Conference 7.286::digital

  Are you going to post the article?
    
>   	o Digital will be a holding company with 5 businesses focusing on
>    	  Consulting, networking, storage, PCs and Mid-Range Products

  The holding company thing is not a surprise; there has been speculation on
this for weeks. However, I notice that there is no division/subsidiary for
IC's; does this mean the author thinks the IC business will be sold, as rumored
in another recent topic?
  I also notice that software is missing; would it go with the PC/mid-range
division?
    
>    	o "Thousands of Sales people" will be reclassified into independent
>   	  agents who would be paid soley on commission

  In this scenario, what recourse would a sales person have who wants to remain
a Digital employee? I expect that some sales people would love to become agents,
but there are several reasons why some would not want to, such as the security
of having a salary (even though they depend on commissions to be prosperous).

  Got this form a news group. Not certain of it's accuracy.
  --------------------------------------------------------

The June 27 issue of Information Week has a big story on the DEC 
restructuring: "Restructuring will transform sales staff into 'free
agents' ".  It starts off:

Digital Equipment Corp. is readying a major restructuring plan intended to 
greatly reduce its head count and turn the bulk of its computer sales 
force into independent agents.  The announcement could come within days.

In addition, sources say Digital will restructure into a holding company 
with five or more business units that focus on consulting, networking, 
storage, PCs, and midrange products.  The goal, says one source, is to 
make it easier to spin off or sell the units.

These moves are designed to slash the computer maker's work force by as 
many as 20,000 employees by year's end and shift the company's sales 
emphasis to indirect channels.  By reclassifying thousands of salespeople 
into independent agents who would be paid solely on commission, Digital 
hopes to avoid paying severance packages and taking a huge restructuring 
charge.

Analysts have serious reservations about Digital's approach...Sources say 
Digital will retain a small direct sales force to manage large customers 
at top Fortune 500 accounts....Some of Digital's customers say they are 
not anxious to work with salespeople whose confidence, loyalty, and 
employee status will be questionable.  "The relationship between us as a 
customer and the Digital sales exec is a partnership.  If you introduce 
free agents, there's no way of telling where that partnership will go 
down the line."  "It's going to be sink or swim for these salespeople.  
It's going to be ugly."  "Digital's customers at large companies are like 
the family jewels--it's not really a good idea to let outsiders near them..."

    Did you say Information Week - please let us know if you are able to 
    post it otherwise I will go and find a copy somewhere.
    
    Barry
    

    I have a copy right in front of me... page 13, big black title
    "Shrinking Digital" followed by "Restructuring will transform sales
    staff into "free agents".....
    
    Ana

    One concern on the sales agent approach (unless it's handled well).
    
    You have to commit by contract to give an agent a territory whether
    it's geography or certain companies for a resonable period of time
    (multi-year) or then the agent acts only as a distributor.  How much
    work would you put into selling something that has a 6-month sales
    cycle if your contract runs out in 4 months?   Especially if you have
    had recent experience with Digital.
    
    We don't have a good track record for making and keeping commitments.  
    
    Mike

    
    	This is a joke. Nobody takes sales reps and makes them
    "commissioned" agents because they think its a good idea. US Federal
    laws and Dept of Labor regs prohibit employeers from eliminating
    employee benefits while maintaining the employee. Get serious, Folks.
    
    		the Greyhawk

    This pilot has been in progress already for about a quarter with a
    great deal of success...  so I hear.  The sales agent get 10% of
    whatever they sell.  So a rep with a budget of $3M now makes $300K
    rather than $60K or there abouts.
    
    Does anybody know more about how this works?  Is there a protected
    territory/customers?  Do reps continue to sell and get credit for
    channel sales and DECdirect?  If not, there can be some serious
    problems.  The rep may/may not have ability to use Digital resources
    and technical sales support.  The rep may also be competing against
    distributors and Digital itself without the ability to discount.
    
    Does anybody know some of these answers?
    
    ..Larry

<<< Note 3187.6 by POBOX::CORSON "Higher, and a little more to the right..." >>>
                            -< This is ridiculous >-

    
>>    	This is a joke. Nobody takes sales reps and makes them
>>    "commissioned" agents because they think its a good idea. US Federal
>>    laws and Dept of Labor regs prohibit employeers from eliminating
>>    employee benefits while maintaining the employee. Get serious, Folks.
  

Well, I don't see much difference between this and hiring back techies as
consultants.   FWIW, my branch manager told me last year this plan was being
considered for ALL sales.

Graybeard, if you're so successful under this current comp plan, you'd likely
be one rich dude as an independant, don't you think?

Of course, if the rep gets 10%, and the VAR gets his cut, how much margin is
in these products anyway?


