8 – Consistency, Thy Name Is…

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MD: RAMESH D GROVER

This might be the last year for Digital Equipment India Ltd (DEIL) to be seen in
the DQ Top 20 rank-ing as DEIL. Or it might not be. The status, predictably, lies in the
small details of the Compaq-Digital merger, which is yet to be made public. But for the
time, DEIL stands firm at # 8, a position it has held for three years in a row. Besides
the rank, the growth rate is also stable at 25 percent like last year.

A significant growth in a year when other hardware players have just about managed to
keep pace with the industry growth of about 18 percent. As for DEIL, it has once again
vindicated its long-stated objective of growing at above industry rate. Much of the credit
for this goes to tight inventory control, astute financial management, and high
productivity. For instance, the company has managed to keep its receivables to a low 30-45
days, as against the industry norm of 60-120 days. The company has also been extremely
prudent as far as adding manpower goes. For instance, while its revenue went up by 25
percent, the head count inched up marginally by 8.8 percent, and productivity by 17
percent.

For DEIL, pragmatism has been the key. Its decision to sell what the market required
instead of selling what it had was obviously a hard-nosed one. In fact, there were not
many who believed the Digital-Microsoft alliance would last, forget about the Alpha-NT
combine digital2.jpg (7483 bytes)succeeding. But Digital has proved the
naysayers wrong. The alliance has paid off handsomely, and more so in the enterprise
computing segment. Simply put, it offered an attractive value proposition-that of
investment protection by giving customers products that connect Unix to NT and OpenVMS to
NT. In the last one year, it has had several wins in the NT server space as well as in the
MS Exchange marketplace. Among the more notable ones are Crompton Greaves and Maruti.
While at Crompton Greaves it was Intel/NT migration to Alpha/NT for SAP, for Maruti it was
implementing RISC-based NT server for SAP. As for MS Exchange, the company set up a
350-node site on Intel for Maruti. Similarly, DEIL is Oracle’s best platform partner, with
more licensed Oracle users on Digital platform than on any other. In much the same way,
nearly 35 percent of SAP’s sale in India last year was on Digital platform.

S T R A T E G Y

  • Giving first-class solutions and services to enterprise customers and get a majority
    share in this market.
  • Enter into ERP space by taking advantage of the company’s proximity to the manufacturing
    segment.
  • Stay with the 1-3-9 strategy; one mission, three platforms-Unix, NT, Internet-and nine
    targeted segments.

T A C T I C S

  • Got Asia-Pacific reduces DEIL’s procurement prices.
  • Reduced sales force by 8 percent and moved sales to channels.
  • Tied up with companies like ABB and CMC to gain entry into segments like power and
    railways.

O B J E C T I V E S

  • Position DEIL as a preferred NT vendor.
  • To stay with a blackline.
  • Strengthen alliances.
  • Increase sale of PCs and Alpha systems through channels.

P E R F O R M A N C E H I G H L I G H T S

  • Grew by 25 percent over the previous year.
  • Remained consistently profitable.
  • Won the largest end-to-end comprehensive outsourcing contract from Reuters at $ 1
    million.
  • Won the single largest order from West Bengal State Electricity Board for Rs 15 crore.
  • Implemented the first Intel/NT migration to Alpha/NT for SAP at Crompton Greaves.
  • MD: SOM MITTAL

PRODUCTS AND SERVICES: Systems, Networking, Maintenance, Systems Integration, Training * TECHNICAL COLLABORATION: Digital Equipment Corp., USA * FINANCIAL COLLABORATION: 51 percent
equity by Digital Equipment Corp., USA l START-UP YEAR: 1988 l EMPLOYEES: 714 l DEALER
OUTLETS: 42 l QUALITY CERTIFICATION: ISO 9001 for Manufacturing, ISO 9002 for Multivendor
Customer Services
* ADDRESS:
Digital Park, 92 Industrial Suburbs, II Stage, Xeshwanthpur, Bangalore 560022
* TEL: 3374785, * FAX: 3374601, l WEB SITE: www.digital.com

Also, last year saw Digital getting its pricing right, and consequently gained in
a market where price slashes were tactically used to buy marketshare. Here, instead of
blindly slashing prices and taking a knock in profit, DEIL took full advantage of its
joint venture status to wrest cuts at the procurement level. Thus, the active support from
Digital’s Asia-Pacific region contributed immensely to enable DEIL to work with lower
margins and be profitable as well.

Besides, beefing up the channels and taking Alpha, too, along those channels has
enabled Digital to crack into accounts where it could not have penetrated on its own. The
strategy was to provide technology layer with applications coming from other vendors. That
was how DEIL could take on SCADA types of projects for the Railways with CMC and bid
successfully for power projects with ABB. Thus, last year, 75 percent of its PCs moved
through channel partners, up from 50 the year before, and 35 percent of Alpha systems
moved through the same, up from 27 percent the previous year.

By virtue of competing in the enterprise space, DEIL has had the benefit of selling a
host of services alongwith the hardware. All of these have helped DEIL register a
25-percent growth. Just looking at the contracts that it has won recently-Rs 8.5 crore
contract to develop fraud management software for Hyderabad-based Tata Teleservices (it’s
part of the Rs 50-crore contract won by TCS) and a Rs 15-crore order from West Bengal
State Electricity Board (WBSEB) to set up its computer-based communication network-and an
excellent post-merger quarter (wherein it sold the maximum number of Intel CPUs),
predicting what DEIL’s next year is going to be like is not very difficult.

Another segment which picked up last year is software exports. From a dip in the
previous year, the exports went up by 45 percent, just shy of Rs 50 crore-once again
proving the clarity of strategy of Digital in going after Y2K and high-end offshore digital3.jpg (20194 bytes)projects. What is also significant is that Digital has
reported close to Rs 33 crore in domestic software and services revenues, establishing its
status as a solutions provider as against an earlier image of a hardware vendor. Overall,
services contributed a healthy 20 percent to the revenues, with maintenance coming good
with a very healthy Rs 55 crore.

The key element in the Digital India strategy for the current year and beyond will have
to depend upon the way the post-merger operations are going to be structured. With
Digital’s CEO Som Mittal taking charge as the head of combined Compaq-Digital operations,
one can expect the Comdig alliance to have the same hard-nosed approach as exhibited by
Mittal at Digital. Synergies will be created, and enterprises will be targeted-as will
volume PC markets. Watch out for this company in the next year’s Top 5.

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