Engineering_Strategy_Review_Mar82 Engineering Strategy Review Mar82
Engineering_Strategy_Review_Mar82 Engineering_Strategy_Review_Mar82
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March 1982 Engineering Strategy Overview Preliminary Company Confidential .-t8···· ~ \:')' L..4L If j.~.! / .;.' ' 1985 1990 - P,O S SIB L E DEC 1995 2000 PRO Due T S - $lJOO cellular radio net discontinouous.100 word speaker independent speech recogn. HANDHELD $1.0K ~ lim! ted context speaker independent , Glata structures & relat~onsh~ps , • sketchpad interpretation ' object filing (invisible, protected structures) natural languaqe $40K I CAB I NET I ~~~n (dedicated fixture) ;., encryption provide limited context ak rind pendent spe ~ e_ .. cont1nued speechlrecogn~tion C ,4 [:~~~~e~ ~~~:~~i:ti~n ~ • voice ~tuate~ retrieval • te1econferenc1ng center " associa t iveJparallel a;;;'e'los ( , Att= -------...--~ ?ertified ~ (secure) os .. • ..j." .---~ ASSISTANT LIBRARlj\N "best match" retrieval (holographic? ) $650K BD 1/15/81 PRELIMINARY ENGINEERING STRATEGY OVERVIEW MARCH lYtil SECONIJ IJRAFT PRELIMINARY ENGINEERING STRATEGY OVERVIEW TABLE OF CONTENTS ,Preface Chapter I Chapter II Chapter III fhe Product Strategy and Transitioning to the Fifth Generation - Product Strategy Overview - The Transitions - Personal Computer Clusters, PCC, Are An Alternative to Timeshared Computers - The Product Strategy - Fifth and Sixth Computer Technology Generations - Uistributed Processing and Limits to Its Growth Essays on the Criteria for Allocation of Engineering Resources - Overview, - Heuristics for Building Great Products, - Proposed Resource Allocation Criteria - UEC's Position in the VAN - Buyout Philosophy/Process/Criteria - Example of a "Make vs Buy" Analysis - Engineering Investment Sieve Essays on Strategic Threats and Opportunities - Uverview, - Strategic Threats - Getting Organized in Engineering and Manufacturing to Face Our Future Competitors p - View of Competitors ---~,.~".~.-~ l f;t-1) IPrT Co?"! v. 7U/L, / IJ ...J - Te-Iecommunications Environment ) ;2f - Competitive TeChnology Exercise, ltv TeChnology Managers Committee Report ,MC- . - Summary - Semiconductors - Storage - Communications/Nets - Power and Packaging - Computing Systems: PSU, MRS, LSG - Human Factors - Terminals/Workstations - Software - Applications in computing e-c.. • Chapter IV ,Chapter V Quantitative Resources - Contents, Uigital's Engineering Investment Product Positioning, Engineering Budget Uverview , Tests of Budget Allocation Market Style, Financial Metrics from Business Plans, Product Group Expenditures - FY'~3 Appendix System ArChitectural TeChnology Group Base Plan , Uenotes cnange or new as compared to Apri1 El:i:l+-e vtI\o wi ~ Reo.l-t'me Cl",,~+ctv"s Co r'I'\ p~4-ers -r eY'""-,, (> YVA.L 4 ~e.+WDt"kS. ~+~~ \fO~ rt?) . , ) £n-...~\.~ 1-z.~~ (I "Iii - 'Ij~) \ :r... • • Pe.1"(!eft+4~ e (it'\# -Jermll'l.Js) Ve.'I'$ \AS +i~e. of COWlPIf\.-\-.e1' L\se (Jct~o- 1 Cf 10) I06~~----------r-----------~----------~-=========~ 10 .~ot "0 ,,-ion., • wi ~ Tt.,..~,ntJ 40 t.nt~" . ctu...-h..rs 'so 'S,,~ OJ'S • t\~-hwV"I£., '40 1'1),," l~ '''2.0) f~b Use l ~50 - \~30 COM PAN yeO NFl DEN T I A L 1.16 THE PRODUCT STRATEGY Provide a set of homogeneous distributed computing system products so a user can interface, store information and compute, without re-programming or extra work from the following computer system sizes and styles: • as a single user, personal (micro) computer (PC) within a terminal, and evolving to PC Clusters and PC Networks, • at a small, local shared, departmental (mini) computer system, and • via a cluster of large central computer(s), • with interfacing to other systems for real time processing, and • all interconnected via NI. VAX/VMS AND NETWORK BASE ENVIRONMENT Achieve a single VAX-II/VMS, distributed computing architecture by 1985 (as measured by revenue) through: • homogeneous distributed computing with varying computing styles including high availability and measured ease (economy) of use, • building new 11 hardware to fill the product space below VAX~ i.e. building a significant PC on the 11 with VAX-compatible files and languages so that user software investment is preserved when the ultimate transition from the 11 to VAX occurs, • having a clear physical .bus structure evolution and transition plan, • and developing VAX, Personal 11, RSTS, M and M+ software for II-VAX migration and 11 base protection. Provide 10/20 systems that will co-exist with VAX/VMS through: • building hardware that runs current 10 and 20 software; • building VMS co-existence aids and using common components, and • making market support and DEC-standard language enhancements. Build and support the PDP-8 for WPS and small business applications until we get PC-II. Invest in application software that will be compatible with the strategy. Ethernet (NI), which we call DECnet IV, is the backbone of our distributed processing. Aggressively breadboard; then develop it for gateways and concentrators. This forms the basis for the "server" model of computing for the network. COM PAN Y CON F IDE N T I A L 1.11 Provide essential IBM network interfaces and help set International standards. These include: Open-systems Interface, and page standards for text and mail. APPLICATIONS Provide general applications-level products that run on VMS and if possible layered on RSTS, M, la and 2a, as a base for direct use, OEM and user programming including (in order): • word processing, electronic mail, user typesetting and profession-based CRT-oriented calc·ulators for the office and for professions, • transaction processing, forms management, and data base query, • management tools for various sized businesses; and • general libraries, such as PERT, simulation, etc. aimed at many professions that cross many institutions (industry, government, education, home). Provide specific profession (e.g., electronic engineering, actuarial statistician), industry (e.g., drug distributor, heavy manufacturer) and commercial products as needed by the Product Lines. Select from the wide range of possible languages a small subset for our own applications programming. USER LEVEL COMPATIBILITY Define, and make clear statements internally and to our users about programming for DEC distributed computing environment compatibility. Tighten DEC user interface standards for editors, forms management, application terminals, files and data bases, command languages, language dialects (e.g., BASIC), and applications languages. DEC standards must be industry standards to get the software industry's maximum support. HARDWARE COMPONENTS Interconnection Interconnection hierarchy with software compatibility: • a.3-19.2 Khz point to point communication line compatible for direct, dumb terminal, • laMhz NI for interconnection at a site and the backbone of the distributed processing structure, • sa Mhz CI for interconnecting Hydra and la/2a/VAX Clusters (in a room). Computer Systems Thin out our basic computers by 11 to VAX transition and by COM PAN Y CON F IDE N T I A L l.l~ positioning CPU and Mass Storage systems (including PC's) to be a separated at least a factor of 2.S apart in the price bands. A low cost, high performance processor either alone or in a multiprocessor configuration should cover a system range of up to 3 bands when combined with the appropriate mass storage configurations. Memories Cover the wide range of needs: • solid state modules for low end software in terminals and PC; • range of components for Personal Computers; • removeable and low cost disk (Aztec, small Winchesters) for entry-level shared system: • hi-volume, mid- and hi-end disks in (R80/R81) with (backup); • high performance controllers; and HSC-Se controller for Hydra (evolving to file and data base service). Computing Terminals Terminals for everyone (in priority): • office environment for quality printing, electronic mail, evolving ASAP for needs (and uniqueness): and • professional using graphics (and/or color) evolving to handle images with target application software, • low cost (dumb) but with ROM programmability for special use NI and NI-Servers for Both Shared and PC Clusters The NI and Personal Computers permit-the evolution of two kinds of structures: Distributed Processing with functional servers for our central and departmental TSS'Si and the basis of PC clusters (in order): • intercommunication among all personal and shared systems; • real time service for process and experimental equipment i/o; • communications concentrators for dumb terminal interconnection to predominantly central sites; • communications gateways to IBM, X2S, and non-DEC NI nodes, all levels; • file service at central and departmental sites for all levels, but predominantly PC's; and • printer service at central and departmental sites for all levels, including PC's. COM PAN Y CON F IDE N T I A L 1.19 Specific Personal Computer Products • aggressively build PC-II for three environments: • support our past, conventional O/S's on the PC-II hardware; • as part of the DEC architecture which starts standalone and evolves to a cluster; this system is compatible with a VAX subset for files and programs and implies a different, lower level interface to be successful. THE Terminal interface must evolve beyond our "glass teletype" to include multiple, concurrent windows and processes. • establish a VAX environment for PC's (including servers) to envelope the PC-II, PC-VAX (i.e., SUVAX) and PC-VAX (Scorpio) • build, ship, and test a SUVAX to establish PC-VAX and PCC-VAX and to begin to acquire the applications that only VAX can support; and • aggressively schedule PC-VAX with a 2.5K - 6.25K cost (system with high resolution scope and mass storage) by 1985 Timeline of Critical Technologies The figure on the next page describes the availability of technology and various systems versus time. COM PAN Y CON F IDE N T I A L 1.2U r) \'7,.. I , • II1'SI C.itcIJ1~') '.%5'1< ( \'p",•• ) I .T/f. ? I",CII~ i::o..'IC.L Q.w,~ ~"".'"'j' .,.... ,DI't~,tc\61..\ ~~VO~~ ~e.ht\.o \O'j1 -"',fee. .(,,,, ·Hs.cn. tJ..ucts V(1\.~ -ri~ ('cJ.""", rooM ~ c:"- '•• 1 PC-'S / C'S, "J '~. -~ PC's R\At.\k e r0- • ~l\ta'lC (~xt-/ w ·t\v~ ~~1'-1 VOl~ b.~~..~. 'O(;'r ....A'2..'i • Voitt '. i~es.", olDjd-s -40 V1tL.o ~.A~h.\i.o) l~ c.vsr lI;du,n~ eo,.,"/, n~ Ia/S t¥7'tt· . tcr~ji ~.~ Co~ ~iIWCHI' Sf""" Vtiu.r~ .~Qce~ "!u\ 'l~ .. roL,ok· 1.21 Fi FTij q-t~eV'l1<~'1 THE PIFTH AND SIXTH COMPUTER TECHNOLOGY GENERATIONS A computer generation is identified by four concurrent factors: • the technology on which the machine (hardware and software) is based1 • the emergence of the machine itself1 • the intended need1 and • the actual use (market) ••• which may. turn out to be a new machine (software) defined by users The Table of Computing Generations lists various landmarks for these factors in both the future and past generations including the three pre-computing generations. Technology generations are now roughly seven years. These generations are driven mainly by semiconductors which evolve exponentially at yearly density factors of 1.6 - 2.9 and are used for processors and primary memory. Secondary memory in the form of magnetic disks evolve nearly as rapidly with factor changes of 1.4 per year. The seventh generation is fuzzy, so for our purposes, we can look at the next two generations 1980-87 and 1987- 1995. The seven year period between generations will continue on into the future, based primarily on technology, and machines because: 1. Historically benchmark machines and/or computing styles have emerged each seven or eight years. The personal computer has emerged in the late fourth generation. With local area network communication, clusters and networks of PCs with specialized function servers (e.g. files, computation, communications) will create a drastically new, alternative distributed computer structure forming the fifth generation. 2. Seven years is roughly the time to get a factor of 199 in semiconductor memory density using Moore's law. (Semiconductor memories dOY~!i9~2)size every year1 the number of bits/die = 2 for experimental circuits. Add 3 years for the circuit in production.) A more conservative model by Faggin has memory density growing at 1.6/year, thus a factor of 100 would take 18 years. The continued increase in density (at least at 1.6x) looks assured. COM PAN yeO NFl DEN T I A L 1.22 3. Seven years is roughly two product design and use generations for small systems. For higher cost machines (minis ••• super), the product periodicity is roughly seven years. 4. Every ten years drastically new use (and then product) segments occur, having at least a factor of ten lower cost. We assume the real cost reductions will continue at this 20%/year, independent of system size. (Faggin's projection is a factor of 10 cost reduction in 8 years or 25%/year. My 1975 model projected from 1972 used 21% and is given in the following table below, even though it might be appropriate to use a more rapidly decreasing rate (e.g., 25%). COM PAN yeO NFl DEN T I A L 1.23 TABLE OF COMPUTING GENERATIONS, WITH NEED, USE AND STRUCTURES ..... GENERATION HIGH LEVEL NEED SPECIFIC USE COMPUTER STRUCTURE Electromechanical 2 p.c. 1890 Mass production & census Census & modern accounting Comptometer, Electric calculator, Hollerith & accounting machines Electronic Power, highway (thermonic) & communication 1 p.c. grids 1930 Engineering calculations & cryptography Network analyzer, Mark I, Bell Labs calculators, ENIAC, Collosus. Electronic (magnetic). 1 c. 1945 Defense War-machine control via tables & real time EDVAC, EDSAC, lAS, Whirlwind, LGP30, IBM 650, 711, 719, UNIVAC. Transistors Space & science ~ir Transport flow control & welfare Process control & social accounting, minis PDP-8, B5010, PDP-6, IBM 361, CDC 6600 LSI 4 c. 1972 Economic models & r.t. control Interactive computing, computers for logic Intel 4004, 8008, PDP-II (RSTS), Cray 1 VLSI 5 c. 1980 Productivity Office (& home) personal computing Personal Computer Clusters, VAX Homogenets, general purpose robots ULSI 6 c. -1987 Information & Knowledge-based Integration into program overload, systems and video standard communications energy processing Electrooptical 7 c. -1995 Arts, leisure, food & energy crisis. 2 c. 1958 N cr· Integrated Circuits 3 c. 1966 defense & TX-I, IBM 7190 traffic control, Atlas, Stretch Engineering & science education Travel substitute Global communication & environmental of video management. G Bell System Price Model (3/75) System price ($) per byte of main memory = = 3 x 5 x 8 x .8~5 x .79t-1972 x no. of bytes .6 x .79t-1972 x no. of bytes where 3 is markup (roughly) 5 is fact that about 1/5 of system is primary memory 8 is 8 bits/byte .~~5 is cost of a bit in 1972 .79 is 21% price decline per year for memory 1972 is base year Some system prices at various time using the GB 3/75 model: Bytes 1978 198~ 1982 Dedicated fixed .146 1.2K .891 745 467 TRS 1 user interactive 9.6K 5.9K 3.7K Apple II/III 11/23 Comet 1 8K 65K (Qbus limit) Example Use .~57 256K n user, 1 app1ic. (Ubus limit) Small, gp. tis 1M 2M (11/78 bus limit) Mid, gp. tis 28.3K 23.9K l53K 95.4K l4.9K 59.8K 386K l19.5K VAX 788 8M 1,225K Large, gp. tis 19~.8K 763K 478K 5. Breadboard structures have emerged in the early part of this fifth generation that can be mass produced to fuel the sixth generation. My guess is that this will take on the form of significantly better I/O, storage, and processing of both voice and 2-d images. 6. There is implicit faith that there's an infinite market. This is clearly substantiated using the five year market data projections. A paper, "Limits of Distributed Processing" describes our computing structure environment together with the factors that may limit computing. None of the following factors look insurmountable for continued exponential change. • technology • VLSI design and new ideas for designs COM PAN Y CON F IDE N T I A L 1.26 • • • • too many standards, especially in communications/networks algorithms ability to define and supply useful systems lack of applications programs (programmers) ••• perhaps the most serious ability for users to get work from systems COM PAN yeO NFl DEN T I A L 1.27 DISTRIBUTED PROCESSING AND LIMITS TO ITS GROWTH A fifth generation computer, can be fabricated on a very large scale integrated circuit (VLSI). Lower cost and increased use disperses computers in a manner analogous to the ubiquitous fractional horsepower motor. Distributed processing to interconnect dispersed computers is essential in order to avoid overloading people with information transmission and translation tasks. The factors that affect and limit distributed processing are: physical technology and design complexity, ideas for new computer structures, basic tools to build applications, networking and other standards, useful applications, algorithms, and the human interface to the end user. A hierarchical, interconnecting model for distributing processing is based on established central and group level mini-computers, and evolving, personal computers. DISTRIBUTED PROCESSING Distributed processing matches computer systems to information processing needs (i.e. processing, memory, switching, transmission and transduction needs) on a geographical or organizational basis, and interconnects individual computers to form a single, integrated network so that related programs can share and transmit data among the computer nodes. The objectives are: • to allow either local autonomy or central control of the various distributed parts; • to provide an evolving open-.ended system so that the development and installation of the parts can proceed in a quasi-independent fashion; • to allow purchase and installation of hardware, taking advantage of timely, reduced hardware cost; and • to build on and communicate with central systems, fully dispersed group-level mini-computer systems, and emerging personal computers. Distributed processing is inherently hierarchical based on the principles that govern human organizational structures. In an organization, computers supplement their human, information processing counter-parts. As computers become better matched to people and organizations, and as people and organizations become more familiar with computers, an individual can interact directly with at least one computer and indirectly with group-level computers serving various functions of the organizational hierarchy. The opportunity of more egalitarian access to data provided by distributed processing may led to a change of the large organization COM PAN yeO NFl DEN T I A L from hierarchical to wider, functional matrix structures. Large organizations need to interconnect the hierarchy of computers for: • communication among computer with dumb and intelligent terminals using large, central computers; • organization of central, group and individual sites; a functional activity such as word processing or order processing; and • a specialized computer-based function such as archiving, typesetting, message switching, and electronic mail. FORCES CREATING DISTRIBUTED PROCESSING Rapid evolution of semiconductor and magnetic recording technologies have forced computers improvements along paths of: 1. 2. 3. constant cost, with increased performance and productivity for evolutionary use; reduced cost, with constant performance permitting new uses commensurate with the lower cost; and higher cost and performance structures permitting radically new applications. Costs for nearly all other forms of information processing are because they are labor intensive. Traditional storage, processing, and transmission in libraries and postal systems are increasingly soaring. Simple word processing computers that replace typewriters save the time-consuming process of correcting errors. When groups associated with information processing start using computers a positive feedback, learning curve effect begins further increasing computer markets and uses, and lowering costs. The industry groups supplying these products and services include: • computers - mainframe, minicomputers, personal computers and computer services; • semiconductors - nearly all LSI components are either memory or a computer processor; • communications - conventional voice and data, new packet networks and associated services; • television and cable TV - stand-alone use with TV sets (e.g. games, home computers) and as an alternative to conventional communication; • office equipment - typewriters, copiers, and mechanical office equipment are increasingly electronic; and • control - gears, cams and levers, and mechanisms for COM PAN Y CON F IDE N T I A L 1.2~ control will become electronic, limited only by transducers and sensors. LIMITS AND PROBLEM AREAS OF DISTRIBUTED PROCESSING Ultimately all information processing will be computer based. Presently the speed of the evolution is limited by two factors: technical solutions to distributed processing problems and user assimilation. Physical Technology Semiconductors and magnetic recording technology provide the basis for cost and performance improvements. Although, extrapolations too far into the future are generally dangerous, the following technological rates of change, based on the past ten years, will continue for at least five years: TECHNOLOGY (PERFORMANCE) YEARLY-RATE OF CHANGE FACTOR semiconductor memory density semiconductors, random logic core memory density improvement magnetic disk recording density magnetic tape data-rate magnetic tape density TECHNOLOGY (COST) 2.8 1.4-1.6 1.3 1.3-1.4 1.25 1.2 YEARLY-RATE OF CHANGE FACTOR memory price reduction computer system cost reduction crt terminal cost reduction communication cost/bit transmitted reduction packaging (cost/vol.) and power (cost/watt) communication line cost increase paper cost increase 0.7 0.8 0.85 0.9 1.8 1.12 1.12 Semiconductor technology, shared among several buyers groups, eg. consumer, communications, computers, has a faster rate of improvement than other technologies. Slower evolution has occurred in magnetic recording density because there is only one user, the computer industry. Widely used, well developed technologies, such as CRT's, previously improved for the mass television market are scarcely affected by their increasing use in computers. Costs of paper and communication lines increase with inflation. COM PAN Y CON F IDE N T I A L Physical transducers that sense temperature, pressure and control power flow are slow to evolve, limiting computer use in automotive applications. Even the most widely used computer equipment, such as keyboards, printing devices and communications devices, evolve slowly by comparison with semiconductors. Complexity of Semiconductor Design Gordon Moore of Intel, observed that the effort required to design semiconductors has doubled each 2-2/3 years since 1962, when a circuit only took 3 man months. 1979 circuits required 21 man years and 1982 circuits will take about 45 man years. While it is easy to conceive of organizing a team of 7 to complete a design in 3 years, the same time task by 15 people is difficult to imagine. Better management and design partitioning is required in order to avoid a drastic loss of productivity and quality that would increase the design effort even more. With one million circuits on a chip by 1982, new methodologies will be required to fully utilize VLSI's potential. Because of the concern and numerous approaches being pursued, I am confident that it will only take another two semiconductor generations (six years) to solve the VLSI design complexity problem. Although we do not have a good measure of circuit complexity, a given circuit description is far less complex than the largest programs (e.g. a million bit, or 128 Kbyte program is not especially large). Ideas About What to Build New directions in computer structures are difficult to predict by simply looking at conventional machines. Current limiting factors point to needed innovations. Applications involving two dimensional signal processing for pictures appear to require a different processor design, and speech signal analysis requires vector processing. A general purpose processor could emerge from these alternatives for one-and two-dimensional arrays: • arrays of conventional microprocessors: • application specific, functional processors: • bit array processors to operate directly on the array data structures, including arrays, or associative processing: • processing associated with memory: and • data flow architectures. Basic Tools to Build Applications Coupling knowledgeable user needs to machine development COM PAN yeO NFl DEN T I A L l.jl produces more capable, yet harder to understand systems: a paradox in the attempt to build highly capable and easy to use systems. The popularity of the Bell Labs UNIX System is a testimony to a single, consistent, easy to use language, that is described in a small manual. The popularity of APL and BASIC systems can be similarly explained. Although one would expect that additional capabilities (memory) would make the user interface simpler, few good examples are known. The time to build a given application using the multitude of systems/databases/languages is highly variable, indicating a continued lack of understanding of the design process. Network and Other Standards Because standards are evolving, the current situation of distributed processing among countries and vendor systems is a disaster. International protocol standards provided by manufacturers (Internets) and by various common carriers for Packetnets which are called by the same name, are fundamentally different and incompatible. Many standards mean no standards. We must get beyond the simple standards required for Packetnets and Internets to define protocols for passing high level messages, such as electronic mail, among computers. Office based applications, centered around text processing, electronic mail, user typesetting, office processing, and electronic filing, all require significant user level standards. Using only lower level communications protocol standards will cause a combinational explosion of high level protocol changing gateways. This leads to added overhead, extra development, delay, incompatibility, and often, misinterpretation of messages. In the low priority area of intra-computer architecture, the U. S. Government has standardized on the existing defacto standard, the IBM Channel, as the means of interconnecting mass storage to computers. Unfortunately this act of standardization will limit change into newer systems architectures. Useful Applications and Distributing Them Decisions to use the major applications centered around office automation are very complex. Justifying an application generally requires an understanding of both computer systems (beyond that provided by manufacturers) and the organizational structure of individuals and group users. Although electronic mail seems right, measurements of increased productivity, decreased paper flow, better COM PAN Y CON F IDE N T I A L 1.J2 decision-making, efficiency of communication, and the creation of excess communication are hard to make. To my knowledge, they don't exist. Given that few measures exist to rationalize, simple stand-alone applications, justifying a distributed network becomes a work of art. Tools have only recently become available for a system manager or developer to distribute the database, processing, and intercommunications over several systems. In the specific case of distributed processing for electronic mail, the results are encouraging but a general solution has not yet emerged. An underlying difficulty of building applications beyond the generic office automation described above exists because problems are solved by patch-work. Usually programmers with computer science (computer engineering) training and a representative of a particular discipline (eg. accounting, mechanical engineering) put a solution together to get something started. This results in sub-optimal designs. In order to use the computer as a component of systems they design, rather than as a simple tool for problem solving, computer science must take on a pure role, like physics, and each of the disciplines take the responsibility for training people and engineering the systems within its own discipline. Algorithms There are many cases of the adage: "It is better to work smarter rather than work harder". If always exponentially improving, technology will eventually permit solving a particular problem in a reasonable time, e.g. a 24 hour advanced weather forecast must be solved in less than 24 hours or an exponentially increasing machine population will be required. However, at a given time, algorithms limit when a problem can be solved and whether it is economically feasible. Human Interface The interface between the system and the final user is a barrier in the same way that a root system for building applications programs is a barrier to building applications. Adding more functions so that an application will perform better is generally accompanied by increased complexity requiring more documentation and training. The lack of standards at the user interface will limit getting the payoff inherent in a given system or set of systems, and may cause adverse user reaction. For example, word processing, electronic mail and user typesetting systems are all likely to have different syntax, semantics, manuals, training and COM PAN yeO N F IDE N T I A L procedures for dealing with the same text. A DISTRIBUTED PROCESSING ENVIRONMENT Proliferation of dispersed computing forces interconnection, hence distributed processing, so that human users don't have to become information carriers and translators between the different systems they use. Communication within and between organizations with common carrier networks is provided via an interconnected hierarchy. Interconnecting the Components The three types of computers in a given ~rganization will be connected via high bandwidth links in what may appear to be a hierarchical structure. In addition, clusters may be connected on a fixed basis. The alternative interconnect possibilities are: • ethernets or rings to interconnect all terminals and computers with specialized terminal concentrators1 • evolution of phone circuit switches using digital techniques for both voice and data1 • packetnet switching 1 and • direct interconnection among the computers with routing through each computer. Central Computers The top most computers of the hierarchy will evolve from the current, highly central computation facilities. These machines store most of the data and do most of the computing in today's organizations. Given the difficulty of migrating files and work from these machines, the emphasis within the centers will be interconnection among the machines within each center, creating in the short run, even larger data bases. The tight interconnection among the central computers will also permit trade-offs among cost, reliability, performance, and evolving performance, for a given application or set of applications. In order to get the economy of scale required to support the large human organizations that attend central computers, their functions will have to be specialized (e.g. front ends for handling many communications lines, and back ending for databases and archiving). Central computing facilities will continue to be operated by large staffs whose emphasis is on knowledge of the operating systems and getting work done using highly specialized facilities such as CODASYL Databases. The casual user will be dependent on the central systems through the applications. Cost will be high for everything except the storage of very large files, where hardware provides an COM PAN Y CON F IDE N T I A L 1.34 ' economy of scale. Programming costs at the center have to be the highest, because the facilities are general purpose and applications are most remote from the ultimate user. The role of central facility will be to provide: • communications among all the other computers within the organization including gateways between various computer and telecommunications vendors; • archival file storage; • unique, sharable facilities such as very high speed computers and printing devices; • computational functions for the entire organization e.g. electronic mail; • operation of historical programs and data bases; and • relatively high cost computing by having to provide generality and service for the worst case. Group Level Computers Group level computers are based on the evolution of timeshared and real time minicomputers and cost roughly that of an additional person. Typically these machines support the single function of the group, (eg. order processing, engineering design and data base, laboratory data gathering and analysis, group word processing, single process control) running a single unattended program. Group level computers provide: • relatively cost effective storage of the group data base; • unique program(s) aligned with function of the group; • relatively high performance processing; and • cost-effective computing through sharing of a common function and specialization of work. Personal Level Computers Personal computers are emerging rapidly, and many believe that they will become the dominant form of computing. Since the only hardware technology for which economy of scale holds is mass storage, and given that all terminals already have embedded computers for control, it is easy to envision adding more primary memory and doing all the computation at the terminal instead of having computation done in any shared facility. A recent, Carnegie-Mellon University personal computer research proposal states: nThe era of time-sharing is ending. Time-sharing evolved as a way to provide users with the power of a large interactive computer system at a time when such systems were too expensive to dedicate to a single COM PAN Y CON FlO E N T I A L 1.35 individual ••• Recent advances in hardware open up new possibilities ••• high resolution color graphics, 1 mip, 16 Kword, 1 Mbyte primary memory, 188 Mbyte secondary memory, special transducers, ••• We would expect that by the mid-1988's such systems could be priced around $18,888. n Personal computers provide: • personal data bases and securitY1 • more, average computing power, with better response time than shared systems, • needed processing for the computati~nally intensive tasks like editing, and speech i/o, • a program creation environment, and • relatively higher costs than group level computing, unless the task is very specific and well-matched to the system. Although both the novice and experienced user relish the independence that the personal computer provides, communications and support by the other levels is equally necessary. Given that we are substantially far from such distributed systems, there are surely additional problems, limits, and opportunities that are yet to be forecast. GB2.S4.8 COM PAN yeO NFl 0 E N T I A L 1.36 CHAPTER II ESSAYS ON THE CRITERIA FOR ALLOCATION OF ENGINEERING RESOURCES OVERVIEW Among the most critical decisions facing Digital each year is the allocation of our Engineering budget. What products and technologies should we invest in? Obviously, we want to maximize the long-term return to the Corporation. Chapter V contains financial and marketing metrics wh~ch are helpful. We must ~roduce the products needed to meet the Corporatlon's business goals. Moreover, we believe that DEC is in a "technology inspired" market so that the first test of a proposed investment should be its contribution to the basic strategy described in Chapter I. Unfortunately, there is no algorithm for translating the broad strategic framework into specific investment tactics. We are forced to study a huge space of feasible choices that lie within our resources (i.e., budget, capital equipment, and talent pool). Then we apply various heuristics to select among the better options. There are three closely related areas of choice: i) ii) iii) Products to build for the Company we want to be Technologies to own (i.e., engineering and manufacturing processes) Components to make vs buy This Chapter contains several essays that provide some heuristics for selection in these areas: 1. Heuristics for Building Great Products -- Revised 1982 by Gordon Bell The Group Vice-President for Engineering describes his rules for achieving winning products. This document has been revised to reflect recent experience. 