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MartCSIV_1-5v2.qxd 8/12/04 5:01 PM Page 688 CASE STUDY IV-5 Merging Information Technology and Cultures at Compaq-Digital (B): Becoming A Single Firm In August 1998, within 2 months of the merger of Compaq Com- lower operating costs as well as increased revenues from new puter Corporation and Digital Equipment Corporation, a new cross-selling opportunities. Senior management felt pressure to chief information officer, Michael Capellas, was brought on board. deliver these benefits quickly, and the information management Capellas arrived with a track record as an international CIO and (IM) organization’s new leader felt accountable: recent stints as director of supply-chain management for SAP In our business IT is not an enabler, it basically is the business. America and a senior VP within Oracle Corporation. At that time, If you’re not getting orders, you’re not shipping product . and he was the only senior manager within the newly integrated com- the world is ending. puter company that had been brought in from the outside. —Michael Capellas, Senior Vice President & CIO When Capellas arrived, the basic communications infra- structure, telephone systems, and e-mail were in place, but Under its former CIO John White, Compaq had a highly cen- integration of the daily operations—taking orders, shipping tralized approach to managing IM. This structure helped the IM orders, interfacing with customers—was still underway. organization get things done quickly and kept IT spending sig- Nonetheless, within 4 months after his arrival, Capellas had nificantly below the industry average. Although each of the seen the new company set a world record for the number of geographic regions had their own IM support groups, White units shipped—4.2 million: was tightly linked with Compaq’s executive committee and IM strategy and infrastructure standards decisions were all set at Despite all the problems, we are outperforming the world in the corporate level. volume. At the end of the day, business results are business In contrast, under CIO Dick Fishburn, Digital had had a results. We must be doing something right. highly decentralized model, with each business having its own 1 —Michael Capellas, Senior Vice President & CIO CIO. This model gave the distributed manufacturing and ser- vices businesses more personal service from their own IS Creating a New Information groups, but it was more expensive. It also meant that the busi- Management Organization ness CIOs often went off and did something on their own. The new Compaq was a combination of the old Compaq’s The June 1998 post-merger announcement of the top high-growth personal computer and server businesses with Dig- management team for the new Compaq named White as ital’s mid-range computer products and highly profitable ser- CIO—but it was well known that White planned to retire some- vices business. According to documents filed with the U.S. time before year-end. In fact, the merger integration activities Securities and Exchange Commission as part of the merger had thrown a kink in the search process for a new CIO and approval process, the new company was expected to achieve White had signed an extension to his contract. The agreement was that he would stay on until a replacement was found and the merger activities had settled down a bit. This left plans for Copyright © 2001 by Massachusetts Institute of Technology. This the new IM organization in limbo over the summer months. case was prepared by Jeanne Ross, Principal Research Scientist at Everyone was concerned about “where do I fit on the org chart.” MIT’s Center for Information Systems Research, and Carol V. Brown, That’s what they really wanted to hear. So until we could actu- Associate Professor at Indiana University’s Kelley School of Business. The authors would like to thank Rick Fricchione of Compaq for his ally tell them that, we gave them a lot about how the business insights and efforts and the many Compaq employees who partici- is coming together, what other organizations at Compaq were pated in the research. doing, and where we were on our plans. 1The interviews for this case study are based on on-site interviews —Laurence Cranwell, Director, Communication Technology held between December 1998 and February 1999. Information Services 688 MartCSIV_1-5v2.qxd 8/12/04 5:01 PM Page 689 Case Study IV-5 Merging Information Technology and Cultures at Compaq-Digital (B) 689 The new senior IM management team was named by the five had plans to relocate to Houston. Laurence Cranwell, White just one week before he retired in August 1998. Thus, one of Jones’ direct reports based in New England, managed when Capellas arrived from Oracle Corporation to head up a team split about 50/50 between Compaq Classic and Digi- the combined IM organization, he inherited a new manage- tal Classic. ment team that had not yet