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 15 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 15 of 140)
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purpose terminal market and paying only token
attention to date to the special-purpose portion —
has never been a leader in the trend toward com-
munications use.

+ Other mainframe manufacturers have captured little
pockets of terminal use both among their own CPU
customers and within IBM's customer base, but have
made no major impact on the total market.

+ Except for Teletype Corporation, no single indepen-
dent vendor holds a major market share in any
general-purpose terminal market subsector.

+ All special-purpose terminal sectors are dominated
by one or two suppliers, but as new application areas
emerge, new vendors will probably enter the market-
place to control them, leaving the total marketing
effort as dispersed as the industries served.

Despite this dispersion, however, some firms will prove highly
successful, either by taking advantage of IBM's marketing muscle,
offering plug-compatible equipment much as the peripheral manu-
facturers do, or by accurately assessing the emerging trends and
leading the way.



5005



In any case, at least $8-10 billion of new equipment will
be installed over the next five years as remote devices com-
municating directly with a host CPU — a market sufficiently
large to support a significant number of participants adequately.



Market Size

For purposes of estimating market size, IDC has defined ter-
minals as all devices that can transmit (and receive) data to (and
from) a CPU via communications lines. Some terminals may operate
off-line most of the time and transmit accumulated data only
periodically; others — like remote CPUs — may even perform some
processing before transmission. In addition, some terminals are
not actually at remote locations, but they can perform the same
functions as remote terminals and communicate directly with the
CPU, so IDC includes them in this market definition. With respect
to Teletype terminals, IDC's estimates include only that portion
of total installations (other than consoles) that is used in con-
junction with computers.

At yearend 1972, the International Data Corporation's count
of all terminals used with computers in this country was as
follows:



TABLE 126



U.S. TERMINAL MARKET, BY NUMBER OF UNITS, YEAREND 1972



Manufacturer Installed Base

IBM ' 150,000

Teletype 80,000

Other Mainframe 31,000

Independents 132,000

TOTAL 393,000



A potential numbers game race between IBM and AT&T plus the
serious start of what may be a vast special-purpose terminal, or
information appliance market, illustrate that terminals of all
sorts — intelligent, editing, batch, conversational, application-
unique . . . any device that can transmit and receive data to and
from a CPU via any type of communications link — are going to grow
dramatically in numbers during the 1970s and beyond. Among some
of the more specific trends:



40-927 O - p'



5006



+ General-purpose terminals connected to general-purpose
CPUs (see Table 125) are growing at about 25% a year
and will triple in number — to almost 1 million —
by 1977. During this same five-year time period,
the number of CPUs will only double.

+ Application-unique terminal devices will bring the
computer closer and closer to the consumer. These
information appliances are destined to achieve the
most spectacular growth within the terminal sec-
tor; no saturation point is in sight as new applica-
tions continue to come to the forefront.

+ A potential battle is shaping up between IBM and
AT&T — at least in the general-purpose terminal
sector. But amid the intense competition and the
large number of terminal manufacturers, much
maneuvering for position remains to be done, even
in general-purpose terminals.

+ In the application-oriented area, it's difficult
to determine whether a handful of leaders will
emerge ... or whether fragmentation by applica-
tion will continue, with no overall leaders.

+ The greatest predictable growth rates will be
among processor terminals such as the IBM 3735,
the Sycor 340, and the Datapoint 2200.

+ IBM — with less than half the general-purpose market
and currently paying only token attention to the
special-purpose portion — stands to be most impacted
by the increased use of terminals. Despite IBM
efforts, views are changing as to the amount of
centralized CPU processing power really needed
for efficient system utilization,

+ There seems to be room for everyone. With $8 billion
to $10 billion worth of equipment expected to be
shipped between now and 1977, a real sellers market
seems to exist. Even AT&T has expressed concern
about meeting demand for its Dataspeed product line.

Amidst all the glowing prospects — especially for the indepen-
dents — for burgeoning terminal equipment growth, there is con-
fusion, some of which has been building for at least two years.
How do you define, or even categorize terminals?



