Compaq: A brand new, age old story

Capellas and co hold their breath and take the plunge into the choppy services waters...

Compaq has been shedding staff. Yesterday it confirmed many users' long-time fears and at last said it would shed its Alpha chip business. It's also trying to shed its hardware company image. No wonder it's hogging the headlines. But what of its attempt - over the next 180 days - to re-invent itself as a software and services giant? It is a move that is both sad and sensible. Compaq has been one of those companies drawn in by the magnetic pull of Intel and Microsoft technology. In the PC world, twas always thus. Compaq has been the Wintel provider par excellence, rarely straying from the two godfathers of the industry. In the higher-end server space it inherited Alpha chip technology when it bought Digital in 1998. It claimed - like others in a similar position before it - that this gave it options. Wrong. While buying into the twin Intel-Microsoft dream, it's almost impossible to maintain in-house microprocessor or operating system businesses. Think of outfits like Data General, ICL and Silicon Graphics. After years of doing their own thing, then hedging their bets, they had to take the Intel and Microsoft coins. Even their own versions of Unix started to take a back seat. And that's sad, at least in terms of user choice. If this sounds familiar, it's because it is. Sun's Scott McNealy, for one, has been giving this particular PowerPoint presentation for years. And guess what - it's because he almost uniquely sits atop a company that does everything its own way, from designing its own chips, to making its own servers and workstations, to writing its own OS and other software. Does this mean the end of Compaq? Not likely. The model here is IBM, a company that has emerged in recent years as the world's top IT services company. It can be argued all its business outside services (much of it loss-making) is about landing the lucrative services contracts. It's not as if Capellas and co at Compaq don't know that. Others also want to emulate IBM's success. Fujitsu said as much this week as it consolidated its disparate services arms. The only surprise is that the other big boy, HP, isn't on more of a services drive (although even its marketing people consistently stress the 'e-services' expertise the company claims to have). Compaq may be waving good-bye to doing things with a degree of independence, but at least now it can cash in on services - the real reason for the Digital acquisition - and tap the growing outsourcing market. And this is the sensible part of its plan.