sorted out lower level report- While Compaq Classic managers lamented the increased ing structures. complexity that accompanied a more distributed IM manage- White chose primarily Compaq Classic managers for his ment model, they acknowledged that, in a very tight IT labor senior management team, but as Capellas filled in the organi- market, Houston alone could not provide sufficient IT resources zation chart (see Exhibit 1), it became clear that IM manage- for a $40 billion firm. They wanted to take advantage of the fact ment at Compaq would no longer be so tightly controlled from that Compaq’s two key acquisitions were in high-tech corridors. Houston. Rick Fricchione, for example, was an ex-Digital man- The 1997 Tandem acquisition gave Compaq a hook into Sili- ager who was tapped to be vice president, advanced informa- con Valley, and the 1998 Digital merger gave it a hook into the tion technology and planning, and Capellas had agreed that Boston corridor and Route 128. Fricchione could fill the role from Massachusetts. Similarly, Adding to the complexity was the recognition that Com- Fred Jones, a Compaq Classic manager who assumed global paq’s newly acquired services business had different IM sup- responsibilities for technology and process, had five former port needs than the manufacturing business. CEO Pfeiffer had Digital managers among his eight direct reports. Only two of kept the leadership for the services business in Massachusetts, EXHIBIT 1 Compaq Information Management Michael Capellas Sr. Vice President & Chief Information Officer Executive Assistant Geography Support Manager Director Director Director Director IM Support Japan IM Support EMEA IM Support MA IM Support LA IM Support APD Solutions & Global Support Mike Whitney Ed Pennington Vice President Vice President Director WW Vice President Director Product WW Mfg. & Sales & Marketing WW Services, Corporate Admin. Development Quality Systems Solutions & Support Systems Systems Shared Services & Delivery Fred Jones Rick Fricchione IM Finance Director Vice President Director Vice President IM HR WW Planning Information SAP Program Advanced Information Systems Services Technology & Planning MartCSIV_1-5v2.qxd 8/12/04 5:01 PM Page 690 690 Part IV The Information Management System reporting to both the CEO and the geographies. Senior VP of suffers a little from out of sight, out of mind, because it’s been Services John Rando had been a key player in the strategy the mentality of the company. discussions during the premerger integration process, and —Michael Capellas, Senior Vice President & CIO Rando became a member of the new Compaq’s top man- agement team as soon as the merger was finalized. The IM Working Toward Process Integration roadmap for services mirrored this structure. Mike Whitney, In order to achieve the objectives of the merger, senior manage- the former CIO for the Digital services group, reported to ment felt that process integration was critical. Immediately follow- Rando, and the IM teams working on worldwide and func- ing the merger, a customer who wanted to buy Compaq, Tandem, tional systems solutions for services reported to Whitney. The and Digital products would have to submit three separate orders IM heads working in each of the geographical services units and later process three separate invoices. Compaq worked to pro- now had a dual reporting relationship to Whitney and to their vide a single customer interface within a couple months of the local services head: merger, but real process integration would take some time: On Capellas’ new organization chart, I’m the only person who is The company had done a pretty solid job of merging the sales shown with a dotted line; everybody else is a solid line. Services force, but the infrastructure was not in place to [enable all sales- makes a large percentage of the profit of the company. But it’s people to sell all Compaq products]. The order fulfillment model difficult in terms of being remote from Houston and there’s still still had a long way to go; it was just in its infancy. Finance was concern on how well services is perceived as integrating into getting the books closed, but with some brute force. the rest of the company. —Michael Capellas, Senior Vice President & CIO —Michael Whitney, CIO, Compaq Services Ultimately, management wanted an integrated supply chain While Houston IM managers were adjusting to the chal- across the three entities. The business vision was that a cus- lenge of managing a distributed work force, those former Dig- tomer could call Compaq and order three DEC Alphas, two ital managers who had decided not to relocate to Houston Tandem Himalayas, and 10,000 Compaq PCs on one pur- had to learn when they could rely on e-mail and videoconfer- chase order. The order would be reflected as one entry in encing and when they needed to be in Houston.

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