by Richard Seltzer, email@example.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."