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Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: Piotr Koziol who wrote (84690)	9/11/2000 8:52:38 PM
From: Piotr Koziol	Read Replies (1) \| Respond to of 97611

I guess Aaron does not believe in the value of Compaq's aquisition of Digital service organization, and doesn't buy into Compaq's "everything to the Internet" motto... Or maybe he's just long HWP :^) Killer business models September 12, 2000 by Aaron Goldberg From the October 2000 issue of Upside Magazine There has been monumental change in the last few months in how Internet companies are valued. However, the real change in how we learn to value companies has yet to be fully understood. That change will be driven by the movement to a business model that values services more highly than technology or products. This "services" transition isn't just a different way to sell our wares to the customer; it's the first true and fundamental change in how technology companies are run. Organizations will have to be set up to speed integration and solution delivery, not to try to build every product they might ever want to sell. In the past, technology companies were all about products, engineering and technology. Build the fastest computer, the most efficient switch, or the chip with the greatest density and performance, and the market would reward you because the basis of buying was all about the speeds and feeds of the component parts. Customers focused on computers, not computing. New attitude That is rapidly changing. This entire new e-conomy shtick starts with the fundamental notion that improving how a customer or their company operates, now and in the future, is the single aspect driving the entire value chain. For example, consumers are focused on using digital MP3 music -- not buying CD-R/W drives, finding ripper software, and integrating Media Player software. We dumb marketers just haven't figured it out yet, so we still market these components and not an MP3 service or bundle. Despite the need for major reorganization, few, if any, technology vendors have moved from the old notion of product-based organizational structures. Hewlett-Packard (HWP) is one of the only companies to make the kind of changes this new reality requires. Others, like Sun Microsystems (SUNW) and Compaq (CPQ), aren't even on the path. The new reality demands that staff be put in place to make integration a key function of the development process, not an afterthought. Let's face it: Technology vendors will have to make significant head-count changes to support this solution-driven approach to market. It's no longer about inventing, but integrating, and the organization has to be built to do that. Defining value It's not surprising that only the real visionary firms are thinking this way. Engineers and development teams have always run the technology business. It's always been about the product or the technology. But the reality is that if you are looking for companies that really do have a value, market or otherwise, you have to look for firms that are organized to drive solutions for the customer, not for the development and flogging of a technology they happened to have built. There are some proof points out there. IBM (IBM) has created an intellectual property (IP) exchange to share details on how to better implement real solutions. HP has cut the number of product P&Ls from 83 to 12. The killer business model for the next decade is one that builds internal processes that optimize the delivery of complete solutions and services to the customer. Being able to deliver a new application more quickly, with no vendor finger-pointing, that links with legacy systems is the new area for process optimization. Just as the '90s were Dell's (DELL) decade, as they optimized the entire organization around the manufacture and delivery of products, the model that fits in our future is an organization that is optimized to do e-services-based delivery and integration. It's about giving customers better operations, not Moore's Law. Organizing a technology vendor to solve customer problems first and foremost is what wins in the next generation, not merely inventing things. Aaron Goldberg is vice president and principal analyst at Ziff-Davis Media Inc. He has spent 21 years analyzing the computer industry.