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 46 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 46 of 140)
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of highly qualified people and promote mobility (see Annex point 10). There is
also a need to ensure that education in computer sciences is not tied to par-
ticular companies. Consultations have already shown that to meet these needs
the existing high level courses run by the PREST group on P^ducation in Com-
puter Sciences need to be extended; The social Fund ^ could also be used to
finance training or reconversion of manpower in certain sectors. Further ini-
tiatives mav also be needed to support collaboration in computing theory (where

;a Europeanas.sociation already exists) and to establish a European Software En-
gineering Institute in the form of an association of national institutions develop-
ing, in particular, basic software.

STRUCTURE OF EMPLOYMENT

38. The expected evolution of the sector in the next few years due to growth,
Industrial change and alterations in requirements for skilled manpower will
inevitably bring appreciable shifts in the structure of employment. The Com-
mission intends to follow this evolution closely, bearing in mind the necessities
-ot regional policy and with a view to ensuring that social considerations have
their proper weight in a Community programme for the industry.

PROTECTING THE CITIZENS

39. The creation of data banks .ioined increasingly by international links will
oblige the Community to establish common measures for protection of the
citizen. When police, and tax, and medical records, and the files of hire purchase
companies concerning individuals are held in data banks, the rules of access to
this information become vital. This is a matter on which a wide debate is needed
in the Community.*^ In view of its basic constitutional importance, the Commis-
sion believes that public "hearings" on the matter are desirable. It would be
better for the community to seek a genuine political consensus on this matter
now with a view to establishing common ground rules, than to be obliged to
"harmonise conflicting national legislation later on.

D. Community Action

40. In the light of all these needs, the Commission submits the attached draft
resolution to the Council. It seeks to do three things — to lay down the broad
direction of a data processing policy for the Community, to provide a impetus
for coordination of national policies in certain fields, and to pick out selected
priority areas for common action.

41. The procedure proposed to give a community orientation to policies for
encouraging and promoting data-processing, in particular by collaborating
in procurement policies, standards and applications has not so far been men-
tioned in this report. The range of subjects on which specialised groups may be
needed and their composition are so varied, that it seems approiiriate to handle
this matter pragmatically, bringing together the key national ofl^cials respon-
sible for overall policy, or those responsible for procurement, or those respon-
sible for certain types of application, as and where appi-opriate.

42. The priority for common action would l)e to undertake in common a small
uumber of major applications development projects of an international charac-
ter. The Commission will make detailed proposals on these during 1974 with
•a view to decision by tlie end of the year. Such projects, while serving iden-
tifiable piiblic needs, will also provide a stimulus for collaborative effort by the
European industry without being dependent on any particular industrial
-structures.



B Spe document 71/fi6/CEE.
« See document COM (73) 1250.



5341

43. Tlie draft resolution also asks the Council to consider (though not at
present to commit themselves to) possible proposals from the Commission for
common support for selective collaborative industrial developments. In the
Commission's view these are likely to be initially in key areas of electronic com-
ponents and peripherals, or software.

Here a word of explanation is needed. This report has shown that the crucial
strategic area in which Eurpoe should pool resources if its indigenous industry
is to be competitive is that of central processors, but it is also clear that with two
major indigenous groups in existence this is not yet completely possible and that
in these circumstances common funds are not appropriate for the support of such
R&D. There are however certain areas of electronic components and key func-
tional subassemblies such as memories ("near-in periphej-als") wliere common
development now may be considered strategically vital and possible and may
even include the two major computer groups which are competing together in
other fields. Certain areas of Software development may also be tackled at once.
Further consultations and teclinical examination are needed before such proposals
are made. Common finance may be appi-opriate in such cases if a common in-
dustrial organisation sucli as a joint subsidiary is set up to do the job.

44. As far as wider support for the R&D of tlie companies is concerned, the
Connnission has accepted in the course of examinations iiTider article 92 of the
Treaty tliat under present circumstances existing aids may continue to be given
on a national basis. An effort must however be made to nio\'e on from the limited
colhiboration that is possible in the immediate future to a systematic programme
for the development of European data processing which would provide a frame-
work for future financial support. Such a programme would cover not only
central processors, but the development of software, electronic components per-
iplierals and applications. In conjunction with Comnninit.\ i>>gional policy it
should also ensure a reasonable distribution of this growth industry throughout
the Community. In this further phase, there is a case for intr.).;ln:-iiig a larger ele-
ment of common finance to support the overall programme, Fn;nuial support for
the European based industry, however, should not be regarded as permanent, but
as temporary help designed to achieve the central o!)jective if a viable European
industry capable, by the early 1980s of standing on its own feet.

