United States. Congress. Senate. Committee on the.

The Industrial reorganization act. Hearings, Ninety-third Congress, first session [-Ninety-fourth Congress, first session], on S. 1167 (Volume pt. 7) online

. (page 14 of 140)
Online LibraryUnited States. Congress. Senate. Committee on theThe Industrial reorganization act. Hearings, Ninety-third Congress, first session [-Ninety-fourth Congress, first session], on S. 1167 (Volume pt. 7) → online text (page 14 of 140)
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application areas.

And there is no indication that this growth will level off even by
the end of the decade.

By that time, however, the data communications market will have
taken on a different shape from that of today, and terminals will
bring computers increasingly close to consumers:

+ IBM — though still a primary force — will not dominate
all sectors. Competition from the communications carri-
ers and special-purpose terminal suppliers will open up
significant new market pockets where IBM may choose not
to participate at all.

+ New transmission networks , geared especially for data,
will greatly simplify the types of interconnection equip-
ment required. Digital networks, for example, will elim-
inate the need for modems.

+ Application-unique terminals will predominate , as general-
purpose terminals find fewer and fewer new user pockets to
penetrate.



4994



Emerging Trends

By the mid 1980s, data communications networks may well be effect-
ing significant changes in our very life style. Joining the power
of the computer with the transmission capabilities of communications
networks creates an environment conducive to whole new ranges of
potential applications and markets. Some of these are highly desir-
able; some are currently considered potentially destructive of the
American way of life.

Information utilities will draw on up-to-date data bases, pro-
viding businessmen and consumers alike the ability to obtain the
latest word on almost any subject — from news and weather to yester-
day's production totals to a hospital lab report entered only a few
minutes before. Corporate computer operations are already on their
way to becoming data utilities rather than functional service bureaus,
but few have yet recognized the extent of this implication. In five
or ten years, they will find themselves providing the instantaneous
availability of enormous amounts of information to managers at all
levels, rather than simply performing the service of payroll genera-
tion or invoicing. Even the payroll function itself could be carried
out simultaneously with time sheet approval (or automatically, in the
case of exempt employees) — all by computer terminal. The paperwork
syndrome will gradually disappear in favor of the terminal syndrome.

The checkless society is also beginning to evolve. At least
one prominent bank is developing a point-of-sale system for its bank
credit card customers. Many more already have cash dispensers that
use credit cards. Integrating these with an automatic payroll check
deposit system would greatly reduce the usefulness of checks even now.

And the increasingly widespread use of cable television (CATV)
will bring computer use right into the home. Many long talked about
services will finally become a reality.

+ Consumers will be able to select from current movies for
their home viewing pleasure.

+ Catalog shopping and other direct mail solicitation will
become interactive entertainment — until the bills arrive
or the funds disappear.

+ Health care distribution will be far more flexible and
economical .

+ Fire and police protection will achieve increased effec-
tiveness.



4995



+ Computer-aided instruction will finally become a cost-
effective teaching technique.

+ Interactive public opinion polls will eliminate the time
lag currently required.

Many more ideas will appear in rapid succession, but all of them are
significantly more long-range and controversial in nature than those
mentioned previously.

In Europe, a similar transition has begun to take place. Some
current teleprocessing networks there are every bit as sophisticated
as some of their counterparts in the U.S. But the overall changes
will be quite different because European society has never incorpor-
ated on a large scale many of the American features — such as checks
and deferred payment plans — that are so common here.

These trends are inevitable, but the changes will take place
gradually. Consumer demand is more difficult to generate than indus-
trial interest and political roadblocks will also slow the evolution.



The Increasing Demand for Communications

The technology is already here, and the rate at which businesses
implement teleprocessing networks is picking up rapidly. By 1977,
the total number of computers supporting terminal/communications net-
works will be about 2-1/2 times as many as in 1972. The greatest
growth will occur among the smallest and largest CPU size classes.

The market for data communications equipment will expand even
more. Interconnection equipment sectors will grow as a function of
the increasing complexity of networks.

+ The number of modems installed will bear a direct relation-
ship to the number of terminals in use on nondigital net-
works. The product mix will depend on the terminal types —
and therefore speeds — used.