2. Proposed Resource Allocation Criteria by Bruce Delagi Another global "take" at identifying investments that support the strategy. Five critical factors are discussed -- vision, winning, partnership, quality, and productivity/responsiveness. COM PAN Y CON F IDE N T I A L l.1 3. DEC's Position in the VAN by Bruce Delagi Computer products start with sand, fire, and water. They culminate in benefits delivered to end users. Different companies position themselves differently along the network of value-added contributors (VAN). This essay discusses a general philosphy of vertical integration and guidelines for selecting specific investment areas. 4. Buyout Philosophy/Process/Criteria by Peter Van Roekens Offers a recommended approach to the make versus buy decision as a part of the regular activities of our major programs. 5. Example of a "Make vs Buy" Analxsis by Gordon Bell and Grant Saviers Actual "make versus buy" decisions can be very difficult. Two memos on high-end disk strategy provide a case study of the diversity of viewpoints and range of issues. Disks have a substantial leverage on profit since they represent the largest single component of systems cost. But if half the cost of current disks is electronics, perhaps semiconductor technology is more strategic since it impacts most of the components in a system. 6. Engineering Investment Sieve by Bruce Delagi A short list of tests for the overall Engineering budget. It is a summary of issues considered at an Engineering Staff Strategy Woods. Additional material of importance to this topic will be found in Chapter IV. It contains a report from Engineering's Technology Management Committee on the state of technology within Digital and the needs for investment. This collection of essays presents a useful but incomplete set of criteria for the allocation of our Engineering resources. DEC is a large company with a diversity of on-going businesses. No single set of guidelines capture the complexity of the tradeoffs between our current business demands and our future opportunities. In the final analysis, the Engineering budget allocation must be a judgement call by our senior management. It has to be tested for consistency within itself and for consistency with our long-term Engineering strategy and our Corporate business plans. COM PAN Y CON F IDE N T,I A L l.l HEURISTICS FOR BUILDING GREAT PRODUCTS Product goodness is somewhat like pornography, it can't fully be described, but we're told people know it when they see it. If we can agree on heuristics about product goodness and how to achieve it then we're clearly ahead. Five sets of dimensions for building good products need be attended to (roughly in order of importance): • maintaining a responsible, productive and creative engineering group; • understanding product metrics (competitiveness); • understanding design goals and constraints; • understanding when to create new directions, when to evolve products, and when to break with the past; and • having the ability to get the product built and sold. ENGINEERING GROUP As a company whose management includes mostly engineers, we encourage engineering groups to form and design products. With this right of organizing, there are these management and engineering responsibilities: • staffing with a chief designer/chief programmer who will formulate and lead the resolution of the problems encountered in the design; No matter how large the project, it must be lead from a "single head". • having the skills on board to make the proposal so that we adhere to the cardinal rule of Digital, "He Who Proposes, Does"; Approving a plan, without the chief designer and sound team violates this! The plan must include the project organization. • having management and a technical team who understand the product space and who have engineered successful products; · understanding excellence and quality; • understanding the performance and the learning curves that apply to design, design production processes, and manufacturing processes; The organization must be staffed with people who understand the product, the design process (CAD and management discipline) and the production introduction process. For complex projects employing more than a single design team (less than six engineers), a written design methodology must exist and include: all design processes as documents forming the design, design conventions, conflict resolution, criteria for task completion, the PERT structure, etc. · having supporting skills and disciplines required in the relevant product areas, ego ergonometrics, acoustics, radiation, microprogramming, data bases, security, reliability; • being open by having external reviews, and clearly written descriptions of the product for inspection; For new product areas, we require breadboards in addition to the above heuristics. When the product gestation time equals the generation time, a full advanced development effort is most likely required to be successful. COM PAN yeO N F IDE N T 1 A T.. a group with no previous achievement must start small, be reviewed and grow when it has demonstrated success; • continuous training to handle the increase in complexity that comes with technology. PRODUCT AND DESIGN METRICS KNOWLEDGE Engineering is responsible for knowing the product area: • metrics (cost, cost of ownership, cost to operate and use); We have classic failures because a CPU cost has been minimized, only to find the total system cost has barely changed 101 and the total cost to the customer is only 51 lower! • major competitor cost, performance and functions together with what they will introduce within 5 years; • leading edge, innovative small company product Introductions; • reasons why the product will succeed against present and likely future competition; Sure success in the market is to introduce a needed function (eg. 32-bit address) by which all other products have to be measured. • productivity, quality and design process metrics by which the project can be managed. DESIGN GOALS AND CONSTRAINTS • The most im~'rtant heuristic about goals and constraints is that they be written down and updated from the day the project starts. Virtually every product failure and period of product floundering 1S a result of no clear goals and constraints since everyone has a different idea of the product. Design constraints are generally set as various kinds of standards. These are useful because they limit the choice of often trivial desIgn decisions, and let us deal with the free cho~ces. Goals are equally important. We should meet the standards unless they are unacceptable, and if so go about an orderly change. Standards can be grouped into four distinct sets: • DEC Engineering Standards; These cover most physical structures and design practice for producibility, and assimilate critical external standards, such as UL, VDE, and FCC. • official information processing and communications standards, from EIA, CBEMA, ANSI, ISO etc. such as Cobol '74, Codasyl, to IEEE 488; • defacto industry wide information processing and communication standards such as IBM SNA, Visicalc; • standards implied by the architecture of existing DEC products: • architecture of computers, terminals, mass store and communications links; These standards include 8, 11's, 10/20, VAX, 8048, 8080, 8086, 68000; VT52, VT100, keyboards, Regis; MCP; HDLC, CI, SI • • physical interconnect busses such as CT, Q, U, NI, CI, etc. COM PAN yeO NFl DEN T I A L 2.4 These insure that future system products can evolve from component or computer options • • operating system interface, file commands, command language, human interface, calling sequence, screen/form management, keyboard, etc. These standards insure our customer software investment is preserved. · Products must be designed for easy translation into in any natural language since we are an inte~national company. In all cases, poor standards create to poor products, even though they may have made sense at one pOint of time. The historical English measures is a good case in point; Currently, the 19" rack and the metal boxes Digital makes to fit in them, and then ship on pallets to customers, act as constraints on building cost-effective PDP-11 Systems. This historical "mind set" standard is impeding the ability to produce products that meet the 20S cost decline. All products must have the goal of customer installability and maintainability. Portability is an important goal. We must achieve this for all systems ASAP! Clearly all new personal computers must be portable. WHEN TO CREATE AND WHEN TO EVOLVE Given all the constraints, can we ever create a new product, or is everything just an evolutionary extension of the past? If revolutionary do we know or care where product ideas come from? The important aspect about product ideas is: • Ideas must exist to have products! If we don't have innovative ideas to redefine or extend a market, then we should not bother building a product. It is hard to determine whether something is an evolution or just an extension. The critically successful products all occur the second time around. Some examples: PDP 6,KA10,KI10,KL10,20BO; Tops 10,Tenex,TOPS20; PDP5,B,8S,BI/L,BE/F/M; OSB-RT11; 11/20,40,34; RSX-A ••• M, M+; TSS-B,RSTS; various versions of Fortran, Cobol and Basic all follow this; LA30,36,120; VT05,50/52,100, 101 etc.; RK05,RL01/2. • A product tree showing product roots, gestation time and product life should be maintained by each engineering group. Goodness All products whether they be revolutionary, creating a new base, or evolutionary, should: . offer at least a factor of two in terms of cost-effectiveness COM PAN Y CON F IDE N T I A L 2.5 • • • • • over a current product; if each product is unique (not in competition with other products within the company), then we will have funds to build really good products. be based on an idea which will offer an attribute or set of attributes that no existing products have; For example, the goals and constraints for VAX included factor of two algorithm encoding and also offering ability to write a single program in multiple languages. VT100 got distinction by going to 132 columns and doing smooth scrolling. build in generality, and extensibility; Historically we have not been sufficiently able to predict how applications will evolve, hence generality and extensibility allow us and our customers to deal with changing needs. We have built several dead end products with the intent of lower product cost, only to find that no one wants the particular collection of options. In reality, even the $200 calculators offer a family of modular printer and mass storage options. For example, our 1-bit PDP-14 had no ability to do arithmetic or execute general purpose programs. As it began to be used, ad hoc extensions were installed to count, compare, etc. and it finally evolved into a really poor general purpose digital computer. be a complete system, not piece parts; The total system is what the user sees. A word processing system for example includes: mass storage, keyboard, tube, modems, cpu, documentation including how to unpack it, the programs, table (if there is one, if not then the method of using at the customer table), and shipping boxes. Good system products can only exist if we have good components. We should not depend on system markups and functionality to cover poor components and high overhead. We must carefully decide what components to make versus buy. It is very hard for an organization to be competitive without competing in the marketplace, hence unless we sell it, we should buy it. Product Evolution A product family evolution is described on page 10 of Computer Engineering along the paths of lower cost, and relatively constant performance; constant cost and higher performance; and higher cost and performance. In looking at our successful evolutions: lower cost products require additional functionality too, as in the VT100; constant cost, higher performance products are likely to be the most useful, as economics of use are already established and a more powerful system such as the LA120 will allow more work to get done (see Computer Engineering for the economics); Revolutionary New Product Bases a new product base, such as a new ISP, physical interconnection specification, an Operating System, approach to building Office Products, must: COM PAN Y CON F IDE N T I A L 2.6 start a family tree from which significant evolution can occur; The investment for a point product is so high that the product is very likely not to payoff. In every case . where we have successful evolutionary products, the successors are more successful than the first member of the family. Product Termination A product evolution is likely to need termination after successive implementations, because new concepts in use have obsoleted its underlying structure. All structures decay with evolution, and the trick is to identify the last member of a family, such as the 132 column card, and then not build it. This holds for physical components, processors, terminals, mass storage, operating systems, languages and applications. Some of the signs of product obsolescence: . it has been extended at least once, and future extensions (For example, PDP-8 render it virtually unintelligible; was extended three times.) • significantly better products using other bases are available; SELLING AND BUILDING THE PRODUCT Buy in of the product can come at any time. However, if all the other rules are adhered to, there is no guarantee that it will be promoted, or that customers will find out about it and buy it. Some rules about selling it: • it has to be producible and work; This, seemingly trivial rule is often overlooked when explaining a product's success. • a business plan with orders and marketing plans from several marketing persons and groups needs to be in place; Just as it is unwise to depend on a single opinion in engineering for design and review, it is even more important that several different groups are intending to sell the product. Individual marketers Are just as fallible as unchecked engineers. • never build a product for a single customer, although a particular customer may be used as an archetype user; Predicating a product on one sale is the one sure way to fail! • it should be done in a timely fashion according to the committed schedule, at the committed price and with the committed functions; • it must be understandable and easy to use. The small size, complete hardware books were the DEC trademark that established the minicomputer. We must revive these such that a particular user never need access more than one. Simplicity must be the rule for our documentation. Now isn't it clear why building great products should be so easy? COM PAN y e O NFl DEN T I A L 2.7 Are there any heuristics that should be added? deleted? or need clarification? GB3.S2.5 2/4/82 Thu 9:00 COM PAN yeo NFl DEN T I A t PROPOSED RESOURCES ALLOCATION CRITERIA (MEETING STRATEGIC THREATS) VISION We want to be known for a uniquely productive style of computing as described by the Product Strategy in Chapter I. This requires us to be primarily a company that understands and satisfies the information system needs of our users and their machines. This criterion calls for a return to a clearer image of what we stand for in computing. Our perceived edge in user productivity with respect to IBM is slipping. The call is in distinction to becoming a company primarily engaged in high volume manufacture of component-commodity subsystems. The intent is supply high volume needs by providing a product offering that is sufficiently broad, deep and interrelated that it presents an especially attractive foundation for others to build on. We hope that our customers will view us as particularly capable of managing complex technologies - providing results in particularly simple and effective packages. This will take the form of the industry's broadest range of comfortable, interconnected computing facilities. Highly productive computing makes effective use of the human contribution. We want to be known for leadership in the human interface to info~mation systems. This requires an understanding of cognitive as well as classical human factors. It implies an investment in speech and image processing in order to couple more effectively with the user. COMPANY CON F IDE N T I A L l.Y Leadership human interfaces are responsive, interactive human interfaces. To provide highly interactive systems, we need to support the cost-effective dispersal of processing to its point of use and use this processing power effectively in our terminals. Increasing user productivity is measured against a given level of customer capital employed. Perceivably and measurable cost-effective user productivity is the goal. We should strive to use our own products early so as to understand their effect on productivity. WINNING We will only enter or remain in a product area if we are playing to win. We will withdraw from a product area if we can't state clearly why we are going to win -or- won't dedicate ourselves appropriately to this goal. Corollary: If we are already winning in a given product area, we will give first priority to maintaining this position: leveraging our installed base, existing products, and distribution channels. We will not enter into later phases of product design without believable plans to generate high returns through product uniqueness and quality. Exceptions: We will carefully review those occasional variations to this criterion req~ired to meet specific bid requirements (c.f. IBM channels, DBMS) even though the product is not otherwise a critical (or profitable?) one. COM PAN Y 2.1U CON FlO E N T I A L PARTNERSHIP Focus of our own resources and leveraging off the work of others must be a key premise of our strategy. We will invest to lead and sustain the industrialization of clear, efficient, effective human and machine interface standards over a broad product range. We've been known historically as a company that makes products to which (and by which) others can easily provide complementary capabilities satisfying particular needs. We aim to continue in this position. To avoid the time-delay otherwise implied in "partnership" marketing, we need clear long lived standards. Our products are sold at several different levels of integration simultaneously through many kinds of channels. It's important that each product level stand on its own competitive merits. The environment of the 1980's will almost certainly include a more intimate relationship between computing and communications. We will seek to cooperate in the development and application of standards tieing together these disciplines. We will provide appropriate internal and external interfaces to tie our ptoducts to local and distributed, public and private communications switching systems supplied by a variety of carriers. We will invest to deal effectively with the integration of voice, data and video images because we believe this is critical to highly productive computing. COMPANY 2.11 CON F IDE N T I A L QUALITY Investments we make will be complete enough to ensure the development of products that work as expected in worldwide markets. The goal must be direct shipment via UPS, customer merge, installation and repair. We seek to improve our responsiveness to manufacturing issues and provide sufficient co~location so that our engineers will get the necessary feedback to appropriately evolve product designs. Together with manufacturing, we will seek automated methods that allow an increasingly higher level of consistently delivered quality. We will invest in design aids that offer the promise of reducing design faults in shipped products. At a systems level we will invest to provide user-tolerant, self-documenting products that rarely need service - and when service is required, do not involve skilled personnel. We will invest to develop an increasing degree of data integrity in our products. PRODUCTIVITY/RESPONSIVENESS There is a strong possibility that the pace of change in our industry will increase. There are several strong new players in our game. Further, IBM i~ much less encumbered by its lease base than previously. We need a strategy for improving engineering responsiveness. Some key operating rules are emerging: Make decisions that can stick (and stick by them); Do advanced (standards) development so invention need not be incorporated in critical schedules; Stick to standards (so invention is constrained to only what is critical for a product); Provide tools for more productive design efforts and understand how our use of resources, especially computers, affect productivity. Keep some slack resource so unanticipated events can be accommodated. COM PAN Y CON F IDE N T I A L 2.12 DEC'S POSITION IN THE VAN (VALUED-ADDED-NETWORK OF SUPPLIERS AND CONSUMERS) We have an industry position in npartnershipn with those who provide end user services. It is our assumption that we wish generally to increase partnership activities overall, limiting direct efforts to areas where we have particular competance and potential. In this, we balanced the benefits below: LESS PARTNERSHIP (MORE DIRECT, ••• ) • More market control as our suppliers forward integrate (potentially around us); • More insite to end-user needs; • Less dependence on OEM skills; • Less vulnerability to economic cycles • More danger of high investment levels in obsolete technologies MORE PARTNERSHIP • Less resource drain for end-user applications development; • More market breadth for products • for higher product volume • more opportunity to succeed in the absence of a complete, acceptable solution • leverage off the ideas and investments of others; • Less possibility of getting caught in a saturated point market; • Clearer product feedback; • OEM test of our output at several integration levels We seem to be in a "technologically inspired m~rket". As a company we have a strength in distribution channels that we wish to emphasize. Our policy on vertical integration (as follows) is consequent to this judgement and a consideration of the individual cases detailed later: • Invest only in necessitites, not for incremental revenue or profit • • Provide the productivity tools to encourage massive levels applications development by others on our systems. COM PAN Y CON F IDE N T I A L 2.13 of The criteria we will use in selecting areas for vertical investment are: • First to ensure sources of supply, e.g. for disk supply that may dry up if controlled by a few large manufacturers. (This requires the test of clear and convincing evidence.) • Then to get technology that is required for leadership proprietary function especially that which is visable to the user (e.g. personal computer terminals and these semiconductor processes and design tool's to support leadership DEC products and proprietary architectures). • Lastly, if ever, to internalize the base products needed for a large part of our revenues. As a result of applying these policies/criteria we wish to allow the following corporate development. B A C K WAR D F 0 R 10 % 10 I N T E G RAT ION (% SELF-MANUFACTURE) hi K-MART INTEL W A S R D E I R APPLE SEARS DEC '90 FUJITSU DEC '75 DEC '80 N T V E G I R A C IBM ADP T I N E AT&T Schlumberger hi It might be valuable to (This picture is probably too simplistic. separate out, say, low-end high-end, computing vs. communications, ••• ) COMPANY CON F IDE N T I A L 2.14 WE WILL INVEST TO ACCOMPLISH SOMEWHAT MORE BACKWARD INTEGRATION TO: • Increase security of supply: where this is critical to our business; • Have better potential for leadership products by control of product definition; • Maintain trade secret protection and the advantage of (unique) proprietary products Provide better internal responsiveness to our needs than outside suppliers would/will provide (and thus potentially shorter time-to-market for new products); WE CHOOSE TO DEPEND LESS ON FORWARD INTEGRATION BECAUSE: • DEC's success has been/will continue to be as a product company; • Fundamentally we are better off if we provide products that don't need services to be useful; We project increasing difficulty in getting trained people: products that don't need service don't need people. only • Cash looks better applied in providing better products than in providing more services. (This is due to expected productivity of capital assets vis-a-vis more direct labor); We project a crunch in service profit as a no-profit policy is played out by Fujitsu (and others). COM PAN Y CON F IDE N T I A L 2.15 This does not imply that we should not derive what profit we can from our service operations. As an engineering organization, however, we should provide products that to an increasing degree do not require service for maintenance, not for facilities management, not for custom installation, not for training, ••• We have some history with prior decisions to vertically integrate our supply. Some (e.g. terminals and "boards") we have chosen to sellon the open market. Some others (e.g. power supplies and most semiconductors) we have not. Recognizing the tradeoffs as detailed below, our overall policy is to subject vertical integration to the market test. INTERNAL USE ONLY OPEN MARKET SALES Better responsiveness to internal demand shi fts Retained focus on systems business More cooperation in fix ing problems Less management in dilution to work on market charter hassles, ••• Reduced need for (complex) allocation schemes More volume/scale Clearer (economic) market feedback Increased incentive/ drive Better customer coupling More sensitivity to (cost) requi rements Less chance of hanging on to an obsolete tec~nical position Spreads DEC's name Develops new channels Value-added on DEC products by more people (leveraging ideas/assets) For these reasons it is important when we indulge in vertical integration that we maintain a clear understanding of what we expect to get from the investment. COMPANY CON F IDE N T I A L 2.16 In terms of forward integration, the picture looks like this: AREA FUNDAMENTAL BENEFITS TO DEC SUCCESS CRITERIA mer implementation Broader markets (for growth ?) blish the environment that most people build on ("code share" ) Image as a manufacturer of high productivity (low hassle, high personal leverage) products Make services unnecessary INVESTMENT STRATEGY 1 1 ------------------------------------------------------1---------------Applications Elapsed time for custoWe estaSuppl y higher 1 (Bill Johnson) Services (?) COMPANY 1 level tools Don' t impo rt systems software Specific attention to methods reducing design faul ts. (d esign auto.) Repeatable processes than can be turned for lower product failure (process automation?) Failure tolerant systems (and subsystems) Self-instruction Sel f-repai r Sel f-install ation CON F IDE N T I A L 2.11 AREA Power Supplies ( H• Sc h a 1 k e ) Physical Connect (Will Thompson) Disks r'\: (Grant Saviers) •..... ex. Semiconductors (Jim Cudmore) Terminals (Si Lyle/ Bill Picot t) SUCCESS SUPPLIERS/VENTURES Design-to-Fi t Time to Market Potenti al Qual i ty Users seek to buy internally Meet MBTF specs Look at Sanyo et al. for 100K), and RP07 (in mfg.) • 4. These disks take a disproportionate share of engineering resources for a disproportionate part of the revenue. Also, they are technically the most difficult to do. Given our limited engineering budget vis a vis the Japanese, HP, and IBM, I believe we have to select. 5. It is more important to have a better system range and to fund the important generic applications, such as the OFIS program than to backward integrate into this part of the system range. 6. We are not a dominant part of the market in terms of units, and hence we will not get the costs vis a vis the BCG learning curves. CDC (NPI) , Fujitsu, Nippon COM PAN Y CON FlO E N T I A L 2.25 Peripherals, STC and IBM all cover us. 7. Maybe there is a joint venture that would be satisfactory such that the facility would get market share. 8. We are not a dominant supplier in this part of the business and hence will not get the volume to mak.e the investment worthwhile. Note the small number of RP07s ordered. 9. If we ever start looking at roi/roa, there's no way to justify this investment. Buying out or joint ventures will be much better ••• provided we don't handle them to death in our multi-FAT sites. 10. We should get our better cost/megabyte by going after more aggressive mid-range system disks and then putting several of them on the larger systems. 11. Our successful products are those that go across both end user and OEMs. This would only go into the less profitable end user segment. 12. From a general direction standpoint, I think we should consolidate the range of products we have and invest in layered software together with the networking, while only manufacturing the parts where we make a dominant volume of the market needs, i.e. the mid range. This is the make criteria to be successful in the OEM business. COM PAN yeO NFl DEN T I A L COMMENTS by Grant Saviers 1. It stretches our range: Our average 11/789 system is selling now for >$25~K. Venus is certain to raise the ASP even higher. If Venus is to be a major system from a revenue viewpoint, we must have competitive, profitable disks. An alternative is to market Venus as a CPU, allowing others to integrate the systems and or sell the disks. This might be an acceptable strategy for a small market at the extreme of our range. Two major risks to this strategy are the willingness of customers to deal with multiple suppliers and lack of account control (sales and service). 