Wednesday, December 11, 2019

Digital Equipment Corporation - Minicomputers

Harlan Anderson, co-founder and employee #2, left the company in 1966, just before the company went public (issued stock). Anderson’s take on his departure, incorporated into a memoir he published in 2009, descripted the problem as a major difference in his and Olsen’s visions for how to manage the fast-growing company. Anderson favored a traditional hierarchy. Olsen, having put in a bit over a year in Poughkeepsie, New York as MIT’s liaison to IBM, loathed this type of rigidity. Each had their champions on the board of directors, respectively Jay Forrester, who had been their boss at Lincoln Labs, later a professor at the MIT Sloan School of Management, and Georges Doriot, president of the venture capital firm that had provided start-up funding for DEC.

[Harlan Anderson died January 30, 2019, age 89 years]

Anderson’s position within the company had been weakened by his ties to the failed PDP-6 computer. He resigned rather than assume a lesser position within the company. Forrester left the board soon thereafter; Doriot stayed on into the late 1980s. Olsen went on to commit to a matrix-style management that perplexed business school academics for years, yet seemed to work fine for a company of engineers making leading-edge products for engineers.     

Ken Olsen standing next to the sign facing Main Street
(Internet download, date not known)
DEC dominated the minicomputer niche. In 1971, Massachusetts Governor Francis William Sargent declared Maynard as “Minicomputer Capital of the World.” By then, DEC had expanded to renting most of the mill. A year later it bought the 60-acre Parker Street industrial. In 1974 it bought the entire mill complex, and in time a few other buildings in town, bringing the total to more than two million square feet of office and factory space.

Exact numbers are not available, but estimates are that Digital employed between one-third and one-half of the adults living in Maynard. Students were hired right out of high school. Other employees commuted – Routes 117 and 27 had twice daily traffic jams, and the mill pond was partially filled in to create more parking. Evenings, restaurants and bars were flooded with employees. There were no empty storefronts. Was there a downside? Yes, in that Maynard was once again a one-company town.  

VAX was Digital’s second act. The name choice itself was significant, as after almost twenty years of ‘PDP-next,’ this was a whole new system. The acronym stood for “Virtual Address Extension.” Design and development started in 1975, The VAX-11/780 was introduced in October 1977. In tech-speak – which will not be interpreted here – VAX had a novel instruction set architecture incorporating a 32-bit system. According to the Wikipedia article on VAX, primary features were “…its very large number of assembly-language-programmer-friendly addressing modes and machine instructions, highly orthogonal architecture, and instructions for complex operations such as queue insertion or deletion and polynomial evaluation.” In non-tech-speak, the VAX computer systems were flexible, robust and scalable. As a customer’s information technology needs grew, more VAX machines could be added, and networked through a new means – the Ethernet. New VAX models were introduced well into the early 1990s, but everything remained compatible.

There was a downside. Faced with an internal competition for resources, Ken Olsen decided in 1982 that it was time to kill the extremely successful PDP-11 series. Vice presidents Rose Anne Giordano and Winston “Win” Hindle were tasked with the announcement at the annual DECUS symposium. The sense of betrayal led many clients to abandon DEC, but most transitioned to VAX. It helped that DEC sweetened the pot with discounts. The success of VAX catapulted DEC into higher and higher income levels: $1.0 billion for 1977, then $4.0 billion for 1982, $11.4 billion for 1988.  

Aerial photo circa 1970 - note full parking lots. Click on photos to enlarge.
Prior to DEC outright buying the mill, it had been owned since 1953 as a multi-tenant rental by Maynard Industries Incorporated. What they had purchased was the buildings, surrounding land, and more: the mill pond, Ben Smith Dam, Lake Boon and part of the Fort Meadow Reservoir. The purchase price of $200,000 equates to $1.9 million in today’s dollars. Lake Boon was relinquished to Stow in lieu of unpaid property taxes, ditto Fort Meadow to Marlborough. The mill pond itself remains private property (presently by Mill & Main). Before the 2008 recession the previous owner/operator had proposed to build an office building on the south side, and either a multi-level parking garage for 1,000 cars or else fill in more of the pond.

DEC’s market capitalization – number of shares times price per share – reached a peak of $24 billion in 1987. The company was riding the peak of the ‘bet-the-farm’ introduction of the VAX-based mini-computers a decade earlier. Even though it had stumbled badly in beginnings of the microcomputer era, DEC had a valid claim to being the second largest computer company in the world. What DEC did not see coming was changes embodied by a famous quote by Georges Doriot: “Someone, somewhere, is making a product that will make your product obsolete.”

Very unofficially, a humor-intended memo circulated within DEC in the 1980s. It finished with the punchline: “This isn’t Burger King and you don’t get it your way. You get it our way or not at all, because we’re Digital and you’re not!”

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