5007



Types of Terminals

After considering the various types of terminals already in
use plus those announced and scheduled for delivery, IDC decided
that a breakdown by end-user thrust (examining the flow of data
in and out) is perhaps the most meaningful classification criteria:

+ Operator-oriented terminals consist of a keyboard for
input and either a printer or a CRT for output. These
condense the traditional two-step data entry function
into a direct, one-step process but there are at least
subsets: conversational terminals (such as Teletype 35s
and IBM 2741s); editing terminals (such as the IBM 3270)
with extensive error correction and block transmission
facilities; and processing terminals (such as IBM's
3735 and the Burroughs TC 500) which are programmable
and provide processing power as well as editing capabilities.

+ Machine-oriented terminals normally transmit input
from machine (CPU) to machine, and receive output in
the same manner. The important distinction here is
that the operator communicates only indirectly with
the host CPU. This class consists of batch terminals;
remote CPUs ; and "other" remote devices (such as OCR
readers or tape transports).

+ Application-unique devices provide input and/or output
in such a way as to make the device useful for one or
a limited number of specific applications. The entire
product is geared only to that application, it is priced
in relation to the costs of the application, and often
(for the present, at least) it looks more like the
manual equipment it replaces than a piece of computer
gear. Among the more prevalent applications so far are
stock quotation consoles, bank teller terminals, credit
verification systems, and point-of-sale terminals . . .
information appliances.



The Markets



As new applications arise, or new products come along, the
above categories will likely need change or supplementation.
Indeed, today's so-called intelligent terminals actually fall into
all three — and they may well be used for many application-
unique applications by the use of special programming and/or
customized keyboards. But for today, at least, growth trends
for the terminal marketplace can best be tracked on this basis.



5008





TABLE


127




DISTRIBUTION OF GENERAL


PURPOSE


TERMINALS BY CPU SIZE


1972






1977


M


NIS
5%






MINIS
13%




«$10,00^v








«$io,ooo\


/j40,000


137o/ \








21% \


/ 29%








/>$40,000\

/ 33% 1


\


/ / $10,000-








^^^,^*— '"^


^,J^ $20,000








[^^^' 1


^ ' ^*^>*.. 18%






^\ $10,000-/








\ y^ \ $20,000/


\^$20,000- $40,000\wy






\^^20,000-\ 18%/


\ 37% 7






\ $40,000 \ /
N. 25% \/



This growth will come because three factors that exist in the
industry will cause an accelerator effect:

+ The number of general-purpose computers will double
during the 1972-1977 period.

+ The average number of general-purpose (operator and
machine oriented) terminals connected to each CPU
that supports terminals will also grow from 20 to 29.

+ Existing networks will begin adding terminals to
small remote CPUs as management inquiry applica-
tions increase. Smaller companies will begin to
follow the lead of larger trend-setting organiza-
tions and start to establish networks of their own.



The result of all this will cause a seven to ten-fold increase
in the number of general-purpose terminals attached to System/3s
and 360/20S — or their equivalents five years hence — compared
to a mere tripling for general-purpose terminals overall. Also,
substantial growth will occur among large CPUs, where approxi-
mately one-third of all general-purpose terminals already exist.
Thus, it appears that users will take fuller advantage of already-
established patterns for centralization of CPU power. This will
undoubtedly affect equipment acquisition patterns, especially when
application-unique terminals are also considered.



5009



COMPUTER SOFTWARE



Software is the element that differentiates computers them-
selves from other types of computing machinery. This man/machine
interface stems from many sources in various forms, but by imposing
reasonable limits and a logical segmentation one can discuss the
actual software market with only a minimum of confusion.



Scope of the Market

The software market as defined by IDC includes all revenues
that derive from computer users' spending on software developed by
outside sources — mainframe computer manufacturers, independent
software suppliers, and other users. This definition automatically
excludes at least 90% of all the software actually installed today.

+ In-house programming and systems engineering staffs
account for 20% to 25% of salary expenditures.

+ Free user libraries exchange large numbers of pro-
grams each year.

+ Mainframe manufacturers provide significant portions
of the software for their systems without additional
charge.

+ Private software swaps never receive sufficient
visibility to allow estimates of their value.

All of these software sources are substantial, but none generates
a significant amount of software revenue for any additional organi-
zation.

In addition, several gray areas exist for which the inclusion
of revenues in the software market would necessarily involve double
counting with other discrete industry markets.

+ Computer service firms provide specialized software for
their clients in order to generate additional computer
time sales. These revenues, however, are part of the
computer services market and appear as software expendi-
tures only insofar as independent software firms receive
payment from the service bureaus for the use of the
software.