2. Low end threats: We are expanding our range downwards with CT and agree that this extension is requiring additional disk products. 3. Biting off too much: We (development) believe that 25% to 3~% year to year real growth is a realistic management limit. At current inflation rates this translates to 35% to 4~% funding growth. The manufacturing growth rate has been 5% to l~% higher because of the rising percentage of NES in storage and continuing increase in the make/buy ratio. 4. Unfavorable ROI: Our large disk analysis indicated a favorable ROI. Our FY82 large disk only (no systems, controllers) NES is about $3~~M. Our current investment (fully loaded) is about $2M/year. It appears that any disproportionate investment is elsewhere. 5. Generic applications and systems breadth are more important integrations: It would seem that making what we know how to sell in high volume (large disks) has lower risks. 6. We have a small market share: We buy more disks than any other systems manufacturer in the world. IBM, CDC, Univac, Burroughs, NCR (via joint venture) , HIS (via joint venture), Fujitsu, Hitachi, NEZ make their large disks. We will purchase about 8,~~~ large disks in Fyal. This is more than MRX's or ISS/Univac production. It is about 3X Fujitsu's or Hitachi's production rate. CDC and STC produce about I~K-15K per year. IBM's 198~ annual report states "ten's of thousands of magnetic disk files ..• are being shipped to customers annually". Our large disk COM PAN Y CON F IDE N T I A L 2.27 usage has been growing at an annual unit rate in excess of 4~%. If we produced our current products, we would be a major producer. DEC's share of OEM shipments* 1. Pack Drives (>10~ (Non-captive) MB) CY81 16500 6000 7400 29900 6100 20% CY82 18000 4500 7200 29700 6100 21% CY83 17000 2600 6500 26100 5300 20% 3200 500 16% 5400 1700 32% 7600 2800 38% 3. Total DEC % / WW OEM Disks (>100 MB) J. WW Total 13400 26900 32100 K. DEC Total 3400 4300 6600 L. DEC %/WW Total 25% 16% 21% 35100 33700 8100 24% A. B. C. D. E. F. CDC MRX Other Total (WW) Total DEC DEC % / WW CY79 7500 5000 80~ 133~0 3400 26% CY80 13000 6500 65~0 26000 4300 17% 2. Fixed Media (>200 MB) G. Total WW 100 H. Total DEC I. DEC % / WW * 22% Source for Worldwide (WW) data 1980 Disk Trend Report + CDC input. NOTE: 7. 780~ IBM large disk products are typically about 30,000 units per year. Joint venturing looks attractive2 We have given this considerable thought and see the guidelines for joint venturing as: Why we might be interested: • • • • • • We can't afford it, but need it Skill need beyond our abilities Acquisition of a technology base Political/tariff/government pressures Economical facility too large for DEC Only game in town Hygenic factors: Our value added is elsewhere • OK for competitor to have it • We can work with the partners • Adequate control of the results COM PAN Y CON F IDE N T I A L • Partners contribute value 8. Small number of RPe7's ordered: The Product Line requests are disappointingly low. We see this as a consequence of the earlier 3ee MB cancellation, the RMeS introduction, large backlogs, and risk aversion. 9. Buyout or joint venture, don't FAT: Buyouts will always find the test of being competitively profitable unless we can market at 1.8X markup. 2S% of the $lSeK and up systems costs (current large disks) could be shipped to customers from the volume factory (ours or suppliers). This should be done in any case. Ie. Multiple mid-range disks to cover our large needs: This appears attractive and m~y be a viable solution. However, it requires a compet1tive technology base (hence investment). We are carefully examining this alternative as it may give us fewer better products. 11. Successfull products go OEM. Large disks "only go into the less profitable and user segment". We want to sell OEM and today have products that are saleable. We only build OEM competitive storage products. If end user is less profitable, why enphasize "generic applications" (is)? 12. Invest in layered software and networking. Make only in the mid range. My view is to invest in a few key hardware technologies and leverage these technologies into products across our range. This should maximize ROI/ROA and establish adequate volume/market share to be competitive. GB2.S4.6 COM PAN yeO N F IDE N T I A L 2.29 ENGINEERING INVESTMENT SIEVE 1. Winning program for distributing processing over the range of departmental to personal computers. • Leadership to terminals since all terminals are computers (personal computers and terminals merge) • • Provide a desireable base for multiple software vendors to independently build on - resulting in an integrated, effective offering. • Preeminance in local area nets: communications concentrators/ gateways, fileservers, person servers. • Be aggressive as possible on VAX. Develop a much deeper competance in human i/o capabilities. • Understand role of integrated communications-and-computing competitors. 2. Get back on the leadership (small) systems curve(s). • Break thru cost limits imposed by conventional form factors. • Invest in the approaches t9 storage that maintain competitive systems position. 3. Manage complex technologies and provide them to our customers in simple, effective packages. • Be able to design (proprietary) systems products on silicon. • Learn how to manage/provide appropriate (CAD) tools to handle or hide complexity in the design process. Do it before the next major program. • Make service, installation and training unnecessary. (Product required services 0) COM PAN Y CON F IDE N T I A L CHAPTER III ESSAYS ON STRATEGIC THREATS AND OPPORTUNITIES OVERVIEW As we look to DEC's future, we face a multitude of uncertainties in the external environment. We must anticipate the threats from aggressive competitors, government regulators, and an unstable world economy while exploiting the opportunities from advancing technology and the seemingly limitless demand for information processing. This Chapter is a collection of essays on the external environment. 1. Strategic Threats by Bruce Delagi A very brief, prioritized summary of key competitive threats as developed by the Engineering Staff at several Woods. 2. Getting Organized in Engineering and Manufacturing to Face Our Future Competitors by Gordon Bell A memo to the Group Vice-President of Manufacturing discussing competitive strengths and weaknesses. 3. View of Competitors by Gordon Bell Some additional commentary on IBM and other competitors. 4. Telecommunications Environment by Bruce Delagi A brief essay on the strategic implications of the joining of data processing, communications, and office automation. 5. Competitive Strategy Exercise Engineering conducted a competitive strategy exercise in December, 1981. The background material is printed here so readers can participate. COM PAN Y CON F IDE N T I A L j.l STRATEGIC THREATS (INTEGRATED/FILTERED AND PRIORITIZED) 1. LOSS OF IMAGE AS (THE) LEADER IN EFFECTIVE COMPUTING STYLES • high productivity terminals • programmer productivity • relational data bases • dispersed processing 2. USER/INDUSTRY ACCEPTANCE OF THE "WRONG" STANDARDS • SNA lockout/account control • WPS "standardization" • integrated comp/communications 3. (Fujitsu, Tandem) (IBM now, Future 432 file system?) UNRESPONSIVENESS (IN COST OR FUNCTION) TO INCREASED RATES OF CHANGE • lease base reduction • entry of technology companies • entry of communications co's. • entry of office products co's. 5. (IBM) (WANG) (NEC, ROLM, EXXON, XEROX?) POTENTIAL DEVELOPMENT OF AN IMAGE OF SECOND-RATE QUALITY • doesn't fail • data integrity 4. (Apollo, 3Rivers, Convergen t?) (IBM System 38, INTEL 432 ADA "capabil i ties" (IBM System/R) (Xe rox, Apollo, Datapoint, servers, and intelligent you-name-i ts) (IBM) (Fujitsu, NEe, Hi tachi) (NEe, AT&T?, In telmati que) (XEROX) MARGIN/PRICE PRESSURES • • • • (Fuj i tsu, IBM?) mass storage price/capacity (Fujitsu) non-profit service vertically integrated competitors (Hitachi, NEe, long-term view of profit Fujitsu, MITI) COMPANY CON F IDE N T I A L . j.j ***************** * dig ita 1 * ***************** TO: DICK CLAYTON TED JOHNSON MFG STAFF: 000: JACK SMITH SUBJECT: DATE: THU 11 DEC 1980 10:16 FROM: GORDON BELL DEPT: OOD EXT: 223-2236 LOC/MAIL STOP: ML12-l/A5l GETTING ORGANIZED IN ENGINEERING AND MANUFACTURING LIMITS TO FACE OUR FUTURE COMPETITORS [UPDATED FROM 10/26/79] I'm still feeling good about our current and next few years of products; but I'm terrified about '83-'90 because I think we'll enter a more cost sensitive, commodity oriented market where emphasis is simultaneously cost AND quality. The challenge will be great in products-, process-, and manufacturing-engineering. The four competitors of concern are IBM (everywhere), TI (only at low end and as a supplier), Intel (typifying the semiconductor revolution implicit in fifth and sixth generation computers of the early and late 80s) and the Japanese (Hitachi, Fujitsu, and NEC; also maybe others). Although each have some unique strengths and weaknesses, they have the following ordered strengths in common [our position is given []]: 1. Strong discipline in their engineering and manufacturing processes with relatively few, and aimed at volume. [Poor, lots with incremental evolution and freedom to define alternatives vs. use standard.] 2. High degree of plant automation. IBM may have the best understanding of robots and Japan is clearly the supplier! Also increased focus on productivity. Intel may not have this. [Poor, no activity outside of test. No automated material flow. Lower productivity per person.1 2a. Focussed factories with combined manufacturing and engineering industry process engineering [good in semis, part of disks. poor in terminals, systems, cabinets, and power supplies.] 3. Very good internal source of semiconductors; all but IBM supply externally. [We only make a few of our needs.] 4. Very good disks (except TI who's now trying). Not Intell (Need better mid/high end.] 5. Basic understanding of all kinds of materials. [Little or no work.] 6. Very large research groups, except Intel. All receive government grants for research! [Weak. COM PAN Y CON F IDE N T I A L ~.5 7. 8. 9. 10. 11. 12. External R+D to couple to.] Aggressive engineering and product positioning. [Ok; many products.] Strong emphasis on quality (here, I exlcude TI). [Ok; improving.] Willingness to change and move rapidly whether it be product, pricing, or market method (e.g. channel of distribution) and manufacturing. [We're strong; getting older and conservative?] Understanding of learning curves, market share and use of forward pricing (including- IBM). [Ok; except too many products?] Low inventories and willingness to drop products at end of life. Significant worldwide engineering and manufacturing, especially Japan. There are selective strengths and weaknesses(-) no particular order: IBM 1. 2. 3. 4. 5. 6. Very strong CAD/CAM tools and effort. Disciplined processes and engineers who use a small number of PCB, Backplane, and common semiprocesses rather than evolving every possibility to get slight gains. An incredible customer base and sales force capable of devouring most of any product. Highly automated assembly lines with independent test and production flow controls. (-)Many competing architectures and problems to evolve networks. Applicators programming knowledge. Japan o. 1. 2. 3. 4. 5. 6. Best overall technology understanding of semis, magnetics, speech, video, robotics, and comm. Ability to quickly assimulate products or processes from others. Experience with low cost products like TV sets that will be model for terminals, small business system, etc. Strong concern for standards as a way to the market. Large population of engineers, including manufacturing engineers. (-)Channel of distribution. (-)Programming. This is immaterial since software will be done by u.s. SW engineers in U.S.! TI 1. Semiconductor strength. COM PAN Y CON F IDE N T I A L J.6 2. 3. Good terminal and low cost product base. (-)programming. Our Strengths 1. 2. 3. 4. The best general architecture/product position potential. Product lines to focus on various users and channels of distribution. Rapid turn-around, dedication of individuals to their plans. (Are we getting older and more 1ithargic?) Strong Systems Programming to orient to generic, profession and other applications. GB:swh GBOOOS/24 (12/11/80) GB2.S4.4 (3/17/81) COM PAN y e O NFl DEN T I A L j.l' VIEW OP COMPETITORS HOW CAN WE WIN AGAINST IBM? IBM has or will have: both constant and a decreasing cost a 360/370 line new in the $100 K to $10 M price range with lots of plug compatible competitors, several operating systems to support, a large backlog; the 8100 for Distributed Processing around the mainframe; RPG-based System 32/34/38 for Distributed Processing and as a Mainframe for small organizations; the aging Systems 3 to 15 for Distributed processing; the System 1 for the would-be minicomputer buyer; the possibly defunct SIOO-series Personal Computers for the scientist, engineer, analyst and small business; [the WPS computer] and several inevitable personal computer. All of these are incompatible, except for the fact that they speak some dialect of SNA and language standards. Products are relatively segmented to customer classes and different languages are used to enforce segmentation and hinder application mobility. Finally, they've sold via DPD, GSD, and Office Products. The 8100 was a radical departure from IBM prlclng as 0.5 Megabytes of primary memory and a 60 Megabyte disk are $ 29 K. Memories on all machines are similarly priced. We repriced as a result. The 8100 is exactly in the price range of the systems we sell and where we make most of our revenue. It is the second product in this price range within a year; the Series 1 minicomputer family patterned after the 11/04-11/34 was the first product. The 370 (via the 43xx series) is clearly either in or is coming into our space this go-around or next generation (1984). On the surface, the product is low priced, with lots of capability, but it also has a new communications structure (versus the one we have used substantially unchanged since 1961). This structure permits easy peripheral and terminal interfacing for both the office and factory environment. There is an extensive range of peripherals, terminals and communications to the 360/370. Since the product is sold by DPD, the strategy seems to keep account control and to make the money on software and the numerous locked-in, generally overpriced hard to emulate terminals. SNA seems finally under control and we must be concerned because it has future built-in capability (e.g. word processing, typesetting, packetized voice). Their strategy seems to be to slowly unfold it, make it the standard, pay no attention to other standards and to make everyone follow their gyrations. A strategy based on being tightly coupled to them (e.g. with terminal emulation or fully compatible COM PAN y e O N F r DEN T r A L across the board) is really risky. We must interface to them "carefully" and be very, very aggressive in our own interconnect plans (both in performance and capabilities). We must collaborate with ATT and the international standards community to set standards. We must watch how the System 38 is used vis a vis its 48-bit address because it can lock us out and cause others to generate many dead end architectures. It may be a E/H series follow-on breadboard. HOW CAN WE WIN AGAINST OTHER COMPETITION? There are established competitors too, such as DG, HP and prime. DG and Prime have very simple, single architectures and have been most profitable and have grown most rapidly. HP is converging on a single architecture around the 3000, but it will have to be extended eventually. [The NOVA has been extended.] The large manufacturers (Univac, Honeywell and Burroughs) which operate with an established base are less profitable, have grown slowly and have multiple, poor architectures. Honeywell, with a simple, but adequate minicomputer architecture seems to be doing well by selling minis to its old line, mainframe base. There is no evidence that they're developing or pursuing the mainframe business actively. There are probably more significant threats from the companies that can be easily founded to build systems into OEM Winchester disks by using the newly announced zero-processor-cost, microprocessors which have 22-bit address spaces and >11/45 performance. These architectures [are already] extended for multiprogramming and to handle larger virtual memories, but many point products, such as RSTS, can be built easily and cheaply and can quite possibly target a specific existing, trained user base. [UNIX could well be the standard that carries interactive computing in the 80s!] There are also the Japanese and TI which can be lumped together because of their similar behavior. Both believe in targeted, high-volume products with forward pricing. Neither have an adequate architecture. TI is strictly limited to l6-bits with almost no escape and (except a new architecture ala VAX] the Japanese are aimed at the 360/370 using U.s. companies (e.g. Service Bureaus) to distribute hardware, and at high volume point products that will go into store~no doubt. [The strategy requires very high volumes for dumb te'rminals, evolving to down line loadable terminals for specific applications like TP.] (The market is requiring COM PAN Y CON F IDE N T I A L :i.1U. and evolving to programmable (intelligent) terminals [i.e. Personal Computers], and this requires using the 11 until VAX is appropriate in terms of price.] [The goal is PC-VAX with terminal, S-10Mbytes of secondary memory, S12Kbytes of primary memory, processor, and NI connection.1 In the mid and high priced minis, the strategy is compatibility and volume, phasing as appropriate from 11 to VAX [as dictated mostly by mass storage and customer need for VAX. We must recognize that virtually every application will evolve to outgrow the 11 and hence we should try to get our users to VAX ASAP, because the longer one can procrastinate a change, the more competitive the offerings will be!] For example, since there is not a high priced 11 after the 11/70 and the 11/44, there is a phasing to VAX (through Nebula) • GB2. 83.32 COM PAN Y CON F IDE N T I A L .J.ll THE TELECOMMUNICATIONS ENVIRONMENT A new industry is being formed from the joining of data processing, communications and office automation. 1. "SERVICE" - The front line of this industry is in providing information services - a data utility. The publishing and TV industries know how to package information. The telecommunications equipment suppliers know how to transmit and switch it. The service bureaus know how to process it. The common carriers know how to manage the transmission network that ties all this together. Our value added must be in our ability to store data cost-effectively and retrieve it flexibly along lines of access natural to untrained users. 2. "HUMANISTIC" - The crucially important part of this industry is its interface to workers whose job is the collection, rearrangement, and dissemination of data in ways that provide for better decisions. Vehicles for providing these services are (communicating) small business computers and office data management systems or pre-processing terminals off-loading central equipment. Our value added is in providing the most natural, most powerful methods to enhance the effectiveness of this work. Although productivity is key, there has been historical reluctance to capitalize such work and since this will remain a competitive. field, cost of the tool providing such methods will continue to play an important part in purchase decisions. 3. "CENTRALIZATION" - The center of this industry will be the data switching and transmission network. Seeking incremental revenue on already committed capital equipment, the common carriers will press to extend their sphere of services. The PTT's will use the force of government regulations to assure their control of this sphere. COM P A N"Y CON F IDE N T I A L 3.13 In such a situation, customer data storage and processing will be part of central office functions (hiearchically decentralized as needed to the customer site PABX's leased from the carrier). The common carriers will look to long established suppliers of central office equipment (for AT&T, there is Western Electric) to enhance their products to support this direction. These suppliers then will govern the market for computer equipment. Our value added is on supplying a compatible line of processing equipment from chips (used directly in switching and transmission control) to very high availability shared central computer facilities. To generate revenue we will need to nurture our relationships with the dominant telecommunications equipment suppliers (Siemens, NEC, Western Electric, L.M. Erickson, ••• ) and make a convincing case for them to buy ours rather than make their own computing equipment. 4. -DIVERSITY- - The breadth of opportunities available in this will favor start-up operations with novel approaches to previously latent demands. Private local, as well as independent city-wide cellular and global satellite communications networks will be an alternate to the previously establlished transmission monopolies. The regulating authorities will take the postion that competition will provide the most effective use of the available resources. Corporate headquarter operations will seek alternative forms of information services to avoid too close an embrace with anyone vendor and to foster innovation through experimentation with novel approaches to the information problem. In this environment, our value added can be in providing the standards and critical components that allow special purpose equipment of many varieties supplied by many vendors to interact effectively. Many of the standards will take the form of open system network specifications at national or global levels and local area interconnects in more restricted geographies. COM PAN Y CON F IDE N T I A L Our experience in distributed processing will allow us to establish a lead good enough for others to follow. Our indirect channels permit us to foster others innovation built on our standards and component pieces. Users seeking freedom from bureaucratic central data processing managers can get their needs satisfied with our equipment. We offer an alternative to the single vendor approach supported by IBM. COM PAN Y CON F IDE N T I A L 3.15 COMPETITIVE STRATEGY EXERCISE Understanding the resources and strategies of competitors is essential to the development of sound product strategy for Digital. In December, 1981, Engineering conducted an experiment. Senior Engineering managers and a few senior people from other groups such as Corporate Marketing and Product Groups got together to engage in a Competitive Strategy exercise. Teams were organized to represent five different competitors. Each team had to produce a set of scenarios for the years 1982, 86, and 90 describing the important product and marketing activities of their respective firms. Specifically, the teams defined processors, storage, communications, terminals, system software, application software, cost/price structure, service offerings, distribution channels, etc. The exercise was administered by Bruce Delagi and a strategy task force that he gathered. Each task force member was assigned to one of the competitors and produced a straw horse scenario. These were given to the exercise teams in order to provide helpful background data and enough structure so the teams would not flounder. The team participants found the competitive exercise enlightening. A second part of the December exercise which centered on alternative DEC strategies had less structure and proved less satisfying. It is being re-worked for the future. Since the number of participants in these exercises is limited, we are publishing the original straw horse scenarios so that others can "play along at home". The scenarios have not been modified yet to reflect recent history (e.g., changes in anti~trust status for ATT and IBM) or a number of constructive suggestions from various experts within Digital. This should cause no problem since the straw horse scenarios are not the "answers", just a framework for thinking about the issues. The five competitors in the December exercise were AT&T, Convergent Technology, Hewlett Packard, IBM, and NEC. They were selected either because they are major direct competitors or because they are good representatives of an important class of competitors. Readers are encouraged to give the exercise a try for one or more of the competitors. If you have questions or would like to pariticipate in future exercises, contact Bruce Delagi. COM PAN Y CON F IDE N T I A L 3.11 AT&T FACTS AT&T is the dominating supplier of communication services in this company. Although there has been some erosion in their mainstream markets (e.g. PBX's), they still dominate in wiring access to the home and within modern enterprises. ~ this point in time they have not been highly successful and moving from voice to data technology. They have been limited by a monopoly mindset, and by regulating legislation that requires lengthy amortization of equipment, preventing them tracking computer technology improvements. Recently AT&T has aggressively moved to change their competitive posture. A modern marketing organizatio~ has been set in place. Effort has been expended to change the permited depreciation schedules. A nonregulated subsidiary seems sure. The question at hand it clearly whether AT&T can break out of their historical mold and capitalize on their tremendous assets (interconnection is central to distributed computing) or whether they will be backed into a communication service position. j.lY AT&T COMPETITIVE SCENERIO During the decade of the 1980's, AT&T successfully used it's stature in communications to become a major computer service vendor. Their attack was based on these thrusts: (1) Enhance PBX's to include significant computation and data processing capability. (This was aided by revision of the time period over which they could amortize capital investment permitting more rapid upgrading of exchanges). PBX's were produced that had extensive "message processing" services. In fact, they had full data management capabilities, and for all intents and purposes where commercial computers. Thus AT&T could offer an, information processing solution as an upgrade tO'installed telephone switches. The key selling point was the use of the installed telephone wiring plant rather than the installation of new "local area networks." (2) Improve terminal capability. AT&T aggressively developed "home terminals" which coupled to telephone delivered services, assumed a subst~ntial percentage of the home computer market because of many adjunct services available through telephone distribution. AT&T also introduced professoinal works.tations. The success in home computers was again based on leveraging the fact that all homes were wired into AT&T suppo rted systems. AT&T was able to develop communication serv ices (e.g. home retail purchasing, information access, etc.) and do software distribution via telephone. These improvements were significant steps in developing the home computer market, and AT&T won significant market share despite the fact that their products were off the leading edge. (3) Encourge second-tier system vendors. AT&T encouraged smaller system and terminal vendors by proyidirig attractive interconnection services and technical and marketing support. Thus AT&T significantly distrupted the success of computer vendor distributed processing efforts, by encouraging evolution using products from diverse vendors integrated by an AT&T interconnection system. AT&T not only permitted independent vendors to utilize their interconnect plant, but they actively solicited use by aggressively marketing the capability and by helping firms develop compatable equipment. (4) Capture IBM interconnection business. AT&T actively develops and markets SNA interconnect capabilities thereby splitting IBM central and remote services and promoting the success of other vendors (including AT&T) in these systems. AT&T provides SNA services, and SNA protocol conversion capability. This coupled with the support of diverse system vendors disrupts IBM's attempts to provide one stop shopping and force's them to compete on a product for product basis, at which point their size and structure become a hinderance. (5) Develop intra-enterprise data services. AT&T pioneered major new businesses serving multiple enterprises (e.g. supplier/consumer links; new forms o( telephone/terminal retailing; major participant in compu3.2U ter banking ventures). This form of inter-enterprise application was the most significant market growth segment of the second half of the decade, after the flurry of personal and professional computers in the first half of the decade, and AT&T gained a leading share of this emerging and growing market. Although AT&T "continued to lag others in both base technology (the AT&T home computer was several years behind the leading competitors in features like graphics), and in marketing innovation, they were able to successfully exploit their dominating lead in communication technology, and develop a full computational alternative (a combination of capable terminals and PBX "computers", and gained significant business as communication and information access applications gained importance throughout the decade. Significantly, although Ethernet and other local area net technologies gained substantial use, in the end, adaptations of telephone technology based on distributed switch clusters interconnected by fiber optics locally and by satellite links remotely won the dominant market share, and AT&T held onto most of its share of this market. j.ll t\ 1b11 Ibw will they win? '!hey will utilize their strel')3th in communications, adding intelligent terminals aoo computer intensive i~x' to provide a full computational alternative, as we~l as various services for other modes of computer system design. '!hey will excell at nuturing new forms of buiness, particularly intra-enterprise information services (e.g. intra-company ordering and ac(X)uting) • 1984 1986 1982 Processor Diverse collection of Bell built and other vendor (e.g. ~X, 11/10) canputers used Home computer features Bell produced bubble manory option Storage Conmunications fbme computer based on 68000 with buyout graphics chips . X.25 data network·developed. Communication services enhanced to include S~ services, Bell introduces Local Area Network technology based on IEEE Standards Introdoction of "departmental" computer PBX based on Bell proprietary design, including SNA transfer (encrypted) services Introduction of"professional " workstation based on Bell CMOS 32-bit processor Significant satellite direct to building services offered Terminals System Software Applications Minimal network data services offered (e.g. message store and forward) Substantial push in home computer Home computer retailing services; appl ications • expanded home information services Aggressive joint marketing of professional applications from smaller companies that build AT&T communication services. (bst/Pc ices Services Market/Dist Olannels Bell products priced typically 25% above market pr ice for same function without integrated communication services Lecdil'l3 supplier of voice and data communications services Offers distribution of home computer software and services via telecommunication AT&T announces major home retailn effort growing on mail order successes but based on computer a telecommunication services Computer services offered through exp:lOded "'lelephone" Stores Major joint marketing anrounced '" large retailers and service companies 1988 1990 A~T Processor announces new architecture family with special features for image and voice processing ~torage A'ItT anmunces high density archival optical memory offering significant cost savings (?O: 1) over magnetic storage Cbrrmlllications Multi-media (voice/data/image) communication services offered 'lerminals ]mage and voice options are offered for professional \«)rkstations Image features extendedto home canputer terminals. System S,ftware Appl ications Cost/Pr ices Image/based retail ing and entertainment services offered A~T offers advanced feature terminals at premill1l prices;· communications prices are highly competitive Services Market/Dist Channels "Telephone" stores offer wide variety of canputer and application products As market competitors catch up in technology and features, AT&T reduces prices toward market levels .