The rise and fall of DEC


DEC article

Firstly, the information that I’m presenting here is taken from various sources, including people I knew who worked for DEC, my own experiences, and the book DEC Is Dead, Long Live DEC by Edgar H. Schein.

Quick background info:

DEC was the first knowledge-based company - a company who valued the knowledge of its employees over anything else, and used it to drive change and sell products.

The founder and father icon of DEC, Ken Olsen, spent time working at IBM. He quickly noticed that IBM was a bureaucracy that was slow to innovate, and decided that he could beat them at their own game by opening a new computer company. He called it DEC (Digital Equipment Corporation) to avoid any negative reaction to the word “computer” (at the time, “computer” was synonymous with “expensive, big, piece of metal that didn’t do shit”). Olsen was of the opinion that science and engineering would benefit the most from computing. As a result, nearly all of DEC’s computers were used primarily in the science and engineering market, and this focus continued for DEC’s lifetime.

In the 1960s, when expensive mainframes were pretty much the only way to get into computing, DEC was making affordable “minicomputers” that could do what you wanted for much less money.

Why DEC was successful:

First and foremost, they recruited the best technical talent by creating a corporate culture that appealed to those who liked technical challenge but hated management and marketing. Working at DEC was informal, open, and fun. Everyone mattered, and everyone made a difference - you could take on whatever project you wanted, and were given complete freedom to best decide how to tackle it - no one told you how to do it. The company motto was “When in doubt, do the right thing.” DEC encouraged loyalty partly by giving people this freedom and trust, but also by relaying its commitment to life-long employment - “If you got a job at DEC, you were set for life.”

This led to more “leaders” than “managers” at the company (a manager follows the bottom line and doesn’t take risks, whereas a leader changes the future and takes risks). Arguments and confrontation at meetings were encouraged (not punished as insubordination), and there were no ranks - Olsen often bypassed managers and talked directly to anyone he wanted.

The result of this culture was immense: DEC grew fast. By 1987, they were the 2nd largest computer company in the world and Ken Olsen was named Fortune Magazine’s Entrepreneur of the Century.

Moreover, DEC’s products were always backwards-compatible (to save the customer money from having to replace old systems all the time), and the sales people were not commissioned. Better yet, the sales people never tried to sell you more than you needed, and were technically apt - they could show you how to use their computers to solve a specific problem (and then get the sale). Customers had their own user group called DECUS (DEC Users Society) that they could use to share knowledge and give DEC feedback, which was then used to re-innovate.

The 1960s and 1970s (The Golden Years):

Before 1965, most computers used batch processing - that is, you had to feed your punch cards with instructions into the computer as a batch and the computer would run each batch in turn. It was slow and inefficient.

The first series of computers that DEC sold were the infamous and popular PDP (Programmed Data Processor) series, which was the first commercial time-sharing (a.k.a. multi-tasking) computer that was inexpensive and easy to use. It was also the first interactive computer, the first computer with a graphical user interface, the first computer to ever have a video game (Spacewar), the first computer to run UNIX, and one of the first computers on the Internet. It sold in large numbers from the 1960s to the early 1980s, and influenced nearly all other computers developed in the 1970s and 1980s.

In the mid 1970s, DEC introduced a 32-bit version of the PDP called the VAX (Virtual Address Extension) that was insanely popular until the late 1980s. Along with the VAX hardware came a new OS called VMS, which was the first to offer standard peer-to-peer networking (DECnet), network clustering, hyper-threading, advanced file management, and an all-in-one office suite (email, word processing, etc.). The guy who made VMS (David Cutler) also made Windows NT later in the 1990s using much of the same architecture.

The 1970s was the golden age for DEC - they had the best microprocessor designs and software compilers in the industry. During that time, they grew the most and had the least competition.

The 1980s (Problems, Competition):

In the 1980s, the computing industry blew up (literally) and DEC had a world of competition. Network technologies, software (Microsoft Word, Lotus 123, etc.) and inexpensive client computers (IBM PCs, Apple Macintoshes, Sun Workstations) were flooding the market, and the trend of the future was quickly shaping to be client-server computing (which is still the focus today). Yes, VMS and DEC applications had great network support, but they were proprietary to DEC hardware and expensive - you could spend a lot less to do the same thing with other hardware and software.

