Republic escapes job cuts sweeping Compaq

The Irish operations of Compaq-Digital will not be affected by the current rationalisation process resulting in the loss of 17,000 jobs worldwide and the State will play a pivotal role in the development of Compaq's European services business, according to Mr Andreas Barth, Compaq's chief executive for Europe. Mr Barth told the The Irish Times: "Ireland will be a flagship call cent re for the European, Middle Eastern and African (EMEA) regions. There is a tendency to bundle customer-facing activities and we now plan to relocate pockets of customer support from other countries to Ireland." Though he could not quantify the expected increase in jobs, Compaq which finalised the purchase of Digital for $9.6 billion (£6.9 billion) last month plans to double its services business to $15 billion by 2002. This will generate increased demand for customer support on hotlines, and Compaq Ireland's call-centre facilities will merge with Digital's at a new 130,000 sq ft facility in Clonskeagh, Co Dublin, in October.

The two companies currently employ more than 1,500 people in Ireland. Last week, 5,000 manufacturing jobs were shed as part of its global restructuring. However, the Republic was excluded, the only change being the announcement that Digital's Galway base will become part of Compaq's services organisation for software development, publishing and marketing support.

Mr Barth expects Compaq's sales support and services arm will be fully restructured in the EMEA region by October 1st, with the Republic in a central position. He is highly complementary of the State's efforts to build a leading position in Europe for call centres: "The high education levels, and the fact Ireland is very attractive to young people, have been important factors in influencing our decision to grow the Irish business."

Digital's Galway operation has traditionally been a strong centre for European research activity. Mr Barth says it is possible this will be affected, due to overlap between Compaq and Digital's research and development activity worldwide. The concentration of growth in Galway will thus be on the development of services and support software.

Mr Barth co-ordinates activities in the EMEA region, which currently generates annual revenues of $15 billion. He predicts EMU will help harmonise activities, as resellers form stronger partnerships across Europe, eased by the advent of the euro.

He believes the Republic can teach the rest of Europe a great deal about best practices for attracting foreign investment.

"Ireland is a very good, positive example of how things can grow. It has understood the elements that attract foreign investment, and I just wish more politicians would go to Ireland and try to understand how it is done and learn from it."

Compaq's acquisition of Digital marks an advance by the desktop personal computers market leader into the enterprise area. Digital has long been recognised as a market leader in this area and it offers a well developed range of services to large organisations. The marriage with Compaq is a bid by Compaq to start competing head to head with industry giant IBM.

As more and more companies outsource their information technology (IT) activities, the provision of these services is one of the fastest growth areas in the IT industry. In 1996, industry analyst Dataquest estimated services accounted for 37.5 per cent of the IT market. Digital's services division employs 23,000 people, and in 1996 it generated $6 billion, or 46 per cent of the company's $13 billion total revenue. Mr Barth envisages Compaq eventually offering complete IT packages from handheld PCs right up to corporate data centres to large multinational corporations.

Under the restructuring process, it is expected the EMEA region will reduce its workforce from 25,000 to about 20,000. So far, restructuring has only taken place at management level, with changes expected gradually to affect the whole organisation as key areas of responsibility are identified. While products will still be delivered through the reseller channel in Europe, Compaq is also stepping up its direct sales activity. "The reseller channel will stay at the heart of our `go-to-market' model, but as Compaq moves from a PC to a total solutions company there will be a more mixed model. IT managers are increasingly looking for a one-stop shop for products and services, and we plan to do whatever it takes to deliver the contract to the customer. In the past, we would have referred these people to other companies."

Earlier this year, Compaq ran into problems with an inventory build up resulting in a surprise first-quarter loss. Now, Mr Barth says the problems, which were largely outside the EMEA region, have been rectified and inventory is running at its lowest level in years.

Compaq has clearly set the Windows/Intel (Wintel) platform primarily Windows NT and the Internet at the core of its future strategy. Tailor-made "mission-critical" applications, such as those designed by software giant SAP, are also central to Compaq's future. Many large organisations run their in-house applications on legacy or costly, customised mainframe machines, whose requirements cannot be fulfilled by the Wintel offering. Compaq sees its alliance with Digital as an expansion of its offering to these companies.

Digital has a very strong legacy system presence with its 32- and 64-bit Alpha chip technology delivering powerful applications to large corporations. Mr Barth believes Digital's Alpha, Unix and Vax products will complement rather than compete with Windows NT.

"While there is not one company not considering rolling out Windows NT, many companies will have their data centre operating at the core of their business on Digital Vaxes. There is no reason for them to replace these systems, but what we will see is newer applications, like the Internet and email, being rolled out on Windows NT."

The central mainframe will remain at the heart of the operation, with Windows NT surrounding it with new applications. By choosing Windows NT, Compaq is hoping to introduce some kind of industry standardisation for deployment of enterprise applications.

Compaq's relations with Microsoft have also been strengthened by the new deal with Digital. Since 1995, Microsoft has had a services arrangement with Digital to support and service its software, in particular Microsoft Exchange's messaging product and Windows NT. Microsoft would view Compaq as an ideal vehicle for the global roll-out of Windows NT.

Compaq has also underscored its commitment to the Internet by announcing a wide range of Internet services, including an enterprise applications extranet, an online store for third-party vendors, and electronic commerce alliances with United Parcel Services, GTE and, of course, Microsoft.

Its commitment to driving Internet usage is evident following a $200 million investment in cable modem vendor, Road Runner, recently. To create a standardisation of modems, Compaq plans to include cable modems in all of its consumer PCs by the end of the summer, and all its machines by the end of the year. This month, Compaq also introduced Active Answers, an extranet solely for partners and customers, that will disseminate best practice information for enterprise application deployment.

In an interesting turn, Digital's Alta Vista Internet search engine recently ended its alliance with the hugely successful Yahoo portal, possibly indicating a Compaq interest in establishing Alta Vista as a similar Internet gateway service. Mr Barth refused to be drawn on the speculation, saying he would prefer not to pre-empt any official Compaq announcements, adding there were plans for Alta Vista to be more than simply an Internet search engine.