A once-golden computer maker mines the rich vein of opportunity running through the World Wide Web
BY ANNE STUART
Finding It Online
Digital Corporate home page
DECdirect Interactive Catalog
Digital Technical Journal
Product information sheets for Alpha AXP line
Digital document search engine
Case study on Digital's Web efforts
This is Digital Equipment Corp.: Stodgy, old-line computer company. Initially a market leader, rising from its start-up in the 1950s to the industry's No. 2 spot in the 1970s and '80s. Best known in the '90s for missed opportunities, lagging sales, stumbling leadership, plant shutdowns, job cutbacks that slashed its worldwide payroll in half in just four years and billion-dollar losses that have only recently turned around.
And this is Digital Equipment Corp.: Globally respected cyberspace business pioneer. First computer vendor to use the Internet for interactive ordering. First Fortune 500 company to bring up a World Wide Web server. Creator of, among other things, the first municipal Web site, the first election Web server and the first Web retailer to handle transactions online (see related stories). Also, an innovator in in-house Web use.
Which is the real Digital Equipment Corp.? Apparently, both. And it appears they may be converging.
Founded in a former woolen mill in Maynard, Mass., in 1957, Digital steadily grew to be the world's second-largest computer-maker, nipping at IBM's heels during the mid-1980s. In those days, as market researcher Bob Djurdjevic has put it, Digital "looked as if it could walk on water." But by 1989, the company was on the decline because of sluggishness in embracing open-systems software and responding to competition from cheaper, powerful desktop workstations and PC networks.
In mid-1994, as part of a drastic turnaround plan, new CEO Robert Palmer scrapped Digital's traditional "matrix management" philosophy, under which the company's various product lines shared sales, marketing, manufacturing and engineering staffs. Instead, he revamped the management structure into independent business units, each with its own staffand each accountable for profitability and customer satisfaction.
Among the most highly publicized new units is Digital's Internet Business Group, based in Littleton, Mass. It's that division that is leading the company's charge into cyberspace, transforming the weary corporate soldier into an aggressive warrior in the battle for business on the Web. In the past year, Digital has moved onto the front lines, developing a variety of Internet-related products and services, making all its platforms Internet-ready, offering consulting services and forming partnerships with vendors such as Netscape Communications Corp., the Mountain View, Calif., Internet software developer.
Most dramatic, though, was Digital's debut on the virtual global stage. In the first year after its external Web site went live, the company's home page recorded 6.7 million hits.
The experience has turned Digital's Internet pioneers into true believers in what Russ Jones, director of the Internet Business Group's program office in Palo Alto, Calif., calls a juggernaut rolling through American business. "The Internet is not a fad. It's a fundamental shift in information technology infrastructure that's going to be as profound in the marketplace as PCs were to the 1980s," he says. "It has implications for almost every business in the United States."
Digital cast its lot with the Internet about three years ago as the troubled company's executives began seeking new ways to connect with their customers.
"The business rationale was that the Internet was global, and we're a global company," Jones says. The Internet also allowed Digital to get information to customers and potential customers with little or no delay. "For example, when we announce a new product, we take the detailed technical description and we can have it online for global access almost immediately. We don't have to wait to ship [the product] overseas or get it out to the local field office so they can drive it out to their customer site," Jones explains.
Technologically, Digital was well-positioned for the move. Its engineers and researchers had been using the Internet for years, and every employee in the company has access to the Net for e-mail. As Rose Ann Giordano, the Internet Business Group's vice president, puts it, "Networking has been something we've been involved with and using as long as it's been in existence. It's part of our core competency."
In addition, Digital was already running a server offering product informationperformance reports, technical data and catalogs, for instanceover the Internet via file transfer protocol (FTP). "So when the Web came along, it was pretty straightforward to just put a point-and-click facade on top of that," says Jones, one of several Digital employees working on separate Web initiatives at the time, who have since come together in the Internet Business Group. Now users can access thousands of documents, including technical information, white papers, journal articles, promotions, performance reports and suggestions for applying products to business problems. One hypertext link brings up a welcome letter from CEO Palmer; another yields work from computer cartoonist Rich Tennant.
Like the Web itself, Digital's site started out small but ramped up quickly. In the first few weeks after going live in October 1993, its home page recorded about 3,000 accesses a day. By March 1995, steady traffic ranged from 75,000 to 175,000 accesses daily.
Despite the increase in traffic, luring visitors was easier two years ago, when there was little else online to satisfy the high-tech community's curiosity about the medium. Now, with hundreds of competing home pages going up monthly, Digital's Web staffers say their challenge is to encourage return visits by keeping their content fresh and useful.
