Re-Uniting Unisys

When you think of Unisys you think service, and today, if Unisys marketing has its way,you’ll think cutting edge technology as well. Late this past September, Unisyslaunched a new ad campaign targeting not only potential customers, but also the employeesthemselves at Unisys. Unisys’ Larry Weinbach told me that the new ad campaign isdesigned to show how Unisys is "no longer the old boring mainframe company;" butrather is "an alive and vibrant technology firm."

I had first-hand experience with both the service and vibrancy of Unisys in a recentdiscussion with Unisys Chairman, President and CEO Lawrence Weinbach.

Fearing my 15-year old tape recorder would pick this important interview to die, Ipurchased a new Radio Shack recorder. Ten minutes into the interview the RS special shutoff and wouldn’t come back on. With the image of Bill Gates walking out on ConnieChung and thinking "I blew it," I watched Mr. Weinbach get up from his chair.However, he quickly returned with his own recorder and said, "Here, use mine."And I did, and it worked.

The day we met for our interview and photo shoot, Mr. Weinbach, that morning, met withthe Mayor of Philadelphia, Ed Rendell, followed by a one-on-one meeting with clients fromIndia; then he was off to film an in-house promotion video on a motorcycle, followed byour photo shoot for the cover of this issue; and, finally, for that day anyway, he wasattending a black tie affair later that evening. Without a doubt, Larry Weinbach is one ofthe busiest CEOs around today; but never to busy to listen to an employee or meet with acustomer.

Larry Weinbach exemplifies the change, dedication and commitment to customersatisfaction at Unisys; however, he would be the last to take personnel credit. Mr.Weinbach recognizes that the ultimate success of Unisys belongs, not to himself or theexecutive management, but rather to the people at Unisys. And I believed he means it.

In our exclusive interview, Mr. Weinbach tells of the challenge of overcoming corporatecultures, the "three legged stool" philosophy, and how Unisys is re-inventingitself through products, partnerships and a "tenacious" commitment to customers.

UNISPHERE: What would you consider yourgreatest accomplishment since joining Unisys?

WEINBACH: The thing I’m most proud of in thecompany is having had the ability to motivate the employees to have confidence inthemselves, to get them to feel and act like winners again in the marketplace. We’vemade great strides to get people to smile again - to feel good about the direction thecompany is going in. And to feel good about their own career potential within the company.

And probably the single thing that I feel best about isn’t paying off the debt ormaking the company profitable, but it is really the fact that the first six months of theyear, we hired 4,000 people, of which 31 percent were referrals from our employees. And ifyou go back a year ago and look at the first six months, it’s practically zero. Andthat tells me that we have a group of people in the company that are not only dedicated,but fell good about the company and are willing to tell their friends to come.

UNISPHERE: What were some specific tactics orprograms you initiated to help re-motivate employees?

WEINBACH: Well, I think the most important thing wasfor people to understand that I look at my role as that of a cheerleader. In the servicespart of the business, in particular, 80 percent of your employees interact with thecustomers, day in and day out. If they feel good, if they’re creative, tenacious andmotivated, then the relationship with the customer will be good. When they’re(employees) down customers can sense that.

We have a very simple vision for the company. It’s called "My three-leggedstool." There are only three words, and they are Customers, Employees and Reputation.We’re living that. It’s built upon the need to be externally focused in order tounderstand what our customers want and need, and to deliver that. It also means beingwilling to say it’s not within our capabilities and help them go somewhere else.That’s also part of serving the customer.

In the employee area, we’ve reinstated the 401K plan. We put in a stock purchaseplan with a guaranteed 15 percent discount. We’ve announced that we will start UnisysUniversity for 1999. This is a vehicle to give our people the right kind of training anddevelopment they need to be successful in the 21st century.

This includes the hard courses, which are technical courses and the soft courses, whichare leadership kinds of courses. We put in the career fitness center. This gives peoplethe ability to see what kind of jobs are available in the company, and what they need toprogress.

It’s really built around employees understanding that we win or lose because ofthem. And not because of me or the other senior executives in the company. This is a mindshare we need to get with the employees. And, frankly, something I think that was missinga year ago.

UNISPHERE: Would you consider this yourgreatest challenge as well?

WEINBACH: The greatest challenge of the company iswhat I call "changing the culture of the company." When I got here, people werestill talking about, "I’m from Sperry. I’m from Burroughs." I keptsaying, "I’m from Unisys." Sperry and Burroughs came together in 1986, andpeople were still referring to them. Now, you’ve got to wonder, when do you get overthe fact that there is no Sperry There is no Burroughs.

And I think the greatest challenge, and something I didn’t appreciate until I camehere, and I did a lot of homework, was the extent of the culture and people living in thepast, and people discussing these old relationships. It was nice because we have customersthat go back. But the fact was employees need to look forward and move forward. So I wouldsay that my greatest challenge is getting the culture change embedded in the company. Andthis is going to be a multi-year effort.

UNISPHERE: Any disappointments this pastyear?

