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Technology Stocks : How high will Microsoft fly? -- Ignore unavailable to you. Want to Upgrade?

To: Daniel Schuh who wrote (10763)	9/12/1998 11:03:00 AM
From: rudedog	Respond to of 74651

Dan - You do ask the tough questions... Had to do a little digging on this but had the good luck to connect to a guy on the CPQ IT team who had the answers. These are long answers so I will reply in several posts. When CPQ bought Tandem, one of the things they discovered was that Tandem's internal network capability was far superior to CPQ's, both in terms of capability and performance, and also in security. Tandem, because of their work with electronic funds transfer and other secure transactions, had a whole technical culture devoted to developing highly secure infrastructures. The Tandem folks were called in to revamp CPQ's infrastructure, which involved physical changes to reduce or eliminate breach points, changes to the security model, education of IT professionals, and specific programming to enhance security within the company. At the same time they fielded a web-based internal information system which is used for product development, project management, and other pretty sensitive stuff. When the DEC acquisition was announced, this team was given the task of analyzing the DEC infrastructure to bring it up to the standard required for inclusion in the new internal network, during the 6 months between announcement and close of the deal. This was a requirement to allow efficient merging of the product teams, and for sharing of confidential information among engineering teams. The Tandem team was apparently 'appalled' at the leaky infrastructure in use at DEC. They apparently demonstrated the ease with which someone could extract information on what DEC was doing, communications between senior executives, etc. They put together a crash program to bring DEC up to the standard needed to merge with the CPQ systems without breaching security. Much of the web-based project and program management had been developed using specific IE security hooks. It was therefore a requirement that anyone who was granted access to that system needed to be running IE. As soon as the DEC acquisition was complete, the job of converting employee access to the new systems was begun, and by definition required those employees to use IE for that purpose. There was no requirement to remove Netscape from people's machines, and CPQ employees are free to use Netscape for access to any non-proprietary web content. Currently, according to this gentleman, more than 50% of CPQ employees have installed both navigator and IE, using IE for the automated internal systems, and the browser of their choice for other purposes. CPQ maintains an automated installation procedure for Navigator which tracks current rev for licensing and support purposes, which is available to any employee and will install Navigator and the required web connections in about 10 minutes. Our buddy Spencer Katt is well connected with the west coast CPQ employees, both at Tandem and at the DEC facilities (such as the Palo Alto research team). The Palo Alto guys in particular have always been a very independent group who believe in pure engineering and scoff at the idea that their work should ever require any practical consequences (say products that the company might sell someday). They have often used the press to push demands which failed internally. Spencer Katt was obviously in a position to know both sides of these stories, but it would have been much less interesting if the whole story had been presented ('ivory tower engineers bristle at being told to comply with corporate standardization programs').

To: Daniel Schuh who wrote (10763)	9/12/1998 11:27:00 AM
From: rudedog	Read Replies (2) \| Respond to of 74651

Push comes to shove, where were they going to go? Well, in CPQ's case, wherever the customers ask them to go. CPQ ships more units of SCO Unix than NT (they have over 60% of the SCO business, and more than 50% of the SCO installed base). They ship more units of Novell than NT (They have better than 50% of the Novell installed base). And despite that, they have more NT sites than anyone else. A better question would be 'where else is MSFT going to go' for an enterprise partner. That's the whole point of news.com As far as the "They have to ship the machines the way we build them" quote, this is the famous 'windows experience' requirement. CPQ told them to pound salt. Buy a CPQ machine and check it out. When you power up, the first screen is a big CPQ splash screen, and the next is a CPQ screen with a variety of options, some of which lead to the standard MSFT stuff. Likewise, Dell, GTW, HP and others have now gone more to this model, after CPQ lead the way. Netscape installation is a choice on all but the Dell machines. CPQ works to a model which simplifies the installation process as much as possible for a given customer segment. Obviously choices for a server setup with a sophisticated fortune 500 client will be a lot different from a sub-$1000 consumer machine, but CPQ's goal is to provide the most satisfying initial experience, to stimulate loyalty and repeat business. I don't think that satisfying MSFT or Intel in that process is anywhere on the product plan, it's a detail of procurement. I hope this answers your question. I would say that any of the majors have the ability to do pretty much whatever they want in OEM contracts. It's always a matter of give and take. MSFT, Intel, and other software vendors offer a variety of incentives including joint marketing funds and 'sticker rebates' (such as Intel Inside) to get the OEMs to play their game, but it is always a business choice on the part of the OEMs. And in today's world, that is increasingly based on what will sell the best to customers, not what will make the vendors happy.