The Big Deal

Enterprise partnership

When Steve Jobs stood on stage at NeXTWORLD Expo and announced a partnership between NeXT and Hewlett-Packard, it was the beginning of a new direction for the two companies. It also marked the end of a long process of courtship and negotiation.

By the second half of 1992, it had become evident to managers at NeXT that there was a mismatch between the needs of its biggest customers and NeXT's ability to serve them adequately.

NeXT's sales and marketing increasingly emphasized enterprisewide, mission-critical applications, but the company was not scaled properly to deliver services such as 24-hour support, dedicated account reps, or wide-area networking. Customers such as Swiss Bank Corporation (SBC) and Chicago Research and Trading were becoming increasingly vocal in urging NeXT to find a partner for enterprise systems.

"Swiss Bank is not looking for a hardware vendor. What we need is a strategic relationship with a technology company that supplies a broad range of hardware, software, and service," says Dwight Koop, SBC's director of information technology and leading a ProNeXT representative.

Historically, enterprise computing solutions, as opposed to departmental or personal-computing solutions, have been provided by only a small handful of vendors such as IBM, Digital Equipment Corporation, and Hewlett-Packard. "It was IBM that first used the term ‘enterprise,' " says Ron Weissman, NeXT's director of corporate marketing. "It implied that the company could supply cradle-to-grave products and service."

In the new world of distributed, open systems, the old model of mainframe-oriented enterprise solutions is no longer relevant. NeXT's object technology fits well with the trend toward downsized systems, but the company was too small to assure easy integration of its software with enterprise systems.

"Our sales model did not include the support and infrastructure of enterprise systems, but our customers were demanding that," says Jim McCrory, NeXT's manager of financial services marketing.

Beginning last fall, NeXT initiated talks with the handful of companies that could serve as enterprise partners. When Steve Jobs met with HP President Lou Platt in November 1992, the two CEOs recognized a mutual interest.

HP was interested in NeXT's approach to distributed objects. It also was impressed with NeXT's success in the trader-workstation market, a venue where HP was losing a lot of potential sales to archrival Sun Mi-crosystems. There also seemed to be a synergy between the companies be-cause of their respective strong roots in engineering.

Instead of assigning the relationship to a group within HP, Platt put the opportunity on the table for managers to pick up if they wanted. When a large group of senior HP managers came to NeXT for a presentation, many came away impressed. Though NeXT's people talked of various potential markets, a manager from HP's server division, Ruann Ernst, saw immediate benefits for HP in financial services. NeXT's portable ob- jects and inroads into the trader-workstation market could bring the power of HP's servers to bear on complex financial tasks, while traders stayed connected to their individual workstations.

The two sides entered a period of technical evaluation, with NeXT's UNIX guru, Avi Tevanian, working with key engineers from HP's workstation and server groups.

The negotiations were not happening in a vacuum, however. Various other initiatives at HP seemed to overlap with the emerging deal, and some groups within HP worried that a NeXT partnership could confuse these relationships and projects. For example, HP was instrumental in the negotiations with major UNIX vendors that would result by March 1993 in the announcement of COSE (Common Open Systems Environment), an alliance from which NeXT was noticeably absent.

In particular, NeXT's reputation as a nonstandard platform worried some HP managers, for whom standards and open systems are a religion. HP pushed NeXT to make its object technology comply with emerging object standards such as DCE, DME, and CORBA. Meanwhile, NeXT was reaching a crossroads on another front. By the beginning of this year, company executives had arrived at the painful decision to discontinue hardware design and manufacturing, a move it an-nounced to the world in early February.

For HP, the ramifications of the announcement were mixed. On one hand, it simplified any potential conflict over workstation sales. But the change left NeXT looking unstable as a long-term partner. Around the same time, the departure of NeXT sales chief Todd Rulon-Miller, one of the key players until then, seemed to add to doubts about NeXT's viability. The deal was in jeopardy.

Things began to turn around in March. For one, NeXT's concurrent quiet flirtation with Sun Microsystems came to an end. For another, the two teams of negotiators, now led by Paul Vais on the NeXT side and including a range of managers in addition to Ernst on the HP side, agreed to narrow the scope of the deal to the financial-services market. Other opportunities could come later after the relationship had borne fruit on Wall Street. "We ageed that the deal had to be concrete. Let's hit some home runs first and then look at other opportunities," McCrory says.

Now only one more critical element needed to fall into place – a way to package the deal to communicate the benefits to customers. It happened in the parking lot of HP after a long Friday meeting.

"We wanted a brand identity like ‘intel inside,' " Weissman recalls. The basic equation of the deal was that NeXT provided the objects and HP provided the enterprise. As he left the meeting with Steve Jobs, a phrase popped into Weissman's head: Object•Enterprise. In two words, it summed up the value of the strategy.

In practice, the Object•Enterprise strategy is a NeXT program that is not exclusive to any one partner, but the HP side loved the concept. All the pieces were in place for a deal, except the legal details.

Now that the two sides were down to contract language, the talks dragged on throughout March and April. Several times the companies thought they had the deal concluded, though it wasn't until the middle of May, just before NeXTWORLD Expo, that the ink finally dried.

by Dan Ruby and Dan Lavin