The information society

Ewan Sutherland

The computer industry

Industry sectors

hardware
software
services

World market shares by sectors

Collision with telecommunications and entertainment.

The infobahn

Hardware

supercomptuers
mainframe computers
minicomputers
workstations
personal computers

System/360

launched in 1964
360 degrees - to encompass all applications
US $ 750,000,000 engineering development costs
US $ 4.5 billion in five new factories including one chip factory
brought in US$ 16,000,000,000
redefined the concept of business computing

Barriers to entry in 1960s

R&D costs of hardware
development costs of operating system and application software
need for economies of scale
need for experienced sales force

Seymour Cray

Control Data Corporation built Cray a laboratory in Chippewa Falls, Wisconsin
effectively a recluse
launched the CDC 6600 in 1963
meanwhile CDC had diversified into more commerical machines

Cray Research

founded Cray Research in 1972 and left CDC in 1973
made the world's most powerful computers
used for processor intensive applications
later left Cray Research to found new company, Cray Computer, which has yet to deliver a single machine

Digital Equipment Corporation (DEC or Digital)

Ken Olsen founded DEC in 1957 with his brother and Harlan Anderson
Olsen had worked in the Massachussetts Institute of Technology (MIT) computer laboratories he had also worked for IBM on behalf of MIT
the "non-computer"
launched the PDP-1 in 1961
niche market below IBM
the minicomputer
major company in mid-1960s
launched VAX range in 1979
featured clustering and networking
VMS operating system (competing against Unix)
failed in the PC marketplace
now trying the Alpha RISC chip

Graph of DEC profit and loss

Wang Laboratories

founded by Dr An Wang
sold his patent for magnetic core memory to IBM
manufactured electronic calculators
minicomputers (from 1964)
standalone word processors
office automation
personal computers
entered "Chapter 11" bankruptcy in 1992
emerged again in 1994 without manufacturing capacity

Apple Computer

Steve Wozniak and Steve Jobs
started in a garage in Silicon Valley
Apple I (1976)
Apple II (1977)
brought in John Sculley from PepsiCo
LISA failed in 1983
Steve Jobs left to form Next Computer Inc

The Apple Macintosh "borrowed" the user interface from Xerox

windows
icons
menus
pointers

Macintosh launched ten years ago

head-to-head with IBM
legendary "Big Brother" advert
niche market for desktop publishing

Xerox Corporation

A major photocopier company, founder of the industry. Establised a "blue skies" research centre in Palo Alto California, where the staff developed:

WIMPs
laser printer
desk top publishing

Then failed to exploit them...

The IBM PC

"standard product"
launched in August 1981 after one year Project Chess high-speed development
Apple Computer welcomed IBM to the market
DOS, processor, etc made from off-the-shelf components

The clone wars

rivals tried variations
then realised it was a "standard" and copied it
companies such as COMPAQ which produced the portable version
hundreds of companies tried to make "clones"
no longer premium prices, but "brands" are still significant

The empire fights back

IBM lost market share
IBM lost design control
IBM went proprietary: Personal System/2 and Operating System/2
IBM misjudged the market

The fall of IBM is not the conventional American story of underinvestment, slipshod standards, and lagging technology. Even with all the recent defections, it still has outstandingly talented employees. Its rate of investment through the 1970s and 1980s was massive; R&D spending in the last half of the 1980s averaged almost $6 billion a year. No other company in the history of the world has spent that much. But still the loss of market share has been precipitate in every major product category.

Ferguson and Morris (1993) p. 84.

IBM Market shares in 1983

Changes in market shares between 1986 and 1991

RISC computing

Reduced Instruction Set Computing (RISC)
simpler and faster
conceived at IBM in late 1970s
1983 launched by Ridge and Pyramid Corps
MIPS
IBM RT workstation (failed) in 1987
also in 1987 Hewlett-Packard and Sun SPARC
re-launched by IBM as RS6000

Underlying causes of IBM's failure:

bureaucracy
fear of anti-trust action
failure to understand implications and applications of new technologies
flexibility of rivals in Silicon Valley
AT&T is finally a rival through vertical integration

Ramsey Clark, the attorney general of the United States during the last waning days of the Johnson administration, on January 17, 1969, signed a complaint charging IBM with unlawful monopolization of the computer industry and requested that the federal courts dismember the company.
Ferguson and Morris (1993), p 10.

An extensive review of the IBM case was an early priority of the Reagan administration Justice Department. The suit was dropped in June 1982 with a curt four-sentence appraisal by the solicitor general that the case was "without merit."
Ferguson and Morris (1993) page 11.

The rise of the Japanese

First in cars, motorbikes and then in televisions, video cassette recorders.

Japanese exports of VCRs to the USA

Finally Japan has been exporting:

computers
memory chips
flat screens
lap-tops

Shares of the world market for microprocessors

Selling chips

how do you keep up with developments
defence by law suits
how do you sell a product the customer cannot see
cross-licencing (dual source and to increase availability)

Long-term product planning is dangerous ... Three years is long-term. Even two years may be. Five years is laughable.

Ed McCracken, CEO Silicon Graphics in Harvard Business Review

We don't pay a lot of attention to whether or not a product is still gaining market share when we decide to launch a new product. This approach is the only way to ensure that no one gets to the market first with a faster, better, cheaper product. When someone beats us to the market, which has happened only a very few times, we are embarassed.