issue for Digital Europe. "At one time we had to
sell a PDP-10 to a research institute at a German university as
a collection of modules rather than a complete system,"
Jean-Claude recalls. "They
were not allowed to buy a computer, but they were allowed to buy
modules; so that's how we did it -- with many dozens of separate
invoices.
"In the UK, protectionism prompted us to
establish a small manufacturing operation in Reading in the late
1960s. In 1971 that
operation was moved to Galway, which became our first full-scale
manufacturing operation in Europe. Later manufacturing activity
expanded to Ayr, Scotland, to a second plant in Ireland at
Clonmel and to Kaufbeuren, Germany.
"On the other hand, protectionism in France
prevented us from establishing a plant there. In 1976, the
French government turned down our proposal, seeing local
manufacture as a competitive threat to the French computer
company."
European Manufacturing started as an
extension of Corporate Manufacturing; but, increasingly, has
been tied more and more to Europe. Since 1977 there had been a
European Manufacturing manager in Geneva, and plant managers in
Europe have reported to him as well as to someone in Maynard.
"That arrangement allowed us to develop,
under the old product line regime, a single European-wide order
administration system, rather than separate systems for each of
the product lines," says Jean-Claude. "Last year when we
switched from the product line structure to the country
structure, having that system in place enabled us to change
rapidly and smoothly."
Now the countries order products directly
from and make forecasts of demand directly to Manufacturing in
Ayr, Scotland. So there are close ties between Manufacturing and
each of the European countries.
DEC also has a variety of engineering
activiti8es in Europe. A small engineering group in Geneva
monitors government mandated standards in such areas as safety,
communications and ergonomics. They let Central Engineering know
what is needed, and these standards are then included in the
specifications for the company's basic hardware products. In other words,
Europeanization is designed into DEC's products from the
beginning.
In Reading, England, two software engineering
groups work on company-wide as well as European products. One
group works on communications and is tied to Bill Johnson's
Systems an Communications Engineering Group. The other works on
business applications as part of Julius Marcus' Business and
Office Systems Engineering.
Customer- and country-specific applications
work is done by the local country's Software Services and
Computer Special Systems groups.
In addition, DEC has a Software Services and
remote diagnosis technical center in Valbonne, France. "We'd
like to expand that center over time, possibly include some
manufacturing and some engineering," notes Jean-Claude.
"European engineering activities have become
substantial and are playing a strategic role in Europe, opening
business opportunities for us," he says. "Engineering content is
an important factor politically.
"protectionism has been going on for years --
sometimes stronger, sometimes weaker. But we have products which
those countries, both government and industry, need. So we have taken
a position of doing a good job, begin a good corporate citizen,
and becoming very competitive in products and services, despite
the obstacles. That
approach has worked well. For
instance, in France, despite the continuing protectionist
environment, we have been extremely successful for the least
four or five years.
"Meanwhile, the Common Market is beginning to
play an increasing role in encouraging European companies to
work together so they can be stronger relative to the Americans
and the Japanese, and also to join forces with some American
companies -- having joint development and join applications and
so forth.
"DEC has become so large that it is
increasingly visible. We are close to being the second largest
computer vendor in Europe, behind IBM; and close in size to CII
Honeywell and Siemens.
"So we are getting into the realm of what I
call 'strategic opportunities.' I don't like to call it
'government relations' because the focus is not to establish
political ties to governments. Rather, we are considering what
we can do to increase the European content of our products --
hardware, software and applications. We're exploring what we can
do in subcontracting some manufacturing work to European firms.
We are also looking at opportunities for establishing join
marketing agreements with multinational companies in Europe. We
are also considering having some senior outside people on our
boards in Europe to help us in our activities. I'm now devoting
my attention those kinds of questions, while Pier-Carlo Falotti
manages operations."
Jean-Claude Peterschmitt studied mechanical
engineering at Zurich and industrial management at MIT's Sloane
School of management. His first contact with computers was
programming an IBM 704 at MIT, as part of his thesis work in
operations research. Coincidentally, he was at MIT in 1957, the
same year that DEC was founded.
later he worked for the firm of Arthur D.
Little in France, doing consulting for computer companies. One
study which he lead was for the French computer company that is
today CII/Honeywell/Bull. They
ad a product that was a simplified version of a military
computer built by TRW. It was intended for scientific and
technical applications.
"In our study," says Jean-Claude, "we came to
the conclusion that there was only one other company that had
the right product for that market -- DEC with the PDP-5 and
PDP-8 -- and that this French company should concentrate on that
market. As it turned out, they didn't follow our advice, but
rather went after the whole IBM market.
"In doing the study, I became familiar with
DEC. So when, shortly thereafter, DEC approached me about
a job as manager of their Paris office, I was already convinced
that there was a large scientific and technical market for
computers and that the PDP-8 was the right product for it; that
DEC had a bright future ahead of it."
In 1966, in addition to working for Arthur D.
Little, he also taught two weeks a year at INSEAD, a business
school which, coincidentally, had been established under the
direction of General Georges Doriot (who founded American
Research and Development, the venture capital firm which
financed DEC at its start, and who is now a member of DEC's
Board of Directors).
"One day when I came out of my teaching
session, I got a note that I should calla Mr. Johnson in Paris.
When I called, he had already left for Munich. That evening, after
class, I tried to call him in Munich, but by then he was already
in Cologne. When I finally reached him, he said, 'Can we meeting
tomorrow? I'll be back in Paris.'
So Ted Johnson, John Leng (then DEC's
European manager), and Jean-Claude had their first meeting in a
cafe just around the corner from the small room that served as
DEC's Paris office (a couple hundred yards away from Eleysee
Palace, the official resident of the President of France).
"It turned out that one of my former
colleagues at Arthur D. Little was a classmate of Ted Johnson's
at Harvard," Jean-Claude recalls.
"Ted had told him he was looking for somebody to manage
the Paris office, and he had given Ted my name because he knew I
had done work in the computer field."