4."». Tlie draft resolution clearly does not cover all the needs raised in the Com-
mission's communication (including for instance leasing, education and re-
search). In such matters, further propsals will be made when necessary by the
Commission, against the background of the growing collaboration which the res-
olution is designed to initiate by May 1974. The commuin'cation moreover is it-
self designed to provide no more than the essential starting point for an evolv-
ing Community policy. The Commission proposes to review progress in a repoi-t
on tlie state of data processing in the Community to be completed before the end
of 1975.



DOCUMENT II
Draft Council Resolution on A Community Policy for DxVta-Processing

The Council of the European Communities

Conscious of the importance of data-processing to the development of the Com-
munity and its position in the world ;

Convinced that because of this importance Europe must contribute by its own
efforts to the design development and manufacture of data-processing systems
through strong European based companies existing side by side with important
companies controlled from outside Europe both of which can prosper in an ex-
panding market,

Aware that the unbalanced competitive situation in the world computer in-
dustry makes necessary special measures to help european-based industry to be-
come competitive on a lasting basis,

Believing that both a stronger industry and a more efficient and economical use
of resources can be obtained through collaboration or joint action on procure-
ment, standai'ds and applications.

Acknowledging the necessity to strengthen the European based industry by
associations between suppliers, .stres.sing the efforts alreadv made to this" end
and intending to sive every encouragement to further steps bv such coni|)anies
to combine their efforts,

40-927—75 33



5342

(a) Agrees in principle that the Community will undertake and finance in
common a limited number of major joint development projects of international
character in the field of applications, these to be followed by others as needs are
identified.

(ft) Intends to give a community orientation to policies for encouraging and
promoting data-processing, in particular by collaborating in procurement policy,
standards and applications and notes the Commission's intention of arranging
progressively the most appropriate procedures for realising these objectives.

(c) Considers that it is desirable to develop a systematic Community pro-
gramme for the industrial development and application of data processing, once
the evolution of industrial structure permits, with the central aim of establishing,
by early 1980s, a strong and viable european based industry.

id) Will take decisions in the meantime on selective proposals which the Com-
mission might present for common financial support for key collaborative in-
dustrial developments.

(e) Notes the Commission's intention, after appropriate consultation.?, of
presenting first detailed programme proposals notably on the actions under a),
b) and d) during 1974 with a view to decisions by the Council by the end of the
year and of preparing a progress report on the data processing sector in the
Community by the end of 1975.

DOCUMENT III
Annex I— Economic Data on the Computer Market

1. Growth rate.

(a) "The growth rate of the computer industry is estimated at about 20%
per annum for the coming decade :

15% in the US, 20% in Europe and 30% in Japan.

It appears certain that between 1970 and 1980 it will become the third largest
industry in the world, after the oil and motor car industries."

( Source : Fourth Report from the Select Committee on Science and Tech-
nology, Session 70-71 (Volume 1) ).

(b) ESTIMATE OF THE DATA-PROCESSING MARKET, INCLUDING SOFTWARE AND SERVICES
[Turnover in millions of dollars]





1970




1975




1980






Total


Services


Total


Services


Total


Services


Europe

United States


3, 900
10,650


470
3,345


8,100
22, 136


1,500
9,750


12,850
36, 600


4,600
20, 800









Source: Diebold 1972.



(c) FORECASTS FOR THE COMPUTER MARKET IN EUROPE AND THE WORLD
[In millions of dollars]



Central units


1960


1965


1970


1975


1980


1985


World


1,315.0
953.0
265.1

70.4
49.3
24.2
59.7
61.5


2, 445.

1,917.0

345.4

77.8
67.7
41.5
69.7
88.7


3. 500.

2,205.0

693.0

184.2
140.8
70.0
138.7
159.3


6,672.0
3, 684.
1,456.6

383.1
292.8
148.6
272.4
359.7


9, 533.
4, 587.
2,346.4

605.4
464.0
246.7
410.7
619.9


13,028.0


United States


6. 068.


Western Europe

Of which—

West Germany..


3, 126.