+ The number of controllers/communications processors
installed will also depend on the number of terminals,
but the types will vary according to the individual
network complexity — size, geographic dispersement ,
diversity of terminal types, and polling requirements.

The number and types of terminals installed, on the other hand, will
depend almost entirely on application implementation. Three distinct
phases are involved as organizations evolve toward network implementa-
tion:



4996



+ Phase 1 focuses on reprogramming existing local batch
applications — usually those affecting sales volume and
customer service — for operation in a communications
mode .

+ Phase 2 usually involves additional terminals, but smaller
remote CPUs, and implementation of applications relating
to costs, such as inventory control.

+ Phase 3 emphasizes scientific management capabilities,
using the enormous data bases built up over Phase 1
and 2 as foundations for simulation and modeling tech-
niques for more knowledgeable decision making.

But every equipment/application combination is completely individual,
governed by factors unique to each organization.

Some of these unique factors also dictate each company's stage
of network implementation. The teleprocessing concept has caught on
more rapidly in some industry groups than in others. Some natural
reasons exist for this phenomenon.

+ Transportation/communication/utility organizations are
networks in themselves; therefore, they are naturally
prone to establishing computer networks to enhance
their operations.

+ Among the financial sectors, banks also tend to be net-
works, but on a smaller scale; consumer finance companies
tend to be even more highly prone to network use because
their information needs are so urgent; insurance companies
tend to lag slightly behind their more money-oriented
counterparts.

+ Trade organizations — wholesale and retail — offer more
limited potential because of the preponderance of small
firms, but are on a par with the industry groups already
discussed with respect to implementation versus potential.

+ Manufacturing organizations, on the other hand, have
relatively much higher potential because they tend to
support several CPU installations already. But this
industry group is lagging in network development com-
pared to potential.

+ The medical/health services industry is undercomputerized
overall, thus showing a high incidence of terminal use
per CPU installed. This sector represents a high growth
area in all computer industry sectors.



4997



INTERCONNECTION EQUIPMENT



The 1968 FCC ruling that independent interconnection equipment
could be legally connected to the switched telephone network gave
significant impetus to an industry that has since become a major
sector in the data communications market. The resulting proliferation
of vendors has afforded data communications users the opportunity to
design more flexible, cost-effective systems by choosing from a wide
array of equipment.

Teleprocessing users typically spend $50,000 to $75,000 per month
on network use, with interconnection equipment accounting for about
4% of that total — a seemingly small percentage. But teleprocessing
network development is still in an embryonic stage, implying a propor-
tionately low level of interconnection equipment use compared to
potential.

As pointed out in the previous chapter, users generally advance
through three distinct phases of network development, each of which
tends to increase the complexity of the total network. This increased
complexity dictates the need for more sophisticated, but flexible,
interconnection equipment, which becomes an increasingly important
part of the network. For example, a network that was originally con-
figured with a limited number of low-speed terminals linked to a
hardwired controller such as the IBM 2701, might often evolve into
one that utilizes a high number of both low-speed and high-speed ter-
minals at several remote locations that can only be tied together
effectively through a combination of multiplexers or line concentrators,
and a programmable communications front end.

Because of this progressive network evolution, interconnection
equipment continues to represent a greater proportion of these users'
budgets.



Competitive Environment

The interconnection equipment market — until recent years
has been characterized by lagging equipment development and unaggressive
marketing efforts. AT&T, because of its monopolistic hold on the
communications sector, has had little motivation to develop high-perform-
ance, low-cost equipment. Data communications revenues account for
an estimated less than 3% of AT&T's total revenues . However, both the
Carterfone and the more recent MCI ruling have apparently caused
AT&T to react to competition. Several moves have enhanced transmission
service and equipment offerings.



4998



Within the computer industry itself, the mainframe manufacturers
were once guilty of slow interconnection equipment development and
ineffective marketing. However, this posture has changed during the
past few years as a result of both increasing competition by the
independent equipment suppliers and an increased awareness of what
teleprocessing users are willing to pay for.

IBM traditionally has not been as strong in the teleprocessing
segment of the computer industry as in other areas, holding less than
a 50% share of most subsectors. However, its thrust during the last
few years has emphasized data communications. It has announced and
delivered several new price-competitive terminal devices, as well as
new programmable communications controllers.