5010



+ Facilities management services — an outgrowth of
custom software development — combine hardware
and operations costs with those for software.
Differentiation would be an impossible task.

+ Turnkey systems are much like packaged software,
but inextricably include expenditures for hardware.

IDC omits the latter two product types from its definition of soft-
ware since their inclusion would produce extremely misleading figures.

To provide a framework for better understanding the patterns
and emerging trends, IDC imposes on the software market the six-
cell matrix shown in Figure 128.

Vendors can provide software under either of two arrange-
ments.

+ Packaged software fills the needs of multiple clients,
with little or no modification. Anyone with an appro-
priate hardware/software configuration, for example,
can implement ADR's AUTOFLOW on his system to obtain
program flowcharts.

+ Custom software solves the specific problem of a
single client as a one-time project. A stock ex-
change automation system is unique to the particular
client for which it is designed.

Each arrangement implies a given set of development and market-
ing parameters. Packaged software requires greater flexibility
for its variety of users, as well as detailed, unambiguous documen-
tation, and active promotion campaigns. The financial burden,
however, is split among numerous clients, whereas the custom soft-
ware client must cover the entire development cost himself.

Implementation of any software product — packaged or custom-
developed — occurs at one of three levels of system use.

+ Systems software performs basic machine operation (the
executive program or operating system) , provides the
raw man/machine interface (language compilers and
assemblers), and routes, assists, or monitors the
flow of data among machine units (system information
management, access control, computer usage measure-
ment, etc.).



5011



+ Utility software manipulates, converts, or organizes
data (sort/merge, media conversion such as tape-to-
print, report generator, etc.), or performs applica-
tions tasks that aid programmers and other data process-
ing personnel in their jobs (flowcharting, test data
generation, etc.).

+ Applications software solves problems unique to an
industry or to a specific department within a user
company. The most obvious and popular applications
program today is payroll.

Market characteristics vary among systems, utility, and applications
software but not quite as obviously as between custom and packaged
software. Most difficult to distinguish is the difference between
systems and utility software; however, the definitions above are
reasonably precise and reference to them should answer whatever
questions may arise elsewhere in this report.



SYSTEMS



UTILITY



APPLICATIONS



PACKAGED
SOFTWARE



CUSTOM
SOFTWARE



IBM's Disk Operating


ADR's AUTOFLOW


phi's Generalized


System (DOS)


flowchart package


Payroll System


SDI's GRASP 360


Informatics'


PMI's Corporate


enhancement package


MAPJC IV file


Shareholder




Management package


System




Comress' SCERT






system performance






simulator








Stock Exchange






Automation


Few exist


Few exist


Law Enforcement
System



Figure 128
SOFTWARE MARKET SEGMENTATION WITH EXAMPLES



5012



COMPUTER SERVICES AND AUTOTRANSACTION



The Computer Services Industry is a $2 billion market experiencinj
current growth rates of better than 20% per year. The Autotransaction
(AT) Industry is a $1 billion market experiencing current growth rates
of better than 50% per year. Included as part of both industries is
a segment IDC identifies as AT -Computer Services. Because of the
high degree of overlap between those two industries; 34% of the
Computer Services Industry is AT-Computer Services and 58% of the
Autotransaction Industry is AT-Computer Services.



Computer Services

After several years of monitoring the growth of computer ser-
vices, IDC in 1971 first published a rather extensive set of defini-
tions for the computer services industry, subdividing the industry
into a three-by-three matrix of nine distinct cells that are mutually
exclusive and collectively exhaustive. These segments are defined
by the way the computer is used:

+ From the user's point of view — batch, remote-batch, or
remote access/immediate response (Rair) ;

+ From the computer's point of view — raw power or calcu-
lation, transaction processing, or data base inquiry/
table lookup.

These factors are illustrated in Figure 129.



Access by User

There are three ways a user can interact with the computer, and
these determine three classes of services:

+ Batch services involve no direct communication between
the user and computer. The user takes or sends his
punched cards, business forms, magnetic tape or what-
ever to the service bureau and the bureau returns the
results. In its most primitive form, the user may
actually operate the computer, but generally the computer
run is performed by the bureau.