Rev

    re: .6
    
    >>> Well, I don't see much difference between this and hiring back
    >>> techies as consultants.   
    
    There are federal labor regulations that apply to commissioned people
    and not to salaried or hourly people.  It has to do with what
    constitutes an unfair reduction in pay -- an effective demotion.  
    
    --bonnie

>>    There are federal labor regulations that apply to commissioned people
>>    and not to salaried or hourly people.  It has to do with what
>>    constitutes an unfair reduction in pay -- an effective demotion.  
  
We sales people already got a reduction in pay this year.  Whether it's
"unfair" or not is purely subjective, IMHO.

Regarding the "legality", if DEC eliminates the position of SME sales rep
and forms a new "organization" of independent sales agents (which the ex-reps
could apply for, let's say), a good lawyer could make a case for this, I would
imagine.

    re: a couple back.
    
    And what *would* happen to sales support people in such a model?
    Jim

    
>>    And what *would* happen to sales support people in such a model?
  
Well, my guess is that there would be no sales support for an independant
SME sales force.  Unless the sales people form "teams" or businesses that
would generate enough revenue to support another team member (read - sales 
support).

    Well, this is one of the problems we have around here with our
    traditional distributors that sell to the SME marketplace...because
    they have absolutely no technical support, they either come crying to
    us for it, or crash 'n' burn by themselves.
    
    I guess I'll just continue to be bewildered...

Re: -1

You've absolutely hit the nail on the head.  What we have here is a bunch of
ivory-tower executives who have never sold, never supported sales, never 
worked in the field and only meet with customers in very controlled situations.
And they think that by making organizational pronouncements, everything will
magically fall into place.  Sigh.  I wonder how many more "organizations" 
we'll have to live through.

Rev

  The way it looks to me is that if Digital converts its sales people to "free
agents", they are no longer Digital employees and have in effect been laid off.
Digital can lay people off without a package, as other (mostly low-tech) com-
panies have done. The question is, does converting sales people to free agents 
allow Digital to avoid the "pay in lieu of notice" that is required by law in 
some states when people are laid off. I read (in here, I think) a few years ago
that the purpose of the 9 weeks (7 weeks?) of pay portion of the package is to
meet this notice requirement.
  A related matter: Will these "free agents" will have to provide their own 
health insurance? I assume they will. This could wipe out most of the higher
pay they get.
  I would rather work for a mediocre salary than take a job that potentially
could pay double my salary or 1/10 of it, depending partly on conditions beyond
my control. 

    Several years ago there was a sales org. in the US that was developed
    based on an analysis that showed roughly 80% of US revenue came from
    only about 600 (out of over 4000) accounts.
    
    Within these 600 accounts there were three tiers:
    
    	100 Corporate accounts (>$30M annual revenue)
    	200 Strategic accounts (>$10M annual revenue)
    	300 Select accounts (<$10M annual revenue - local mgmt. selection)
    
    The idea was to focus selling resources on these accounts which would
    have a maximum impact on Digital's revenue.
    
    Most of what I've seen reported on Digital's direction hints at a
    similar arrangement with one major change: the likely elimination of
    direct sales/support for accounts not defined to be in this upper tier.
    
    Various publications hint at Digital's planned use of 'sales agents' or
    VARs or distributors.  All reports I've seen are consistent is saying
    that these other accounts will be handled by other, less expensive,
    sales channels.
    
    This does seem to be the model that most vendors have adopted.
    Microsoft, Sun, HP, Novell and even IBM.  I often wondered because  IBM
    always seemed to have a major presence in every account I visited but
    when you look at their revenues in these accounts it made sense.  Some
    of these acounts for IBM were the size of multiple districts for
    Digital.  When I supported smaller accounts (e.g. non-profits) I was
    more likely to see an IBM VAR as the sales competition with occaisional
    appearances by the VARs support people from IBM.  They always made it
    appear seamless (at least from a competitors perspective).  This was
    normally the Sys. 38/AS 400 arena and the VAR was the application
    provider (huge business application portfolio on these systems).
    
    What is interesting in this model is how you define the top tier of
    accounts that will receive sales coverage and how you transition a
    growing account to direct coverage without causing problems with your
    incumbant sales channel.
    
    Another interesting point is that more and more of these large accounts
    are pressing vendors HARD for price reductions and there is the issue
    of how to demonstrate (and price) the value added from direct support
    in a way that the customer can (in the face of the purchase police) and
    will (in the face of pressure to cut budgets) pay for it.
    
