Compaq back-pedals to keep Tru64 customers

Embattled director fends off attacks on vendor's decision to pull the plug on Windows NT for Alpha.

Gareth Cadwallader, recently appointed director of the Enterprise Solutions and Services Group (ESSG) at Compaq, can testify to how hard it is finding one's feet in an unknown workplace.

Instead of being allowed to settle in gently, he had to field calls and explain to irate customers why the vendor had decided to terminate any further development of the Microsoft Windows NT operating system for the Alpha platform.

Luckily for Cadwallader, most customers were able to understand the reason behind the decision. Now his job is to help them migrate to another platform.

"As there aren't many customers in the UK, it's necessary to tackle each one individually. In the next six months, Compaq will work with them, one at a time, to plan out what they do now," he said.

Cadwallader revealed Compaq wants to focus on Tru64 Unix on Alpha machines and Windows NT on multiprocessor Intel devices. "The Unix market is consolidating. Winners will gain more while the losers will disappear," he declared.

"Sun Microsystems and Hewlett Packard are out there on their own, and there's a big group led by IBM's AIX and Tru64. Compaq needs to separate itself from the group and catch up with the leaders, and maybe displace one of them.

"In the ProLiant Intel sector, it has reached phenomenal levels of performance in its shift from four-way Xeon to eight-way and 16-way servers," Cadwallader claimed.

"Compaq has to catch the same mindshare with this technology as it did with the entry-level System-Pro server. In the low-end, the company expects the same commoditisation that we've seen in the desktop sector. Compaq must lead the change and not become defensive," he added.

Cadwallader also claimed consolidation of the enterprise product and services divisions into ESSG showed that Compaq has recognised the need to present a coherent strategy to customers, ISVs and channel partners.

The ESSG's goal is to set up partnerships between ISVs, system integrators and support specialists to create packages tailored for particular markets.

Mike Hender, director of ecommerce at Compaq, will lead the initiative in the UK.

According to Cadwallader, the establishment of the ESSG means more than the partition of the sales force and marketing efforts to focus on particular industries.

He did not foresee the merging of the services operation into the product division to present problems for corporate clients, who prefer to work with partners that support other vendors' products. "In the UK corporate sector, the multivendor proposition is the only one that customers listen to.

"They want a single source service provision; they don't want to deal with up to 40 service providers. I don't think customers are in any doubt that we have multi vendor capability," Cadwallader said.

"Some of our leading customers don't buy Compaq at all. Between five and 10 per cent of our top 50 services customers do not have Compaq hardware on their preferred vendor list. The company has not lost one of those accounts since the Digital acquisition. It's not an issue," he added.

But unlike the issue of multivendor computing, Compaq has found more hard and fast rules as it aims to establish a customer choice-based channel model. "The vendor has done a lot of research globally and in the UK to find out how customers want to buy. The biggest customers give a fairly consistent answer; 35 per cent want the basic product and to strip it of channel value, while 65 per cent want to continue with a channel model."

Cadwallader explained how the latter model will allow customers to decide whether to buy goods directly from Compaq or to use a reseller. This approach is in the process of being tested. "We have done some piloting and we've taken some orders. But so far, we haven't found a flood of customers who tell us that we must do business this way or that way.

"While we need to be decisive and establish this customer choice model, Compaq will take it at a sensible pace - that way it can really understand what people want. This direct/indirect argument is a simplified issue."

He added: "What the customers really look for is the best overall supply system - a value chain that delivers to them the technology package they need in the most effective way possible."

But he argued that selling direct to customers does not necessarily disenfranchise the entire channel. "We have found that much of the work we have done has helped to tie the channel back in. The customer thinks: 'Right, I can buy this direct or over the web, but who is going to install it for me and where am I going to get system support from? I'm going to need the channel again'."

Cadwallader did not deny that Compaq's move towards the customer choice model has caused unease in the channel. He said: "Some things are inevitable.

There is no way we will be able to sell over the web without the channel becoming anxious. There is an understanding that volume market customers are going to break off.

"Compaq cannot deny them that choice, but that does not mean they are all unhappy. It is the company's responsibility to reach a more stable model and at the same time ensure that we can retain the confidence of our partners."

The vendor has also been spending time and money on account handling and mapping sessions with its partners. But Cadwallader admitted there was no simple recipe for success. "Every account is varied and every channel partner is different. These things tend to start with the big volume deals. There's a tendency to muddle through each deal, while keeping customers loyal to the Compaq brand and maintaining the confidence of the partner."

He said customers are no longer prepared to pay a premium for the delivery of product within a given time. While Compaq does not want to tell its partners how to run their businesses, it has offered programmes such as system service partner (SSP) for organisations, and accredited service engineer (ASE) for individuals, which it hopes will help partners find a niche in the value chain.

He did not believe the integration of Compaq's direct service arm into its product business will alienate the very resellers it has tried to encourage. "Last autumn, we had much anxiety as Compaq engaged in relationship building."

He added: "There isn't a single contract for which Compaq has not competed, but the conflict over services has been this year's non-issue. In a fragmented market we all have low market shares. There is plenty of room for all to play."

INDUSTRY ANALYSTS UNANIMOUS IN SUPPORT TO DITCH ALPHA

While resellers and users question Compaq's decision to halt development of Windows NT on the Alpha platform, industry analysts have unanimously judged the vendor's decision as a sound move. Kirsten Ludvigsen, analyst at research company IDC, said the effort and cost in developing the operating system could not be justified with IA64 and Windows 64 coming out next year.

"The arrivals will hardly leave room for a Risc processor running NT," she said.

She believed it will be easy for Compaq to help customers who have invested in Windows NT for the Alpha platform to migrate as there are relatively few of them. But Ludvigsen was unable comment on the cost involved in the migration, and said no models had been revealed.

Rob Hailstone, research director at information company Bloor Research, said it was not commercially viable for the vendor. "Compaq has never managed to lure a huge number of customers to Alpha NT," he claimed. He added that the termination of Alpha NT signalled the start of a shake-out of the operating system sector, as there are too many proprietary platforms which could not be supported in the market.

James Gruener, managing director of Windows 2000 platforms at The Aberdeen Group, said Alpha NT had not been a huge focus for Compaq and the decision to ditch it was sensible in the light of the expected release of Windows 2000 and the performance boost from Intel platforms.