+ Remote-batch services require the user to enter his own
data or program through a terminal connected to the com-
puter (usually by communications lines) . The user sets
the process in motion by giving the computer its proper



5013



instructions through the terminal. At that point in the
process, the user can disconnect his terminal or use it
for another job; he need not intervene further until
the run is complete. The computer may not and usually
doesn't run the job right away; rather, it schedules it
for later processing. When the user wants his results,
he reconnects and the computer transmits them.

+ Rair services involve interaction between the computer
and the user while the program is running. To the user,
it appears that he is the sole user of the computer —
making inquiries, supplying data to a program, and receiving
answers or output from the computer.



Function of the Computer

The computer, no matter how it is accessed, can supply three
types of service to the user. These are defined by what the computer
does for the user. Distinctions are based on whether the user supplies
his own software; whether the service vendor supplies extensive amounts
of data; and how the user is charged for the service.

+ Raw power applications . In this mode of operation, the user
is generally running his own programs and he is charged
according to the computer resources used in terms of time
and capacity. Even if the vendor supplies some programs
or data (at additional cost or not) , raw power applications
are distinguished from other types because the user is
charged for the amount of time he uses and is able to
execute the programs at will. The vendor merely operates
the system without complete awareness at any point in time
of exactly what the computer system is doing.

+ Transaction processing . Rather than paying for the amount
of time used, the user operating in this mode pays for the
number of transactions processed. This may be measured in
terms of input or output documents. The data being oper-
ated on is totally the user's; his master files are being
updated. The software being used is totally the vendor's;
a turnkey service is being provided. Generally, vendors
of transaction services dedicate their system to a particu-
lar service and hence are totally aware at all times of
exactly what the computer is doing.

+ Data base inquiry . In this mode, the primary resources
being offered by the vendor is a data base of some nature.
In many cases, the user is charged solely for the number
of accesses he makes to the data; in some cases, however,
he is charged an additional amount that reflects the



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5015



computer resources used. The retrieval software is the
vendor's, but the user may supply his own manipulation
software. The vendor knows that the use of his system
centers around data access, but he may not know what the
user is doing with the data.



Market Shares

Consolidation has clearly taken place - during the past few
years - most significant is the merger of Service Bureau Corp. (a
former subsidiary) with Control Data Corporation forming a powerful
service combine which also includes Ticketron and pieces picked up
from ITT Data Services.



TABLE 130

Computer Services Market Share Leaders

Control Data

Electronic Data Systems

General Electric

Automatic Data Processing

Wyly

Bradford Computer & Systems

Bunker Ramo

National Cash Register

Statistical Tabulating

McDonnell Douglas Automation
Company



$ 150


million


6.7%


100




4.5


85




3.8


85




3.8


A5




2.0


45




2.0


45




2.0


35




1.6


30




1.3


30




1.3


650




29.0%



IDC expects the consolidation trend to continue. In addition
to companies such as National Data, Tymshare, National CSS, and Computer
Sciences — all close to the size of the companies at the bottom on
the list above — several large companies with virtually no computer
service revenue at present have stated business objectives of becoming
industry leaders by 1980.



5016



As this consolidation continues and the services industry grows
at greater than 20% a year, IDC expects the distinction between some
of the cells in its matrix to wane, then vanish. The chart below
shows the distribution of the $2.2 billion services revenues in 1973 —
and the expected arrangement for this industry segment that will be
almost twice its present size after only three years:

TABLE 131

CHANGING STRUCTURE OF COMPUTER SERVICES INDUSTRY
(Worldwide Revenues of U.S. -Based Companies; IDC Estimates Copyright 1974]



1973: $2.2 Billion



Batch
Raw Power

Mo


Remote Batch
Raw Power

8%


RAIR
Raw Power

14%


Batch
Transaction

59%


Remote Batch
Transaction

1%


RAIR
Transaction

5%


Batch
DB Inquiry

1%


Remote Batch
DB Inquiry

1%


RAIR
DB Inquiry

7%



1975: $4 Billion



TRADITIONAL

BATCH

30%



REWTE COMPUTING
25%



AUTOTRANSACTION
45%



Auto transact ion

The Autotransaction Industry did not exist prior to 1973. The
pieces existed, but the determination that these pieces could be joined
to form an industry did not happen until 1973. Like the Computer
Services Industry, the Autotransaction Industry is not just one busi-
ness, rather it is several hundred businesses that have a common theme:



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 15 of 140)