    Peter Dillard

I came to Digital from an industry where all the salespeople were
independent reps on 100% commission.  This was the medical device industry
for those of you who are curious.  In fact, I was the Eastern Regional Sales
Manager for a small medical company. I can assure you that, if implemented
and controlled properly by the sales managers (who work for the company),
it works very well.  Here are some of the benefits and problems I observed
with both the independent agent system and the direct sales system. 

[By "direct sales" I am talking about salespeople employed by the company,
drawing a salary plus up to 50% bonus/commission on sales.  By "independent
agent" I mean someone who does not work for the company, works on 100%
commission, and may represent other companies' product lines.]

DIRECT SALES - BENEFITS 
----------------------- 
o Direct control over what gets sold, how it gets sold, and to whom it is
  sold 
o Direct control over hiring and firing
o Direct control over how salespeople look, act, and do.


DIRECT SALES - PROBLEMS
-----------------------
o Very expensive to operate
o Salespeople may not represent enough lines to present a complete solution
  to the customer.
o Often difficult to accomplish cold-calling that will result in
  high-revenue new customers.
o Does not respond rapidly to changing market conditions.
o Generally does not attract highly aggressive, highly self-confident,
  risk-takers ("generally" is a key word here).

SALES AGENTS - BENEFITS
-----------------------
o Agents tend to naturally gravitate to those accounts that have the
  potential to produce the highest revenue.
o Sales managers can focus the agents using special incentive.  For
  instance, for every DEC 2100 sale from July 1 through September 30,
  commission could be increased by 50%.  This helps focus sales for things
  such as product launches.
o Special incentives can be offered to target new markets, new geographic
  areas, specific competitors, etc.
o Agents can ask the company for sales support help.  Help can be sent to
  those opportunities that look most promising for the company.  The company
  is under no obligation to help.  When turned down, agents may choose to pick
  up the expenses to fly a corporate expert out to their account.
o Agents strongly support company training and generally pay their own way
  to attend new product announcement training.
o Generally attracts aggressive, self-starter, self-confident, risk-takers
  who would never dream of working for someone else.  The system is highly
  geared towards rewarding those who are successful and weeding out those
  that don't bring in the volume consistently.
o Agents are not shy about telling the home office what is needed for future
  products.
o The company can always go direct or split the territory once the volume is
  built up in a territory.

SALES AGENTS - PROBLEMS
-----------------------
o Small volume customers generally do not get great service.
o Agents will choose not to sell some products because they are too
  difficult or the cycle is too long.  These problems will have to be
  addressed by direct salespeople or alternate channels.
o Agents tend to become specialized in areas where they can make the most
  money.  Sales management will have to deal with this by either splitting
  the territory by industry or requiring by contract that the agent bring
  in so much revenue from the area not being covered.
o Requests from the company to call on a specific account may or may not get
  done depending on whether the agent feels it's worthwhile to his effort.
o You have little control over what they sell, to whom they sell it, and how
  they sell it.
o You have little control over how the agents look. You might have a guy in
  New York City who wears $1000 dark suits and calls on the financial
  industry.  Your agent in Houston who sells to the oil industry may wear 
  jeans & cowboy boots, and drive an old pickup.  National sales meetings
  are a lot of fun.
o If your line is not generating money for the agent, you will not get much
  of the agent's time and attention.


I feel Digital needs a combination of direct sales, agents, and alternate
sales channels such as 1-800-DIGITAL and DEC Direct.  One thing I can tell
you from experience is that the product mix for Digital will change
dramatically if and when we go to reps.  The company will become more sales
and customer focused, and many of the 'great ideas' that come out of
engineering will never get developed unless they have strong customer
support and pull.

Jim

    >Your agent in Houston who sells to the oil industry may wear  jeans &
    >cowboy boots, and drive an old pickup.
    
    And probably gets _way_ more sales than a slick-suited dude would in
    the same accounts. One of my large chemical accounts here in Houston
    doesn't trust _anyone_ that comes in wearing a tie. They're much more
    comfortable with folks that look and dress like them. 
    
    (What's sad is that Digital paid to send me to a "customer relations"
    class a few years ago that taught _exactly_ this concept. DON'T
    outdress your customer. Yet Digital managers still insist that everyone
    dress up so they look "professional". It doesn't impress the customers.
    They want solutions to their problems, not a GQ model...)
    
    Harry, the MCS engineer in lizard skin Tony Lama boots. :-)
    

    RE: .17
    
    Do you think the Corporation noticed when the Corporate Account Teams
    were superceded, that for some reason revenue from those accounts
    dropped way off?  I never did understand that move.
    