758.4
639.6


Italy

United Kingdom.
Other countries


345.7
525.8
8E6. 5







5343

Peripherals 1960 1965 1970 1975 1980 1985



World

United States

Western Europe.

of whicti—
West Germany...

France_

Italy

United Kingdom.
Other countries..



1,651.0

1, 190.

414.1


3, 192.

2,333.0

612.2


6,128.0
3, 644.
1,384.8


13, 784.
7,117,0
3, 339. 9


23, 052.
10,115.0
6, 409. 5


38, 394.
16, 238.
10, 465. 5


109.8
76.9
38.0
93.3
96.1


136.3
120.4
73.7
123.9
157.9


372.3
284.5
135.3
280.3
312.4


893.9
633.2

346.7
635.6
839.5


1,653.7
1, 269. 1
673.0
1,121.6
1, 692. 1


2, 543. 1
2, 145. 4
1,161.7
1,758.2
2, 857. 1



Source: Electronic Industries Association— An economic, technological, political, and social look ahead at the electronic
industries. May 1972, sec 111, the electronics industry In 1985).



(D) ESTIMATED GROWTH RATES FOR 5 YEARS
[In percent]



1970-75 1975-80



Europe United States Europe United States



Central units 110 67 61 25

Peripherals 146 95 89 42

Services 219 191 207 113



2. The m-iin raanufacturerp. .



(a) Breakdown of the vt.lue of installed capacity at 1.1.1972 (Base lOO).



Won US manufactur'irR
in the US :



European : 6.5
Japanese : 4.3
Others : 6.5




(Source : Delegation a I'Inf ormatitiue, Paris).



5344

(B) BREAKDOWN OF THE WEST EUROPEAN COMPUTER MARKET BETWEEN THE MANUFACTURERS
[Expressed as percentages of the value of the installed capacity]



IBM



HIS



UNIVAC Burroughs CDC



ICL



CM/
Siemens
Philips Others Percent



Germany 57 8

Great Britain 38.4 7

France 57.5 18

Italy 73 11

Benelux _,. 60 9.5

Others 65 6



Total (percent)... 59.47 10.0



3


3


3


0.5


16.5


9


100


3.7


3.9


1.8


34.7


.9


9.6


100


3.5


1.5


3.5


3


12


1


100


7


2.5


2.5




2.5


1.5


100


5


4


4


3


8


6.5


100


4


3.5


4.5


5


2


10


100



4.4



3.12 3.27



7.83



6.93 4.85



100



Source: Delegation a I'lnformatique, Paris 1972, Department of Trade and Industry, 1973.

3. NATIONAL HELPS AND OTHER SUPPORTS IN THE COMMUNITY
[In millions of u.a.]



Belgium: 1971-73

France:

1967-70

1971-75 .-

West Germany:

1967-70

1971-75

United Kingdom : 1968 to September 1976.



Hardware


Applications


0)


4.0


109
158


7.2
29.0


66
190
(r)


15.6

150.0

(0



1 Maximum 25 percent of public contracts to Phillips and also to Siemens.

2 Support for ICL— difference 144.

Note: Estimated IBM expenditure on R. & D.— about 6 percent or its total revenue or $400,000,000 to $500,000,000
per annum.

Source: National delegations and 4th report from the Select Committee on Science and Technology, session 197-71
vol. 1.



Ill 1965, however, government participation in tlie USA in R&D on data-
processing amounted to 300 million dollars, or 49?o of the total R&D in this
sector.

Soui-ce : Gaps in technology. Electronic computers, table 2-1 — OECD, Paris 1970.

4. The problems of scale faced b.v the European computer industr.v.

A number of thresholds affect the size and viability of a computer manufac-
turing tirni :

The R&D threshold ; this is an absolute minimum level of resources necessary
to obtain an objective (development of a range of computers) .

It is dependent on many factors.

The marketing threshold (services and technical assistance) ; this demands a
minimum volume of sales if the operation is to be economically justifiable. For
Europe, this can be put at 5-8% of the European market.

The European market is, at present, divided up as follows :

(In value — source : Financial Times.)

Percen t

ICL 7. 5

Unidata 8.

IBM 55.

Hone.vwell-BuU 13.

The threshold for entry into tlie world market will be higher than that for the
European market.