~~P..12/60~1 Convergent Technologies Fact Sheet Convergent Technologies was founded in 1979 by Al Michels and two others from the INTEL Microcomputer Division. (AI Michels had worked at DEC for the 10 years before that, mostly in sales.) Their product set consists of several workstations based on the INTEL 8086 16 bit micro-processor. These workstations include a 15 inch medium resGlution display (with RAM font memory), an electronics package, plus .5 megabyte flGppies a~d/or 10 megabyte hard disks. There is some ability for OEMs to add hardware value, as there are 2~5 Multibus slots internally. They believe that their primari.y advantage today is thei r software. It consists of CTOS, an RSXI1-M like operating system, that also supports communication between up to 16 workstation~ on a multi-drop line, running at about 300k baud. They have 5 languages that all run under the operating sys~em (COBOL, FORTRAN, BASIC, PASCAL, and Assembler), and can share files. (It doesn't appear that programs in different languages can . communicate directly by calling each other.) They also have a Forms facility, Sort/Merge, Word Processing, and IBM communication packages. Nearly all sales of their products are through third parties. They have signed very large contracts with Burroughs, NCR, Savin and Thomson-CSF (in France). These contracts allow up to 10% equity investment (each) in CT, plus give manufacturing rights. CT has also signed up several very small OEMs that will add special software (and hardware in a few cases) and sell the systems. Service is always the responsibility of the OEM. J.25 SR12/61-1 Convergent Technologies Narrative of Events 1982 CT shipped 2000 stations this year, nearly all to about 20 OEMs, with about 100 units going to 30 potential new OEMs. Their products are well received, with the outside evaluators giving them high marks for the -human engineering- and overall system reliability (HW and SW). They have spent the last 2 years primarily developing a high volume production line, with relatively little investment in new prod~ct development. They have announced several -fill the holes· software products, such as IBM SNA support and X.25. They have also announced that they will support some of the new disks that are available on the ANSI standard interface, and they will support the XEROX Ethernet. There are no HW price reductions, although the price/performance of their systems improves as they introduce 64K memories and the new disks. The software license prices on some of the new software packages seem high, compared with the older software products. 1984 CT shipped 10000 stations, half.to 4 large OEMs, including Ricoh (which was signed in 1983) for distribution in Japan. They also have about 200 active, small OEMs selling turnkey systems into a wide variety of applications. Their (OEM) customers are generally very pleased with the product, although there are constant requests for software features which they can't meet, .and which in some cases, conflict. CT has introduced a new version of the operating system that is much friendlier to both the programmer and the user, and is compatible with the newly specified -Friendly UNIX". This new OS is sold for significantly more money than the old one (which is still available), but CT successfully switches most of their customers by convincing them that the improved productivity of their programmers will more than offset the increased license fees. They introduce new versions of their processor module: one has the INTEL 186, and reduces the cost of the basic workstation about $500; a second has the 286, which doubles the compute performace for the same price as the original 8086 product. They also announce a third version which has the 386, although they can't start shipping it, because it requires extensive changes to their operating system to support the extended addressing. CT starts discussing, under non-disclosure aggreements (but it shows up in the trade press anyway), their new high end workstation. It will inc~ude a very high resolution display, with a reasonably page 2 Narrative of Events sophisticated graphics processor. The compute engine consists of an INTE~ 486, giving it the power of the DEC VAX-11/780. This system will use new disk controllers, although it will still support the ANSI standard drive interface. A multibus is available as an extra cost option. CT'introduces a XEROX Ethernet connection, support for XEROX printers, and software that allows their workstations to interface to the "XEROX office w• CT recommends that the Ethernet connection be made once from the cluster, instead of having a connection from each station, as the cluster interface costs 1/3 of the Ethernet connection, and there is rarely a performance penalty for using one of the workstations as the Ethernet gateway. CT also indicates it will support the IEEE 802 LAN, when the spec settles down sufficiently to allow an implementation. They have added redundant communication to their clusters, plus support for journaling and automatic shadowing on the mass storage, and several OEMs are successfully selling into the Whigh availability· market. The greatest penetration is at the low end, since the product is somewhat cheaper than Tandems, and much, much cheaper than DEes. 1986 CT introduced its much touted high end workstation in 1985, although volume shipments didn't start until 1986, with about 1000 going out. It carries a premium price. In addition, they shipped 20000 of their midrange product. Most of their OEMs seem to believe that the midrange product will continue to be the high volume item, with a relatively small number applications for the high end system. They also deliver a "Telephone Management System" option, available on all the workstations, that allows voice store and forward. Burroughs drops their OEM contract, so CT now has some additional manufacturing capacity available~ They decide to enter the turnkey system market, selling products acquired from a few of their small OEMs that went out of business. They sell these systems through office supplies distributors. They also start selling directly to large end user accounts (Fortune 200) and are running into conflicts with their large OEMs that are selling basically the same product (but see below). They develop a small end user field sales force. . CT works with several major third party software publishers and software stores, and reachs agreements that the CT workstation will sold in software stores as the engine to run the applications. CT takes no responsibility for the software warranty, the software stores get somewhat better margins than the computer stores, and the software publishers get 3% of each hardware sale. J.21 SR12/61-1 Convergent Technologies Narrative of Events page 3 In addition, CT sets up a software publishing group to distribute SW written by third parties. They set pricing so their OEM customers total system prices are about the same as the sum-ofthe-pieces prices (HW plus SW) from CT. Most customers continue to buy from the OEMs, since they take system responsibility. Several OEMs use the CT software distribution group as their manufacturing facility. Service continues to be the responsibility of the OEMs. For the end user sales, CT develops a unique program of training the customers "key operators· (for no extra charge) to swap all the field replaceable units in the workstations, with a return-tofactory repair method. CT offers the spare modules for saie, or is willing to lease them in a more traditional ·service contract· form; although either method is only about 1/3 the cost of the service contracts of their competitors. Their end user customers are somewhat wary of this service scheme, but a few do try it. Others contract with third party service companies. CTs OEM customers are pleased, as it gives them a clearly different product. CT introduces new software that supports the high quality graphics on the new workstation, plus a ·compatibility package· that allows a subset of the graphics to be supported on the original product. They provide many enhancements to their Friendly Operating system, but have not added any features to the original os. They announce that support of the original OS will be dropped in 2 years. They also announce that they will offer a combination hardware/software secure communication option, that provides encription and other security features on all transactions between workstations. CT needs additional financing to continue their growth, but isn't .willing to go public (yet). They decide to offer non-voting stock to the public, and make an additional offering to all their large OEMs that increases each of their shares in the company to 12% to 15%. 1988 CT has made a major effort with direct sales into large accounts, and now has half a dozen of the Fortune 200 standardized on their woikstations ·for every deskft. CT has purchased marketing rights to many of the software packages created by their OEMs, so now can offer a reasonably complete menu of applications for their systems. However, many of the applications don't integrate together well, and customers are somewhat frustrated by this. They continue to sell turnkey systems through office supplies distributors, and also st~rt using third party retail stores. The sales of workstations through the software stores has been quite successful, and is the faster growing distribuion channel. 3.2H SRi2/61-1 page 4 Convergent Technologies Narrative of Events CT total sales volume growth slows down as many of their small OEMs decide they can't compete, but their profit margins improve. INTEL has introduced newer versions of the 86-family processors that tend to have increased levels of integration at a constant cost, but there are no major improvements in performance. CT uses these to get incremental cost reductions, along with the new disks and 256K memory chips. Margins improve as price reductions are not as great as the cost savings. CT announces they will interface to the IEEE 8020 broadband/CATV local network, and support images (using the new digital TV standard), voice, and data. Product delivery is scheduled for 1989. CT introduces a new version of their operating system that is a strick, but significant, superset of the UNIX standard. It is priced 50% higher than the previous version. The new system includes extensive security features, including data encription on the mass storage media. CT also raises the prices from their software publishing operation 20%; sales drop slightly, but the overall revenue and profit improve significantly. The service method as been moderately successful, but about half of the end user customers have signed with outside third party service companies, and CT management feels that they are having trouble signing accounts because of the service problem. CT decides to use a dual strategy to solve the problem: for the large accounts, they offer to train in-house, full time repair people (customers employee), which the large accounts find much more acceptable. CT also contracts with outside third party service organizations, so that for small accounts, CT is responsible for the whole system. BMC rates are competitive. They still offer the "key operator," training. CT and NCR announce a major extension of their contract through 1995. CT will continue to provide workstations; NCR will provide major new funding over the next 5 years for 20% ownership, and will get exclusive manufacturing rights (after CT). 1990 CT announces a new family of workstations. They are based on the new INTEL 32 bit architecture, the 96-family series. The 96-family architecture is culturally compatible with the 86, but does not run 86 machine language. CT announces a new operating system which has all the functionality of their 1988 release, but runs 2~3 times as fast. The new operating system provides a combined hardware/software simulation of the old CT environment, allowing (nearly) all software products to run, although there is no performance improvement in this mode. Nearly all the software is running in this mode, although there is a PASCAL compiler that runs in and produces code for "native" mode. The new PASCAL compiler cost 50% more than the old one. j.2~ Convergent Technolo9ies Narrative of Events SR12/61-1 page 5 The graphics processor is very impressive, including full 30 frame~per~second color animation (with limits on the rate of change of the picture). It is capable of interfacing to the IEEE 902 broadband network and displaying TV signals in windows on the screen. CT has started developing a field service organization, as several of the third party service companies failed to deliver acceptable service, and CT ended up with several very unhappy customers (and a few lawsuits). The service rates on the old hardware remain unchanged, and for the new hardware are about half as much (per selling price). In addition, they guarantee that in a cluster of 10 or more stations, 90t will be up at least 98' of the time, includin9 the return to factory turn-around that will always be less than a week from pickup to delivery. CT getS alot of praise from the trade press from the 9uaranteed overall availability this implies. J.JU SR12/65-! CONVERGENT TECHNOLOGIES Key Strategies They will be very creative applying -off-the-shelfhardware technology, but will not develop any base hardware products. They will be a ·system integrator~. They will write base software to generate competitive products and some uniquenss. They will use outside high volume distribution channels that will not require extensive field sales or support organizations. Over time, they will continue to use standard hardware, but integrate forward, selling directly to end users. J.Ji Convergent Technologies SRl2/54-1 NOTE: PriciBJ asslllles constant value (1982) dollars. 1984 1982 1986 1998 1988 Processor 8886 based workstation, wi th Multibus slots 186 and 286 based 386 based processor for original product, 486 for new high end, giving 11/780 perf new versions that give incremental cost reductions new -family· brought out (culturally compatible), still building old. Storage 5- and 8- disks and floppies on industry standard interface new disks as they becane available, more memory available Can mix various disks on either processor Can use new disks as available, more memory (256k chip) New fanily uses sane disks as old Cannunications Ethernet coM8Ction, IEEE IEEE 882 available. Proprietary network 882 comiBJ. Redundant Encription between units. between un~ts, CX style carma outside, SNA, X.25 IEEE 8828 broadband/CAW support announced IEEE 8928 support Terminals charac~er new high end graphics (with pointing device), supports bnages, telephone mngt system same as 1986 full motion animation and TV support System Software unique RSXll-M 11ke ~, some good function layered products, poor to fair performance os moving toward UNIX industry standard Some Hi-Avail tools available Enhanced OS, graphics compatibility pkg, sane securl ty Major unique enhancements New OS, culturally to OS, ·completecompatible, full security compatibility mode, which everything uses. Application Software Word processing Integration with the XEROX office SelliBJ some outside developed SW Extensive menu of applications Costs and Prices $10K-$20K/station HW1 $lK-$4K/station/product JIeI prices constant, new New fItI has praniUll price, 1.ggressive pricing on old HW gets 18' turnkey products (-18') reduction (·volunes Reduce !If 5', add 28' to up·) . SW Much better cost/perf on -key operator- or 3rd party for direct sales, OD! for 0D4 ~les customer on-site repair person, CT contracts wi th 3rd party, OEM small service orqanization, guaranteed availability Sales force for Fortune 28B, office dist and stores for turnkey sys; ODt; SW store sales very successful Extensive advertisin} on new products, available thru stores, catalog, distributors. Salesforce for Fortune 288. graphics with same as 1992 good resolution and RAM ·font memory SW ~ disks and memory give improved price/perf New SW about 20' more provided by OEM Most appUcations r\ll in compatibility mode new fanily SW prices up 2B'-58' Service provided by Chamels Vollllle thru,4 large ODls, sane also same small OEMs and distributors, no direct sales same, plus some end user sales to Fortune 288; software store engine, turnkey' sales thru office supplies dist. Business Actions Large OD! contracts wi th Burroughs, NCR, Savin, 1.greements with lrd party 6 Fortune 288 announce 5W publishers+stores standardizing on the Non-votin} stock sold to fanily on every desk public Major extension of NCR Lose Burroughs contract Public stock offering silDe same Ricoh in Japan becomes 0Dt 'ftlomson-CSF Key SkU1s Good h\lll8n engineering, Marketing, manufacturing ramp-up Good human engineering, quality SrI, clever marketing, Quality/ Volune mfg sane 8 December 1981 --- Strategic Pianning Game TeeM. Competi t(!)r: C,oNv6C.6E:tJ, ----~------------~~-----~~ ----~----------~-----~-MARK EACH SCALE WITH (1) AN "8" TO SHOW WHERE YOU THINK THE COMPETITOR IS IN 1980 AND WITH (2) A "9" TO. SHOW WHERE YOU THINK THEY WILL BE IN 1990 Your Name: Hardware Cost/Performance I--~I---I--~I--~-~--I---I---I---I 1 2 3 4 5 6 7 8 9 10 poor ~ > indu~y norm ->excelle~t Cost of Ownership I-~-I-~~I--~~-~--I-~-I~-~I~--f-~-I 2 3 4 5 6 7 8 9 10 1 . Existing Base / Reputati(!)n I--~--I---f---I---I---I-~~---I---f 2 3 4 5 6 7 8 9 10 1 Unique Capabilities f---~~~p-I~--I---I---I~--I-~~I~--I 2 3 4 5 6 7 8 9 10 1 Programmer Pr(!)ductivity I~-~I~-~~-I--~~-I-~-I---I-~-I---I 1 2 3 4 5 6 7 8 9 10 Availability of Third Party Software and Services I---I---I---I---I---I--~-~---I---I 2 3 4 5 6 7 9 10 I---I---I--~--I---I---I--~--I---I 1 2 3 4 5 6 7 8 9 10 Use of Industry (or (!)ther) standards 1 . 2 End User Productivity· ~ 1 Breadth of Offering I---I.--I---I---I~--I--~-~--I---I 3 4 5 6 7 8 9 10 I-"-I--~~--I"-~--I"--I-"-I---I---I 2 3 4 5 6 7 8 ~~ 1 Distribution Channels I-~-I ~--I ~--I-~"I""-I---I· ---I--~-~ 1 2 3 4 5 6 7 8 9 10 • f-~-I---I~--I~~-I~--I~--I---I~--I---I 1 2 3 4 5 6 7 8 9 10 Total Information System and Services Market Share (% of total market) gained or lost during the decade of the 1980's expressed in "MILLIPOINTS" (1/1000 of one percent of share). In 1980 one millipoint corresponds to about $1 million of annual revenue. ,b~ <:) millipoints of share ~A'NEt> gained or lost J.JJ '. '\ Convergent Technologies In recent months, a new name has appeared quite regularly in the small systems world. Convergent Technologies has contracted (or is in negotiations) with NCR, Thomson-CSF, Savin and most recently, Burroughs in pacts to supply systems which these major leag"uers should have already had in their product lineups. Convergent Technologies (CT) was fOllnded in August 1979 with the goal of becoming a leading OEM supplier of desktop minicomputer "integrated worl isis. The Dynabyte system wiD accommodate 16 users and is expected to seD for well UDder $10,000. i ! I I I' ELECTRO\"rc \F ' . . .WS. 'fO~DAY J:\\T.~RY 4.1~ TRWto Distribute Convergent Gear By JEFF MOAn SANTA CLARA, Calif. ConvergeDt TecbDologies last w~ signed an overseas distribution contract with TRW Datacom, lining up what sources close to ConveJ'IeDt said is an agreement that could exceed the value of earlier OEM contracts with Burroughs, NCR. TbomsoD-CSF aad Savin. The agreemeut - which is UDderstood to be aon-exeJusive - gives TRW a small computer system to replace the Datapoillt products it distributed abroad ill the past. Last year TRW IOld its DatapoiDt distribution organization to Datapoint iD a $102 million deal,CEN, Aug. 10, 1981). TRW has commltted to purdwe Convergent AWS aDd IWS series 16-bit systems for distribution ev~bere outside the U.S. Soun:es Jasi week estimated the deal to be in the same range as Convergent's' previous c0ntracts witlt Burroughs aDd NCR. wbidl bave beea pegged at about SlOO million. Sources close to Convergent said the contract could grow much larger, however. pointing out that TRW's business with Datapoint has been estimated at more than $150 million annually. According to.Convergent president Allen Michels, who confirmed the signing of the agreement. "It is our hope that this relationship will be at least as successful as that between TRW Datacom and Datapoint." Mr. Michels refused to comment further ~ on the contract. The agreement is not believed to include an option for TRW eventually to buy into Convergent. Some of Convergent's earlier major contracts, including Burroughs and NCR, include buy-ir:t clauses that are tied to the number of systems purchased. TRW is expected to market Convergent systems under tbe Convergent logo just as it had used the Datapoint name; however, the Convergent equipment Is not operating system-compatible with Dalapoint hardware. 3.4U HE\-ILETT PA CKA RD I Hew~ett Packard is a 30 billion dollar a year corporation deriving approximately 50~ of their revenue from the electronic data processing division. The Computer Systems Group has grown from a base of 375 thousand dollars in 1976 to a base of 1 and 1/2 billion in 1980. HP is a well known supplier of electronic instrumentation, digital calculators, computers~ medical instruments and medical electronic equipment. HP is the third largest manufacturer of small computers after IBM and Digital Equipment Corporation when measured ·on dollar volume. HP' s current product lines include the HP83 and 85 personal computers, the HP980 series desktop c~mputer, HP250 and 300 small business computers, HP30qo - t;.he companies larger b\Jsiness system, and the HP1000 - the general purpose mini-computer used primarily in scientific and industrial environments. HP introduced several significant products in t980 and 1981. In 1980 the expanded the top of the 3000 line into larger business systems and introduced new printing systems. Additionally, they announced personal computers with integrated terminal printers and cartridge tape drives. In 1981 HP introduced several new products to address the OFFICE market. HP derives approximately half of their revenue from international sales with, an ov,erall net profit margin of 9S. HP has been able to achieve a 25$ a year. growth rate based on that 9~ through outstanding asset management which has been improved ove~ the yea~s to currently allow a self financing growth of 31~ a year. HP over the years has focused.,significant resources ,on application software such that today HP is able to solve the problem of approximately 25~ of their potential customers for comp~te~i In 'a manufacturing se~tcir., HP off~r~ ifgnif{cant't~~rd patty software to compliment'their own application capability. Additionally. HP is focused on the quality and reliability,of their computers. HP has the goal of reducing the raif~~~ Tate on their products by 50~, as well aS,reduce the manufacturing costs by 15% for 1981. This quality is manifested in terms of HP's abili ty to guarantee a 99S up-time over a ,three montl1'per'!od for their computers. HP has recently fabricated and tested a 32"'bit 'inicr'o-p'rocessor' which is indicative' of HP's committment to ~aki ~' 3Z bit product. Other product announcements include the CADCAH package 'called ADSAD 2000 for their HP 3000 series. HP has a competi~ive cost to manufacture which in 1980 was 47~ of their revenue (which compar~s to 55$ cost to manufacture for Digital). J.41 dP h~s long had ~ith concern fer tHe reputation of being a high qualitj company their employees in. addition to product innQvation ~~~ new product introduction. They have maintained an ability tr be competitive in the marketplace with products that most people would consider to be less than a leader in technology, i.e. 16 bit HP3000 vs. VAX780 3.42 * d.i g i t a 1 * ***************** TO: *BRUCE DELAGI DATE: THU 3 DEC 1981 8:26 EDT FROM: BUD HYLER DEPT: COMMIL MKTG EXT: 264-7369 LOC/MAIL STOP: MKl-2/N38 SUBJECT: HEWLETT PACKARD Evolution of a Strategy - Hewlett Packard Approaching 1982, HP has a fairly strong position in the computer industry, with computer sales of 1.5 billion, and a total company revenue of 3 billion. They are among the larger of the" mini-computer manufacturers and have been experiencing . significant growth for the past several years. HP is currently focussing on the manufa~turing industry, to leverage both their internal manufacturing data processing experience, as well as their other engineering and technical oriented product lines. They are considered to be a quality vendor with a full range of commercial and office systems. . One weakness in their product offering is the fact that their mini-computers are not 32 architecture, but HP is committed to address this weakness. So far product deficiency has not significantly impacted their growth or profitability. In 1984, Hr is replacing many of their older products and generally turning over the product line so that all their products are of 32-bit architecture. They will enhan~e their graphics capbility and the communications capabi1ites wiih other products that might be usea in the manufa~turin9 environment. Because of the range of products "which they need to communicate with, HP has maintained a fairly open communications capability in terms of supporting many of the standa~d communications architectures. 1:982 is the year for continu~c1: ..applr~ations and system software growth following the intro~t.ic·t.i~n:~.of "the 32-bit architecture throughout their product lin~: focussingo"n databases and application packages. Many of the applica"tio"n packages in " the ~ndustry are not written for HP operating systems, but are written for other industry standards such as Unix. HP has decided that they will be better off by also offering to support the Unix operating system on their HP series to insure to their customers the availability of the widest range of application for solving their problems. In this respect, 1984 is a turnlng point for HP in which they realize that the real value added to their . customer wasn't so much the unique capabilities of their software or hardware, but really the availability of applications and the experience to solve their problems. . . 1985 sees completion .of all of HP product lines with the 32-bit architecture which gives them a fairly young product offering, extended communication support and a rounding out of thei~ own operating system function~lity and applicati~n set. Additionally, there is a continuation and expansion of the strategy to offer applications, solutions, and general capabilities to their customer. HP has focussed their resources on solving the customer problems more than on the development of unique systems just as the primary differentiating factor. This philosophy and the re-evaluation of the make-buy decision for processors and processor components has resulted in HP using a significant number. of standardized "commodity" systems . (68000,286) as components in the packaging of HP systems. Mini~computer vendors had been buying out disk tapes and printers for years, but this was really a breakthrough for HP in terms of buying out processor 'components. HP finds tflat, in terms of the make-buy decision for systems capabilities, the buy decision offers dramatically much more price performance to their customers. HP d~amatically reduced their internal systems development group to focus all t~eir' resources on the application .of c,?mputing to address the customer problems. In 1988, HP will be the leader in layered applications across a range of products, s'ome of which were the traditional HP made 'systems and some have been the more recent HP "buy" systems, all. of which run a common layer to which HP can offer their unqiue software capability. HP begins focussing much more on offering "one stop shopping" capability for their custome~s and, as such, adds a robotics capability to their product line as well as s~pporting several industry standards in terms of systems . software and database managers. There is con.tinued emphasis to merge the skills of computing capabili ty into manufactu'rfn-g tools and products, and focus on having all of the different elements in the manufactur~ng process work together so that there is a commonality of the HP layers and interfaces. _ ...&"'i..: Computers have become part of the element ~ha·t~··:~P·:'.~s~s. to solve the customer's manufactur ing problem but repre~en.ti~g· a decreasing component of that solution. Especially in the context of HP unique systems, although they do continue to support and sell HP unique products to their traditional installed base. /bal 03-DEe-81 09:27:49 5 12906 EMMK j.44 nc,,,&..c,!, ri\\,I\i\nV-"".::>l.:JJ.l:.n nuuo::>t." UVl:.t{Vlt.~1 In the beginni~g of the 1980's HP realized that as simply a manufacturer of computing systems they would lack the financial resources to compete with the emerging commodities envlornment being driven by Japan and IBM. HP's skill historically had been one of competant engineering with excellence focused in the transition from the engineering group to manufacturing, e~abling them to introduce new products through manu~acturing which were of a high qu~lity nature on a regular basis. While this corporate skill was critical for HP's success in the embryonic computer industry. the skills necessary to succeed in the emerging competitive envir~nment muc.h more one of high volume manufacturing capabilities and financial assets for vertical integration. HP saw the computer evolving from an embryonic/growth industry to a more mature industry in some areas,'noteable the "mainframe" product area. a result of this maturing. the competitive strategies will begin to evolve from one of "newpro~uct introduction" to one of "industry standardization/low-cost commodity production". A~ COMPETITIVE STRATEGIES New Product Introduction ( SYSTEM HOUSE ) / / / / / / \/\/ \ \ \ \ \ \ / / / \ / I I \/ \/ low cost production ne.w product of industry "standards" - ij300 architecture introduction - 68000 Intel 186 \ \ \ \/ \/ new competitive s t rat e g i e s : .. ' .. Trading company/ .technology .• pr.od uc.t~·· b~ uti ciue·s < • HP h~s decided to continue to compete ob the basis of "new product introduction" as a systems house, but they realize that the basis of their value added will probably change dramatically. As critical met mass built around industry standards. both hardware and software, it became increasingly difficult for HP to justify their uniqueness to perspective customers. The issues ott::u w~r~ unt::~ VA "lit:: ClVO.&..LOU.&..L.L v~ VA " , CI.LUC::I.I yel . ; ) v . . . . "" ... , ....... easingly one of software availability. This impact was ~pounded whe~ ~~: industry standardization provided significant .everage to t~e top software producers which made it financially attractive for the software development tal ant of major corporations to go into business for themselves.HP's survival, then, depended upon it's ability to maintain it's uniqueness and the value of that uniqueness to it's customer base. However, the source of that uniqueness had to evolve from one of manufactured systems and system software to one of application software and manufacturing experience. The focal point for HP's competitive edge evolved from one of manufacturer of unique systems to one of unique capabilities in the utilization of standard systems to address manufacturing problems. Tbis was provided through "one stop shopping", manufacturing experience, and a range of application software. The effect of competitor in one "OEM" for captured over manufacturing this transition was for HP to evolve from a the systems manufacturing environment to the number the manufacturing community. By 1988 HP had 35$ of all computing system sales to the areas of corporations. 3.46 Hr 1982 1984 1986 ARCHITECTURE HP offers point solutions. Full range, well integrated commercial/office systems (low end workstations to 50 user systems); personal computer; new 32 bit architecture at high end; fair technical systems, low to mid range; very good I/O periph. Some older office products replaced with new versions; mid and hi systems are 32 bits; images on hi end graphics; full range workstation products; new 32 bit tech. product Migration from 16 bit to 32 bit architecture. Replacement products introduced so that no products are more than 3 years old; all are 32 bit based; maybe common 32 bit hardware. COMMUNICATIONS Continued commitment to "open systems"; i.e. systems including equipment from multiple vendors. Layered comm. products. SNA/SDLC support. Continued support for Ethernet/IEEE 802, SNA, ACS. Store & forward voice. Support CATV/Broadband industry std; line of sight 5 mile network link; full PBX function. SYSTEM SOFTWARE Good function, g9~d performance, Layered product set quite complete for commercial applications. OS and files on 32 bit HW not compatible, but excellent conversion tools. Incremental improvements in function and performance • Much improved DBMS. HP supports, industry standard system software (ex. UNIX) Significantly enhanced OS and some layered products introduced with much better "ease of use"; compatible subset user and program interface; conversion aids (when necessary) for migration. No commitment to HW arch., only SW. HP begins use of industry standard architecture as basis for system, disbands processor design engineering program. . ,. 