WEINBACH: My disappointment is my own impatience.Maybe I was Pollyanna-ish in believing that we could get further ahead on this culturechange. The fact of the matter is that no company has been able to turn a culture aroundin a short amount of time. So I am probably disappointed because I set hurdles for myselfthat I haven’t been able to accomplish. Yet, at the same time, being more realisticit’s probably going to take a couple of years to do it.

I’m a believer. Philosophically, I believe that the company is successful or notbased on motivation of their people. Obviously, you can have a hot product or hot service,but ultimately it’s the motivation of the people that could make us a real winner inthe marketplace.

UNISPHERE: Last time we spoke you mentioned a"report card." How did Unisys do on its 12-month report card?

WEINBACH: In the area of reputation, we have gone along way to build credibility in the financial markets; and the stock price is evidence ofthat. We’ve had more analysts following us than in many many moons ... lots of years.We have more buys on the stock than we’ve had in many years. The industry analysts,I’m talking the Gartners, IDCs, take us seriously again.

We’re getting invitations to speak at technology conferences that we didn’tget before. I'm speaking at a Gartner symposium. Just before I met you, I was with acustomer who said they did their homework on us, and Gartner gave us very good marks. Ourcustomers today are no longer asking is Unisys viable? Which is one of the questions I gotwhen I first got here. Customers today are saying, "Unisys is viable. Tell us aboutyour services. Tell us about your products."

From the customer standpoint, our customer base is expanding. Of the services business,the new orders that we’ve gotten in last six months, over one-third come from brandnew customers to Unisys. We’ve put in the "large account program" whichdeals with global customers. It’s been successful because customers like the idea ofa single interface. We’re rolling out new services and products. We’re goingforward with CMP [See "Cellular MultiProcessing: An Introduction" on page XX].We will continue the next generation of ClearPath, our goal with the enterprise serversover the next couple of years is to take that to 100 MIPS. CMP will be out in 1999. We arespending a lot of money making sure we have migration for our present customers.

And yet at the same time we have equipment out in the market that is very competitive.The recent TPC-C’s numbers on the Aquanta server show we are the lowest cost. We havemoved away from some of the commodity products - as you know we outsource PCs and ourcustomers accept that.

We are spreading the engineering talent over fewer products, while spending the samedollars on R&D. which will give us more capability to ensure that we are coming upwith the right technology as we go into the 21st century. We have our top 100 people whohave two customers each. We have provided more calls on customers and we have morecustomers visiting Blue Bell looking at our clustering of 192 PCs, as well as visiting ourremote networking areas this past eight months, than we’ve had in years.

Talking from a report card standpoint, we are working very hard to ensure this companyis focused on the outside market and our customers and getting away from some of theinternal stuff that it did for too long.

Again, in the area of employees for the first year we put in a plan to ensure everyemployee has an annual review as part of their career planning.

UNISPHERE: A review process never existed?

WEINBACH: It did. But no one ever followed up on it.We had something on paper. Something that never got implemented, never got executed. SoI’m insisting that it get executed, to the point, that if at the end of the year if amanager does not provide appropriate performance evaluation of all their people, theyaren’t going to get one. Which means they’re not going to get a raise. Thatshould get some people’s attention - hopefully.

We have undertaken an in-depth amount of research to come up with our new advertisingcampaign. Part of this will impact our reputation, but part of this is geared toward ouremployees. We want our employees to feel good about what we are doing. The campaign isfocused around our people. It’s an exciting campaign. The purpose of the campaign isto get people to say that, "Unisys is no longer that old boring mainframe company.Unisys is alive and well." We are a technology company. We have great servicecapability and great technology capability.

So those are some of the things we’ve accomplished. If you want to look at some ofthe metrics: By the end of the first year, we’ve paid off one billion dollars in debt- a year early - providing $98 millions in interest savings a year. In 1997, we earned 46cents a share. This year, the street estimate is $1.02 ... and we are not uncomfortablewith this estimate. The company for the first time in many years has positive cash flowfrom operations. We have our growth engine revved up. If not for currency considerations,we would have had an 11 percent growth in the first six months, because of that,we’re at 8 percent. And by the way, that 8 percent is after getting out of the PCbusiness, or outsourcing our PC business. The right word is we’ve"outsourced" our PC business.

UNISPHERE: So what does this mean for Unisysat the end of the day?

WEINBACH: We’ve discussed reputation. When youput all this together, from the report card standpoint, what we currently have is acertain amount of predictability for the company, which we never had before. People lookedat us as a flying saucer, never knowing when we were going to land; never knowing when wewere going to take off. And, now we’ve brought it back to earth. So I feel good aboutwhat all the people at Unisys have been able to accomplish my first year. Since I’vebeen here, people have been willing to do a lot of things. Some of which they thought wereinteresting, some of which they thought were crazy. But they went along, and we can lookback on this first year and say it was a good year.

UNISPHERE: My take is that Unisys is nolonger a hardware supplier. What is the key to its services success?

