Someone contacted me via email recently and drew my attention to the history of Digital Equipment Corporation (DEC). She said her name is Megan Davenport but I am not sure if this is her real name. Well, anyway, the DEC story sounds interesting. DEC was a major American company in the computer industry and a leading vendor of computer systems, software and peripherals from the 1960s to the 1990s. It suffered the same fate as Sun Microsystems recently: like Sun which was acquired by Oracle, DEC was acquired by Compaq and disappeared subsequently.

Yet DEC was not an arbitrary computer company among many. Once DEC was the second-largest computer company in the world. According to a boston globe article, DEC was the Google of the ’70s and ’80s: it was dominated by an innovative engineering culture (only focused on hardware instead of software). Now it no longer exists. Some legacy parts of it still live on in other companies like HP and Intel, others became part of public domain and open source. DEC invented interactive computing and developed the first computers for personal use. DEC was one of the first businesses connected to the Internet with dec.com, registered in 1985. It developed the command-line interface, console or terminal. The first versions of C and UNIX were invented on PDP mini computers from DEC.

Like Microsoft, Amazon, Google and Apple today, DEC was once a pioneering force in the fields of computer systems and software. Now it has vanished nearly without a trace. The last VAX workstations and PDP-11 systems have been used to control and monitor factories, transportation systems and nuclear plants. The big PDP mini computers in the museums look increasingly like fossil remains of an ancient, now extinct computer culture.

Computers and Markets

How can a major American company in the computer industry with so many crucial innovations and over 100,000 employees simply dissolve, collapse and cease to exist? It was larger than Microsoft, Apple or Google today: Microsoft has now 92,000 employees, Apple 60,000 employees, Amazon 56,000, and Google 33,000. Will one of the powerful IT corporations today – Microsoft, Apple, Google, Amazon – share the same fate? Well, Microsoft is at risk, since Google will win the race for the smartphone operating system. And Apple certainly would have suffered the same fate already if Steve Jobs would not have turned the company around and positioned the company in the new smartphone market.

DEC and the early Apple had a lot in common, they sold the full stack, a bundle of hardware and proprietary software, i.e. a complete set of hardware equipped with an own operating system. DEC built not only one OS, they built quite a lot of interactive operating systems, including OS-8, TOPS-10, TOPS-20, RSTS/E, RSX-11, RT-11, and OpenVMS. Each of their PDP computer series had an own operating system. Yet it was Microsoft, originally a programming language company in Albuquerque, New Mexico, which displaced DEC with the success of MS-DOS and Microsoft Windows. The founders Paul Allen and Bill Gates used PDP computers from DEC for their early work. It is probably a path-dependent frozen accident that lead to the lock-in effect of Microsoft’s operating system. DEC was destroyed by the tremendous success of the IBM PC coupled with Microsoft’s MS-DOS and Windows. It was killed by the disruptive innovation of the PC which created a new market (the PC market) and destroyed an old one (the minicomputer market). DEC vanished together with the minicomputers it built.

Failure to adapt

Similar to the fall of maya civilization, which failed to adapt to their environment, DEC failed to adapt to their changing environment and to their changing markets. The reason for the downfall was the failure to adapt successfully to the PC market, to the mass-market of home computers, and to the needs of people in the personal computer era. Although DEC invented interactive computing and developed the first computers for personal use, they failed to produce successful products for the personal users of the PC era. And although the PDP-1 was the first commercial computer that focused on the development of interaction with a human user, they failed to recognize the needs of the typical business user. People in the PC era needed compatibility and standard hardware, and the IBM PC was the winner here. And they needed standard software: a standard operating system, which was MS-DOS, and a standard office software for word processing (MS-Word) and spreadsheet calculation (MS-Excel).

Apparently, a computer maker is doomed if it no longer produces computers people need. People wanted PCs, and DEC was only able to produce PDPs. The larger DEC became, the more it was focused on the own proprietary and idiosyncratic products, the VAX/VMS OS and the PDP-x minicomputers, and the less it saw the environment in which it was embedded. The bigger it became, the less it was able to react quickly to competitors. As Harlan Anderson writes in his autobiography, the strength of DEC was hardware, and hardware became increasingly a cheap commodity within the industry. The x86 architecture of the IBM PC was by no means superior or excellent, in fact it was gruesome. Since the company culture valued excellent hardware and elegant design, the corporation was unable and unwilling to produce cheap commodity hardware. But IBM PC comatible computers were cheap and became standard. The same engineering culture that made DEC successful also contributed to the decline.

Are there any lessons from DEC’s rise and fall? We can learn that even a major American company in the computer industry and a leading vendor of computer systems and software can disappear in a short time. If the company and its products may disappear, then the only thing which is left is are the stories of the employees. The legacy may shine bright if the culture was original and the people were treated right. As a MIT management review says in an age when companies come and go one should “watch out for disruptive innovations, keep in mind that even a culture of innovation can become dysfunctional as markets change, and remember that one of an executive’s most lasting legacies may be how he treats people.”

References:

* The autobiography of Harlan E. Anderson, co-founder of Digital Equipment Corporation (DEC): Learn, Earn & Return, My Life as a Computer Pioneeer, Harlan E. Anderson, Locust Press, 2009

* Digital effects – Computer maker’s rise, fall still echo in Mass., Boston Globe, February 15, 2011,

* DEC Is Dead, Long Live DEC: The Lasting Legacy of Digital Equipment Corporation, Edgar H. Schein, Berrett-Koehler Publishers, 2003