1988 1990 Continuation of better cost/ performance products introduced; excellent "faml1iness." Complete layered software move to new system; improved function and performance. HP systems sales reflect decrease in "HP unique" systems except to installed base. Incremental improvements in function and performance. APPl. teA1'1 ON SOFTWARE Good automated office; electronic mail and· filing; some generic applications packages. Total turnkey solution in manufacturing space (MRP+). Extensive 3rd .party software. Complete office and Complete office, -well iniegrated with.DP; extensive plans for many turnkey commerappl~cations support cial products, in well with new OS; several targeted vertical high quality turnkey markets. Continue application packages to add applications available. packages which grow out of installed base. Trend to add more financial packages like distribution and ordering to integrate the factory. COSTS AND PRICES Competitve pricing; most system software bundled with HW. HW prices +5~, new SW not bundled. FIELD SERVICE High quality service at low cost, worldwide. BHC reduced to price, 6 month warranty. ~fARKET/ Extensive salesforce, direct sales to large accts, many OEM sal~s. Industry speoialists~ sell produots. ~~rong push to sell their.·~· office automation I . ~i products announced. in',. 3~d October, 1981. party SW suppliers market programs to existing HP customers. Applications brought in-house, through purchase; provide all but maintrame to large oompanies. DISTRIBUTION CHANNELS I .2~ of With the addition of the Robotics Inc. acquisition, HP now offers complete "one" stop shopping" for the manufacturing industry. HW prices constant; SW prices up 10~. HW prices constant; SW prices up 10~. 8M~ .15~ of price, one year warranty. BMC .1~ of price, one year warranty. Very low product/costof-ownership; be viewed as very lost cost prciducer of high quality, oomputers. Same. Retail store channel for personal computers. Baokward integration espeoially in robotics area - put computers in robots to integrate into MRP package. HW prices constant; SW prices up 10' BUSINESS ACT} ON • Major thrust into s'olution sell through applicaton sQrtware. HP will operate like an OEM company. Complete solution stressed into vertical markets, whioh are few but fooused. COMPAI~Y By 1988 competition will force HP to integrate computers and instruments business. At less than 1/2 DEC's size in oomputers, HP oan best survive IBM/JAPAN competition by ooncentrating on natural strength ~f manufacturing. SKILLS 23 November 1981 --- Stratesic Plannins Game You rNa D, e : ____________________ '____ ~ _ Com pet ito r : ______ Hardware Cost/Performance ~ / V it c ___________ _ . 1-----1-----1-----1-----1-----1-----1-----1-----1-----I 1 2 3 4 5 6 7 8 9 10 poor )averaSe - Cost of Ownership ->excellent V.eav I-----I-----I-----I-----I-----I--~--I-----I-----I-----1 1 2 3 4 5 6 7 8 9 10 ~ Existins Base / Reputation 1-----.-----1-----1-----1-----1-----1-----1-----'-----I 2 3 4 5 6 7 8 9 10 1 UniQue Capabilities v~~ ;-----1-----1-----'-----1-----1-----'-----1-----1-----1 1 2 3 4 5 6 7 8 9 10 Prosrammer Productivity -;;;----7 v' 1-----1-----1-----.-----1-----1-----'-----1-----1-----1 1 2 3 4 S 6 ,7 a 9 10 • V End User Productivity V -,;;----r? ~ 1-----1-----1-----1-----1-----.-----'-----1-----1-----, 1 2 3 4 5 '6 7 8 9 10 Availabilit~ of Third Party Software and Services ' .., v'--~ V I-----I--~--I-----.-----I-----I-----I-----I-----I-----I 1 2 3 4 5 6 7 8 - 9 - - - 10 standa~ Use of Industry (or other) ~ ".",. J-----I-·---I-----I-----I--~-~I~----I-----I-----I~----1 1 2 3 4 5 6 7 8 9 10 Bredth of Offerins V ?;:> ,".. V'" 1----- J -----I-----,r---.:-~ ..------1-----' -----1-----1-----. 1 2 3 ., 4 '5 6 ?.~Y_A.f!~::r__ it,,(-~(:!:.'-:-~:.:~~::.(othe 1') ~ - 7 ?> 8 9 10 ~ I-----I-----I-----J-----I--~--I-----I-----I-----I-----I 1 2 3 4 S 6 7 a 9 10 h . TOTAL HARKET SHARE GAINED OR LOST: /1) ~ ;"'4-J =================================-----------~-================================= s , - -- R. Smart 4/23/81 ********* COM PAN Y CON F IDE N T I A L ********** HEWLETT PACKARD COMPETITIVE STRATEGY RELATIVE POSITION IN MARKET SPACE Geographic Dimension ·HP has good international coverage with S2~ of it's FY80 business outside USA. The international coverage was presumably developed on the basis of its Instrument business. Information on computer product revenues is not yet available by country. However. FY80 total HP revenues by geography are: USA 48%. Genmany 8%. France 7~. UK 6%. Italy 4%. Other Europe 11%. Japan 4%, ANZ 2%. Canada plus latin America 6%, Other Asia 3%. Africa 1%. Annual report date. (cf DEC). "Industry Dimension HP is heavily biased towards manufacturers as end users. Compared with DEC's mix of end-user business, HP's mix has more concentration in manufacturing, while DEC is much stronger in education and research,. as well as in EDP service business - all according to a mini/micro magazine survey published in April 1980. If DEC's OEM business is included. the manufacturing segment of our mix of business is closer to HP's mix. Kind of Customer . . . ~ HP's end user is presumably like DEC's - technical business rather than accounting oriented. They have targeted the FSOO and stressed coexitence with the IBM central DP Site. They have exce 11 ent manufactur-i ng, management-_control. appJi cat 1ons offeri ngs and can target thi s segment very comfortably." . ·Long-term, we can expect direct overlap of end-user target m~rkets. HP is les~ evident in communications-oriented applica,tjons.: m'ore so in industrial automation and medical instrumentation. Channe"ls According to IDC, HP does 48~ of. its revenue via OEMs (surprisingly. high to me). Product/Application HP's coverage of the price bands has a focus in the $100K-$2S0K segment with the HP 3000 and in the two bands 6.2SK-16K-40K with emphasis at the lower end. The products are the HP 1000 Minicomputer and the Desktop 98xx. Computer products are now j.50 50% of the total HP -reve-nues a-rid increasing; As a subjective judgement, it is believed that HP have done a better job of providing applications software for the manufacturing end-user segment. RELATIVE CAPABILITY Financials HP accelerated the growth rate of the computer segment significantly from 1975, to a 42% annual groWth rate in 1979 and 1980. The computer segment profitability also increased in the last few years on a PST percent basis. HP's ROA is close to DEC's, DEC having a better tax rate but HP doing better at asset management (especially inventor)es) and cost of goods and services. The computer segment is now HP's biggest and is more profitable than the corporate average but second to the slower growing electronic test and measurement segment. This latter segment performs the role of a cash source, which has meant that HP has not need~d to look for outside financing. Quality - Subjective Judgements HP has a quality image as' a company but a limited computer product offering. They are ahead in applications program offerings for manufacturing and seem to be good at marketing what they have. They do not have an integrated set of products and perhap~ their structure tends to dull the forces for achieving better product synergy. Their customer interface (including administrative processes) is thought to be superiqr to DEC's at this time. Organization HP's business units are more independent than ours. Engineering, Manufacturing, as well as Sales/Marketino. is decentralized into these business segments. R&D HP in total spends more on Engineering than DEC does. Summary HP will be a competitor for the long term with primary market overlap occuring in the manufacturing segment. They have made the most (marketing, sales, administration) of quite limited product offerings. . Probably the biggest trend to watch for is a turn around in their product engineering to support their financial and sales/marketing capability. j.51 7 ---------------------- ",~\ Hewlett Packard Company Hewlett Packard (H P) is expected to announce at least 20 new products near the end of this week (October 29 is anticipated), which will clarify HP' s strategies for office automation, software and networl /spioole at $321MB • Everest disk (3380 quadruple density with 4.~spioole) at $251MB • tatabase ~ine at • IUncrs of new disks volune $401MB • ~l Q'o streaming tape cartridge at 2O.5Kbpi. l8-track. for $8(1{ • tatabase ~ine $321MB caning • Iatabase Fngine at $32/MB am facw of 5 perf. over IMS introd\.Ced at faCtor of 3 retrieval perf. OIer IMS aoo $40/H3 • f..a.I cost fixed disk backup - video technology for lON end systems CCH-lJNlCAnOO • New PBX family. not too aggressive • Mirage (370X replacanent) anl'DUOOed ."'" 0', ~ • Some penetration of rooftop SBS in Fortune 500 • Digital pax'compatible with SIB. SNA. am voice mail • IfftJ sells teleconference facilities connected to SBS • Substantial SBS penetration in Fortu'le 1000 • Low cost rooftop Sf5 systan for $501< • PBX voice mail integrated with J10 office software • ~l PBX managers voice. video, and data 1984 1982 If:l-1 1986 TEIt1INAlS • C<:Iq)etitive functionality; approaching competitive prices • Better blsiness grapucs • $5OK laser printer annoU1Ced for J'(O & 5/38 • Tenoinals canbined with telelitOne for "I&l desk" to 1&1 PBX • Laser printer fanily from $30K to $300K • Simple ~rd proceSSing and· SNA cal'lWnication in . all but cheapest Selectric typewriters • &apport for voice menus • Laser printer fan1ly as ~A nodes fran $2OK • Introduce lQi cost teletex tenninal SYS'I»1 &FIWARE • 5138 maintains • Good 5/38 ease-of-use features (incluUng cannand language) migrated to 370 • &aperior Relational rEltabase arx1 (JJery product for JlO with Datab&5e Fngine. • Intel 386 PC has UNIX-like OS am CP/M canpatible extension fran Digital Research • craceful coupling of '!f0 host to 370 Personal "obsoletes" time-sharing • Graceful distribution of OA functions between host and personal 370 • Different support levels fran 1fM for 3rd party software • IBM claims largest library of applications • PreniLm Price application market develops for 370 personal • Carmitment to products in every price band, every market • Itctive oppostion to proposals to make MVS into ANSI standard ease-of-use leadership • layered p-oducts DOle to compatibility on Mv.S, 005, $X • !TO Office Autanation Software (CAS) introduced APPUCATIONS • IIt1 mcrkets library of SCF1WARE applications fer its personal oarp.aters • New pricing and tenns erlCOU'"age8 3rd prl.y applications and OEMs W3T & PRICl:S • ODnitment to stay eqJal. or ahea::t of Japan on costs • .ressive )ricing of calDaiity hardware for volune • Continuing increases in System Software pricing . (,.; 0(j 1988 • JCL totally obsolete except for backward canpatibility • Powerful application generators for JlO IH-t 1982 1984 1986 SERVICES • lDw serv ice pi,c1ng to block J~nese • Penmit ug-oampatible hardware manufacturers to sell 1&1 S'lftware maintenance service • Total service package for PBX, canputer hardware, and software CHANNELS • Fortune 1000 - Direct Sales • Snall fUsiness - Direct • Very snall business . sane retailers and ntl stores • Home - retailers BUSINESS ACTIONS • Ever mre aggressive variations of channels ald terms and corx1itions to canpete in all • Salary/reward mechaniSJJS al tered to mId key technical contributors • lltl active again in Service areau business • Heavy contributions to Republican Presidential campaign • Service areau evolves to Information Library Teletex service • Utilize commodity p-oductslarchitectures where roost cost-effective • Ability to DlCI'lBge ruge organization in highly dynamic market • Keepi~ thing:s simple for the over\tA1elmed users of the ~ld mcrkets • Extensive investments in plant capacity for vollme p-oduction KEY SKILLS • Qxnpetiti ve Jr1.mcry technology (e.g., disk, semi, ocmnunication, etc.) • &eak away fran old 1&1 1OOIlO11thic approach 1988 8 December 1981 --- Strategic Planning "<:ame Your Name: 198u (0) /1~90 Competitor: lX) --------------------~----- iBM ------------------------ MARK EACH SCALE WITH (1) AN n8" TO SHOW WHERE YOU THINK THE COMPETITOR IS IN 1980 AND WITH (2) A "9" TO SHOW WHERE YOU THINK THEY WILL BE IN 1990 o X 1---1---1---1---1---1---1---1---1---1 Hardware Cost/Performance 1 2 poor 3 4 5 6 7 8 9 10 > industry norm ->excellent o X 1---1---1---1---1---1---1---1---1---1 Cost of Ownership 1 2' 3 4 5 6 7 8 9 10 x 0 1---1---1---1---1---1---1---1---1---1 Existing Base / Reputation 1 2 3 4 5 6 7 X Unique Capabilities 8 9 10 0 1---1---1---1---1---1---1---1---1---1 1 2 3 4 5 6 7 8 9 10 o x 1---1---1---1---1---1---1---1---1---1 Programmer Productivity 1 2 3 4 5 6 7 o End User Prod uctiv i ty 8 9 10 X 1---1---1---1---1---1---1---1---1---1 1 2 3 4 5 6 7 8 9 10 o X Availability of Third Party Software and Services I---I---I---I---I---I---I-~-I---I---I 1 2 3 4 5 6 7 8 9 o x 10 1---1---1---1---1---1---1---1---1---1 Use of Industry (or other) standards 1 Breadth of Offering 1---1---1---1---1---1---1---1---1---1 2 3 4 5 6 7 8 9 10 OX 1 2 3 4 5 6 7 8 9 o X 1---1---1---1---1---1---1---1---1---1 Distribution Channels 1 -------------------------(other) 2 3 4 5 6 7 8 9 10 1---1---1---1---1---1---1---1---1---1 1 2 3 4 5 6 7 8 9 Total Information System and Services Market Share (% of total market) gained or lost during the decade of the ~:980 's expressed in "MILLIPOINTS" (1/1000 of one percent of share). In 1980 one millipoint corresponds to about $1 million of annual revenue. millipoints of share 10 gained or lost 3.67 10 R. G. Smart 4/17/81 ********** COM PAN Y CON FlO E N T I A L ********** IBM STRATEGIC COMPETITIVE ANALYSIS RELATIVE POSITION IN MARKET SPACE Geographic Dimension IBM is represented directly in almost every country of market significance. India and Nigeria are exceptions where local national ownership or other requirements have been enforced. IBM have distributed their Manufacturing and even their R&D activity geographically in order to maintain influence over nationalistic trends. The geographic mix of business and profits had moved towards non-USA markets through the 70s. USA revenue share has (temporarily?) stabilized at 48%. The following is the estimated 1979 geographic mix of sales. USA 48%, Germany 11.5%, France 6.8%, UK 3.1%, Italy 4.0%, Holland 1.8%, Belgium 1.6%, Spain 1.3%, Sweden 1.2%, Denmark 1.0%, Switzerland 1.4%, Other Europe/Africa 3.1% - Subtotal of Europe 36.8%. Japan 6.9% (an increase over 1977), Canada 3.3%, ANZ 0.9%, Latin America (Brazil) 1.7%, Other Asia 2.9% - Subtotal IIGlA" 15.7%. These figures are derived from an analysis by Dean Witter Reynolds, dated March 1979. Country planners can convert to projected IBM revenues for their country market, by noting IBM's 1979 world revenue was projected by Reynolds to be $24.68. In fact it turned out to be only $22.98 of which $18.38 was from data processing. IBM's EOP penetration of. country GOPs in 1979 was approximately: USA 0.37%, Genmany 0.28%, France 0.22%, UK 0.14%, Italy 0.22%, Canada 0.28%, Japan 0.13%, Australia 0.13%, New Zealand 0.15%. There"was relatively little growth in penetration of major countries by IBM throughout the 170s. Industry Dimension IBM's'industry distribution of EOP revenues is of course very close to the mix associated with all general purpose (mainframe) systems. Only in the Federal Government market in IBM's mix unusually low, with CDC and UNIVAC together doing more Federal business than J.6~ IBM. DEC's market mix of business by industry shows nearly twice the all mainframe average (much stronger than IBM) from the Federal Government. We are a little ahead of the average (and IBM) in Education and in Medical. The mix of our revenue in Manufactuiing is slightly ahead of the mainframers average including IBMs, even at the end-user level. Our OEM business keeps our mix well above IBM's position in Manufacturing, although some of our OEM business ends up outside Manufacturing. We have great strength in Telecommunications mix (Western Electric, Bell labs and the Telephone Operating Companies combined), relative to other vendors including IBM. Business Services is also exceptionally strong for DEC if the Channel Business is counted here. IBM seems to be growing strongly in this segment as well as in Manufacturing. Of course, in absolute size, IBM dominates any broadly defined segment. In all other significant industry segments, DEC's position is well below the mainframer average, because of our choice of target markets: e.g., state and local governments, insurance, finance (excluding some specific banking segments), retail and wholesale (excluding channel business) all have a very low proportion of DEC business. Wherever we target, IBM is there even though some of the industry segments are a much bigger proportion of our business than of IBMs. Kind of Customer IBM has a very strong position in the large organizations. For example, in the F500 Industrials, IBM has a better than 76% market share of the mainframe business as against about 69% average for all kinds of customer~ in USA. There are very few F500 companies without an IBM presence in terms of some IBM equipment installed. IBM are expert at leveraging off their powerful market position in most accounts. Our "Kind of Customer" differentiation from IBM is primarily at the departmental and. individual professional level, where the._ respective business/technical personalities of the two vendors can have some influence. Channels Most of IBM's business is via direct sales. There are signs that IBM is experimenting with the OEM channel. They are rumored to be planning to run on-customer-site service bureaus. They are also rumored to be developing retail channel (Sears, Penny's) for 51xx PCs. Relative to DEC, IBM is far behind in the use of third-party channels. IBM's imperative towards direct account control and their attitude towards PCMs, imply a less than enthusiastic drive into third-party channels. This contrasts with DEC's channel attitude, experience and reputation. In summary, DEC is substantially differentiatea from IBM 1n tne channel dimension of the market space. The one exception is in the use of third-party applications software. IBM may be ahead of us in the exploitation of this "channel". There is also a substantial third-party's systems software market on IBM's base, which IBM has tolerated. It will be very important for us to accentuate the channel differentiation in our strategies and promotions. At the same time, we need to watch for substantial moves by IBM into the OEM market with 5/1. Product/Application We are also substantially differentiated from IBM in the product/application dimension. Most of IBM's business is based on systems larger than $250K. "'the more successful IBM products are above $625K even today, except for 5/38-5. The 4331 is weak as was 370/115 (bottom of the architecture range). Below $250K, the 81xx products are constrained to be linkage products into large mainframes (no doubt deliberately, to channel . work to the central DP site). System 3 pulled in a lot of revenue but these systems are ageing as is 5/32. 5/34 also went through its peak revenue years in 79/80. Series/1 is receiving a very strong marketing push which is bound to pull in business from IBM's captive accounts, of which there are very many. IBM has products all the way down to the PC level. IBM's systems below $250K do not at all equal the compatible range of general-purpose "small" systems that we have and for·which we have built a substantial customer base. In these price bands, IBM's strength is in commercial applications e.g., COEM competition and decentralized commercial applications in the many IBM captive central DP sites. IBM was almost as big as DEC in 1979 in the below $250K price bands and they will be pushing hard for a share of growth in this product space. We are probably becoming even more-- differentiated from IBM jn terms of software compatibility across the small bands. We are differentiated in terms of applications: IBM volume is mostly commercial accounting applications while DEC is supporting a wide range of professional/technical and sophisticated "commercial" applications. The trend to watch for is in our respective attractiveness to the users (end-users, software houses or OEMs) who will be implementing the volume applications of the future the approachability factor in hardware/software system design. 5/38 seems to be a significant advance by IBM into an approachable software system (RPG-111). This indicates a very significant product trend towards our historical advantage of ease of use. Note however that so far, only the S/38 model 5 (above $250K) has any performance, the model 3 is a poor product. RELATIVE CAPABILITY 3.7U Financials IBM's financial strength is enormous and their manufacturing costs on a percentage basis much lower than ours. However, they have been maintaining high profits by selling off their depreciated base of rental sites. Profitability with high growth requires high productivity. IBM's and our productivity are closer together than are our ROAs given that DEC has been growing at more tvan twice IBM's rate. The other side of the growth adjusted profitability, is that IBM has invested heavily in Manufacturing as well as in bringing out a range of state-of-the-art products. Theoretically, they are ready to pour out a great stream of very attractive performance/price products relative to their historical position. Their internal pressure to increase revenue growth with their new capability will be enormous. Even if their products and channels don't overlap our own, we can expect powerful forces to be applied allover our Being so much smaller than IBM financially, but market space. approaching their market share at such a speed (even if from a distance) has got to attract considerable competitive attention which will require us to keep objective about our strengths, alert to breakthroughs into our market space and aggressive at building distance between ourselves and IBM in the whole market space. Quality-Subjective Judgements Subjective comparisons between IBM's performance and ours show our need for better administration of our customer interface especially in terms of order handling. Our business is probably more complex than IBM's (range of separate PIGs, channel complexity, rate of growth, range of product options and complicated product mix forecasting). However, these are our problems not our customers~. We-have to be good enough to manage our own complexity and growth rate or give them up and lose market share gracefully, if not graciously. We have been incredibly flexible in managing manufacturing volume changes and in generally adapting to operational conditions which do not follow our "plans". This capability is squandered if we use it to save ourselves the trouble of getting better at our planning, especially of market demand for the various products. IBM may not be better at this than we are but there are enough competitors around for someone to pick the right product volumes if we don't. Note that IBM are very good at selling what they build, even when it isn't the best product/price available in the marketplace. Producing quality products is becoming an important competitive capability. The Japanese hardware quality thrust will be amplified by IBM. In system software, we have a good edge except in large commercial data base support. The ease-of-use quality will be critical for future applications development. IBM are clearly recognized as the leader in commercial accounting J./l software. However we have to--exploit our software advantages in the more complex business applications (DOP and decision support?) and strongly coexist even in the many IBM accounts. As a final subjective judgement, my relatively small sample of IBM people suggests that we have been much more exciting to work for and that we stimulate greater motivation in more of our people. Even if this was true, IBM's future will be more exciting to their employees than has the last few years. Consequently, we have the management challenge of clarifying the role satisfactions we want our people to strive.for and of removing more of the obstacles to their achievement of those satisfactions. Organization Although IBM is reputed to have a highly centralized mangement philosophy, there are indications that their structure is anything but rigid. According to a Booz Allen study, IBM has no hesitation about establishing project-oriented structures and using communication channels which go right past the formal organization, in order to solve a technical/business/marketing problem. We can assume that the IBM organization will pursue established goals with considerable organizational momentum, but that they will be quite nimble in solving organizational . obstacles to their success. R&D IBM has now restored itself as a technology-driven product-oriented Sales/Marketing company. A huge investment is made in R&D and the days of expensive mediocre products are over. Their focus has been on the high-perfonmance mainframe products. While continuation of this emphasis is a natural extrapolation of IBM strategy, there is already a strong thrust into services (unbundled software) and networking to the departmental machine and to the intelligent terminal. The approach seems designed to maintain the role of the central DP facility and its associated software/hardware momentum. IBM spends at least five times our dollar figure on Engineering. 3.72 DATE: ''It.'E 8 DEC 1981 11: 13 EM THIS EMS IS FROM ROGER BISSO, DrN 264-6777. '!he current issue of B.1siness \\eek (12/14/81) is devoted to "Japan's Strategy for the '80's" (pp. 39-120). Ole article (starting on p. 65) specifically discusses Japan's lrtOrldwide strategy for the complter market. Japan has set a natlonal goal of winning 18% of the U. S. and 30% of the global compiter . business by 1990. 'Ihe key Japanese tactic for reaching this goal is the production of mM-compatible mainframes (i.e. S/370 look -alikes). Since IBM daninates both the u.S. and global markets, any Japanese eXp:lnsion will be at IBM's expense. Cbncentrating on plug~compatible mainframes allows the Japanese to capitalize on their streDlth in highly produ:::tive manufacturing \thile avoiding their \\eakness in software ergineering. Ibwever, it leaves them extremely vulnetable if IBM switches to a new computer architecture and/or operating system. '!he Japanese are hedging their bets by launching a massive effort to build intelligent, Fifth Generation systems. lhfortunately, this is a lOl'l3-term strategy which provides little safety ira the short to me:1iun-term. Business \\eek believes that mM may already be ~ised to swi tch architectures and o{:erating systems (see aAn Ice in the Ible," p. 74). ~e new architecture ~ll be S¥st~38. 8W notes that IBM's reorg~nization ~li allow the entire IBM salesforce to sell all products. '!hey state that John R. Q?el, IBM's President, has indicated that IBM customers w::suld be willing to remer obsolete their software investments for a radically new, arrl better, comp.1ter.. 'Ibis was· also the consensus of a panel of experts convened by Datamation magazine to discuss usability problems of IBM' s mainframe o~ratir~ systems (see "Penovating Dinosaurs,· Datamation, 10/81). It is highly unlikely that B.1siness \\eek- w:>uld have published such a dramatic statement wi thout substantiation. EW did not credit their data to a source outside IBM. Apparently mM has divulged to EM certain, previously confidential, infonnation. It could be that IBM has floated a "trial balloon" via aN to gauge their customers' reaction to, what WJuld certainly be, the most significant product charge since the announcement of the Syst~360. . 1here is a book, published in 1978, \\bich presents the scenario of IBM changing to a new architecture. "'!he \-eves of O1ange" was written by Olarles Lecht after extensive research involving the Telex vs. IBM trial. IBM was forced to divulge a considerable amount of confidential information during this legal procee:1ing. Lecht's system/80, discussed in his book, could very \VeIl be System/38. It lrtOuld be extremely difficul t, if not imp:>ssible, to produce a plug-compatible system/38. IBM has buried most of the operating system in proprietary microcode. Considerirg the present state J.13 c)f Slft\/are engineering in Japan, it W)uld appear that the JaP{inese are, indeed, at risk if IBM do~s successful.ly switch their mainfrane customers to a comp2tible family of System/38's encomp2ssing snaIl, mediun, and large processors. OS-DEe-81 17:18:55 S 26628 EMMK U9~EC-81 06:24:27 S 31414 FLIN J.74 EVOLUTION OF IBM PRODUCT FAMILIES S/370 $25H H7 MVS, etc. $500K $250K Working (X) 43.31-1 I DOS, Only I System ~ o o 5/38 til .'1:1 , I tzj () . $100K t-3 $120K I H G'l I I~ I I :1 lIOK 16K f T5ERVICE I BUREAU . I I 6 1/4K I . 2 1/2K .J... T ,, = LONG TERM TREND ..L J.75 :/148 ... ,., ... ,. ..... " .. ,. • digital • TO: Bud Hyler I N T E R 0 F FIe E M E M 0 RAN DUM DATE: 13 November 1981 Roger Bisbo Rick Case Joanne MacMullen Don McGinnis Commercial Marketing FROM: CC: Dave Fernald Bob Perry DEPT: EXT: 26~-6777/7307/~~77/5375 LOC/MAIL STOP: MK1-2/N38 SUBJECT: IBM BUSINESSES IN THE 1980'S The attachments represent our best efforts, in the half day allocated. This exercise deserves much deeper study. If time permits that· study. we may require gross changes to the _attachments. We disagree (on strong technical grounds) that the ~300 can be driven into a commodity. A ~300 is its software; and compatibility/history precludes "4300-Apples." The System/38 could be made into a commodity over time. We don't think IBM can grow the volumes it wants without signi ficantly changing the nature of its business e IBM major st-rategiq moves show thi s change e. Our specul ation as to the nature of this .change derives from conversations with Ph~l Cosgrove. The analysis is not limi ted to the tOPics you project more signficant changes by IBM. dw Attach~ents 3./6 sketched, as we THE IBM BUSINESS IN THE 1980'S 1982 1984 1986 No unification through 1984. ARCHITECTURE (CPU) (DISK) (TERM) COMMUNICATIONS Begin unificati:oj ~ ~i:(~~~~) & I PC) :-------------------,--------------------- MIPS will continue to improve/price ~ Better 8" IBM will continue to be industry 1eadex ----------------- --------------------New·S 1/4" Only Japan, Inc. 