Merging Information Technology and Cultures at Compaq-Digital (A):
Meeting Day One Objectives
On June 11, 1998, stockholders of Digital Equipment Corporation approved its acquisition by
Compaq Computer Corporation, creating a $37 billion (US) personal computer and computing services firm. Within an hour of the stockholder vote, the more than 100,000 employees of the new Compaq were able to access a smgle e-mail directory via a corporate network that linked its world-wide sites. The IT units of the individual firms had banded together to successfully deliver their Day One objectives:
There wasn't a whole lot of time to decide who was going to make what decision.
As a team we marched off to figure out how we were going to get the networks to talk together even though they weren't the same technology. We figured out how to share mail, messaging—that kind of thing. It just had to happen pretty quickly. So we had a common task that we both went after. —Fred Jones. Vice President, Information Services. Compaq
Experts inside and outside the firm recognized that the Compaq-Digital merger created a firm that could rival Hewlett-Packard and even IBM. But in order to leverage the potential synergies,
Compaq's management team would need to overcome the challenges posed by the two firms' very different business models and cultures.
Company Backgrounds
Established in 1957, Digital Equipment Corporation introduced minicomputers to corporate computing environments. As minicomputers encouraged greater distribution of computer processing in organizations. Digital rose to become the world's second-largest computer maker in the mid-1980s. Headquartered in Maynard, Massachusetts, USA, Digital flourished under a highly distributed structure that encouraged innovativeness and consensus decision-making. In
1 997 the company had over 1 1 00 sales, production, and service sites world-wide, of which 400 were in the U.S.
In the 1 990s, management underestimated the importance of microcomputers in business, and the firm sank to a weak fourth among US computer manufacturers. Management responded by shifting business focus from computer manufacturing to computing services. In 1997 Digital had revenues of $13 billion, almost half of which were generated by its services business. More than
22,000 of its 70,000 employees were service business employees. At the time of the merger the firm was the third largest provider of corporate computer services after IBM and Electronic Data
Systems (EDS). In 1998, as it was about to merge with Compaq, Digital's profits exceeded $1.3 billion. This case was prepared