WEINBACH: Well, let me rephrase your words first. Weare a services company with a hardware component or arm. So we are manufacturing hardware.At the end of 1997, when I took a strategic look at what business we should be in andwhich we should not; we concluded to get out of the PC business, but determined that thecore competency that we have in the high-volume, mission-critical kinds of systems -systems that require scalability and availability - were the forte of Unisys. And Iconcluded that we should stay in that business.

We made an overt decision to stay in the hardware business at the upper end. So whatyou’re seeing today, basically from the Aquanta 6 up, is the room we want to be in.We’re out of the commodities businesses and there’s no business we’re goingto do in the consumer space. We’re in the business to business space, and we’regoing to do it in the four-way or six-way on up. We believe the enterprise arena is ourskill and that’s where we ought to be.

I just wanted to put that in perspective. We’re not out of the hardware business.We’ve refocused ourselves to concentrate on the upper end of market. In the servicesbusiness, if I can be generic, we’ve got services in four pots, if you will. One issystems integration. The second is repeatable solutions, and this is the wave of thefuture. The reason being, custom applications take too long to develop and get to market;therefore, customers want to have their applications up an running faster.

The repeatable applications approach is similar to object-oriented programming, whereyou got a certain amount of programming on the shelf and you take it off, put a front-endin, and a back-end in, and it’s up and running.

I'll give you one example, the Hermes product. What we do is go in two competitivenewspapers, literally, across the street from one another. We will take the front end ofthe process and design it to interface with whatever the paper does internally. And thenpublish on the back end with whatever format the paper needs. And people don’t knowthat the guts of this thing is the same. But you don’t really care because the gutsof the application isn’t what makes you competitive. It’s the editorial content,the formatting. It’s this kind of solution that is the future.

We have about 35 application solutions that we sell into five different industries. Thethird area in services that we look at is outsourcing. We are looking at middle marketcustomers and we are competitive in outsourcing the data center, applications and businessprocesses.

The last area is the whole area of networking. And within networking, which we look atas a service, we provide an array. We can design the network. We can install the network.We are Cisco’s first or second largest installer of Cisco hardware. We can maintainthe network - on the street, on the ground, or all of the software on a remote basis, or acombination. About 85 percent of the problems can be handled on a remote basis. About 15percent are hardware problems and they get done on the street. We do desktop support,what’s known as DCSS. So that’s the kind of short answer to what we do in theservice business.

UNISPHERE: You mentioned Cisco. What isUnisys doing to attract and maintain its own partners?

WEINBACH: We have a number of partnerships in thenetworking area. For example, we provide networking services with Dell, Micron, Toshibaand, obviously, Unisys hardware, as well as many others.

Software products: Unisys, historically, felt we needed to do it ourselves. Our visiontoday is to have alliances, partnerships, to work through third parties. And whatyou’re seeing today is our making announcements every week, like our testing SAP R3on our hardware. You’re going to see more of those arrangements coming out of ourhardware.

Secondly, we have middleware, which we now license to third parties. For example, ourUREP, Universal Repository, which is a middleware product, which we have four or fivelicensees - Sybase being one of them. We’re looking today at expanding relationsacross the horizon. At the same time, we have a partnership with Microsoft in which we arelooking at our core competencies in the enterprise arena. We want to take 5.0 when itcomes out and make it as scaleable and available as anything that is required formission-critical applications.

The point I’m making is that we have established in the services area, thesoftware area, as well as the hardware area a different concept here that we want to getout into the marketplace and have appropriate relationships with parties that will enableus to enhance our business. And we are not looking at Unisys being totally internal toitself as it has been in the past.

UNISPHERE: Does anything keep you up atnight?

WEINBACH: I don’t stay awake worrying about whatsomeone else is or is not doing. I think what we have to do is look at this market andpick out the areas where we can be as good as our best competitors. And instead ofworrying where our competition is going, we have to worry where we have the skills to besuccessful and then look at who is the competition in that space. So I’m looking atit the other way - trying to figure out where we’re good, where we need to go. Wehave a lot of competitors that are bigger than us - with a lot more marketing clout. Andif you stayed up worrying about competion, you’d never get any sleep. We do notenvision Unisys being a $70 billion company; but I do envision us being a $10 billioncompany in about three years. And we’ll do that through internal growth.

UNISPHERE: What’s the number one reasona potential customer should consider Unisys today?

WEINBACH: When you look at Unisys, you have to look atthe different businesses we’re in; but if you want a generic answer it’s becausewe have creative, tenacious people who are dedicated to making our customers successful inthe global marketplace. And we do that by offering products/services that are capable ofsolving business problems.

That’s the answer. Now to expand on that, the marketplace is very sophisticated.Nobody today is buying a piece of hardware because they like the looks of it. Nobody buyshardware because it is from company X or company Y. They are buying solutions to businessproblems. It may be a technology solution It may be a service solution. It may be anetworking solution. It may be a combination of all those. We are in the process ofgetting our people at Unisys in the habit of thinking, "How does our customer makeits customers more successful?" That’s the challenge. Our customer, wants to addvalue to its customer. How can we help them?