'wi11 be in race unify on Functionality to Color & GraPhics,· Flat screen 3101 base Touch screen horne (TRY FOR MARKET LEADERSHIP) LOCAL AREA NETWORK S.B.S. (PABX (US) Cable TV View data Telephones 1) (OFIS) . - 1990 1988 ~ Cable TV network Horne entertainment broadcasting Electronic pub- ----------------------lishing Value added (Encyclopedia) publishing -....J SYST SW App'l generators---~--SpeCia1ized----------------------------------------~--- --------------------- BIG REVENUE SOURCE I APP'L SW LOTS COST/PRICE CRT 1/2-2/3 FIELD SERVICE MARKETS/ CHANNELS BUSINESS ACTIONS Video Disk . I BIG REVENUE SOURCE RAPID DECREASE. IN Distributors Joint ventures Wholesalers HW & SW MAINTENANCE No HW maint. $100K system. Major Ed. Serve Catalogue Office Prod. suppliers Buy major publisher BUy cable TV co. BUy view data co. Buy cable TV network Buy encyclopedia Buy news service Debt = equity PRODUCTS/SERVICES OF THE IBM BUSINESSES (Systems Integ~ation) Trading .Co. View Data Cable TV Networks Phones PC sas Systems House Commodity 14300 S/34 Short Range Sll Short Range S/38 Long Range 3310 Disk, 5 1/4 n Disk S/38 S/34 8100 Service Bureau 3101 PC (Series/1) 3101 AS: 3270, 5251 Shbrt Range "Home Entertainment DW t 3.7~ PC NEC FACT SHEET Nippon Electric Co. is a member of the Sumitomo group. This is a relatively tight knit group and commanded (in 1972) the greatest financial resources of the Japanese zaibatsu. It includes Sumitomo Mutual Life Insurance, Sumitomo Bank, and Sumitomo Trust. These last two are the leading loan source for over 120 major companies in Japan. The group also includes Meidensha Electric (facotry computer appli~ations) and Sanyo (consumer electronics). Sumitomo maintains close ties with C. Itoh trading company which does the bulk af its banking with Sumitomo Bank. (But C. Itoh also has affliations with Dai-Ichi and thus with the looser group of which Fujitsu - through Furukawa - is a member.) Sumitomo also has its own trading company, Sumitomp Shoji Kaisha, which though only the sixth largest in Japan, is the most profitable. Matsushita Electric Industrial Co. is loosely allied with the Sumitomo group. NEC started out in 1899 as a communications company and is now the largest supplier in Japan of semiconductors and personal computers. They are currently third in the production of general purpose (other than per~onal) computers in Japan, but have the highest growth rate (20%) and in JFY8l (ending March, 1981) sold $l.OB of such equipment, about 25% of their total business in that year. The other pieces of NEC's business include 20% in semiconductors, which grew 40% in JFY8l, 15% in consumer electronics, with the remaining 40% in (wired and wireless) telecommunications systems. NEC has publically articulated a strategy of nintegrating computing and communications" but there's little evidence of what exactly they intend this to mean. NEC exports about 30% of what they make (up from 24% the year before) and sell another 30% of what they make to the government of Japan and NTT (which is forbidden, by law, to do its own manufacture). They are spending about $200-250M a year (6% of sales) in R&D but this, of course, excludes the work done by (and with) NTT which is the foundation for the equipment designed for NTT purchase - and, perhaps, other ends. NEC employs about 60K people (4K in R&D). They use about half a9ain as many assets per employee as we do and generate about half again as much revenue per employee. Profit performance is in the 2% area (after taxes levied at roughly a 50% rate). they net. Dividend payout is about a third of what They have heavy debt expenses with net profits only about 1.3X· their debt service expenses. Sumitomo banking interests. About 25% of their stock is held by ITT owns 13 percent of NEC and is represented on its board of directors. In all, 30% of NEC's equity is in foreign hands. NEC's products include microcomputers and 2S6Kb (3~Ons cycle 190 X 340mil) RAM's (they do some offshore assembly of 64Kb parts in Lexington, Massachusetts) supplying both W.E. and IBM with l6Kb and 64Kb dynamic RAM's. NEC will also produce 64Kb parts next year in San Mateo. Product volume of the 64Kb parts will be boosted from the current 300K units/month to 1000K units/month by next March. Since 1975, they've had production use of a fully ,automated pattern recognition based wire bonder of their design. They recently reported a mask-pattern driven logic simulator used successfully on 10,000 transistor control circuit at about a 70,000 to 1 rate. They have developed a 25ns l6Kbit static RAM chip using metal plus 2 layer poly (with poly loads). The same technology in a 1.5 micron design, yielded a 64Kb lS0ns access time static RAM in a 150 X 300 mil chip. In the bipolar area, NEC has lab samples of 1 X 3 micron emitter regions providing 290ps, 1.Smw (4S0fj) gates. Current lab results in production automation include a precision measuring system for optical fiber array pitch using an air bearing linear guide system with a laser interferometer and a new CCD camera. The camera had a 3S0nm/bit resolution yielding an overall accuracy of 800nanometers over a SOmm span in the measurement system. NEC is the largest manufacturer of personal computers in Japan selling SOK units ($200M) in the year ending March 1981 and taking first position over from Sharp. Their December 1981 capacity in personal computers is planned to be 2SK units/month (up from 10K units currently) - about twice that of Sharp. fiscal year (ending March '82) Total Ja~anese output for the current is estimated at SOOK units. Japanese domestic demand, however, is estimated to be only 200K-300K units per year compared to 400K units ($2B) per year on the U.S. market. NEC has just introduced two new models bracketing their first PC entry. The new high-end product features modular construction and provides several storage and display options as well as an IEEE 488 bus interface and a 60 word (discrete, trained) speech recognition unit. NEC has a network of consumer appliance· (e.g. TV) stores and a new family of 60 computer outlets in Japan. In the area of computing systems, NEe's reported research results tend to be in the area of (distributed) databases, file systems, and query languages. Nippon Electric sells office automation equipment including office computers, but principally seems to come at the office from the perspec~ive of the communications supplier: facsimile, PBX's, and a promise of teleconferencing. They are putting in place $15M of (internal?) communications circuits linking computers, FAX, terminals and teleconferencing to promote office automation (and their role in it) • NEC has reported a video "subscriber set" providing moving image video: 1/10 second per 100 X 100 frame over a 64Kb/s line using CCD and SAW based real-time signal bandwidth compression techniques. They claim to to be marketing 100 word continuous speech voice recognition equipment and developed a digital video effects system. They have lab demonstrations of a single chip 384 X 490 element CCD sensor in a prototype color camera. Together with NTT, they have produced an amorphous silicon image sensor intended for use in a facsimile system. NEe reports the development and commercial production of a 23 inch, 4 color (red/orange/yellow/green), 1500 line monitor using beam accelleration voltage to control the color. Their Ie graphics display controller provides graphics drawing capability of 800ns/dot plus a flexible scheme for zooming, panning and scrolling of a 4 plane 1024 X 1024 display without cpu intervention. NEC has also developed a digital video effects system. NEe's traditional telecommunications business includes installation of J.tH countr~ wide networks (in Libya and Saudi Abrabia), telephone (PBX and central office) and mobile radio radio - systems. ex~hanges, including digital cellular Digital signal processing for (digital) TV networking, optical fiber connector/transmission systems, semiconductor lasers and very high speed GaAs IC's (50-lOOps/gate) are active research areas in support of this mission. There is, of course, keen interest at NEC for integrated digital networks and integrated service networks. NEC's business also includes complete systems - an. example is the radar target detection air traffic contro~ system for approach control at Singapore's Changi International airport. SOURCES: NEC Annual Reports Japan Economic ~ournal Abstracts of reports submitted by NEC authors to various technical journqls and trade magazines. 1972 Handbook of Japanese Financiall Industrial Combines. NIPPON ELECTRIC COMPANY THEMES FOR THE EIGHTIES • COMPUTERS AND COMMUNICATIONS - IN THE OFFICE PENETRATION OF THE OFFICE ENVIRONMENT THROUGH BROAD CAPABILITIES IN TELECOMMUNICATIONS- • SEMICONDUCTOR AND PERSONAL COMPUTER VOLUMES FOR WORKSTATIONS VOLUME DOMINANCE: HIGH PERFORMANCE FOR MANAGERS AND SMALL BUSINESSMEN • PROFESSIONALS~ WIDELY ACCEPTED COMMODITY FOUNDATIONS FOR AVAILABILITY OF MUCH VALUE-ADDED SPECIFIC APPLICATIONS SUPPORT: UNIX 68000 AND 386~ SNA • JOINT VENTURE WITH PRIME COMPUTER FOR NORTH AMERICAN APPLICATIONS/CHANNELS/SERVICES AND FOR MID-RANGE COMPUTER SYSTEMS DEVELOPMENT • CLOSE OEM RELATIONSHIP (AND A BIT MORE) WITH A SUPPLIER· OF FACTORY AUTOMATION EQUIPMENT PROTOTYPE NEC SCENARIO (Narrative of Events) IN 1982 NEC concluded a multiple source agreement with Motorola for the 68000. NEe's semiconductor business continued to grow in this year but the worldwide capacity for memory chip production impacted its profitability. T~e mid-range and hi-end computer system business seemed to grow faster at Fujitsu and Hitachi. The bright spots at NEC were the lower priced computer systems, personal computers, and more specialized semicondu~tors: graphics display con- trollers, speech processors and high performance microprocessors. The bright spots at NEC were the lower priced computer systems, personal computers, and more specialized semiconductors: graphics display controllers, speech processors and high performance microprocessors.NTT'S announcement of a si9nifi~ant capital plans for an upgrade of the Japanese telecommunications plant showed promise for NEC's extensive communications business. In this year, NEC completed the installation of experimental advanced office communications networ~ for Sumitomo Bank, Asahi Breweries, and Meidensha Elec- tric Manufacturing Co's (all members of the Sumitomo, Group). These integrated digital services nets provided electronic mail, primative voice-store-andforward, and facsimile network facilities within the (extended) local aiea defined by a contiguous group of buildings. The building PBX was the center of these facilities and linked through NTT operated (NEe designed) central office switches to other building clusters in Tokyo and Osaka. Links between multi- ple PBX's within a facility was via fiber optic communications. The offices of top management in all these firms could communicate with each other through the teleconferencing terminals on their desks. Existing building wire pairs provided the requisite 64Kb/sec and the PBX's used arrays of high performance 68000s in a non-stop redundant configuration to control switch matrix. - 1984 IN ~984 NEC announced a high performance UNIX 68000 based professional workstation. It provided a floating point processor using the IEEE standard formats and auxilliary processors for backward compatibility with CP/M 8085 programs. It included links to the integrated digital services network installed experimentally in 1982. An inexpensive hi-resolution, 4-color display, advanced display controllers, 256Kbit memories, an amorphous silicon nfacsimile platen and simple local area network connection to shared departmental laser beam printers and data storage facilities were brought together to provide the foundation for cost effective professional (and business) computing. The choice of UNIX and the 68000 (and ~ackward compatibility with CP/M) provided NEC's customers with a variety of popular application packages that were coupled effectively together through the UNIX npipes" facility. UNIX's relatively unfriendly user interface was sufficiently well masked so that many managers and clerical workers 'accommodated themselves to the product in spit~ of some rough edges. NEC established an apparently unassailable dominance in professional and high end persona·l computers in Japan and a significant, perhaps overpowering presence elsewhere. It amazed u.s. manufacturers to see the volume increases NEC delivered from relatively fixed costs. In this year also, NEC's mid-range and high end computer systems business continued to lose momentum hitched as it was to an increasingly unfamiliar (Honeywell) architecture. The market did not see much benefit in deviation from comfortable, de-facto standards at the lower integration levels of computer and information systems. The comfort and security of purchasing known MVS 370 and UNIX 68000 foundations were of increasing importance. In this environment DEC continued to base its development on VAX VMS (and its subsets). In general DEC had interesting products that, however, were increasingly not in the mainstream of computer developments since, to a greater and greater degree, most added-value in computer systems was available on the UNIX 68000 or MVS 370 base. NEC executives approached DEC to discuss this issue and to see if DEC wished to engage in joint developments to reverse this trend or, even better, capitalize on it. DEC debated the question internally for six months and NEC withdrew the offer. NEC than concluded a joint venture agreement with Prime Computer. The details were not clear but it appeared Prime would manufacture mid-scale computer systems for NEC-Prime and do applications development for professional, small business, and office information systems. - 1986 IN 1986 NEC-Prime announced a parallel processor 68000 isp departmental machine in the 10-25 Mips range; each processoc individually was. a 4 Mips machine. NEC gate arrays, a custom CMOS 68000 processor, and IMbit memories were brought together with a redo of the UNIX internals to provide the computation engine that the NEC office-information-system needed. Prime provided all the standard language processors and in particular, a very highly optimizing FORTRAN compiler for this system. NEC announced that its PBX products could be connected to the NEC-Prime System to allow all the workstations served by a PBX to access these central computation facilities as they accessed each other. ~asily as Simple local area nets could still be used where high performance links to other departmental resources were needed. Personal/professional computer sales continued to grow as new UNIX 68000 applications were generated by many independent software publishers and integrated together by the engineers at Prime into a cohesive package more suitable for North American and European users by the engineers at Prime. VLSI CAD tools' sparked by the Fifth Generation Computer project and retrofitted to an upgraded NEC P~ofessional Workstation were made available to the Prime hardware designers. NEC also announced, however, that to better serve its customers and allow them better linkage between their workstations and central edp systems, NEC would provide a network upgrade service. Customers would then be able to use an SNA backbone for direct connection to IBM and Fujitsu mainframes. In order to demonstrate its committment to its customers and this market, NEe did this for purely a nominal charge. work. NEe-Prime announced the SNA Total Information Net- It linked together Prime computation servers and NEC workstations, PBX's, and local area nets. Only in France and Italy was permission denied for NEe to install its own network-control PBX's. In Japan, an experim~ntal central office exchange was built to allow NTT customers in separate buildings to exchange electronic mail, and do invoicing, billing, and payables between their firms. In this year, NEe's semiconductor business continued to flourish, focusing increasingly for profit on the unique capabilities NEe had developed in speech and image processing. The volume operations in memory and stock micro- processors were increasingly run for the incremental revenue they bought in on a relatively fixed asset base. The principal value of the semiconductor capa- bility was the volume base on which rested many significant custom VLSI designs for highly capable but cost effective workstations. - 1988 NEC)opened its new $SOOM semiconductor fac,ility in Tsukuba, Japan. It pro- duced 5 million packaged chips a month in any mix of part designs. Mask and test tooling were variable on a die-by-die basis. It was run by just a few people but more importantly it provided very quick turnaround for new designs. With a fixed asset cost structure of this magnitude in place, Sumitomo Bank encouraged NEC to price for incremental volume. Sanyo designs were ncastn by this NEC foundry. Also in 1988 NEe Telecommunications promised to build a personal computer manufacturing and process engineering plant in Brazil. In return Brazil awarded NEC a $600M contract to wire Brazil nationwide for the advanced telecommunication facilities first experimented with within the Sumitomo Group in 1984. Sanyo used this capability very effectively with its family of dependent subcontrac~ors. International Telephone & Telegraph (ITT) promoted the system in South America and in those parts of Europe- where it had influence. In the meantime, of course, NEe's capabilities in speech and image recognition had moved forward quickly (thanks in part to their collaboration with NTT research efforts). The store-and-forward systems were encoded but still pre- served original quality of speech and identity of the speaker. Speaker identi- fication, in fact, was central to the security and authentication system that was used in the network. An experimental speech to text system yielded re- sults equivalent to typical shorthand transcription accuracy and thus met wide acceptance. Meidensha Electric Co. announced that in a joint effort with NEC and Prime Computer that they had built a fully automated facility for small to medium sized electronic and electromechancial assembly operations. (NEe video- processors and vision systems were crucial in this accomplishment.) The facin lity could be "programmed to build new parts with a combination of standard NC tooling tapes and assembly robots "instruction". These robots were capable of efficient generalization from a series of mimicked hand driven assembly actions. - 1990 IN 1990 DG filed for ~eorganization under Chapter II and a week later had a fire s~le in Southboro but NEC-Prime saved the governor of Massachusetts from certain electoral defeat by installing a second copy of its automated IC production facility in the Natick-Framingham area. The facility was complemented by a general assembly facility built for Prime by Meidensha. Meidensha went into the robotic factory business on worldwide basis. Prime agreed to market NEe and Meidensha robotics equipment for those companies that wanted to do their own factory system integration. Design skills at NEC and Prime kept their factories busy producing products and systems with new capa~ilities for information processing centering around speech and picture understanding. NEC was rumored to be looking for a site in Hudson, MA. Prime announced a small business information system that by an automated interth~ viewing process could construct forms, data flows, and control procedures appropriate to the business operations of each given (client) firm. This was provided as a superstructure to the NEe Workstation/PBX/Computation Server Area Net. (There were hints of extending this to the control and data interchange needs between ,corporations in North America). In this system, voice recognition was used to access databases and "sign" authorizations as well as do simple form fill-ins. IN 1990,NEC was one of the few firms left in the Personal Computer business. The low end of the market (for homes and education and simple accounting) had been captured by consumer electronic companies - which, however, did not have foundation in computer systems needed to provide effective office and professional systems. NEC's concentration on the needs for communication, information interchange, and business control flow had established it in the higher margin sectors of the personal computer markets. The match with Prime had provided sorely needed North American outlets as well as an applications design center around a fundamentally solid manufacturing capability. The choice of SNA, UNIX and the 68000 allowed many U.S. firms to add value to NEC-Prime products. NEC's advanced semiconductor, speech and vision capabilities, and worldwide telecommunications base coupled with Prime's computer system integration design skills and Meidensha's insight into industrial automation had together provided products and services that proved to be both highly valued and difficult to imitate. Combined (deflated) profits of Meidensha-NEC-Prime were 18% after taxes. But more importantly, the ROA reached 35%, IS points ab~ve the no-risk interest rate. Club of the Sumitomo group was very pleased. The Wednesday .- .•... ~ ""-'~------- .. "1913'1 "'~ .'.-"~ ~.' . .... 19Hfl • 68000 tt lSMHz w/mem. mgt. .~ Parallel processor 10-25Mips IlBOOO departmental machine (Prime) PROCESSOR • 68000 @SMHz (&8088,180B6) STORAGE • 25~Kbit memory • 5" Winchester, 5MB (buyout) aJtIttUNICATIOOS • Teleconferencing net, 68000 based digital PBX, 64Kb/s desk interface TERMINAIS • 600X400 pixel color • 4 color 1500 line • Speech and image • VLSI CAD tools understanding terminal UNIX 68000 based • Speaker identification voice encoding, workstation • 64Kb/s limited teleMedium quality speech conferencing • Facsimile xfer plate to text terminal • 300dpi laser be~ printer (buyout) • Special purpose • Graphics display chip display/speech processors 5YSTEM • UNIX, DINA Simple file server • Special speech and image processors 1Mbi t memor ies ? '''\0.-', I .;>\,I&.' & HI'VUI APPLICATIONS SOF'l\tlARE PRICES net • Electronic ma1l, Voice store and forward, facsimile network • Simple and limited local area net • Fiber optics for inter LAN's Experimental <;saka CoIIInerclal Information System Departmental PBX links to computation server and SNA net Final LAN aeslgn with extension to external nets • user FrlenalY Facaae • paral.lel processor .. (for UNIX) UNIX • Integrated applications interface fo UNIX Add UNIX 68000 applications avail. thru third parties • Information flow control (prime) • Factory automation (Meidensha) • Automated Business Information System Design • Generally to maximize vollllte on fixed costs • Driving for volune dominance in workstations • Incremental costing in standard prices • Value priCing in unique equipment • Premllllt for unique ''Value in products and services SERVICES • Generally Site and store return! exchange for computer terminals • Nortll ivnerlcan service (Prime) • Information Network installation and maintenance (NEC telecommunications) • Cl ient business operations analysis (Prime) CHANNELS • Computer stores in Japan • Direct sales of co~ munication systems • Direct in North lvner- • IT&T and other teleica (PRIME) communications vendors ? BUSINESS ACTIOOS • Experimental co~ pany nets in Sumitomo test sites • J01nt venture with PRIME • Fully automated VLSI semiconductor facility, • Brazilian factory .-Joint marketing with Meidensha • Natick Ass' y and IC Automated Production • Prime markets robotics KEY SKIUS • Volume semiconductor and terminal manufacture • Communications, Graphics, and Semiconductor design • Information System design • Factory automation • Information network service ca;TS , HoW will they win? 'Ibey will use tile production capabilities In personal computers and semiconductors and their deSign knOWledge of telecommunications and display electronics to form PBX - centered professional/small business workstation netwprks to form a commodity - foundation for applications developments by .themselves, PRIME and many softwaLe publishers. They will complement thir nn~itinn in the office with a oosition in factorv automation won in concert with their robotic. OEM'.. • 23 ,Uovember 1981 --- St rateg ic PI anning Game . . '[out "Name: 1980 (0)/1990 (X) Competitor: Prototype NEe -) Iardware Cost/Performance o -----X 1-----1-----1-----1-----1-----1-----1-----1-----1-----1 1 poor 2 3 Cost of Ownership 4 5 6 - >1990 Industry norm 7 8 9 10 ->exce11ent o X 1-----1-----1-----1-----1-----1-----1-----1-----1-----1 1 2 3 4 5 6 7 8 9 10 Existing Base / Reputation o X I~----I-----I-----I-----I-----I-----I-----I-----I-----1 1 2 3 4 5 6 7 8 9 10 Uniquely Useful Capabilities o X 1-----1-----1-----1-----1-----1-----1-----1-----1-----1 1 Programmer Productivity 2 3 o 4 5 6 7 8 9 10 X 1-----1-----1-----1-----1-----1-----1-----1-----1-----1 1 2 3 4 5 6 7 8 9 10 End User Productivity o X 1-----1-----1-----1-----1-----1-----1-----1-----1-----1 1 2 3 4 5 6 7 8 9 10 . Availability of Third Party Software and Se.rvices o X I-----I-----I-----I-----I-----I-----I-----I-----~-----I 1 2 3 4 5 6 7 8 9 10 Use of Industry (or other) standards o X 1-----1-----1-----1-----1-----1-----1-----1-----1-----1 1 Breadth of Offering 2 3 4 5 6 7 8 9 10 o X 1-----1-----1-----1-----1-----1-----1-----1-----1-----1 .1 2 3 4 5 6 7 8 9 10 Effective Distribution Channels o X 1-----1-----1-----1-----1-----1-----1-----1-----1-----1 1 2 3 4 5 6 7 8 9 10 (Other) ---------:-1_-_-_-_-_'-:-1_-____ 1- ---- 1----- 1- ---- 1- ---- 1- ---- 1- ---- 1- ---- 1 1 2 3 4 5 6 7 8 9 10 TOTAL MARKET SHARE GAINED OR LOST (Information Systems/Services) (Consider np&G", "BOEING", nM&p BOATS", "IRVING TRUST", "GE REFRIGERATORS") SHARE OVERALL CHANGE (+ OR -) MILLIPOINTS (Each market share mi11ipoint is worth $lM in 1980) 3.YU +---------------------------+ I I I I I I I I I I I I I I I I Id I i I g l i l t ; a l l ; INTEROFFICE MEMORANDUM +---------------------------+ SUBJ: THC - CHAPTER 4 PART OF ESO DOCUMENT TO: DISTRIBUTION Date: From: Dept: Ext: Loc: 4 FEB 82 Eli Glazer Cor~. Product Management 223-4434 HL 12-B/T61 Chapter 4 of the ESO document is a draft submission of the Technology Management Committee (THC). THC is comprised of all the Advanced Development Managers from each of the Engineering organizations. The goal of THC is a corporate advanced development plan. The (Chapter 4) THC document requires further integration and rationalization leading towards a revised verison in Hay. Please direct feedback on this chpater to Nancy Neale, Corporate Research, HL2-3/N04, DTN 225-5867. CHAPTER IV ***************** * * * DIG I T A L.* ******************* INTEROFFICE MEMORANDUM DATE: FROM: DEPT: EXT.: LOC. : SUBJ: 2/2/82 l \ '; ( NANCY NEALE N~ Corporate Research 225-5867 HL2-3/N04 ESO TECHNOLOGY SECTION DRAFT The enclosed document represents the current TMC draft of the ESO Technology Section. This collection is subdivided into the following nine major technology areas: ESO TECHNOLOGY SECTION 1• Summary Bruce Delagi 2. Semiconductors Bob Supnik 3. Storage George Hitz 4. Communications/Nets Tony Lauck 5. Power and Packaging Henk Schalke Joe Chenail 6. Computing Systems: PSD MSD LSG Don Gaubatz Peter Jessel Roy Rezac 7. Human Factors Russ Doane 8. Terminals/Workstations Walt Tetschner 9. Software Bill Keating 10. Applications in Computing Russ Doane Bill Keating 11 • Appendix Listing of Technologies 4.i The Listing of Technologies (Appendix) provides background detail on technologies considered in this review. Each of the nine technology areas is outlined according to the following format: ESO TECHNOLOGY SECTION FORMAT I. Strategic Assumptions · critical II. assumpti~ns for particular technology area Key Parameters • critical technology measurements for area II. Doane Metrics • ratios of the preceeding key parameters IV. Competition • ranked on a 0 to 10 scale according to Doane Metrics V. Investment Imperatives · key decision rules for DEC VI. Investment Priorities · technologies prioritized for DEC This draft of the ESO Technology Section received preliminary evaluation by TMC and PEG at the January 22, 1982 Non Product budget review. It will be further integrated by TMC against in depth review of the Research/Advanced Development/Tools/Processes program plans in each of the nine major technology areas during February and March. The ESC Technology Section draft is considered a working document; critical feedback is welcomed. TMC 4.2 4.ii SUMMARY BRUCE DELAGI 4.1 DEMAND ASSUMPTIONS (priority ordered values) Fundamental cost performance is highly valued (simple metics first - proprietary only viable if competitive) Products must be "immediately" useful and work as expected ("obvious" function; lots of helps; few failures) Increasingly less reliance on central edp - or other experts ~ Communications and computing must be integrated (the need is for office/factory information systems) ~~ Ultimate user desire is to ignore the net Terminal/Workstations need to be simple and effective pOints of entry, to the computing/information services provided by a variety of vendors. OUR SYSTEMS MUST DEAL EFFECTIVELY WITH IBM AND COMMODITY SOFTWARE APPLICATIONS & IBM./PTT/AT&T AND DOCUMENT INTERCHANGE STANDARDS. ---- TMC 3:44 4.2 SUPPLY ASSUMPTIONS (technology, regulation, industry) SEMICONDUCTORS ARE BASIC - and may be the foundation for radical change. RATIOS OF COST/PERFORMANCE TRENDS LEADS TO "SERVERS" COMPUTE STYLE (built around electro-mechanical givens) NATURAL IMAGE DISPLAY/PROCESSING COST EFFECTIVE BY '88 (available in volume terminals - and industrial/office building broadband capacity will be in place to handle it) BUILDING WIRING CONNECTS TO PBX'S AND ISDN'S 56-64Kb (Europe: mid '80's; North America: late '80's; Japan:?) GOVERMENT REGULATION WILL DICTATE ERGONOMICS/SECURITY (and they'll be inconsistent/subj~ct DISK STORAGE 25$ -> 30~ to interpretaion) OF SYSTEM EQUIPMENT COST BUT EQUIPMENT COST DECREASING AS A PROPORTION OF THE COST OF EFFECTIVE USE TARGETING OUR MAJOR EFFORTS ON ONE SINGLE OS INTERFACE IS THE MOST ECONOMICAL WAY TO PROVIDE EFFECTIVE USE REMEDIAL SUPPORT OF DESIGN FAULTS WILL DOMINATE SERVICE TMC 3:45 4.3 .:rSM "0') S7bR.4G.1C ATtJT '" SEMICONDUCTORS BOB SUPNIK 4.5 SEMICONDUCTORS I. ASSUMPTIONS SEMICONDUCTORS ARE THE BASE TECHNOLOGY OF LOGIC AND MEMORY MEMORY IS HANDLED BY A LARGE NUMBER OF AGGRESIVE (VORACIOUS?) COMMODITY SUPPLIERS. THEREFORE, DEC'S SEMICONDUCTOR TECHNOLOGY FOCUSES ON LOGIC. THE ULTIMATE METRIC IS COST PER FUNCTION (E.G. GENERAL PURPOSE MIPS PER DOLLAR) VERSUS YEAR: IT IS DECLINING. ANY DEC PROPRIETARY HARDWARE STANDARD WHICH DOES NOT FOLLOW THIS METRIC WILL ULTIMATELY LOSE IN THE MARKETPLACE. THE SEMICONDUCTOR INDUSTRY WILL NOT PROVIDE DEC WITH THE STATE-OF-THE-ART TECHNOLOGY, METHODS, AND DESIGNS NEEDED TO KEEP OUR HARDWARE COMPETITIVE. NOR CAN DEC SUCCEED SOLELY AS A PACKAGER OF INDUSTRY COMMODITY PARTS. SEMICONDUCTORS -HAVE THE POTENTIAL FOR REVOLUTIONARY CHANGES IN COMPUTER STRUCTURES, COSTS, AND USAGE. THEREFORE, DEC MUST OWN THE KEY SEMICONDUCTOR TECHNOLOGIES (PROCESS, DESIGN METHODS, SILICON ARCHITECTURE) THAT CAN MAKE (OR BREAK) ITS BUSINESS. III. METRICS NORMALIZED DEVICE DENSITY VERSUS YEAR OF INTRODUCTION GATE PERFORMANCE/GATE POWER VERSUS YEAR OF INTRODUCTION TOTAL DEVELOPMENT TIME AT DIFFERING COMPLEXITY LEVELS VERSUS YEAR OF INTRODUCTION ARCHITECTURAL INNOVATIONS/CAPABILITIES VERSUS YEAR OF INTRODUCTION BOB SUPNIK 4.6 IV. THE COMPETITION O-----------------------------------------~------------------10 IGNORES/ FOLLOWS/ IN THE PACK/ LEADS/ NORMALIZED DEVICE DENSITY (MOS): WANG DEC ---) Al & T [INTEL] NEC HP IBM SHARP NORMALIZED DEVICE PERFORMANCE (BIPOLAR): HP WANG SHARP (--- DEC [SIGNETICS] AT & T [T I ] [MOTOROLA] [FAIRCHILD] IBM NEC [FUJITSU] DEC ---) SHARP NEC [INTEL] AT & T AT & T IBM NEC HP [ INTEL] TOTAL DEVELOPMENT TIME (MOS): WANG HP IBM ARCHITECTURAL INNOVATIVENESS: WANG DEC ---) SHARP BOB SUPNIK 4.7 .7-JAN-R2 5 V. INVESTMENT IMPERATIVES 1. BE A LEADER IN MOS PROCESSES FOR LOGIC BY COMPLETING A 2 MICRON, DOUBLE METAL NMOS PROCESS BY DEVELOPING A 1.5 MICRON, DOUBLE METAL CMOS PROCESS BY DEVELOPING BASE TECHNOLOGY IN OPTICAL AND NON-OPTICAL LITHOGRAPHY, METALIZATION, ETCH, DIELECTRICS 2. BE A LEADER IN DESIGN METHODS FOR HIGHER ENGINEERING PRODUCTIVITY, FASTER DESIGN TIME, AND LOWER COST BY IMPROVING DESIGNER PRODUCTIVITY BY REDUCING TOTAL DESIGN TIME BY REUSING (SHRINKING) EXISTING DESIGNS BY TRAINING NEW VLSI DESIGN ENGINEERS 3. PROPAGATE VLSI DESIGN THROUGH DEC BY DEVELOPING COMPONENTS FOR LOW-COST 32 BIT SYSTEMS BY EXPLORING ALTERNATIVE ARCHITECTURES BASED ON SILICON-UNIQUE CAPABILITIES 4. ARCHITECT LEADERSHIP PRODUCTS IN VLSI 4.8 VI. INVESTMENT PRIORITIES (-------------) TECHNOLOGY AREA HI PRIORITY A. PROCESSES i!1QS, B. PROCESS Del I IIH DIEI EtIBICS DR~ EI~H METAl S SII ! t IDES TECH.NOLOGY c. E~l JI JWlS. HnH nfIIIIU ; I ASEPS JW. ,, DE~ ~nDEI SUPPORT RElIARIlJTY SURFACE ANAl HA~DrBaEIED (POLYCELLI TECHNIQUES E· ARCHITECTURE • SOl I (PROC MnDEL) PROCESS D. DESIGN lnW PRIORITY (GATE APPAY) SHRINK~ HEW BED,!NDA~~~ ~~IP~ NnN VON NEil IESTABII C~ELF-TI"'tE) II! F. TonLS AND TEST S~NIHESI~ CATG) . SCENARIO A- (AI DESIGN) <-- SCENARIO· A <--I SCENARIO B OR C < - - - I 4.9 STORAGE GEORGE HITZ 4.10 STORAGE SYSTEMS I. ASSUMPTIONS Storage strategy needs to be consistent with DEC systems strategy Storage products are high impact (>40$ NES Now, trending to >50$ by FY85) i.e., collectively they must be competitive. CPU leadership cannot carry substandard storage Buyout storage products in general are not sufficiently competitive (some exceptions, e.g. MOS RAM's). Some of the vendor base is weakening. High NES products need to be internally developed. Technology evolution is rapid. Disk density is increasing at 32S/year, tape density at about 25~/year, MOS RAM density at about 60S/year. Technology evolution is expected to continue for a decade or more without much change in pace Meeting environmewntal and people induced constraints of an office environment is required, especially for low-end storage Meeting governmental constraints is a necessity Data integrity, data security, and reliability will continue to grow in importance over the next decade. LSI will continue to invade magnetic storag~ products until electronics costs become small relative to total product cost. Optical storage will eventually service some storage applications. George Hitz 4.11 II. KEY PARAMETERS Cost Capacity (Megabytes) Total Fetch Time Hard Error Rate MTBF Size II PRIORITIZED METRICS Cost/Megabyte Requests/Second/Megabyte Megabytes/Cubic Foot IV. MAJOR COMPETITORS (Leaders in Order) Disk Cost/Mega~yte - IBM, Fujitsu and DEC Disk Requests/Second/Megabyte - IBM. Fujitsu, DEC Disk Megabytes/Cubic Foot - DEC, Fujitsu, IBM Tape Cost/Megabyte - IBM & STC Tape Requests/Second/Megabyte - STC, IBM Tape Magabytes/Cubic Foot - IBM and STC MOS RAM Cost/Megabyte - TI, Hitachi, NEC 4.12 Y. o o o o o INVESTMENT IMPERATIVES PUSH TECHNOLOGY OF HIGHEST IMPACT PRODUCTS (HIGHEST NES COUPLED WITH WEAKNESS OF VENDORS) IMPLIES - NEED-FOR COMPETITIVE DEC DISKS - MAXIMUM· DISK LAG OF ONE YEAR BY FY'Ss-'S6 - NEED TO REBUILD TAPE CAPABILITY CAPITALIZE ON DEC STRENGTHS'- (CONTINUE INVESTMENT) STRENGTHS - BEST SUB-SYSTEMS STRATEGIES - BEST CODES, READ/WRITE SYSTEM AND SERVO STRATEGIES - GOOD HEAD START ON PLATED MEDIA - STRONG THIN FILM HEAD TEAM ASSEMBLED MAINTAIN, USE AND SUPPORT STRONG MOS VENDOR BASE. PUSH LSI HARDER TO IMPROVE OUR WEAK COST, RELIABILITY POSITION. CONTINUE MONITORING AND INGESTING (AS APPROPRIATE) EMERGING TECHNOLOGIE I~PLIES - NEED.. TO UNI)ERSTAND HCM TO USE OPTICAL .TECHNOLOGIES .