The "experience curve" indicates that the unit cost of a product is reduced by
approximately 15% each time the cumulative volume of products on tbe market
doubles. It can be shown that the unit costs of IBINI are about one half of those



5345

of European based mannfacturers. The present rate of growth (approx. 207f >
of tlie Conununity market shows that European manufacturers are already
struggling to hold their share of the market. Concentration is the only way of
doing better.

Source : Towards a European policy on the EDP industry Y.S. HU, 1973. Study
carried out under contract from the Commission.

5. Components :

(a) The percentage of the turnover of the electronics industry absorbed by
data-processing is as follows (1968) :

I Ct'CCtlV

EEC (without the United Kingdom) Ip- S

T'nited States of America -•^-

Japan "^^ '^

(b) It is estimated that in 1972 data processing used 31% of the semi-conduc-
tors in the EEC (37% in the United Kingdom).

{(■) On the integrated circuit market in the EEC (without the UK), the mar-
ket was shared as follows in 1970 :

Texas 24 SGS ^

Philips Group 20 AEG-Telefunken •>

ITT Group 15 Sescoseni ; J

Motorola 9 Others ^

Siemens 8

Source : La recherche et le developpement en electronique dans les pays de la
Communaute et les principaux pays-tiers. BIPE study — October 1970.

(>. The software industry.

(a) It is estimated that in France and Great Britain in 1971 the share ot the
service companies in the turnover of the software sector came to 35% and 2.j%
by value respectively. (Presse Informatique No. 24 of 4.12.1972).

' (?)) In 1971 there were approximately 1000 service companies in the USA, asr
against ."00 in France and 750 in Great Britain. It is estimated that 3% of the
service .companies accounted for 57% of the turnover of the sector and that about
40% were running at a loss.

(c) Productivity in 1971.

PRODUCTIVITY OF THE SOFTWARE INDUSTRY



West United Great

Germany States France Britain



Turnover (in mlllons of u.a.)_ 75 300 51 40

Share of the market held by the 12 main companies

(oercent) _ __ __ - 50 51 'U *'■

Data-procesVingipeciaiistsempioyed;:::::::::;::::.:: 4200 12000 3,000 4,350

Turnover pei man in u.a 17,850 25,000 18,500 9, lUU

Orders passed by the government (in millions of u. a).... - - Ho '• '^■^

Proportion of software (independent companies) be in . _

relation to hardware (percent) - 5-4 8.d o-J-



Source: 0.1 Informatique, No 161 B of 7.9.1971. Handelsblatt, 6.3.1973).

7. Share of the data-processing market represented by the public and the an-
cillary public sector :

(a) Capacity held by the central administrations (1971) :

In France: 12% (by number), (Source: annuaire 0.1 Informatique).
In West Germany: 14.6% (by value), (Source: Diebold).
If the ancillary public sector is included, the proportion for Europe is between
20 and 30%,.

(b) Service (1971)

In France : 28% of the turnover of the service companies.
In the United Kingdom 2S7o of the turnover of the service companies.
Source: La Presse Informatique No. 24, 4.12.1972 based on a study by Sesa-
Logica.



5346

8. SUMMARY OF PUBLIC-SECTOR DATA-BANK PROJECTS IN THE COUNTRIES OF THE ENLARGED COMMUNITY:





Total

numtier of

projects

enumerated


Operating -
or under
construc-
tion




Operati


ingor


under


construction










Access








Vol


ume




Country


Random


Sequen-
tial


Combined


Large
>10'c


Medium
lO'-lO'c


Very
small
<10'C


West Germany


49


23

6
12

(')

4 .

7 .
14

2 .
13


14

1
2
(')


13

6
10

(')
4




4
1


4
1
1




18 ..

4
7

(')
2




Belgium

Denmark

France.

Ireland

Italy..


13
15

(»)

4

7
18

4
20


1
4

"i


Norway

Netherlands

United Kingdom


5
5"


11

2

10




2
-"2 -


2
4'




10

1
5


2

1
3



' Inquiry being carried out by the Delegation a rinforn,atlque.

Source: Document OECD DAS/SPR;71.44— Annuaire des banques de donnees dans le secteur public.

9. Planned expenditure on data commnnication in tlie United States up to 1980 :
(a) ". , . between now and 1980, the United States will spend 250 thousand

million dollars on setting up and developing data processing and telecommunica-
tions networks . . .

These networks will be of vital importance if one considers that according to
estimates the United States alone will, by 1980, have 2.5 million terminals per-
mitting 250,000 million operations or "calls" per year."