Rising interest has also left Digital's Internet pioneers scrambling to reevaluate the marketplace. "The thing we never could have anticipated is how much demand there really is," Jones says. "Every time we think we have a handle on the opportunity, it turns out to be twice as big as we thought."
In the early days, Digital's external Web site ran from a single machine, which was also being used as an FTP archive and a server for the Wide Area Information Service (WAIS), an Internet search and retrieval tool. Later, the Web site moved to its own server; now, with more than 4,400 documents online, it sprawls across three servers.
But Jones says the hardware statistics don't tell the real story. "The server's easy to run," he says. "It's a computer; it kind of runs itself. The hard part is the content management that goes on behind the Web server."
The emphasis on content is illustrated by the company's Web-site staffing. Digital has assigned only one IS manager to its external Web servers, although the company maintains a larger IS staff for its internal sites. "But behind the systems manager it's at least a magnitude of 10 in terms of content management," Jones says. Those employees, primarily marketing specialists, oversee the review process Digital's divisions must undergo to publish information on the Web and elsewhere. Staffers also track online documents to ensure that all content is accurate, up-to-date and applicable worldwide. For most, the Web work is an additional line on their job descriptions, rather than a full-time position.
How does Digital's Internet presence affect the bottom line? Giordano says only that the Internet Business Group's charter was to create a "substantial" new organization. "We're not interested in starting a $10 million business," she says. "We think this is going to be a significant piece of the Digital Equipment Corp. in years to come."
Giordano says the initiative is already bringing in revenues, although she declines to discuss numbers. Digital officials attribute the income primarily to product sales; in addition, they say, the Web site saves money by allowing the company to phase out some direct-sales jobs and cut the cost of printing and mailing promotional materials.
Analysts contend that it's tough to gauge the value of the company's investment. David Wu, an analyst for securities firm S.G. Warburg & Co. in New York, says Digital's Web presence ranks "about 55th" on his list of priorities for measuring the company's performance. "It's a footnote," he says.
Others say that despite its expertise and leadership, Digital's Internet Business Group remains one of the Internet's best-kept secrets. "DEC is making the right moves," says Tim Sloane, director of messaging applications for the Aberdeen Group, a Boston-based high-tech market consulting company. "Now it's a matter of effectively marketing all that energy they're expending."
The Web has also become a critical part of the company's enterprisewide strategy, helping to sell hardware and software, generating partnerships and stimulating new product development. Customers can buy and download software "patches," register for seminars and courses through an interactive catalog, browse through frequently updated online publications, join discussion groups and link to Internet newsgroups and mailing lists on Digital topics. And, in one of its best-publicized services, the company offers Internet users a free "test drive" of its Alpha AXP computers. About 1,400 times a day, somebody logs onto the Alpha server from somewhere in the world to kick the system's tires.
Digital has also invested heavily in the Web as an in-house communications utility. Currently, the company maintains about 250 internal Web servers worldwide, using the medium for everything from posting announcements to offering training seminars to linking far-flung members of project teams.
"We're seeing it as very useful for getting information to ourselves," says Tim Horgan, technical director of Digital's Web Services Group, a Marlboro, Mass.-based division that oversees the company's internal Web use. Its value, he says, lies in reducing time to market by helping employees find information that already exists somewhere in the company.
Or in someone else's company. Horgan recalls that when Digital was embroiled in a bidding war for a particular customer's business, one curious staffer called up a competitor's home page, where he easily obtained a detailed product description, specifications and performance numbers. Armed with that information, Digital revised its sales pitchand won the contract. "That, for me, was the resounding proof that this tool's going to work," Horgan says.
And Digital expects to continue growing its in-house Web use. For example, in the near future, executives hope to use the Web as a supplement to Lotus Notes and other tools for conferencing. "Notes gives us a way to talk to each other. The Web is a large repository of information," Horgan says, explaining the distinctive functions of the two.
While employees can use Digital's internal servers to visit outside Web sites, firewalls and other security measures prevent outsiders from viewing Digital's internal systems. And Digital's peeks at its competitors only reinforce staffers' understanding of the need to monitor every piece of information that goes out to the world via the Web.
Running a close second to security on the Internet Business Group's list of concerns is content, and that means more than sparkling prose, exciting hypertext links and cutting-edge graphics. Above all, Jones says, the virtual world must reflect reality. "One of the things that's becoming very obvious to the Web community is that the Web doesn't make your products any better," he warns. "It might make them easier to understand, it might make them easier to find out about, but it doesn't turn a sow's ear into a silk purse."
And even the best Web site won't make a difference if nobody visits it. Jones says some companies have rushed to put up flashy home pages, only to find that their customers couldn't care less. "They don't have a global audience for what they do, and for them, perhaps, the Internet is not the right thing," he says.
But for those certain the Web is the way to go, Giordano has just two words of advice: Don't wait.