But despite this increased activity by industry participants,
very few suppliers of interconnection equipment can claim to offer
a full complement of equipment to serve all the teleprocessing user's
needs.

+ There are currently over 90 modem companies in operation,
selling a variety of devices to both OEMs and end users,
but less than 30% of these companies can also offer some
other type of interconnection equipment.

+ Of about 20-25 companies who produce multiplexers, most
supply modems, but very few also produce some form of
communications controller or processor.

+ About 50 companies offer communications controllers or
processors, but less than four also produce modems and
multiplexers.

Like users in other sectors of the computer industry, teleprocessing
users prefer to have a single supplier for all their interconnection
needs. With the exception of the large, more independent users, they
look to the mainframe manufacturers or AT&T to simplify the entire
process. As a result, industry participants — especially modem
manufacturers — are under user pressure to broaden their product lines.

Independent modem manufacturers have been increasing their share
of the market, and will continue to penetrate AT&T's domain over the
next several years. But their rate of penetration will slow consider-
ably as a result of increased competition by AT&T itself, the main-
frame vendors, and some of the OEM customers, who will develop in-house
capabilities in order to remain flexible.

Once AT&T begins operating its all-digital , private-line network
in 1974 , competition with AT&T for users on this network will stiffen
considerably. The modem as we know it today will disappear; in its
place will be a digital interface device attached between terminals or



4999



CPUs and the transmission line. AT&T has already indicated that its
Data Service Units (DSU) , which will be used to connect carrier
equipment to the network, will be inexpensive. It will also offer
an attachment analogous to its Data Access Arrangement (DDA) , which
is required today for users of non-carrier equipment on the switched
network. Called the Channel Service Unit , this device will provide
only some of the functions accomplished by the Data Service Unit;
the user will have to obtain the other functions through his indepen-
dent supplier. Whether independent equipment manufacturers will be
able to provide these functions within their own equipment and still
compete with the low price of the DSU is a major question. But the
requirement for modems on switched lines will remain, albeit a smaller
proportion than in the past.



Communications Controllers/Processors & Multiplexers

The communications control function in teleprocessing networks
has assumed an increasingly important role over the past few years,
as existing networks have progressed through their evolutionary
development. Users are configuring high-volume systems that use a
variety of terminals and a mixture of line disciplines and speeds,
creating the need for flexibility and sophisticated network design.
These configurations demand much more than can be accomplished through
the use of rigid, hardwired controllers, multiplexers, and concentra-
tors — the primary offerings of most interconnection equipment
suppliers for the past several years.

But rapid improvements in minicomputer technology and price/
performance levels over the past three years, have fostered the growth
of a new breed of fully programmable control devices, capable of
handling a significant portion of the teleprocessing load. The
ability to meet the changing requirements of these systems is para-
mount, especially in view of the vast array of terminal devices avail-
able to today's independent-minded user. The most practical solution
is through software; the same controller can emulate several host
devices, while simultaneously handling the concentration, multiplexing,
speed, and code conversion of many different remote devices. The
second consideration that is important today — and will be moreso in
the future — is the ability to reduce the overhead on the host CPU.
It is not uncommon to find a CPU in a teleprocessing network spend
over 60% of its time handling the teleprocessing chores — terminal
polling, message routing, code formatting and conversion, and so on.
For a medium- to large-scale CPU, such as IBM's 370/155, this is
an extreme waste of CPU capability. Alternatively, a programmable
processor linked in front of the CPU can execute these functions,
freeing the host CPU for tasks better suited to its capabilities.



5000



Programmable controllers — or processors — are nothing new to
this industry, but the price/performance levels available today
certainly are. A previous lack of network sophistication and volume,
combined with the disproportionately high costs of the controllers
and processors available, stymied the growth of this market. But
programmable device costs are now comparable to their hardwired
counterparts, in many instances, while offering enormous increases
in capability. And more important is the entrance of IBM — with its
3705 controller — into this market segment .

Hardwired devices like the IBM 270x series that have been around
for some time outnumber programmable controllers and processors by
fourteen to one . At yearend 1972, for example, there were 17,175
controllers installed on general-purpose teleprocessing computer sys-
tems, but less than 1,200, or 7% of these controllers offer processing
capabilities. However, this situation will change fairly rapidly.
IDC estimates that by 1977 , programmable devices will constitute about
45% of all controllers in use.

