Compaq Computer: Information Technology in a Company in Transition
Jason P. Dedrick, Kenneth L. Kraemer · eScholarship (California Digital Library) · 1999
Compaq Computer, based in Houston, Texas, is the world's largest personal computer manufacturer and the fourth largest information technology (IT) company.From 1992-1997, the company's aggressive high volume PC strategy propelled it to high growth rates in revenues, while its leadership in PC servers sustained strong margins and drove profit growth.Starting in 1995, former CEO Eckhard Pfieffer began to transform Compaq from a pure PC company to a full-service IT company that could compete with the likes of IBM and Hewlett-Packard.The key strategic moves were the acquisitions of Tandem Computer and Digital Equipment Corporation in 1997 and 1998, giving Compaq a diverse line of technologies and service capabilities.Compaq stumbled badly in 1998 as it faced new challenges in the PC market and tried to assimilate Tandem and Digital.In particular, Compaq struggled to catch up with Dell Computer, whose direct sales, build-to-order model gave it a big advantage in cost and speed over Compaq's indirect sales, build-to-forecast approach.When the company disappointed investors with poor results in 1999, the board removed Pfieffer and replaced him with Michael Capellas.Since Pfieffer's departure, Compaq has reorganized itself along business lines, streamlined its distribution channels and developed a new electronic commerce strategy called "NonStop eBusiness."In 1994, Compaq began building a global enterprise information system to support its manufacturing and order fulfillment operations.The systems were built primarily around SAP applications, running on Compaq PC servers and the Windows NT operating system.Compaq's IT people were forced to distribute the SAP applications across ten interconnected sites around the world and customize extensively in order to run on Windows NT and meet Compaq's needs.The company had a very centralized IT organization until 1998, but the structure has started to change with the decision to break up the SAP group into separate teams for each major business unit.Further reorganization is likely to align IT with the new organizational structure announced in 1999.