What's the rush? "The market is just going to continue to grow. Commercial use of the Internet is just going to continue to grow. It's just too compelling for it not to," she says. "I believe the whole Internet is going to be integrated into the business just like the PC and the fax and the phone."
Five years from now, she says, we'll all wonder how we ever got along without it. "This is not only a technology, it's an environment that is going to dramatically change the way business is done."
A sci-fi bookstore finds unexpected life (and customers) in far-off worlds
When Digital Equipment Corp. invited Palo Alto, Calif., bookseller Jean Schroeter to put her business on the Internet, she had just one question: "What's the Internet?"
That was in early 1994. Today, Schroeter's Future Fantasy Bookstore has become a model for online entrepreneurs. The science-fiction bookshop filled more than 2,200 orders through a World Wide Web site in its first year, accounting for at least 20 percent of its sales.
That success was beyond Schroeter's wildest fantasy when Digital asked her to set up shop in cyberspace as part of a pilot program to demonstrate howwith Digital's helpbusinesses and organizations could benefit from a presence on the Web.
Customers accessing Future Fantasy's Web site can browse through an online catalog, view covers of new books, place orders and read up on book news. The home page also offers hypertext links to other sites, including reading-related news groups, the Internet Book Information Center and two online fiction magazines.
Future Fantasy, a Palo Alto fixture since 1979, historically got most of its business from walk-in or repeat customers who live or work in the area. But by opening an electronic storefront, Schroeter transformed her one-woman shop from a local business to a global one. A customer in Sweden placed the first order through the Web site, and since then, she's filled orders from all over the world, particularly Europe, Australia and Japan. "The only continent we haven't hit is Antarctica, and we're working on that," she says.
Schroeter estimates that for every book-lover who buys something through the Web-site, 100 others drop in to browse online. But she doesn't mind. "This is basically found business," she says. "It's all business you never would have had in just a walk-in store."
You'll find the The Future Fantasy Bookstore at http://www.commerce.digital.com/palo-alto/FutureFantasy/home.html.
Everything you always wanted to know about Palo Alto
About 18 months ago, executives at the Digital Equipment Corp. office in Palo Alto, Calif., wanted to do something special for the city's centennial. Working with city officials, they developed the nation's first interactive municipal World Wide Web site. When its Digital-designed home page went live in April 1994, just in time for the 100th-anniversary celebration, Palo Alto became the first community in cyberspace. Officials call that honor particularly appropriate in the Silicon Valley stronghold, where half the population has access to a PC at home or at work.
Over the past year, the Web site has become a one-stop source for just about anything anyone might want to know about Palo Alto. Tourists can point-and-click their way through lists of hotels, restaurants and shops. Residents can obtain public-meeting agendas, train schedules and annual reports. There are also hypertext links to the chamber of commerce and the city historical association. Earlier this year, officials posted the mayor's "state of the city" message minutes after it was delivered, while police used the Web to distribute a bank-camera photo of a robbery suspect. (Despite all this activity, the city at one point did allow some information to become outdated, including at least one of the hypertext links to its webmaster.)
Assistant City Manager Bernie Strojny says the Web site hasn't yet brought in revenues. "Right now, we're seeing it as a service. We've opened the community's eyes as to how the Internet can be used." But eventually, he says, after the legal and security issues have been resolved, the city hopes to let residents apply for permits, register for classes and conduct other city business online, saving costly staff time.
You can find Palo Alto's home page at http://www.city.palo-alto.ca.us/
California keeps the electorate informed
After the polls closed in California in the November 1994 election, millions of state residents turned to the World Wide Web to track the results. In what was billed as the biggest live event in Internet history, Digital and California election officials put up real-time results for all state and federal races and for dozens of ballot questions. The Web siteor, as Digital calls it, "multimedia news center"extracted data from the state's voter-tabulation system, reformatting it into county-by-county graphics. Numbers were updated continuously as results became available.
Russ Jones, director of the Digital Internet Business Group's program office in Palo Alto, Calif., describes the project as a "hybrid news medium," combining the best of print and broadcast coverage. "You have the depth of newspapers, but the immediacy of television," he says.
At the time, the NASA Jet Propulsion Laboratory held the record for the most accesses in a single day190,000for its Web photos of comet fragments crashing into Jupiter. But the election server won by a landslide, with 1.4 million accesses in the 24 hours after the polls closed. California election officials say they'll use the system again.
The Web server also offered candidate photos and position statements, party platforms, district maps and links to state agencies and tourist destinations. Information was provided in Spanish, Chinese, Japanese, Vietnamese and Tagalog, as well as in English.
Although frozen in time a few days after the election, the California election server remains online as an archive. You can find it at http://www.election.digital.com/