- H~-.BEST TO APPLY SOLID STATE MEMORY VI·. INVESTMENT PRIORITIES PRIORITY 3 (ALL C) 2 LOW 4(C) ------------------------------------------------------ -----~------------------ GENERAL TECHNOLOGY R/W & CODES SERVO DRIVE LOGIC DATA BASE SYSTEMS-C VERTICAL FLEX MEDIA-C FURTHER ACCELERATION OF 60MB/IN. MECHANICAL SYSTEMS LSI THIN FILM HEAD VERT-RECORDING ADV. TESTERS DISK EXCLUSIVE VERT RECORDING IN FUTURE PRODUCT THIN FILM MEDIA LOW FLY HEAD ---------------------------------~---------------------------------------~--. VERTICAL RECORDING IN FUTURE PROD. TAPE EXCLUSIVE -----------------------------------------------------~-------------------~--- S.S. MEMORIES APPL. TECH. A,B ----------------------------------------------------------------------------~ICAL DISKS VIDEO, AUDIO A,B 4.13 WRITE-ONCE M~GNETO-OPTI COMMUNICATIONS/NETS TONY LAUCK 4.14 TONY LAUCK 13 JAN 82 COMMUNICATIONS/NETWORKS I SPECIFIC STRATEGIC ASSUMPTIONS • ULTIMATE USER DESIRE IS THAT HE DOESN'T NOTICE THE NETWORK • COPING WITH DIVERSITY WILL BE A SERVICE CUSTOMERS WILL WANT VENDORS TO PROVIDE • NETWORK POLICY AND INFRASTRUCTURE WAS DECIDED ON BEFORE CUSTOMER DECIDED ON DEC • "OST CORPORATE NETWORKS ARE • SECURITY AND ENCRYPTION WILL POP UP GREATLY IN CUSTOMER VALUES • SELLING THE TERMINAL ON THE CUSTOMER'S DESK WILL BE THE KEY TO. SUCCESS IN THE COMMERCIAL MARKETPLACE • • SNA BASED MULTIPLE TECHNOLOGIES WILL COEXIST FOR LOCAL AND LONG-HAUL NETWORKS DUE TO TECHNICAL AND POLITICAL CONSIDERATIONS NEW INDUSTRIAL AND OFFICE BUILDINGS ARE NOW BEING WIRED FOR BROADBAND TRANSMISSION • ALMOST ALL BUILDING WIRING TODAY CONNE·CTS TO PBX's • MA BELL WILL PROVIDE • ISDN's WILL BE PERVASIVE VIA EUROPEAN • ISDN IN THE LATE 80's <56KBPS AT DESK> PTT's BY 1986 INTERNATIONAL STANDARDIZATION OF NETWORK PROTOCOLS WILL BE ACCOMPLISHED BY MID-LATE 80 i s • DEC's CURRENT STRENGTH IN DEPARTMENT COMPUTING IS AND WILL BE HIGHLY VALUED • DEC WILL CONTINUE TO SELL STAND-ALONE TIMESHARING SYSTEMS • DEC MUST INCREASE ITS EMPHASIS ON THE LOW-END OF ITS PRODUCT SPECTRUM FOR PERSONAL COMPUTERS AND WORKSTATIONS 1 BOTH STAND-ALONE AND CONNECTED TO LOCAL NETWORKS • ETHERNET IS THE ONLY ·STANDARD· WE'lL BE ABLE TO DRIVE 4.15 II KEY PARAMETERS o NUMBER OF NODES IN NETWORK o -ET GOOD BITS PER SECOND (THROUGHPUT) o Ot~AY o PRICE INCLUDES TRANSMISSION COST 1 HARDWARE COST 1 SOFTWARE COST 1 AND COST OF CPU CYCLES CONSUMED BY SOFTWARE o NETWORK APPLICATION INVESTMENT TO MAKE THE NETWORK INVISIBLE o INVESTMENT TO ADD N+lsT NODE ON A NETWORK~ INCLUDING COST OF ·SYSTEM ANALYSIS· AND ·NETWORK DESIGN- o UNDETECTED BIT ERROR RATE o FRACTION OF TIME A TERMINAL USER PERCEIVES THE NETWORK IS ·Up· o NUMBER OF TERMINALS SUPPORTED ON A TIMESHARED SYSTEM THROUGH THE NETWORK IN SECONDS (RESPONSIVENESS) III COST~ DOANE METRICS 1. (NETWORK ApPLICATIONS INVESTMENT TO MAKE NETWORK TRANSPARENT) o (-LOG BIT ERROR RATE) 2. (THROUGHPUT) ~ (PRICE) 3. (PRICE) ~ (NUMBER OF TIMESHARING TERMINALS) 4. (INVESTMENT TO ADD NODE) ~ (FRACTION OF TIME USERS PERCEIVE THE NETWORK UP) 4.16 SUPPORT IV 1. NETWORK 2. COMPETITIVE POSITION ATJ"PTT's ApPLICATIONS NEC"OLIVETTI INVESTMENT SHARP THROUGHPUT/PRICE SHARP 3. PRICE/NUMBER OF TERMINALS SHARP~NEC ATT~OLIVETTI DG WANG IBM NODE/FRACTION OF NEC TIME UP OLIVETTI HP DEC TANDEM AlT WANG IBM IBM TANDEM TANDEM NEC DG WANG TANDEM DEC DG PRIME DEC TANDEM PTT HP 4.11 PRIME ABLE IBM ATT DEC DG PlT's ATT WANG PRIME PTT HP HP q. INVESTMENT TO ADD SHARP PRIME V INVESTMENT IMPERATIVES 1. REGAIN LEADERSHIP IN PRICE/PERFORMANCE CONNECTION OF TERMINALS TO COMPUTER SYSTEMS 2. PROTECT OUR STRENGTH IN INVISIBLE NETWORKING BY SUPPORTING FAST-EVOLVING INFRASTRUCTURE 3. 4. SIGNIFICANTLY REDUCE THE COST OF OPERATING OUR NETWORKED SYSTEMS (RAMP) ENABLE OUR CUSTOMERS TO PURCHASE AS MUCH INTEGRITY (SECURITY 1 AVAILABILITY) AS THEY NEED VI R & AD INVESTMENT PRIORITIES II NTERNAL 1 CODE: (EXTERNAL) lli.H. A. COMMUNICATION SERVICES B. NETWORK OPERATION c. NETWORK DESIGN D. PROTOCOL & DATA STANDARDS INETWORK TEST ] & DI AG1HlS 1& ~NA COMPATIBILITY I (OSI ARCHITECTURE) PROTOCOL SPECIFICATIC~ & VERIFICATION SECURITY & ENCRYPTIONS I(F4r~(-'- ILE INTERFACE) LARGE NETWORKS 1~TELIDON/ANTIOPE/CAPTAI N INTERFACE) E. DIGITAL NETS TELEPHONY & F. COMMUNICATIONS INTERFACES IISDN/PBX COMPATIBILITY ( I ~ATV/LAN ADAPTERS ~ND MODEMS LOCAL NETWORK VOICE TECHNOLOGY 1'1 I~TELEPHONE MODEMS ,DIAGNOSTIC CAPABI G. ~. NETWORK SERVERS OTHER SIGNALLING I. low COST TERMINAL CONCENTRATORI I ILow COST ROUTER I FIBER OPTICS 4.18 Ro OM INFRARED MI CROWAVE POWER AND PACKAGING HENK SCHALKE JOE CHENAIL 4.19 HEIH~ SCHALKE ., I'~ oL '",'" 20 .:H POWER AND PACKAGING SPECIFIC STRATEGIC ASSUMPTIONS • • • DEPARTMENTAL MACHINES WILL CONTINUE TO FORM THE CENTER OF OUR PRODUCT OFFERING 1 WITH CONTINUED REQUIREMENTS FOR MODULAR PACKAGING FOR. THE . OE~"-NARKET • SMALL SYSTEMS 1 ' PERSONAL COMPUTERS AND WORKSTATIONS WILL FIND THEIR WAY INTO THE OFFICE AND LAS ENVIRONME~T AND WILL REQUIRE SYSTEMS PACKAGIHG . APPROACHES· SERVER 'BASED ARCHrTECTURES WILL NOT APPRECIABLY CHANGE PACKAGING REQUIREMENTS· THE COST OF PACKAGING MATERIALS CONTINUE TO INCREASE- • INCREASING POWER DENSITY TREND AT THE MODULE LEVEL· POWER SUPPLY DENSITY HEEDS WIll DOUBLE IN THE NEXT FIVE YEARS- • 'CUSTOMER EXPECTATIONS ARE CHANGING: MIGRATION TO THE OFFICE ENVIRONMENT WILL MAKE PRODUCT ACOUSTICS A MAJOR HARKET ISSUE BY THE MID 80's. DISTRIBUTION CHANNELS WILL BE CHANGING TO COMMON CARRIER SHIPPING. INCREASE PRODUCT RELIABILITY· WIDER RANGE OF OPERATING ENVIRONMENTS· CUSTOMER MAINTAINABILITY/INSTALLABILITY. INCREASING ERGONOMICS FOCUS· • I'NCREASING COMPETITION WILL FORCE IMPROVED POWER AND PACKAGING PRODUCT QUALITY AND VALUE· • REGULATORY REQUIREMENTS WILL HAVE AN INCREASING COST IMPACT. PRODUCT SAFETY REGULATION ('MECHANICAL - ELECTRICAL ). ERGONOMIC REQUIREMENTS. ACOUSTICS REGULATION. POWER POLLUTION PROTECTION REQUIREMENTS· ENVIRONMENTAL PROTECTION REGULATION· ENERGY EFFICIENCY REQUIREMENTS· EMI REGULATION. 4.20 SCHALKE 1 11 KEY PARAMETERS o PACKAGING COST AND 'WEIGHT o o o o o o POWER SUPPLY SIZE, WEIGHT, COST FOOTPRINT ACOUSTIC NOISE POWER EMISSION LEVEL POWER UTILITY SERVICE LINE REQUIREMENTS (LEVEL, DISTORTION) ~ NET POWER DISSIPATION LEVEL (WATTS) ELECTRICAL POWER EMISSION LEVEL (R~I/EMl) (MTBF) PERFORMANCE o SERVICABILITY: (MTTR) o RELIABILITY: o INSTALLIBILITY DEGRADATION, ENVLRONMENTAL TOLERANCE III DOANE METRICS 1 LIFE CYCLE COST/PRODUCT WATT PACKAGING COST/WATT POWER COST/WATT CABLE COST/SYSTEM SIZE SHIPPING COST/SYSTEM WEIGHT 2 ACOUSTIC NOISE POWER EMISSION LEVEL/PRODUCT 3 ELECTRICAL POWER EMISSION LEVEL/PRODUCT 4 SQ·FT./PRODUCT '5 POWER DENSITY WATTS/CU·IN SCHALKE 2 4.21 POWER DENSITY 3.0 t .... 2.& I 2.6 I 2.4 • ,.cst. 2.2 Z Ute - 2.0 • :l o J.8 ">- 1.6 ...tn 1.-4 I: ~ LOW YCLTAGE SWITC....OOE LOW flEQLEJCY EAlLY HIGH UAOt£TICS HZ =9/:",," .,' .8 .,--J:{' .6 6) e ~.- .2 )1 . I 1.2 .4 LAII:1f' HIGH SWIT VQ.TAGE S.'TCHaJ£ ffi ~ / .,..".- -'" ¥flO! IIOIr IA .Q linD III. 72 £ II~ / " ~., '·4 76 78 YEAR 4.22 80 82 61 86 -1CHIP POWER DISSIPATI~ IO~O· .-- AMW«... -470 ffi . ~ N w II/7sa • ; •a.. 1.0 • HITACHI KlIOL 0 II. 4300 I:' 4300 -IBM 3081 Eel. TTL a. .... a 0·.1 ~.--~----~--~--~---+--~~--+---~--~--~----~-73 7." 75 76 77 78 79 80 8I 82 83 84 YEAR IV COMPETITIVE POSITION IGNORES FOLLOWS KEEPS PACE LEADS B· 2 4 6 1 3 I 1 I I I I WANG ,APPLE I HP DG I AT&T, DEC ELECTRONIC PKG COST/PERFO~CE THERMAL PERFORMANCE PRODUCT ACOUSTICS POWER EMISSION LEVEL/ PRODUCT POWER SUPPLY DENSITY ELECTRICAL POWER EMMISION LEVEL/ PRODUCT (EMI/RFI) 5 DG HP EXCELLS 7 I I IBM DEC AT&TI IBM I I I I I I I I (STC) DEC I (CDC) ,IBM BP (JAPAN, INC) I I I I DG , TI ,.WANG I I I I I I I (JAPAN INC) I APPLE I IBM DECI HP AT&T WANG (AC/DC (LH) I I I I I I I I I I I I I I DECI IBM HP I I DG I I I SCHALKE 3 4.24 8 9 Ie V INVESTMENT IMPERATIVES 1. POSITION THE POWER AND PACKAGING TECHNOLOGIES TO FACILITATE THE CHANGING MARKET NEEDS OF: THE OFFICE ENVIRONMENT DISTRIBUTED SYSTEMS OEM MARKET ~ 2. A GRACEFULL INTRODUCTION OF REGULATORY REQUI.REMENTS INTO PRODUCTS AND PROCESS ENA~LE 3. INVEST IN THE DEVELOPMENT OF TOOLS AND CAPITAL EQUIPMENT FOR ENGINEERIING AND MANUFACTURING PRODUCTIVITY IMPROVEMENT AND FOR DESIGN INTEGRITY AND PRODUCT QUALITY. VI R & AD INVESTMENT PRIORITIES HIGH LOW IANALYSIS TOOLS A. POWER TECHNOLOGY I POWER HYBRIDS TECHNOLOGY B. POWER PROCESS TECHNOLOGY POWER COMPONENTS) ( TECHNOLOGY EMI COMPATIBILITY POWER SUPPLY TEST TECHNOLOGY ( C. THERMAL DESIGN RELIABILITY MODELING NEW INSPECTION) TESTERS (ANALYSIS TOOLS I ( FAN & BLOWER) DESIGN -I-CO-O-L-I-N-G-T-E-C-HN-O-LO-G-I-~-s-'I ILEADERSHIP D. ACOUSTIC DESIGN (FAN BLADE DESIGN) &. STDS I I ANALYSIS ·ACTIVE ATTENUATORS TOOLS I EMI/RFI COMPATIBILITY( E. SIGNAL INTEGRITY -----------------TRANSMISSION MEDIA & CIRCUITS F. ELECTRONIC PACKAGING ADVANCE PACKAGING MATERIAL ENGINEERING (PLASTICS) ~. H. OTHER 4.2b (EMI GASKETING & MATERIALS) (MECHANICAL) PROCESSES I ENVIRONMENTAL TEST I I STRUCTURAL ANALYSIS I PHYSICAL lNTERCONNECT I: A-S-SUMPTIONS' o LSI TECHNOLOGY At-lD PRODUCT TRENDS WILL LSI GROUP'S LRP. o DURItIG THE FORESEEABLE FUTURE SINGLE CHIP DESIGN SOLUTION WILL AT BEST COVER ONLY THE BOTTOM END OF THE PRODUCT SPECTRUM- o By BE As OUTLINED By THE THE LATE RO's MANY OF THE VLSI CHIPS WE USE To BUILD COMPUTER SYSTEMS WILL HAVE 1/0 BETWEEN 100 & 300 PINS .. AND POWER DISSIPATION EXCESS OF fIVE WATTS. IN BE ANn o MULTICHIP PACKAGING WILL PuRSUED FOR PERFORMANCE BECAUSE PACKAGE COST WILL EQUAL OR EXCEED CHIP COST. ECONOMY o TEST PROCESSES tJEED To DEVELOPED FOR PROBE TESTING VLSI CHIPS To A VERY HIGH CERTAINTY OF GOODNESS. o SYSTEM MANUFACTURERS CANNOT RELY ON SEMJCONDUCTOR VENDORS To OFFER SOLUTtONS FOR THESE CHIP ASSEMBLY AND INTERCONNECT REaU 1REMENT.~· o IT WILL TAKE THE COMBINATION OF IMPROVED SIGNAL DENSITY PROCESSES AND CONTINUOUSLY IMPROVED CAD LAYOUT TOOLS To MAlflTAIN A QUICK TURNAROUND MODULE PROTOTYPE PROCESS- o ESTABLISHING LIKE CAPABILITY FOR r'1ULTICHIP AsSEMBLIES WILL BE EQUALLY AS IMPORTANT- o DESIGN AND MANUFACTURING PROCESSES FOR ELECTRONIC PACKAGING l\r-lD INTERCONNECT AT ALL LEVELS WILL BE FURTHER COMPLICATED Ry REQUIREMENTS FOR IMPEDANCE CONTROL .. THERMAL COOLING .. AND REPLACEMENT AND REPAIRABILITY. BE PWB JOE CHENAIL 4.26 II. KEY PARAMETERS DESIGN COST DESIGN TIME PROTOTYPE TOOLING COST PROTOTYPE 'TURNAROU~~D TIME STATE-OF-THE ART TECHNOLOGY o RISI< o DENSITY o CAPACITIVE LOADING o SIGUAL PROP DELAY o POWER DISSIPATION o TEST COVERAGE MANUFACTURING PARTNERS ___ _~&a&4.'&'&"' "&'~ IMPACT ON CURRENT ~'FG BASE (IMPACT ON INVENTORY TURt'S) CAPITAL INVESTMEt:T WORKFORCE IMPACTS COUTROLLABLE FABRICATION PROCESS HIGH FRESH LOT YIELD QUICK DIAGNOSIS &REPAIR STABLE Ues I Gfl ADEQUATE RAW QUANTI F I ABLE rtlATERIAL SOllRCES PROCESS PA~"'ETERS GOOD nlAGNOSABILITY ~ASE OF REPLACEMENT AND R=PAJ~ . SOCKETED Co.'1PONPlT ASSEMBLY HIGH MTBF 4.27 III. METRICS CPU GATE DENSiTY HSERlES 3()(J- I / I()O I I I I • VeNus2.. 3000B, 130P / I~DEtl VENUS 8ooG~ :61f.P SERJES1 7tJ 80 Y£II/fS 4.28 '/0 Cf/U GATE P£Als/ry - IBI1- -0 -(jI)~.G}H~~ - - -- ________ - -- 0 3tJO- _NAUTilUS (ZOO£)~) 1~6 • VENIJS-(800G) - I 70 - -- J -0 - - - -0 - - o.C()m£T{~()() 6-) -1 -0 -- J 1 - -BO. --- --- --- -.. 0 - 0 iff) o~-- ~-~ ~ -~~~~~-'!~~-=~_~: . ~ . _~~~~z. __ 4.29 ----0-- --00- 0-- INTERCONNECT DENSITY / / / SH / / 0 6 , / / / / I> -c:J 3DO ~ I ~ / 0 D / CS 2MJ 0 0 / 0 I/)o / .,/ CI) I • / I / / / I / / /~:o£cl /// // // t/ 80 YEARS 4.30 / / / / / )JAPANI 0 ~ ~ ~ 0 / fM • .,/ go INTERCONN£CT -b£HS/TY -- --..3Cc51. -- I()()() - - --IB-M - 9«;· _ - ~_~~~- ----;~~~~----- - --~ -----~ - -- - - - -+---------------- - - -- ----- ---- -,~ --- - ~----~-~~_~=~=_~= -_~-_~==~=~~~~iUi -- ----- - - - - - -~~ - ----- - ----- - - - -- --- -. --------- - - -- - . -- --- -- - "' -soo _~oo - - -sao- - -- -- ---- -200 - - - 100 - - - 0 - ---+----...,..----~---....._---~- J - .--- ---. --- _ - 7/)--.-- -- -- : I ____ - - - --- ---- ~~ '---~=-_-:~=- ~~--_-_=~~ ~---~-- ~ -. ---l- -,- - - --. - J -- - - __ J _-_-80--_______ .-- -- - -9-0 - - -t£M ~- __--~~-__~~--_-___ .- ~ -- --~- -~ - ~ 4.31- ~ - ~/rL- - ~ IV. ; COMPETITIVE POSITION 012 LEADING .. KEEPS PACE FOLLO~/ING 456 3 7 INTERCONNECT DENSITY INTEL DEC H-P FUJITSU . - HITACHI MULTI-LAYER INTEL DEC H-P FUJITSU HITACHI 10 NEC WANG FUJITSU INTEL I·DNEYWEI..L HITACHI NEC 1/20/82 4.32 9 NEC DEC PRODUCT TESTABILITY 8 IBr1 INVESTMENT Il-1PERATIVES 83 1. MICRO PACJO\Gm:;- 2. MSL PR..TNTED 85 84 DESIGN TOOtS 2D'PROCESS ---------~~~~~------.------.3D PROCESS cm'ROLLED Z 3. SIGNAL INTEGRITY PROCEss - - - - - - - CHARACTERIZATION & DESIGN RULES I ~~;...-;..;.;;;;.;;;;;;;.;;;.---------- 4.33 87 l"tlY ~ 1LI\L VI. INVESTMENT PRIORITIES. I rCJF~(Jl (lGY IH.J~1/\ IN ~'ll1lllt:llll' r'1ICHO I'I\LI':/\"l !.~,; ~ULTICHIP FEASIBILIlY ... ] 36 85 \0"" oJ •. 1 -.... -. ---_._..• ] BUt,.PS., TABS., & CERAMICS BREADBOARDS.0 .•••••.•_ • !JHI n11!J HIII I NG HO/'.HIlS (~1Sl..) 1/20/82 KEY PROGRAM & ACTIVITIES 82 f 11'1 I I.:I\l,UI1I"L:.l. I <6 _ _ _ _ _ _ .. _ _ _ _ _ ,. .. ·.!~~~~iEi'·~iULE~~-·~:] I . . . . ...... r1S-L'_-'CAD ·DEVELOPMEtJT-·_·_·· ..·.._· '-"-I _----_.. _. ..... _ ............... ' .. _.. .. . .... - 1..... _ ...H2~_ r~s.~._~.~.vj·~~PM·~NT--· --] [-H";D'' t1SL-~FG. J L~=·' H~-PROCESS" DEV-;=_] [H;DMFG~-·· "] CONTROLLED Z . MFG. STRUCTURED ·1 rS fl\B 11.1 TV . . "'EvALUAT'ioN~OFJ ~ESIGN ] [------... . PROTOTypEl SET SCAN I:. RUl£S & :=-..~ SELF TESTING TECHNIQUES ....._... _.. __ ..._.... __ _.. SOFTWARE "--..- - TECHNIQUES IN PRODUCT DES I GN AND ~1FG. COMPUTING SYSTEMS OVERVIEW 4.3!:> COMMON STRATEGIES (ALL SYSTEM PRODUCTS) o ASSUMPTIONS: (ALL AGREE WITH B. DELAGI SET W1TH UNIQUE ADDITIONS) METRICS: COMMON DIFFERENT PRIORITIES TO SATISFY CONSTRAINTS OF DIFFERENT DESIGN CENTERS o o FOCUS/DESIGN CENTER OF ADVANCED DEVELOPMENT +------+--------+-----------+-------------+-------------+------------+ ! GROUP! KEY ! SEMICOND. ! PKG./LEVEL ! PROC. ARCH. I TOOLS ! I ! METRIC I I OF INTEGR. ! I I i-;~~--i-~~~~---i~~~~~~---i~~~~~------i~~~~~~-----i~~--------r ! ! I ! I I ! ! ! CHIP ! I I BOARD PARALLELISM ! EFFICIENCY ! ! • MECHAN ICAL ! ! ! PACKAGE ! ! ! +------+--------+~--------+(i)----------+~----------+~~--------+ MSD COST/ PERF. GATE ARRAY· (CMOS) INTEGRATED SYSTEMS PACKAGING DRIVE FOR MAX. PERF. AT UNDER $lOOK COMPLEXITY TO GET TIME TO MARKET .PERF MODEL • •MICRO SW .CAD +------+--------+~--------+~~~~-~~~~~-+~r---------+~~--------+ LSG PERF ECl: -GATE ARRAY -CUSTOM GAAs PKG -HEAVY -NON AMBIENT PIPELINE COOLING -VECTORS COMPLEXITY TO GET TIME TO MARKET •HI ER. DES IGN •PERF MODEL • •CAD FOR CUSTOM lSI +------+--------+-----------+-------------+-------------+------------+ PRIORITIES SHOWN AS(!) 4.36 COMPUTING SYSTEMS I • ADDITIONAL STRATEGIC ASSUMPTIONS 0 COMPUTING SYSTEMS ARE EXPECTED TO BE INCREASINGLY RELIABLE INCREASINGLY AVAILABLE INCREASINGLY SECURE 0 CUSTOMERS (USERS) WILL WISH TO DEAL WITH COMPUTING SYSTEMS AT LEVELS ABOVE INSTRUCTIONS SETS AND OPERATING SYSTEMS WISH TO INCORPORATE INDUSTRY STANDARD (NON-DEC) OPERATING SYSTEMS LANGUAGES APPLICATIONS MICROPROCESSORS TO THEIR EXISTING DEC (AND IBM) COMPUTING FACILITIES 1 0 1 1 CUSTOMERS (USERS) WILL WISH TO SOLVE PROBLEMS WHICH ARE SYMBOLIC RATHER THAN NUMERIC PARALLEL RATHER THAN SEQUENTIAL 0 VLSI LOGIC AND STORAGE DENSITIES ARE LEADINS TO HARDWARE COMPUTING STRUCTURES WHICH INTEGRATE THE ·CPU· AND ·STORAGE· (PRI. & SEC.) 0 SEMICONDUCTOR COST PERFORMANCE TRENDS AS COMPARED TO ELECTROMECHANICAL POWER PACKAGING LEAD TO ·SERVERS BUILT AROUND ELECTROMECHANICAL UNITS 1 N 1 0 EQUIPMENT COST WILL BE A DECREASING PROPORTION OF THE COST OF EFFECTIVE USE 0 REMEDIAL SUPPORT OF DESIGN FAULTS WILL DOMINATE SERVICE COSTS 4.J/ II. KEY PARAMETERS (CONCENTRATED ON CUSTOMER VALUES) III. 1. $E $0 SA Po - A CI Co Ip TD - COST OF EQUIPMENT COST OF OWNERSHIP COST TO EFFECTIVELY APPLY THE COMPUTING SYSTEM WANTS DISSIPATED PER CUBIC METER PDT - THERMAL PDA - ACOUSTIC AVAILABILITY OF INSTALLED COMPUTING SYSTEM INSTRUCTIONS PER SECOND DATA STRUCTURE SEARCH AND UPDATES PER SECOND ILLIGITIMATE DATA STRUCTURE ACCESS RATIO DEVELOPMENT TIME PRIORITIZED METRICS 1. $A (LOG Ip)/C D: APPLIED SYSTEM COST PER SAFE UPDATE CAPACITY COST PPER AVAILABILITY YIELDED 2. $O/A: CLASSICAL COST PER COMPUTING 3. $E/C I : CAPACITY 4.38 COMPUTING SYSTIMS 'PSD DON GAUBATZ 4.39 I. II. ASSUMPTIONS 1. PDP-11 SYSTEMS REVENUE WILL NOT PEAK UNTIL FY84 2. PDP-11 SYSTEMS WILL FACE INCREASING PRICE AND PERFORMANCE PRESSURE FROM COMMODITY-DERIVED SYSTEMS PRODUCTS. 3. CMOS J-11, TO BE DELIVERED BY SEG IN FY84, IS LAST PDP-11 CPU FOR CORPORATION? KEY PARAMETERSA. II Text VOICE to , Store and Forward Waveform Encoded ~peeCh II Word Recognition ~ I Store & Forward ( Parametric encoded B. • J Electrophotograph1c Printer PRINTERS Speaker ) ( Recognition Color Hi-resolution Impact Matrix c. \Ribbonsl (Scanners) (Motors) (Photoconductors) (Encoders) (Toners) IPrint HeadS) (Fusersc===========~--------------~ MECHANISMS Fhee€Feeder3 ,. (Capacitive) Elastomer D. KEYBOARDS l1li[ E. SPATIAL lCurso-r 1/0 "po-s.~~Ionerl (Graphic Input) F. DISPLAYS. (Flat Panel) f Monochromatic ,25 --> 7~ lines .. LCD Color 25 --> 72 lines Custom Printer LSI G. TERMINAL Icustom Video LSII CONTROLLERS Display of Natural Images, Text, and H. NATURAL IMAGE PROCESSORS I. DATA COMM ~ . Va 1 ue HDLC SYSTEM ARCHITECTURE V\d. e."te~ .. - fBackward ICompa ti bi 1 i ty 1 Added Linl Programming. (Professionals and Another concern: The Japanese are behind us today in Software. However, good Software engineering is characterized by hard meticulous work. The Japanese will be outstanding in this, watch out! 4.69 VI Investment Priorities Technology Areas For Software H1 Methodology <--------~-------------> Ar.chi tecture Management Design Metrics Implementation Standards Lo Verification Maintainability Documentation (Design/Arch. Tools) Packaging (Proor or Correctness) Consistency Performance Surprises: Operatins Sys. Errorless Embedded Doc Prog~ New way of Delivery Human Factors Data Integrity Hi Reliability Realtime Addressing Special Purpose Security Servers Object Based Systems ~ Hi Availability Performance (Provably Secure 5ys) Recovery Distribution of Funcitons Languages Compiler Design Surprises: Fully . All Languages Lang. Environment Language Design Integration (other DEC products) Cognitive Factors 4.70 (Languages) Dist~ 0.5 • <----------------------> Data Base Hi' Data Integrity Lo' Query/Access Languages Distributed Data Integrated Text/ Data/Voice Relational DB Security/Cryptology Addressing (New Approaches) Apptication Tools Transaction Proc IDistribution of thesel Forms Mgmt. Graphics Development Tools Application Packaging (New Developments) Office Human/Cognitive Factors Text Management Office Graphics Voice Image Compatibility with DEC Software Integration with DP Video Disc - App. (Video, 'Electro Optics, FAX, Digital PBXt Cable TV, Voice Digitizers) Dist. Data Processing Dist Functions Foreign (IBM) Dist Applications Cooperation Dist Data Servicing Network Naming Management/ Installation 4.71 (standards) APPLICATIONS IN COMPUTING RUSS DOANE BILL KEATING 4.72 , R Doane 4feb82 COMPUTER-INTEGRATED MANUFACTURING BASIC ASSUMPTION We want to get computers to perform or at least discipline the routine things. People should be freed up to improve qual i ty, productivity, asset utilization, and responsiveness. ASSUMPTIONS ABOUT QUALITY / PRODUCTIVITY Inspection and test would ideally be eliminated altogether replaced by excellent process control, so things are right first time. Every touch costs money and threatens quality. and the If defects are few and information is current and believable then materials and the whole mfg. process can be made to flow smoothly. Smooth mfg. takes less people, space, equipment, $$, and less WIPe When a plant operates with low WIP, problems surface fast. People can focus on improving the process, not on mounds of bad product. ASSUMPTION ABOUT THE INFLUENCE OF GOOD INFORMATION ON ASSETS Our $IB inventory is largely a stand-in for Believable Information. The only BELIEVABLE information j"S On-Line, Real-Time information. ASSUMPTIONS ABOUT RESPONSIVENESS When Cycle Time approaches 2 times the .. ideal n process time (wi th appropriate buffers for predictable interruptions), manufacturing is responsive. Good information, low WIP/short cycle, and low inventory allow such quick response that manufacturing becomes a competitive weapon. AUTOMATION PRIORITIES Where eliminating push it upstream. inspection and test is impractical, we And we should automate it where we can. should Dirty, hyper-clean, or hazardous jobs should be automated first. Scarce-skill work (e. g. welding) should be automated. 4.73 PARAMETERS that have relevance and could conceivably be measured are llsted below just as a resource, so that when we later select a few metrics we aren't making that selection with blinders on. This list is supposed to be complete, but it is the product of an intentionally out-of-control "brainstorm" process. Nobody is proposing to take all of these items seriously: it's just a list. THREATS TO BELIEVABILITY of "information" GATHERED WITHIN a plant - Length of Incoming Inspection Queue (mat' r of unknown usabili ty) - Length of In-process Inspection / Test Queues (same issue) - % of Quality Data Automatically Sensed (avoids inputting errors) - Percentage of Material Moves Automatically Sensed in real-time" - Percentage of Non-Sensed moves Manually Keyed in real-time - Absence of manual information-changing - Paper (human writing gives errors both in writing and reading; can't be automatically checked for reasonableness): - Number of paper forms - Number of paper documents - Number of people on the floor who ever write anything down - Number of information-collecting formats (confusion factor) - WIP as percentage of actual process time (WIP may hide problems) TIMELINESS of "information" INPUT TO a plant - Hours from DEC Booking to effect on Component Vendor Orders - Planning Pulse Rate (on-demand, hourly, d~ily, weekly, etc.): - Request / Commit - Parts Explosions - MRP - Vendor Orders (weekly deliveries may require hourly control!) SMOOTHNES OF MATERIAL FLOW - Material Move Pulse Rate (on-demand, hourly, daily, weekly, etc): - Vendor Deliveries - Kitting - Intra-process - Inter-process - Inter-Plant Deliveries - To Remote Distribution Centers - Customer Shipments 4.74 GRANULARITY (if coarse, leads to big lots: raises WIP) - Number of units produced during time of one setup/tooling change - Minimum economical lot size - Average Diagnosis Time (size of bad-pile when process found bad) - Diagnosis Time within which 95% of faults are identified - Percent Defective exceeded 'by 5% of lots or on 5% of days - Min. number of workers req'd to put one unit of work thru process - Versatility: % of plant's jobs that median worker is skilled for - Range of product complexity within economical process capability ("complexity": no. of ICs, no. of boards, BOM line items, VOP) - Range of product type within economical process capability ("type": component, board, cable, mech. assy., box/unit, system) UTILIZATION (production work vs. non-production work or costs) - ECO value added - Rework "value" - Machine uptime (% of regular production hours) - Data collection time (writing, keying, walking, talking) Data processing time (reading, calculating, graphing) Waiting time (waiting for information, supervision, material) Learning time - Floorspace dedicated to WIP - Walking time caused by obstructions - Energy consumed (HVAC; products; equipment) AUTOMATION FOCUS - Percentage of Assemblies analyzed by GroupTechnology - Percentage of jobs requiring workers to wear: - Dirt-protection (aprons, boots, etc.) - Cleanroom garb (bunnysuits, etc.) - Hazard protection (masks, gloves, etc.) - Pixels (area scanned, divided by minimum just-tolerable flaw) inspected by eye - Precision req'd in assembly - Number of unique line items req'd (not common to other products) - Percentage of skilled jobs open more than 3 months 4.75 PRIORITIZED METRICS (selected ratios involving Parameters above) 1 1 Paper In divided by Value Added (reams per $lM) 3 Sigma bracket width on Daily Shipment Value 2 2 Employees per $lM of Value Added Assets per $lM of Value Added 3 3 Cycle Time divided by Process Time WIP (hours) 4 4 Special-garb workers per $lM Value Added Pixels inspected by eye per $lM Value Added 5 5 % Upside capacity increment avail. in 13 weeks % Capacity conversion (complexity and/or type) avail. in 13 wks COMPETITIVE POSITION; where we are Today vs. DEC competitors: IGNORE FOLLOWER Convergent Systems DEC FA&(not T), HP, DEC Terminals, Prime, D. G. NEC, Oki DEC Storage (mid-range) IN-THE-PACK LEADER Sharp, IBM, Hitachi, Epson/Sieko, DEC T (not FA) , 2-stage mfg., Fujitsu INVESTMENT IMPERATIVES 1 Speed up the information pulserate so NO category of routine Mfg. data flow happens less frequently than Weekly, including: Orders Booked information Inter-plant scheduling (request-commit, etc.) Intra-plant scheduling (MRP etc.) Purchasing releases to vendors Shipping info to Sales & Customers Labor Reports Quality Cost information 2 Training / teaching / experiencing a "headset" that Knowledge and Inventory are to a large extent interchangeable; and that Knowledge is nearl y always better than Inventory for qual i ty, productivity, and responsiveness. (Credible, automated knowledge generates trust.) 3 Exploiting design simulation and manufacturing automation to motivate a thorough, disciplined approach to an entire system (eg design, specs, diagnosis) 4 Inter / Intra plant interlocking real-time MIS business system 4.16 R & AD INVESTMENT PRIORITIES - HIGH-<~---U P ~ LOW S T R E IClean & Schedule ordersl A IRequest-Commit I M t I I I MatI Reqmts Planning ("MRP") Electronic CAD Simulation & (purchasing Adm i n is t rat ion) ISchedul ing Shop '"Floor Load & Slots) (Vi rtual Test) Shop Floor Control I «(Ie"', fc 0 1'".".,........ ) I Diagnostics Downloading (APT, etc) I (Diagnosis Data Feedback upstream} (Qual i ty Cost Reporting) + o D Automated Materials W Handling N S T Distribution & "Electronlc Switch" Mana ement R E A M Key: Boxed internal; parentheses (external). Upper-case SURPRISE Perentheses within box means BOTH internal and external 4.1"1 APPENDIX 4.18 LISTING OF TECHNOLOGIES - Background Information CODING: INTERNAL: Critical technologies to be developed internally EXTERNAL:' Necessary technologies to stimulate through external funding SURPRISES:Technologies having potential of substantiall shifting industry direction OTHERS: Technologies to be watched and/or ignored 4.19 1. SEMICONDUCTOR TECHNOLOGIES (Bob Supnik) A. Processes Internal: External: Surprises: Others: B. Process NMOS (till FY84) CMOS (none) ECL, GaAs MNOS, TTL, CML, Josephson Junction, "HEMT, lnP, EEPROM, IG FET, DNA logic (1) ~echnolo9Y Internal: (buy): Optical Lithography, Ebeam/Xray Lithography, dry etch, resist, annealing, silicides, metalization, dielectrics, beam processing External: (none) Surprises: insulating substrates " Others: metal customization of buyout layers c. Process Support Internal: (buy) :Surface analysis, device modeling, device reliability analysis External: Process modeling Surprises: Materials analysis, manufacturability analysis Others: (none) D. Design Techniques Internal: Internal: External: Surprises: Others: E. Handcrafted (buy): gate arrays, polycell (none) (none) random Hierarchic~l Silicon Architecture Redundancy, testability, architectural transforms, silicon unique structures External: Self-timed systems Surprises: (none) Other: ~nalog, linear, multilevel logic Internal: F. Tools and testing Internal: Buy-out: External: Surprise: Others: Hierarchical chip simulation including fault insertion, integrated chip data base, total chip verification, partial then total chip synthesis, design for test Automatic test generation, testers AI-based design and test techniques Leadless probe (SEM test) Microcode compiler, automated combinational logic design, LSSD, in circuit test, transmission modeling 4.80 ~TORAGE SYSTEMS TECHNOLOGIES (GEORGE HITZ) EXTERNAL ALSO INCLUDES PURCHASED COMPONENTS AND GIVING VENDOR DIRECTION IN PRODUCT DEFINITION 1. GENERAL TECHNOLOGIES INTERNAL: READ/WRITE & CODES, SERVO & DRIVE LOGIC, MECHANICS, LSI, HEADS, SYSTEMS, ARCHITECTURE EXTERNAL: LSI FAS, COMMODITY LSI, CUSTOM LSI, PACKAGING, POWER SUPPLIES SURPRISES: OTHER: 2. FLOPPY DISK STORAGE INTERNAL: HEADS EXTERNAL: FLEXIBLE MEDIA, HEADS SURPRISES: OTHER: 3. MAGNETIC DISK STORAGE INTERNAL: HEADS, RIGID MEDIA EXTERNAL: SURPRISES: OTHER: 4.81 4. MAGNETIC TAPE STORAGE INTERNAL: HEADS EXTERNAL: HEADS SURPRISES: OTHER: MEDIA 5. OPTICAL DISK STORAGE INTERNAL: EXTERNAL: MEDIA, DRIVES FOR WRITE ONCE, LASER REFLECTIVE VIDEO/AUDIO DISK SURPRISES: MAGNETO-OPTIC OTHER: 6. SOLID STATE MEMORY INTERNAL: EXTERNAL: DYNAMIC, STATIC, NON-VOLATILE RAM, ROM SERIAL RRAMR, BUBBLE SURPRISES: OTHER: 4.82 3. COMMUNICATIONS/NETS (Tony Lauck) A. Communication Services Internal: (none) External: (none) Surprises: (none) Other: Teleconferencing, Videotex B. Network Operations Internal: External: Surprises: Other: c. Network Design Internal: External: Surprises: Other: D. Network test and diagnosis (none) (none) (none) SNA compatibility Open systems architecture (none) (none) Protocol and Data Representation Standards ·Internal: External: (none). Telidon, Antiope Prestel, Teletex, Bildshormtex, Captain, FAX Surprises: (none) Other: (none) E. Digital N&tworks & Telephone Switching Compatibility with integrated digital service nets and rex's (none) External: Surprises: (none) Other: (none) Internal: F. Communications Interfaces In ternal : Local area interconnect adaptors, cable television(adapters), telephone modems, broadband modems External: Codecs (?) Surprises: (none) Other: (none) 4.83 G. Microwave Communications Internal: External: Surprises: Other: H. links, Infrare6 transceiver links (within a room) cross-building infrared transceiver links fiber optics (internal buy) (none) . Signall ing Internal: External: . Surprfses: Other: J. co~munication Optical Communicatons Internal: External: Surprises: Other: I. (none) (none) (none) digital radios, satellite, cellular radio (none) (ECC) (none) Signal integrity, signal processors, signal detectors, modulation techniques, Optical Components . In ternal : External: Surprises: Other: (none) (none) (none) Integrated optics, se·miconductor laser, optical fiber material technology. 