The average number of controllers installed will drop from 1.2
per CPU in 1972 to 1.04 by 1977, as a result of displacement of
several hardwired devices by a fewer number of programmable devices.
Recent surveys conducted by IDC have revealed many cases where three
or four 270x devices were replaced by a single 3705. Therefore,
while the number of controllers in use will not increase as much as
one might expect, the average dollar value of shipments will certainly
increase at a much greater rate.



5001



DATA ENTRY



As the computer industry enters the conununications era, the
data entry market, too, is gradually changing its complexion. The
traditional keypunch room itself may even disappear. Although the
ever popular keypunch will continue to dominate the environment for
several years, the change to more sophisticated techniques —
already occurring at the largest sites — will eventually filter
through the entire spectrum of data processing installations.

As the 1970s began, recession-constrained budgets caused users
to demand more efficiency, economy, and flexibility — even at the
cost of changing procedures. As a result, shipments of standard
keypunch equipment started to fall while total data entry ship-
ments increased more rapidly than computer equipment as a whole.
This trend has continued:

+ Shared-processor systems reached volume delivery
levels and began rapidly penetrating installations
interested in expanding and utilizing the intelligence
now available in the data entry environment.

+ OCR systems decreased in price, significantly widen-
ing the range of applications for which they are
economically justifiable.

+ Direct data entry has been fostered by IBM — long
accused of foot-dragging to protect its keypunch
base — and the user can now consider upgrading
directly from the keypunch to the intelligent
terminal.

+ Point-of-sale terminals became widely accepted by
the retail industry, setting the stage for a wider
variety of special-purpose data entry devices
(information appliances) in other industries as
autotransaction takes off.

The change, though slow, is clearly beginning to evolve, and 1975
will see a completely different product mix from that of 1965,
when the keypunch was virtually the only alternative.

The trend away from the standard keypunch is beginning to
infiltrate smaller installations, but as Table 125 shows, the
move will be slow. Even in 1976, the keypunch will still be with us .



5002



+ The installed base will actually continue to grow
through 1974, buffered by new 80- and 96-column
buffered units offsetting the retirements of the
old 80-column unbuffered ones.

+ In 1976 the total keypunch base will still exceed
that of all other data entry products combined,
except terminals.

In all, however, over 112,000 traditional 80-column, unbuffered
keypunches will disappear over the next five years.

Other segments of the market can look forward to a more
exciting future.

+ Shared-processor systems will see the greatest growth,
quadrupling in number, although this growth will slow
in 1975 and 1976 as direct data entry becomes more
popular.

+ Terminals will sustain their current growth rate
throughout the entire period, with that portion
used primarily for data entry increasing signi-
ficantly. There will be a shift toward special-
purpose terminals (information appliances) as auto-
transaction blossoms.

+ Optical character recognition (OCR) equipment will
continue reasonably strong, spurred by the intro-
duction of low-cost equipment will be the major
factor in maintaining this position. But the accom-
panying need for resystematization will still pre-
vent OCR's widespread use outside of label scanning
in retail autotransaction systems.

Key-to-tape equipment, on the other hand, has passed its peak.
Retirements have begun to exceed shipments.



5003



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5004



TERMINALS



Of all the major sectors in the computer industry, the
terminal market will achieve the most spectacular growth over
the next five years. As the number of general-purpose computers
doubles from 1972 to 1977, the total number of terminals connected
to those CPUs will more than triple.

+ General-purpose terminals will increase from 303,000
installations in 1972 to over 960,000 in 1977, with
the emphasis on increasing amounts of remote process-
ing power.

+ Application-unique devices — the so-called appliances
of the computer industry — will experience a snow-
balling growth rate from its current 90,000 installa-
tion base, with no saturation point in sight.

Today's terminal market is highly fragmented and the emerging
trends will probably make it even moreso.

+ IBM — dominating less than half of the general-



Online LibraryUnited States. Congress. Senate. Committee on theThe Industrial reorganization act. Hearings, Ninety-third Congress, first session [-Ninety-fourth Congress, first session], on S. 1167 (Volume pt. 7) → online text (page 14 of 140)