    RE: .19
    
    When I joined Digital, I was told to dress like my customer. (I'm a
    field service type)  My customer at the time was the old Stanford
    Research Institute, now SRI.  So I decided to check out the computer
    center manager for the AI lab.  I go up there Tuesday and he is
    literally wearing a coat & tails tux with all the trim.  Wednesday, I
    go back to see if that is really the mode, and the guy has cut-offs
    with holes in 'em and a grubby old Tshirt and jesus boots (sandals).  I
    decided to choose another person to look at for this dress example
    thing.
    
    Bob
    

RE: -.2

The nice thing about agents is that they are almost always born and raised in
the area where they sell.  They know the local customs, they have contacts,
they know the local businesses, and they know what's presently hot in their
area and what's not. 

Our Houston agent sold to doctors and hosptials so he wore a suit with a
western cut.  One thing he always wore was his *boots*.  When I visited from
Boston he said "got any boots"?  I answered "yes" and he said "wear 'em when
you come down here so people will trust you!" 

Jim

    
    :-all
    
    	You are all on the beam here. Dress for success. Reps vs. Agents.
    Digital should make every single one of you sales managers. Give you
    full control and turn you loose. First conference I've sat in where
    EVERYBODY made sense.
    	There may be hope for this place yet...
    
    		the Greyhawk

    Yeah Greyhawk, you got that right, now if they can only figure out how
    we are going to do recruiting of new firms who right now are being told
    we are in the ICU on life support with the Priest waiting outside for
    last rites.
    
    And oh by the way folks, if anyone is wondering our manufacturing
    backlog is *UNBELIEVEABLE* right now and we are scheduling systems into
    September.  It's gonna be an interesting Q4 and Q1 for this outfit.
    
    Mav

    Well,
    
    This section is interesting to me.  My name is John Rogate and I am the
    President of VTEC (Vermont Technology Exchange Company, Inc.).  My
    partner and I are the pilot for the Agent program and we are the first
    geography agents in the US.  We were both DEC employees for over 12
    years.  We both love Digital and the products.  We also have a loyalty
    to our customer base.  We helped define the program and contracted with
    Digital on our own accord.  It is the correct direction for Digital. 
    It has gone over exceeding well in Vermont and has met with great
    success from our customer base.  As a part of this program, we are our
    own company and are on 100% commission basis.  We do have access to our
    old accounts and other info (as do other partners).  Doing this is the
    best thing for both us and Digital, and certainly our customer base. 
    We are selling product with a new fervor that we experienced a number
    of years ago.
    
    As agents we do not take title to equipment as do distributors.  We
    quote to cust from digital, cust po to digital, digital invoices cust.
    
    IBM has done this for years.  There used to be 16 IBM reps in Vermont. 
    Now there are none.  The territory is handled by agents.
    
    If Digital just takes sales people and makes them agents...the program
    will fail.  A person must want to do it, and certainly must have all of
    the necessary startup funds to run a business.  The individuals should
    be knowledeable in digital product and certainly internal admin.  To
    end this, it cannot just be anyone.  It also does not work in every
    territory.  Vermont is rural and it is 90% SME.  It works well here. 
    Oh, by the way, Digital sales reps do get credit for what we sell.
    
    Note:  agents cost digital substantially less than full time employees.
    
    Any questions:  John Rogate  DTN 266-4933 (yes we kept that too).

    Thanks John for adding your reply, a few questions from someone who
    thinks he would love the "agent" scenario:
    
    1.  Do you have a protected territory?  Any protected accounts or
    products etc.?  Are there limits to who or where you can sell?
    
    2.  Are you in competition with Distributors?
    
    3.  What pricing can you offer "your" customers?
    
    4.  I understand you use Digital facilities for your office, do you pay
    for that privilege?
    
    5.  Is Digital support (DECSale, Sales Support, etc) available?
    
    6.  Is your commission on a sliding scale (0-100K -2%, 100-500K-3%,
    etc.) or fixed?  Any caps on earnings?
    
    I've got many more but this will do if you can answer.
    
    Thanks - Kevin  

>    Note:  my note 24 was the first time that I had used notes in 3 years. 
>    This reply will be my last usage of this product for a while.  It is my
>    personal belief that it is a waste of company resources.

I find that quite a bizarre statement, unless you were referring to this
specific notesfile rather than to notes in general.  For notes in general,
as used within Digital, it's clearly total nonsense.

	paul

    RE: .27
    
    Makes me wonder why he bothered replying. Gosh! Aren't we lucky...
    
    Laurie.

re .26 -

Ya gotta realize that John's been up there in the Northeast Kingdom a long time
now and he views all of this old-DEC culture with an obviously jaundiced eye
since he's done without, both by necessity and choice. By any measure he has
succeeded both as a DECie and now as a DECagent - but I certainly wouldn't treat
his opinion as anything more than that.

With respect,
Norm