4. POWER AND PACKAGING (Henk Schalke, Joe. Chenail) A. Interconnects Internal: External: Surprises: Other: B. bumps, passive & active slabs, conformal spiders (none) (none) RC chips or wedges, traditional TAB, wafer scale integration, co-fired and thick film ceramics' printed Circuits .. Internal: Impedance control, multiwire, blind vias surface mount External: (none) Surprises: laser enhanced etching Other: - Additive processing, flexprint, metal core, polymide c. packaging & Cooling Internal: Hostile environments, acoustics, EMI/EMC (use optical and magnetic components, aesthetics, local heat pipes, air flow modeling, SW/chip External: (none) . Surprises: ( none) Other: Free air optical signalling,liquid cooling/plumbing, cooling functions, plastics, critical materials, (gold, siler, tantalium, cobalt, chromium) dangerous materials (e.g. berylium, cadmium) D. Power Cond i tioning Internal: External: Surprises: Other: Local regulation, 2 vol t powe·(, power hybrids (none) (none) glassy metals, active rectifiers, ferrites, optical power transmission, distribution drops (power factor correction) 4.85 ~. COMPUTING SYSTEMS (Don ·Gaubatz, Peter Jessel, Roy Rezac) A. Computer Architecture Internal: External: Surprises: Other: . B. Capability-based machines, non-numeric computation BLL-restricted machines Floating point standard Theory of computation, automata theory .. parallel processing Internal: VLSI processor arrays, pipeline machines External: (none) Surprises: inference eng ines, dataflow machines, °non-vonNeumann architectures FFT engine, vector processor, processing by optical other: effects c. Computer Performance Internal: End user productivity/performance (product positioning), network measurement and analysis tools, load drivers for end user and network environ~ents °External: Modeling tools Surprises: (none) Other: (none) 4.tib 6. HUMAN FACTORS (Russ Doape) A. Physical Factors Internal: Front design, flicker (visual) fatigue, ergonomics, ergonomic standards (radiation, health, safety) External: (character) intelligibility Surprises: (none) Other: (none) B. Cognitive Factors Internal: self-training systems, limited training interfaces, user-installability (modular packaging) External: (none) Surprises: (none) (none) Other: 4.8"1 7. TERMINALS AND WORKSTATIONS( Walt Tetschner) A. Voice (buy): phonetic recoding & smoothing algorith~s Text-to-speech subsystems, digital telephone voice messaging (waveform encoding), Voice messaging (parametric encoding). External: Word recogni tion (speaker dependent &" independent) Surprises: Speaker recognition Other: Speaker recognition, voice response (canned) Internal: B. Printers Internal: External: Surprises: Other: c. Impac.t matr ix, Electro-photographic Band (none) . Thermal, electrosensitive, electrostatic, electromagnetic, daisy wheel, band, drum, thermal transfer, piezoelectric ••• Mechanisms/Electromechanical Internal: Sheet feeding, shuttle, re-inking ribbons, films ribbons, color ribbons, stored energy print heads External: Stepper motors, DC servo motors, disc' encoders, linear motors, Galvo scanner, acousto-optic scanner, photoconductor, toners, fusers, illuminators Surprises: (none) Other: (none) D. Scanners Internal: Bar code/graphic input on impac·t matrix printers, Group III Facsimile on Electrophotographic printers External: CCITT standards Surprises: (none) Other: Wand E. Keyboards Internal: Typewriter style mechanical, soft labels, low profile External: ANSI keyboard standards Surprises: (none) Other: Touch panel, LED Magnetic, elastomer ••• 4.88 F. Spatial I/O Internal: . External: Surprises: Other: G. Terminal Controllers In ternal : External: Surprises: Other: H. Cursorposi tioning devices (none) (none) Touch Screen, tablets, mouse ••• Video custom lISI, Pr inter custom lISI (none) (none) (none) Softcopy displays Internal: Monochromatic CRT's' (240-960 lines, 12"-17.), Color Crt's (480 lines, IS") External: Color CRT's (488 lines, 19") LCD message panels, LCD 1/4 page displays Surprises: Home TV high resolution displays Other: Plasma, electroluminescent, LED, Fluorescent, Ferroceramic, electrochromism, electrophoresis, incandescent ••• I. Natural Image processing Internal: Frame grabbers, display of natural images. text & computer graphics External: Videodisc. CATV, TV camera Surprises: (none) Other: (none) J. Terminal System Architecture Backwards compatibility, host/terminal function migration External: (none) Surprises: (none) (none) Other: Internal: 4.89 8. SOFTWARE (Bill 'Keating) A. Software Process & Methodology Internal: Architecturei design, implementation, management, metrics, verification/validation, maintainability, documentation, packaging standards, consistency-over-products, performance External: Design & architectural tools, proof of correctness Surprises: Error free ·programming, embedded (in software) documentation, new package/delivery of software (none) . other: B. Operating. Systems Internal: Human Factors, Hi reliability/recovery, security, Hi availability, addressing, performanc~, data integrity, realtime, distribution of functions, special purpose servers & systems, object based systems External: provably secure systems, (monitor) Surprises: Fully distributed OS Other: (none) c. Languages Internal: Compiler design, integrated language environment, A/I languages, language design (for end-user, and high productivity professionals), cognitive factors, integration with D & E External: Languages (probably special purpose) (monitor) Surprises: New break though man/machine programming interface Other: (none) D. Database Management Data/information integrity, distributed data manageme"nt, relational data bases, query/access languages,. information management, integrated text/data/voice, addressing, security/cryptology External: New data base approaches- (moni tor) Surprises: Hardware assisted data management Other: . (none) Internal: E. Application Tools Transaction processing, forms management, graphi~s, software development and management tools, distribution of these External: Monitor above areas for new developments Surprises: New breakthroughs Other: (none) Internal: 4.90 F• Of f ice ro 0 1 s Internal: Human/Cognitive factors, text management, office graphics, voice, image, integration with DP, compatibility with DEC traditional SW Architectures External: Video Surprises: New breakthrough in man/machine dialogue Other: (none) G. Distributed Data processing . Distributed functions, distributed application, distributed data, network (Local & dist) management/installation, servicing, network addressing, foreign (especially IBM) communication/cooperation, evolving Nets for customer External: Standards (formal & ad hoc) Surprises: Revolutionary approach Internal: I have not covered several other Software Areas which are critical to the success of the above (Networking and Intelligent Terminals). I assume these will be covered elsewhere. 4.91 CHAPTER V QUANTITATIVE MEASURES A) DIGITAL'S ENGINEERING INVES'lMENT 1) LRP nunbers and Ehgineering atdget 2) Canpetitive ErgineerillJ Investment - no lag - 2 yr lag - Growth to investment correlation graph B) PRODUCT POSITIONING - Bencmark Systems: Price vs nme at 20~ decline chart - Price Band Charts: 16-B, 32-B, 36-B, Tenninals, Printers, storage - System Positioning Charts, Gestation Chart C) CE BUDGET OVERVI&l - FY82-86 - Ex pense by organization - EXpense by activity D) TESTS OF BUlXiET ALLOCATION - NOR by price band and architecture (Oct 81 Data) - NOR by price band am architecture (Nov 80 Data) - Comparison of Cbt 81 data with tov 80 data (2 pgs.) - Revenue shift OIer time by architecture - Prodoots in each Jrice band - Revenue/Investment can pari son by architecture - Revenue/ investment canparison by price band E) MARKET SIZE - Segmentation, size, growth rate, shares - IBM revenues by SystEm type, price band F) FINANCIAL METRICS OF BUSINESS PLANS - Cash breakeven charts - NOR v s IRR - Systems - Storage - Tenninals G) P. G. ENGINEERING EXPENDITURES - FY83 -86 D. CUNTON 5.1 2/3/82 5.11 A) DIGITAL'S ENGINEERING. INVESTt-ENT ;ENGINEERING INVESTMENT; LRP ; ...ll LRP 83 LRP 84 2.2 2.9 3.6 4.6 6.0 7.7 9.9 NES ($B)(LRP IS APPX.) 1.8 2.4 2.9 3.7 4.9 6.2 8.0 NOR ($B) 2.4 3.2 4.0 5. 1 6.8 9.0 11.8 CENTRAL ENGINEERING ($M) 133 178 254 347 446 579 753 1% NOR 5.6% 5.6% 6.4% 6.8% 6.6% 6.4% 6.4% 45 58 73 85 107 144 186 9 16 21 33 43 55 71 MLP ($B) P/L ENGINEERING ($M) MANUFACTURING ENGINEERING ($M) I AlL ENGINEERING %NOR ACT 7.9 % 7.9 S 8.7 S LRP 85 LRP 86 LRP 82 ACT 80 9.1 % 8.8 % 8.6 % 8.6 % OBSERVATION: Central Engineering is expected to increase its historical spending proportions of NOR. SOURCE: 1) CorJX)rate LRP dated December 1981. 2) Central Engineering expense from Engineering Budget as of January 1981 for FY82,83,84. Fy85,86 groWl 30% on FY84 base. 5.1 D. CLINTON 2/1/82 A) DIGITAL'S ENGINEERING INVESTMENT :COMPETITIVE ENGINEERING: INVESTMENT --2 YEAR IAGKey Competitors in .B::>x El'G % NOR (2 YEAR LAG) : FUJITSU: EST NOR 3 YEARS 1981-1983 ($ BILLION) ESTI REAL ENG EXP 3 YEARS 1919-1981 ($ MILLION) $640 1.2% DG $ 8.8 192* 2.1 :HPI 6.0S 839 13.9 I DEC 4.1 516 12.3 1I8M: 4.5 4580 102.9 PRIME 4.3% 65 1.4 NEC 3.4% 563 16.3 --- ...: WANG I 3.2% 121 3.1 HITACHI 2.9 1415 51.6 TANDEM 2.3% 32 1.4 ------ *D .G.: "Real investment is p-'obably $160M or 5.9% D. CLINTON 5.2 2/2/82 A) DIGITAL'S ENGINEERING INVESTMENT ICG1PETITIVEI :ENGINEERItli: : INVES1MENT : : NO LAG Key Competitors in B:>x APPX ANNUAL SALES GROtlTH OVER PAST 5 YRS ENG EXP AS A ~ 'OF NOR 10 % : FUJITSU: 9 15 IHP: 9 27 DATAFDINT TANDEM 9 9 40 126 I DEC 8 32 -----: WANG: 8 59 PRIME BURROUGHS NCR 8 7 6 64 12 10 : IBM: 6 13 XEROX SONY NEC TI 5 5 5 5 14 18 14 25 HITACHI TOSHIBA A'I&T 4 4 2 13 12 11 ------ SOURCE: FY81 OR FY80 ANNUAL REPORTS OR 10K OR FY81 EARNINGS ANNOUNCEMENTS 5.:i D. CLINTON 2/2/82 A) 7 c;. (UJt.J-r-H o F' ~ 1;(.. 6vEa. DIGITAL'S COMPETITION S- yEl1flS 11(:) 7 rNVESTHEN~ GROWTH RATES AND R&D % NOR tAft 0 ENGI~EERlnG CORRELATION OF E-' /lO DIGITAL'S p~nE G> I tNAN&1 (!) . r:r 0 ." _ .. ____ ._._--1-_ 10 ~I / 3 , 9 i I~ /1 IJ. , ._-'-" OBSERVATIONS: 1) For the COMputer Industry, there is a positive correlation between growth and size of R&D invest~ent. 2) Of the competitors above the trend line, WANG and PRI~~E have very focused product offerings. In contrast, IBM and PUJITSU, although ~uch larger, have procducts across a very broad range. Clear product • __ focus may correlate with higher growth. ' SOURCE: CORPORATE ANNUAL REPORT 0.4 \-ta.",cl I-,.e.Ld. ;Qt.le +Cf --.Ii.4------ _ _~l 1 Ten'W\'lYIeJ 4r {,~. " (1 0 ~ .." s 'f Y' \I f; r: ~ 7DI ~ ~ !i' 0 ~ '-' 7nBr 'fOIL' Lllte. ~ \'tot .,~" fPOp_(. l :tLL.Ilot. IV r~~~- I SCn,t ," I 78 I I i f o E2 f4 I ~6 : " I T-1I T , :, ::! i ;600 " t·! , j I ,I t· L -~. ~ ., tl,-. 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HI~H FNh l~nllv~"ATlm 1 -t----t--··+=··-+1~t~Ej~tjt~~t~ti-=-t~I=-i--=-tl~-ilti~t1~1~Ej~tjTt'1 -i f*~ftl_-fr--r-'--~t-"t-r't~I t-t±r--t-~---'RPP~P~~Pp':' ~!~I'~ ~-~g~~HglJ~~~~bbb~-~t--rIT-t--t--t--+-+-+-l-~lj,::jJ=L .-~--+-t-, : : 6. 2S .; _rir I-._.--t---f--!-_.L ~ -- H i .T I (iw ;'Nr : I I4 w )D~ ~T. ,T :---- I I I : , I 86 -f- .~ ,,,. oa.-,--r--r-+--+-+--!-_l -J- 36-Bll PRODUCT OFFERING TRI S~ (15) 1600· SMP (9) JUPITER SCIENTIFIC (25) ......... ~ ~ ~ ('1-6 t1FLOPS) w ~ z ~ w u 2060 1091 (5) 1090 1090 (5) ~ ~ JUPITER (25) 625 2OttO (3) 250 2020 ·(1) 2020 • 1.0 11/780 • 1.5 76 78 80 FISCAL YEAR 5.11 82 86 88 I ! I 5.12 J I· -1- ,.J ! ! ' ~_,+ __ 1.., .., t._ .! i 1 .' I .~- ,.1 ~; $ 5000 VideQ' ,0' " • . ,." , ", . ...,... . , ."~'''' ... - ...-._.. __.." ~""-""" ., TermJnats Product Summary " ,s3000 . .. " Vi 200-C - VTr '"~ " ..... $2.000 "'-- 'VTLOO - H \I" I 100 t I I - " I 'IT' 0% VT\3. VT2.00 -H~ VT100· G.X VTIOI Lt)w Cost V,deo (SWE) I FY 80 I I I F'f 81 -- . .... VT100" F ( -11000 . F'1 82 I I I FY 83 Low Cos+. Video FY 84 FY 85 FY 86 . . 5 14 t30,oOO r I $20,000 · , 10,000 ~ LPl4- -I- EPZ I LP07 r:Pl .. ........, C/) $5000 0 -. · 0 I l- c::: ~ ~ I · CI) ...: '1000 -l- (S"Y Engine} LQP~t I . LA 720 Fam'/y I- LA200 tAtoo 'r .I I 'r 1500 EP3 LP2.5 . LQP a11 l.... ~ . LP2.6 I LA 31/38 Farru/y -- I.A300 · .. I Low I -. r Ne,t Low Cosl RO (In-h D~se) (8Lt'{o~t) ·. $100 Cost. 1\0 I l.ow Cost RO · FY 79 I I='Y 80 I F18t I F'I82 I Hardc.opy I/O F183 I F'I 81 I FY 85 I ~y 86 . I F'I 87 I WORD PROCESSING SYSTEMS 12 Xerox 8110 11 Savin 1005 (5MB Wini) 10 List .Price 9 $K ·NCR WS '-10 (5MB Wini) 8 Savin 1002 IBM Displaywriter 7 NCR WS 130 fDECMATEI Wangwri ter Exxon 520 11 5 ICONDORI 4 3 2 1 I I I I Available Today Announced FY83 Configurations exclude printers and application software, are dual floppy-based or Winchester/floppy-based (Wini capacity is stated), with memory necessary to run target applications. NCR and Savin systems are based on Convergent Technology's AWS system family. on a CompuCorp. System. The Exxon 5'-0 is based COMPANY CONFIDENTIAL ti.15 SMALL BUSINESS C~PUTERS pc Enterprise 3n00 (12.5MB Wini) 12 11 103151 IBM Datamaster 10 List Price $K Fortune 32: If; .(lAMB Wini) 9 8 TRS 80-11 (S.3MB Wini) Vector 3005 (5MB Wini) 7 DG Enterpr ise lCT15AIl'IIIB Wini Apple III (5MB Wini) 6 5 4 I I 3 - I I 2 1 Available Today Announced FY83 Configurations exclude printers and application software, are dual floppy-based or Winchester/floppy-based (Wini capacity is stated), with memory necessary to run target applications. COMPANY CONFIDENTIAL ti.16 PROFESSIONAL COMPUTER WOR~STATIONS 40 (Nebulal (20MB and up) 30 Apollo Domain (33MB Wini) Three Rivers Perq (12MB Wini) 20 Convergent IWS 2200 (10MB Wini) List Price Xerox Star (10MB Wini) $K 10 Convergent AWS 240 (5MB Wini) Fortune 32:1~ (10MB Wini) 9 8 leTl50) (10MB Wini) I ... I . ,. 7 DG Enterprise Conve.rgent AWS 230 HP 125 5 4 IBM PC Convergent AWS 210 (No Mass Storage) [ CT25 J I CAT) 3 2 1 --------------------------------------------------------Announced FY83 Ava ilab1e Today Configurations exclude printers and application software, are dual floppy-based or Winchester/floppy-based (Wini capacity is stated) , with memory necessary to run target applications. COMPANY CONFIDENTIAL 5.17 DIGITAL PRODUCT SPACE ANALYSIS The enclosed figures examine product group characteristics from a composite price-performance-time point of v iew as follows: Figure 1 groups our products along lines of constant performance. The 11/03, 11/34, 11/44, 11/70, 11/780 and 11/782 serve as pivots for the different Iso-performance curves. Figure 2 positions our products per the $1 K-2. 5K -6. 25K -40K -1 00K-250K -625K 1so- pr ice- band s lines. Figure 3 breakes the product space by three major "vintage periods": The 1975-1976, 1980-1982, and 1984-1985 (introduction year) periods. Products introduced in other years are depicted as well; their relative "goodness" is measured by their proximity to the aforementioned period lines. Fig ure 4 depicts our products' excellence (in terms of price/performance merit index) versus machine size class. Contrary to the intuitive expectation, diseconomies of scale seem to be indica-ted. In all four figures arrows are used to denote (hypothetical) product adjustment to their "appropriate" lines. 5.18 2/4/82 \(, l '0 J( Lc.r & -/00 .,.'. "-'C~"5 cr / 73 f 77 7J 8?J gs I g7 , L/J\I.€S ac- coNSf"'..1Nr ~/t:.e" A£;teFa(JIH;W~ f-··' ~ IfA1111 LVS 60itION -Cil J 3 I I /0 /F£r~A'#££ (~~ S'~~ (8) /975- /97~ x /9'() - /9tf2 0 /978 V /983 d /181-/"5 0 5.l1 1936 /00 /IX) ~OtlJcr /50- ~/}AJG~ Ct/,Rv'£S 11/7n- ///70 M!50/VhJ MINI 8MA~L- " H II o sy~.ftVl'l . . ~t(- - 'Pn:c.. . ($} ·-~t.-§>3l~/l f-.~~~I- _ ~4J, .~, /'\ Ii 'Il_' _ -..f-e;:.:; tJMt1 -- -- --~i~ f,iru . .2. $~... nWfes -.--.- ... \. ~~yl. " ~~ ~.~ __~:: 12. ~~_ t'hf.Jv'~a.~n~. '.- I~ . ~. ? _. +~,,~ ~.!--.iJYr I 'I-.g L~ > - If r-t~ J-.J;-:£ (w.s'-m / ~~) 1 - e s t ' -12 til;. ~ l" -9 . . .• ~ ~L<;-+ ~~-''3 2 (;h.~p~ L?~-U P-II I,ll J -II . \to' ~ -k."'L Lf- 3 l\-&Il.u..cf ~J ...~~ .... '1-3 ~'1(.t~) . ~ (v.tj .____. _ GebIJ,..hO,.. ..- '3 o.2J b 5 . -. -k W\.l l'j rs ) , _.'~b 2JlJ1~. CENTRAL ENGINEERING BUDGET OVERVIEW ENGINEERING BUDGET: BREAKDOWN BY ODD GROUP (excludes contingencies and undistributed funds) 100 -r------- -- ~ iIIr- ..... -M Sites/Tee hnology/E} ternal Ref. 'l'U.t"J:) ISEb 80 - UJ a: .... rentr-'i II SA&T IPDT _I- ~lII" • --i~ S/W :::::J IH 0 60 ~ "- - UJ Q. X ..... rkstations were assigned to that program. 5. Communications (Lacroute) was proportional to the spending by Gutman, Demmer and Fagerquist 32Bit projects. 6. Semicondoctor Engineering was proportioned among all except the 36B program according to the sperdirq by Gutman, Den1ner, Fagerquist and Avery. 'Ihe "back of envelope" analysis is meant to be an overall sanity check of speooing versus revenue. Allocation algorithims, time value of near versus longer term revenue etc are all part of the fuzziness of the data. ~st if not all investment decisions are made on a more pragmatic basis of meeting competition, exploiting creativity and new technology and satisf~'1\9 perceived custaner needs. EG:kr3.29 Eli Glazer 5.20 2/3/82 NET OPERATING REVENUE FY82~ PRICE BAND PROFILE 32 BIT SYSTEMS 1.9 ~ 12 16 BIT SYSTEMS FY84 1 OCT 1981 PLAN & FY86 BIT SYSTEMS 0 TERMINALS AND II 36 WORKSTATIONS BIT SYSTEMS fZI 1.81.7 1.6 N 0 R $ <..T -'" B 1.5 1.4 1.3 1.2 1.1 1.0 .9 ,8 .7 r .0 .5 .4 0 en -r-f ~ ~ N r-r, lD t..D .....-t 0 .::::t' FY82 0 0 r-t 0 ~ N LO ~ N L.I"\ N r-r, - to- t..D rl 0 .::::r 0 0 r-f FY84 PRICE BAND $K <=> L.I"\ N L.I"\ ~ r-r, N lD N lD lD r-f FY86 o .:::r <=> 0 r-f 0 lJ"\ N ~ N 1O m CPU AND TERMINAL PRODUCTS BY PRICE BAND INCLUDED IN THE OCT 19S1 PLAN +----------------+---------------------+----------------------+ I FYS2 I FY84 I FYS6 I +--~---------+----------------+---------------------+----------------------+ I 1 - 2.5K I TERMINALS I TERMINALS, VT18X, I TERMINALS, CT120, I I I VT18X I SBC 11/21 I J-11, SBC, SBC ·11/211 +------------+----------------+---------------------+----------------------+ 1 2.5 - 6.3K I PDT I VT1S0, CT120, I VT180, CT120, CT200,1 I I I I SBC 11/21 J I LSI 11/2, LSI 11/23 I I I I BOARD SETS +------------+----------------+---------------------+-~-----~--------------+ I 6.3 - 16K 1 I 1 I I 11/03, 11/23 I 1 I CT15~, I SET), GEMINI (BOARDS) VT103, I 1 11/03, J-11 (BOARD I I I 1 CT150, CT120, CT250 1 VT103, 11/23B, I GEMINI (BOARDS ., 1 +------------+---------------~+---------------------+----------------------+ I 16 - 40K I I I I I I I I I 1 11/60, 11/44 I 11/730, 11/750 I I 11/03, 11/04, 1 11/23, 11/23B,1 MINC, 11/24, 1 1 11/34 I 11/2XJ, 11/23B, MINC, 11/750, 11/24, 11/75U, 11/34, 1 I I I I CT-SCORP, SUVAX, 1 TWS, 11/2XJ, 11/75U,1 11/24, 11/750, ·1 11/34, SCORPIO, I SCORPIO (BOARDS) I +------------+----------------+---------------------+----------------------+ I 40 - lOOK I 11/24, 11/34 I 11/24, 11/2XJ, I 11/24J, 11/24, I I I 11/34, GEMINI, 11/730, 11/750 I 11/750, KS10, ATHENA, NAUTILUS, ATLAS I· ATHENA I I 1 I 11/2XJ, SCORPIO, 11/730 1 11/750, 11/730, I I +------------+-----_:..._--------+---------------------+------------------'----+ I 100 - 250K 1 11/70, 11/750 1 11/44, 11/70, I 11/70, NAUTILUS, I 1 I KS10, I 1 I I I I 1 I +------------+----------------+-----~---------------+---------------------~+ I 250 - 625K I 11/780 I 11/780, VENUS, I 11/780, VENUS, I +------------+----------------+--------------------~+----------------------+ 1625K - 1.6M I KL10 I 2080, KL10 I 20S0 I +------------+----------------+---------------------+----------------------+ 5.28 DEC r£T EQUIPMENT SAlES 32 IqQQ M . (J I'\; ~ I L L 1800 1700 1600 1'500 1400 1100 1200 1100 a 1000 qQO S 800 700 I N 81T SVSTEMS PRICE BAND PROFILE FY82. FYSLf. ~ FVSb ~ 16 BIT SYSTEMS II 12 BIT SVSTEMS --------------------...-.-.----- ------- -- ------- ---~---. 0 36 .... ---------- ---- .... -----..------ .... P\,IQV 1980 DATA TERM I NALS NOT SOLD WITH BIT SYSTEMS IZJ -~ bOO ';00 400 '300 200 100 0 FY82 FY84 PRICE BAND SVITEMS --------,-...-------- FYSb [ill COMPANY CONFIDENTIAL CPU AND TERMINAL PRODUCTS AVAILABLE BY PRICE BAND ND ~ 1980 • ~r4 +----------------+---------------------+----------------------+ I FY82 I FY84 I FY86 I +------------+----------------+---------------------+----------------------+ I 0 - 6K I Terminals (LA I Terminals (LA, VT, I Terminals (LA, VT, I I I I I VT, VK) I I I I I I I I 11/03, 11/23, I 11/24 (box) I I I I I 11/34A, I I I I I I I I I I BOARD SETS I I VK), CT FAMILY, BOARD SETS I I VK), CT FAMILY, BOARD SETS I I +------------+----------------+---------------------+----------------------+ I 6 - 16K I 12b Systems, I 12b Systems, I 11/238 (box), I I I 11/03, 11/23, I 11/23B, 11/24 (box) I 11/24J (box), I CT/MU, CT150 I 11/24 (box), I 11/24J (box), CT/NU I Scorpio (box) I CT250 I +------------+----------------+---------------------+----------------------+ I 16 - 40K I 11/23, 11/24 I 11/24, 11/23B, I 11/23B, -11/24J, I I I 11/24J, 11/34A 11/238, 11//24, 11/750. I I I 11/750, 11/730 11/780, 11/750 I I 11/780, 11/750 )tlltl(. I I 11/3 4A?, Scorpio, 11/730 (box) I I I I I 11/750, 11/730 I I I I I 11/780, 11/750 +------------+----------------+---------------------+----------------------+ I 40 - lOOK I 11/44, 11/34, I 11/44, 11/70, I 11/24J, 11/44, I +------------+----------------+---------------------+----------------------+ I 100 - 250K I 11/70, 11/44, I 11/70, -11/44, I 11/70, 11/44, I . I I +------------+----------------+---------------------+----------------------+ I 250 - 625K I 11/780, KSI0 I 11/780, Venus I 11/780, Venus I +------------+----------------+---------------------+----------------------+ I 625K + I KL10 I Jupiter I Jupiter I +------------+------~---------+---------------------+----------------------+ 5.JU 161 VS. 32B OLD AND NEW DATA 168. 5." 4'''' 3e•• 3280 NOV' 80 OCT '81 DATA DATA 2'" 1'" • --~--~~~~~~~1-~~~-- FY '82 '84 '86 '82 '84 '86 The current plan shows the 16B architecture family to h~ve relatively flat growth compared to the plan developed one year ago. nov 8' DATA OCT 81 FY86 DATA FY86 W/SS J-----==t-- 36B 1% 36B 410 Th. 32B family growth plan, as of October 1981. re8ulted in that family representing 59\ of equipment salea. Th. Iove.ber 1980 terminal data included the WP and Retail projections. The 361 family has a significantly larger % of the equipment sale. in the current plan compared to the older plan. ~.31 610 NOV 1980 OCT 1911 DATA PLU WP/SS 6% 36B 41 I - - - = = l - - 36B 1~ FY86 36B S% 36B 21 FY84 WP/SS 3% 36B PRODUCT:FAMILY FOR FY82. FY84. "86 IN ntE NOVEMBER 1980 DATA. 3% 368 PRODUCT FAMILY FOR FY82 , FY84. pya6 IN THE OCTOBa 1911 DATA. 3% OCT 19.1 PLAN TOTAL AU. rAHlLYS ,A."FY86 /. N o /' R , \ ........... " "./ " ~""'-"'" '" / "84 \ , \ /' / , ,------ • "/ \• \, ,./' FY82 \ \ \ , \. / ,~ o U ~ lC ~ ad ~ ... "t ~ ... ~ ~ ~loll I ... ~ § ~ .. ad ~ I ;: ~... ~ W 0 loll 0 ~ z: ~ ~ M loll 0 ~ M 11fE PRICE BAND PROFILE CHANGE FROM FY82 '1'0 FYI6 SHOWS THAT 11fE BULK OF THE BUSINESS .lEHAINS IN THE PRICE lANGE ABOVE $161. THE 'lWO BANDS THAT HAVE 11fE HOST SIGMlrICAIIT CRCNtHRELATIVE '1'0 TIl! REST or 'l'H! lANDS AlE THE 2.51 TO 6. 31< BAND (T!lHINALS AMI) C'1') AND THE 2501 '1'0 6151C (YEWS). 32B _ OCT 1981 PLAN BY PRICE BAIID /,,"86 \ ,/ ! / / ~!"-\ '\ \ I /' /" FY82 , , ..1/ , ... M ~ ....; 1.1 CIl ;: ~ ~ ~ N Ch .. '" ~ '" ;'" ::; 1 .D ~ Cit Ch '" 0 ~ M '" 2 0 I \\ \' 0 ~ \ M a 0 ... lC ~ ~ THE BREADTH OF nlE 328 FAMILY REMAINS LARGELY IN THE $40K AND UP IN FY86. TOTAL 321 161 PIICI IAIID SHI" , OCTIl DATA 500 800 700 ,\"86 400 600 / 300 500 400 , i 200 300 , / '\ \,A V" , 200 I. lOa lOa 0 W ... "! U III x ~ .. .. ~ M ! ~ ~~ 1 :it ..."! 4 ~ i ! ......'" ...'" = ""W M ~ :01 loll M .. ad M ~ loll 0 ~ I ad u III ;: "t ...~ ~ ~ ..... ad N ~ 0 ..."" .. :it ad ~ M ~ ad 0 2 i~ II.: ~ ~ .. ad 0 2 ::... W a 0 -..... II.: .. ~ '1'£RHS/WS 5.;$;$ PRICE lAND SHIFTS FROM "82 TO FY86 FOR 168 AND l'EIHINALS/WORlSTAnONS. n BACK OF ENVELOPE" FY83 CENTRAL EN3INEERIN3 INVES'IMENT CCMPARISOO WITH FY82 THROUGH FY86 ClMULATlVE REVENUE PROORAM +I 16BIT ClJYlUIATIVE (UNDISCOUNTED) NOR FY82 THRU FY86 FY83 ENGINEERING 19% 30% 72% 54% 5% 4% 16% 11% l- I 32BIT +-I 36BIT +I TERMINAIS & I WORKSTATIONS +----- FIGURE 1. EG:kr3.29.1 5.J4 "BACK OF ENVELOPE" FY83 CENTRAL EKiINEERING INVESTMENT BREAKDCl'IN BY PROOAAM $M -+-----+- - - - - - - - , -+ I I I 168 TEIMINALS & 328 I .368 I I WCRKSTATIONS I I I I I I - - - I f - - - - , _ _ + _ ----r--- --+--, --------+ 12.3 I I ----+ --~------'--rl-------+-------~34.5 I I +I SYSTEM PRCXiRAM I I I EN:; OOGANIZATlOO --- GU'lMAN t I AVERY +-,----- ---------- I DEMMER 44.0 -+----+------ - - - - - - + I I FAGERQUIST +---I SUB'roTAL I - 19.0 NOTE 4: NOTE 5: 12.5 I I ----+ 12.3 63.0 12.5 I -+--,-----~------~-----+- I [ACROUTE (OP) 1 3.4 17.6 I +-----,--+--+I JOHNSOO (SW) 2 19.4 44.5 I +-----------+I SAVIERS (SSO) 3 8.6 45.7 I +I TEICHER (SEG)4 5.1 9.2 +-----, -+-TOTAL 48.8 I I 180.0 % 19.4% I 71.5% I .. +NOTE 1: NOTE 2: NOTE 3: I 34.5 I I -----+I 4.0 2.1 40.6 5% 251.9 100% +-- I ,-------+ ---+ I -+ I ---,-+ I I ---------------+ Allocated in proportion to 16B and 32B Engineering Expense. Allocated according to projects within SW Engineering. Allocated according to primary program office 16B, 328 Engineering Expense, except for identifed Tenninals & Wbrkstations projects. Allocated in proportion to primary program office investment in 16B, 328 and Tenminals & WOrkstations. The remaining part of the Engineering expense for FY83 is treated as overall support for the programs. FIGURE 2 FYS2 - FYS6 OCT Sl SHIP PLAN NOR $B +-I I PROORAM I +I 16BIT I FYS2 I t I FYS3 6 I I I FYS57 I I FY84 I CUMUIATIVE I FYS6 I (UNDISCWNTEDl NQR IFYS2 TO FYS61 % I 1.4 1.5 1.5 1.5 1.5 1.0 1.S 2.5 3.6 4.7 I I 30% 7.4· 32BIT 54% 13.5 36BIT .1 +--------+----tI TERMINAI.S & I I WCRKSTATIONSI .2 I I .2 .2 .3 .3 1.0 .3 .4 .7 1.0 -+-I I 2.7 11% I I OVERALL I TOTAL +NOTE 6: NOTE 7: . 4% .. - t- FYS3 data is 1/2FYS2 and 1/2FYS4. FYS5 data is 1/2FY84 and 1/2FYS6. FIGURE 3 5.36 100% 24.6 I I ,..--" FY83 ENG INV ESTMENT VS. FY86 NOR BY PRICE BA ND % OF TOTAL INVESTMENT/REVENUE R E ~o ~.,~ ,0X AJ AJ v 1I ~ e s 1 T T ~ - '" E' b X- '1 70 ~o/o - E AI ,...... t 10 - % ~ E u ,.... v ~ ,~ 1010~ U ~ ,., %Il. ..- :r ~ v R e- "E -- V }.J e u "e ~ .J - t t ..... AI ~ ~ "E ~ N ~ r (.) AJ c II T r t ~ t e T r-- , " S AJ .-It .r AI u ~ e T T ~ Jill. AI r $ -,- E T ~ AJ T AI N u tI u " t .r AJ E T ~ V N AI N .: E C ~ I N l/ If J ,.,T e , AI u ~ r- ,- b1-4 f .- ----, '" PRICE BANDS leo ($K) I , I-- ra e v i:N U E MARKET SEGMENTS DEFINITIONS 1. System Components The products sold to third parties who build and resell systems. The se<]ment shown is for minicomputer boards, boxes and systems. Below thIS space are the semiconductor components. 2. Technical/professional Eng ineers, scientists, planners, consul tants and other professionals and departments buying products to use for various Technical/Professional purposes. 3. Management Decision-Making This is a new segment, as yet not well defined. Much of the Technical/Professional computation is done in support of management. However, the new segment is intended to imply the new computer tools which are specifically intended to make organizational management more productive. 4. Office This is primarily Word Processing, the market for office automation. 5. Accounting Transactions/Financial This segment is transactions. 6. the routine processing Very Small Business A subset of (5) in very small businesses. 5.J7 of accounting and financial MARKET 5E6MENT~ SI Z E «GROWTN RATES, SHARES 198) t>137B a,. '8M 3~% { DEC ACC.OUNTING. TR..""N SAC-."ON /FrNANelAL. 1980, ~ 108 OFFIce (WP) IBM 3s:~cr.l DEC TANbY 4.b'- 391. DEC. 04---'" $12.6 MAtlAc;.EME~" t£C.lSiotl- MAklr-l~ TE"C..~ NICAL PRoFeS6loN AL $26.6 SYSTEM C.OMPONENTS SMART/MCGJNHfS IBM REVENUE ESTIMATE~ BY SYSTEM TYPE 78 77 81 82 83 84 85 H&S SERIES 0 0 0 ~ 1,308 5,925 8,690 10,398 9,192 3033 0 2,448 5,141 6,24:S 4,411 940 0 0 0 3032 0 864 2,331 e 0 0 0 0 0 3031 0 1,078 2,770 23 0 0 0 0 0 4341 0 0 71 1 ,510 3,666 3,842 1,945 0 0 4331 0 0 210 3,062 900 568 90 0 0 O&C SERIES 0 0 0 0 0 307 2,515 3,101 4,446 370/148 2,301 2,608 0 0 0 0 0 0 0 370/138 1,976 1,760 52 0 0 0 0 0 0 S/38 0 0 0 1,400 1,936 2,583 3,357 4,373 5,576 S/34 0 625 875 992 983 970 1,210 1,700 2,200 S/32 412 63 0 0 0 0 0 0 0 65 104 ,280 344 422 519 637 800 1,000 0 0 0 0 60 1,000 1,500 2,250 3,175 OTHER _,706 1,716 131 0 0 0 0 0 0 TOTAL 9,460 11,266 11 ,861 12,579 13,686 16,654 18,944 22,622 25,589 5/1 PERS. COM. NOTE * 80 79 THE SIGNIFICANT GROWTH OF S/38 AND PERSONAL COMPUTERS ON "IF-SOLD" BASIS SOURCE: DON MCGINNIS FEB 1982 !5.40 IBM REVENUE ESTIMATE .fc- BY PRICE BAND 81 80 79 78 77 82 84 83 85 0 0 0 0 0 56 175 288 102 485 432 379 1,670 1,278 2,016 3,027 4,664 5,374 $4-10M 2,378 4,033 6,494 4,765 3,087 3,335 3,629 4,089 3,442 $1.6-4H 1,470 2,360 3,470 684 1,387 1,719 2,571 1,714 470 $625K-l.6M 3,510 3,498 76 1,222 3,137 4,112 1,871 1,580 1 ,436 $250-625K 123 78 275 2,600 1,984 1,260 1,840 2,265 3,391 $100-250K 816 119 113 503 1,424 1,687 2.,458 3,302 4,399 $40-100K 399 635 968 929 980 890 1,090 1,500 1,950 $16-40K 279 111 186 224 440 600 760 1,000 1,250 $6.25-16K 0 0 0 0 10 409 524 750 1,660 $2.5-6.25K 0 0 0 0 60 670 1,000 1,500 2,115 OVER $25M $10-25M $1-2.5K NO TRUE SYSTEMS - NOW OR ANTICIPATED TOTAL 9,460 NOTE 11,266 11 ,961 12,597 10 TRUE SYSTEMS - NOW OR ANTICIPATED 13,,787 16,754 18,945 22,652 25,589 THE HIGH EXPECTED GROWTH OF THE $2.5-$6.25K BAND, AS WELL AS THE MID-RANGE BANDS OF DIGITAL'S TRADITIONAL STRENGTH. *ON "IF-SOLD" BASIS SOURCE: DON MCGINNIS FEB 1982 QUARTERS TO BREAKEVEN~ CASH BREAKEVEN CHARTS TERMINNLS QUARTERS TO BREAKEVEN- SYSTEMS Scue.ee ~ ?~ouer~USfN.'J PIA""~ LA34 5o a: Q. I 11/730 LASS t; I 20B 0 W_MVG. en J 11/7B 0 J US20 w. ,, VT100 i LA1S0 AVG LU20RA AVG ~ VENUS CJ ::J g 11n50 ~ AVG 1 L J I . , .LLILL /1 11/24 LA12 J VT10 1 I I o I I I I J 11/238 I I J J J J I 10 5 f I POT150 I VT125 I CT I LA24 -.I . ...L.L I I J I o 20 15 I QUARTERS TO BREAKEVEN FROM FRS I I I 5 f ~UAATEAS I t I I 10 I I I I I I I 15 TO BAEAKEVEN FROM FRS QUARTERS TO BREAKEVEN- STORAGE en u t- ::J 0 0 a: Do 5.41 J RC25 TU78 AX50 w. AVG AMSO UDA50 J1 I \1} ? t" c tn Ave ~ ,~ A050 RAS! AABO TUSS AM05 HSC-50 AP07 AP20 'l I '" ~ 3! ....(n I (b ~ ~ ~ I I I I 5 I I I I I II I 10 ~ ~. 0 J I I I I , I J o J 15 , I I I' 20 • QUARTERS TO BREAkEvEN FROM FRS 25 NOR VS. IRR- SY~ , 10000 - VENUS I:l. 8000 - - 6000 :E fit - - a: ~1/780 a z 4000 11/730 6. - ~1/750 2000 2080 CT I:l. I - o o 20 11/24 I:l. I:l. ll. T 40 I 60 I 80 IRR el) IRRSYS.RNO 29-JAN-82 SOURCE: PRODUCT BUSINESS PLANS 11/44 I:l. PDT 150 T I 11/23B I:l. (BURP) 5.42 100 NOR VS. IRR- STORAGE 4000 aooo -- - CAR"tTI ~) a - : I: fRo 2000 - 0: a - z RA60 a - RA8I 1000 o - RD50 RMBO ~ 6. HSC50 RgO a MSPII ~TU7~ f f1RP20 J I I I I I I I 25 a RP07 50 TU5 I I I I o a 50 I I I I 75 I I I I 100 IRR el) IRRSTO.RNO aO-JAN-82 SOURCE: PRODUCT BUSINESS PLANS (BURP) 5.43 125 NOR VS. IRR- TERMINALS 800 / - LA120 b. VTIO] b. 600 - LA34 b. a: o 400 vX100 It\.LA12 ~ b. b. LA36 z LA24 VT125 200 u VT180 - LA120RA b. b. o I J o 20 I I 40 60 J 80 IRR (I) IRRTER.RNO 29-JAN-82 SOURCE: PRODUCT BUSINESS PLANS (BURP) 5.44 100 PG ENGINEERING EXPENSE P.G. ENGINEERING EXPENSE ($M) 82 83 TECH VOLUME: TOEM MICROS 2 1 2 9 TECH END USER: MSG(MED) LOP TPL ECS(EOU) ESG(ENG) GSG(GOVf) LCG 2 5 1 2 2 5 2 2 2 CSI MOC TIG PBI COMM'L ENO lEER: SMALL SYSTEl-1S : SERVICE: 85 86 3 4 16 3 3 7 1 2 4 4 9 4 11 2 3 9 5 4 3 11 14 2 3 3 1 3 2 2 6 4 6 4 5 5 1 5 7 4 1 6 10 5 1 7 12 7 18 7 COEM Tffi WP 4 9 8 4 10 11 5 12 11 6 16 18 22 29 MSG 3 5 4 4 6 5 5 7 7 7 10 11 8 12 15 73 85 107 144 186 CSS SERVICES CORP. TOTAL SOURCE: 84 1 1 1 8 8 FINAL CORIDRATE ffi LRP DATED IECEMBER 1981 5.45 CLINTON 2/3/82 SYSTEMS, ARCHITECTURE AND TECHNOLOGY - Sam Fuller Table of Contents Group Charter. 1 Base Plan A Scenario 2 Key Observations on Base Plan 3 Response to Unplanned Demand 4 Risks and Concerns 5 The Key Message • 6 Corporate Unfunded Needs • 7 i SYSTEMS~ ARCHITECTURE AND TECHNOLOGY GROUP PROVIDE THE TECHNICAL LEADERSHIP IN THE KEY AREAS AND PROCESSES NECESSARY FOR THE DEVELOPMENT OF DEC'S FUTURE PRODUCTS. IN PARTICULAR~ SA&T IS RESPONSIBLE FOR: * GETTING RESEARCH RESULTS THAT WILL LEAD TO INNOVATIVE PRODUCTS OR PROCESSES IN FIVE TO TEN YEARS * FUNCTIONS THAT OF NECESSITY REQUIRE A CENTRAL FOCUS: SYSTEMS ARCHITECTURE STANDARDS POSITIONING PRESENT AND FUTURE PRODUCTS TECHNOLOGY STRATEGIES * TECHNICAL ACTIVITIES MORE EFFECTIVELY DONE CENTRALLY: CROSS-ORGANIZATION/CROSS-PRODUCT STUDIES UNUSUAL (TO DEC) TECHNICAL EXPERTISE VERY NEW TO DEC SPONSORSHIP OF TECHNICAL CAREER LADDER NOTE: THE ABOVE IS MY OPERATIONAL DEFINITION OF "TECHNICAL LEADERSHIP" AND IS ALSO THE CHARTER FOR OUR GROUP· -1- S. FULLER 6 JANUARY 1981 SA&T BASE PLAN Scenarlo A Central $K FY81 ' Actuals FY82 Bud 83 Bud 84 Bud 85 Prop 86 Prop Standards 410 480 535 626 736 846 Architecture 501 9~2 1100 1229 1413 1625 Opns & PIng. 382 450 479 547 627 721 Contingenoy 0 220 Strategio Opp 0 214 350 413 487 575 XCON 286 400 450 504 562 630 CRG "2728 3186 3732 4295 4941 5679 SPA 1279 1410 1745 2017 2322 2689 Personnel 0 215 241 270 310 357 Hudson Relooation 0 1576 2182 2430 2795 3214 5586 9133 10814 12331 14193 16336 RAD 1387 1718 1969 2373 2800 3304 Total 6973 10, 851 r2,783 14,704 16,993 19,640 Subtotal -2- KEY OBSERVATIONS ON SA&T BASE PLAN o THERE IS ZERO NET GROWTH IN PEOPLE. THIS IS INCONSISTENT WITH COMPANY'S NEED FOR STRONG RESEARCH ARCHITECTURE STANDARDS AND PERFORMANCE ANALYSIS FUNCTIONS. 1 1 I o PERFORMANCE GROUP NEEDS MORE CENTRAL/STRATEGIC FUNDING OR LONG TERM CROSS FUNDING COMMITMENTS. CURRENT APPROACH FORCES FOCUS ON SHORT TERM RATHER THAN STRATEGIC ISSUES. o UNPLANNED DEMAND FOR SA&1 RESOURCES MUST BE RECOGNIZED IN THE APPROVED PLAN. SAM FULLER 1/22/82 -3- UNPLANNED DEMAND FOR SA&T RESOURCES - HISTORY CRITICAL UNPLANNED PROJECTS IN PAST YEAR • ROBIN/VTI8X • ZEBRA · ECL 11/780 ANALYSIS • ARPA PROPOSAL · OPERATIONAL ETHERNETS • VAX 11/750 WORKSTATIONS TO UNIVERSITIES • VAX SUBSET PROPOSAL • IBM S/38 ANALYSIS • CMU PROPOSAL • LSI-11/23 FRONT END PROTOTYPES · LISP STARTUP PEOPLE WHO LEFT SA&T FOR CRITICAL pROJECTS IN PAST YEAR GLORIOSO KOTOK AND EGGARS TO VENUS GAUBATZ AND MORSE TO PDP - 11 (PSD) PASSAFIUME AND TARDO TO DECNET LINDENBURG TO NEW DIST. SYSTEMS GROUP IN MR PEOPLE DIVERTED FOR SIGNIFICANT PERIODS POTTER ON ETHERNET STRECKER ON SEVERAL PROJECTS CLARK ON NAUTILUS RUPP TO ZEBRA/ONYX J BOTTOM LINE: PLAN MUST RECOGNIZE SA&T CONTRIBUTION TO UNPLANNED DEMANDS: RECOGNITION IS NEEDED IN THE FORM OF $1 HEADCOUNT PROJECT PRIORITIES J SAM FULLER -4- 1/22/82 RISKS AND CONCERNS o SA&T HAS A TECHNICAL INTEGRATION AND RESEARCH/ADVANCED DEVELOPMENT FOCUS SOME CONSEQUENCES: DIFFICULT TO RANK WITH REGULAR PRODUCT DEVELOPMENT GROUPS. ZERU NET GROWTH - NO MAJOR NEW STARTS U SA&T IS SEEN AS A SOURCE BUT RARELY A NEW ASSIGNMENT FOR KEY PEOPLE o AS ENGINEERING BECOMES LARGER AND MORE INTEGRATION FUNCTION IS MORE DIFFICULT DECENTRALIZED~ THE SAM FULLER -5- 1/22/82 THE KEY MESSAGE IS: SA&T NEEDS SOME BEAL GROWTH TO BE AN EFFECTIVE FORCE IN PRODUCT DEVELOPMENT. REAL GROWTH MEANS FUNDING ADVANCED DEVELOPMENT OVER AND ABOVE THE "A SCENARIO" LEVEL. SAM FULLER -6- 1/22/82 CORPORATE* AD REQUIREMENTS B & C .SCENARIOS - PRIORITIZED FY83 TERMINALS ARCHITECTURE MICROVAX ARCHITECTURE STANDARDS LISP SOFTWARE RESEARCH END USER PRODUCTIVITY VLSI KNOWLEDGE BASED SYSTEMS WORK STATION CLUSTERS ALTERNATIVE LAN TECHNOLOGIES DIAGNOSTIC ARCHITECTURE VAX SUCCESSOR ARCHITECTURE $ FY84 160K $ 180K FY86 FY85 $ 200K $ 220K 80 50 90 58 100 67 542 200 330 300 500 1452 621 400 400 350 550 1500 713 500 450 500 600 1140 110 77 700 500 325 600 650 730 900 1315 1410 1230 80 90 0 100 300 110 500 0 *THESE ARE VIEWED AS CORPORATE NEEDS AND SHOULD BE ADDRESSED BY SOME GROUP IF NOT SA&T. -7- SAM FULLER 1/22/82
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