Open communication also became more difficult as the company grew. The corporate culture that worked to promote innovation in the 1960s and 1970s started to hinder the company in the 1980s - they were just too BIG for that culture to work. Things were disorganized. The company was divided into little empires that had their own way of doing things, and each empire didn’t talk to one another. Power struggles started to erupt amongst managers. Customers didn’t have a specific salesperson assigned to their account, and often got conflicting information from different salespeople. And orders were slow to process.

The biggest problem that caused DEC problems in the 1980s was their lack of strategy - what kind of company were they? Where did they want to go? Ken Olsen and the senior management team didn’t believe in strategy - they thought that the market would guide them the right way (which doesn’t work in a big company, and they were a really big company by then). As a result, they couldn’t put processes in place that would focus priorities, weed out bad projects that were unprofitable, resolve issues, etc. They were too inefficient, and were supporting too many projects and people. They were engineering-driven instead of strategy-driven. VAX was still making them money hand over fist. But without strategy, organization, and innovation, how long would that last?

DEC had a hard time adapting to a shifting marketplace (minicomputers to personal computers). They tried to enter the low cost PC market but failed miserably - DEC was never very low cost on anything during their entire lifespan!

In 1986, RISC processor technology was fast becoming the way of the future and DEC figured out that for a given investment in hardware, RISC would double or triple outperform VAX. So they scrambled and brought out a few high-end MIPS RISC workstations, but Sun Microsystems had already seized hold of the high-end workstation market by then.

Plus, they bet too much on VMS in a world that was using UNIX. UNIX ran on VAX very well, but DEC never exploited it the way it should have - they invested all their energy into VMS.

Probably the biggest blunder that DEC made in the 1980s was developing a mainframe version of the VAX (called the VAX 9000) that was to compete with IBM mainframes. IBM owned the mainframe market at the time and about half of their revenue came from the services and software that it provided to its “locked-in” customer base. A direct attack on this ecosystem was doomed to failure, and the VAX 9000 sold poorly. A billion dollars in research and development down the drain.

The Alpha Redemption:

In the late 1980s, a team at DEC started down a path that could save the company. They were to develop a blazingly fast RISC platform that was backwards compatible to VAX Originally called Prism, it was eventually called Alpha and was developed by a very talented team of experienced engineers who worked independently with little support from the rest of the company. They had a single focus to make the world’s best platform and save DEC. They were motivated and organized - they communicated frequently so that they could work around delays that would affect project milestones. And what they came up with was the fastest and most powerful CPU platform the world saw for the next decade! The Alpha was the first CPU to go over 100MHz, and the first to go over 500MHz (the competition was half that speed). It was a billion dollars well spent. But it was developed a bit too late to save DEC.

Decline (1992-1998):

By the time Alpha hit the market in 1992, the VAX had already gone out of style. After two years of losses in 1991 and 1992, Ken Olsen resigned, and Robert Palmer took over. Palmer put in strict management practices which killed much of the corporate culture that was previously responsible for innovation and sold off many business units in order to bring DEC back into the black. He sold off the disk business to Quantum, the database business to Oracle, and the semiconductor fabrication business to Intel. In 1998, he sold the rest of the company to Compaq.

It is important to note that between 1992 and 1998, DEC was still developing and selling Alphas like crazy, and many people in DEC still had DEC’s original freedom and entrepreneurial spirit. DEC even created AltaVista - the world’s most common Internet search engine before Google - and, yes, it was hosted on some kick-ass Alphas.


DEC was a company the grew and innovated tremendously using a unique open culture - their height as a company was in the time-shared computing era (1965-1981) with their PDP and VAX lines of computers. Rapid growth, bad decision making, inability to adapt to a changing market (due to their corporate culture) and inability to focus on strategy rather than engineering ultimately led to their demise. AltaVista and the Alpha platform kept them alive until they were sold to Compaq in 1998. Regardless, DEC will always be remembered as the most influential computer company of its time.