Source : Doc, SP (71) 19 OECD.

(&) '. . . American experts estimate that, by about 1980, $260,000 million will
have been invested, $160,000 million in computer systems and $100,000 million in
extending and developing telecommunications networks."

Source : same document, revision 1.

10. Needs for computer specialists :

(a) According to the Second West German Data-Processing Programme, the
manpower needs at the beginning of 1978 will be 250,000-400,000 (operators, pro-
grammers and analysts), including 200,000-300.000 for utilization. These figures
are based on an average manpower of 6.9-9.0 per computer.

At the end of 1970, computer specialists totalled about 100,000.

(&) A .study by the BIPE (April 1970) estimates that in France 100,000 new
computer specialists will enter the profession between 1970 and 1975. At the
beginning of 1970 their numbers were estimated at 70,000.

(c) As regards Italy, an AICA study estimates that in the period 1971-80 the
number of graduates or holders of equivalent diplomas to be trained for data-
processing purposes will be 38,100-54.400, which probably lepresents about 20%
of the total university degrees during this period.

DOCUMENT IV

Annex II — Summary of the Commission's Communication on a Community
Policy for Data Processing

1. The effective application and industrial development of data processing is
crucial to the European economy ; it is the third largest world industry, growing
at 20 per cent per year in Europe ; its applications penetrate almost every walk
of life (§1).^

2. This industry is, however, dominated by a single firm based outside Europe
which has 60 per cent of the world market ( § 2) .

3. The Commission has the obligation, under Article 86 of the Treaty, to ensure
that there is no abuse of such a dominant position. The best guarantee against
abuse is, however, effective competition. A flourishing European data processing
industry ought to include a strong European-based element, side by side with the
important companies controlled from outside. In an expanding market, there is
room for both (§2-4).



'' See corresponding paragraph of document I,



5347

4. To achieve a strong European-based industry, tlie key need is to develop an
industrial structure capable of competing with the dominant producer in the
supply of a range of central processors. In an endeavor to maintain a national
capability, three governments have supported indigenous companies with finance
and preferential purchasing. Given the small size of the European-based enter-
prises, (they have only 6 per cent of the world market together) there is much
evidence that they will need to combine forces, if they are to achieve long term
viability, make the best use of available funds and achieve a genuine European,
indeed world dimension (§ 5-8).

5. A first welcome step towards this aim has been taken by the formation of
the Unidata group by Siemens, CII and Philips. The separate commercial plans
of this group and the other major European enterprise, ICL, mean, however,
that a further regrouping between them in the near future may be diflicult and
tiiat the immediate prospect is for two major European Groups competing with
each other (§9-10).

6. In this situation, Community ix)licy towards the indigenous industry is best
seen in two phases: In a first phase, a limited collaboration should be encour-
aged both for ends useful in themselves and as a means of encouraging a con-
vergence of the companies with a view to a further combination later, which
resi>ects the rules of competition under the Treaty. In a later phase, a more
comprehensive pluriannual programme for the support of European data proc-
essing is desirable ( § 11 ) .

7. A iK)licy towards the data processing industry must take account of the
needs of the components, peripherals and software industries, which together
account for a large and increasing part of the value of computer systems (§ 11).

8. In what is loosely-called "peripherals", though a variety of European com-
panies have been successful, the overall picture is one of a growing payments
deficit and technological dependence. Further consideration needs to be given
at Community level to the question whether the industry needs to develop and
the Community to support an indigenous capability to produce key sub-assem-
blies of computer systems (for example disc luiits) (§ 12-13).

0. In electronic components, it is essential for the European industry to be
abreast of the latest technologies, notably in the field of memory teclinology and
especially Large Scale Integration. Further consideration should be given to the
possibility of joint support for a common development and production capability,
even during a period in wliich the major companies are apart (§ 14-15).

10. In software, there is a need to develop a "market" in transferable soft-
ware packages and to support the development of programmes which enable
users to switch from one type of equipment to another. The best way for the
Community to stimulate the growth and strength of the software industry would
however be to sponsor one or more major international development projects
which stretch its capability (§ 16-19).

11. Side by side with the objective of strengthening the European based indus-
try, the Community should promote collaboration between users, particularly
public ones, with a view to applying data-processing more effectively to society's



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 46 of 140)