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

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needs ( § 21 ) .

12. In the United States, the market provided by Federal Government procure-
ment has not merely served users but spurred and stretched the industry. In
Europe, procurement policies need to be combined at Community level with the
dual aim of providing analogous opportunities for the European based industry
and achieving economies for users by joint purchasing and development
(§ 22-24).

13. In the field of applications, collaboration on three levels can bring benefits :
(a) certain applications have a basic international character (air traflSc con-
trol, environmental monitoring, meteorology, customs and trade statistics, air,
sea and rail freight systems for example). Major development projects in such
areas could also provide an impetus to the development of the European-based
industry. A small number of such projects should be undertaken, as soon as
project selection, planning and organization can be completed, to be followed
by others as the need arises (§ 26).

14. (b) In some areas, where common needs exist, further savings may be
achieved by specifying requirements together, and jointly developing programmes
or systems which can then be u>sed, in whole or in part in several states : medical
systems, social security records, urban traflBc, control and management are
examples (§27) ;



5348

15. (c) In many areas coordination of national policies may bring economies
and greater efficiency : Data-communication and the management of data hanks
are priority examples ( § 28-31 ) .

16. International projects as suggested in 13a above would be appropriate
subjects for common financing as would common ^ development contracts to
industry carried out jointly by common subsidiaries. The Commission when
examining national aids under Article 92 of the Treaty has accepted that in
the present circumstances, existing aids to the overall R&D efforts of the major
national companies should continue. However, in the later context of an overall
programme for Europe, providing support on a temporary basis for a rCigrouped
industry, a larger element of common finance would make sense (§ 44).

17. There is a need to develop and apply common standards, notably in the
fields of higli level languages and electronic interfaces, in the interests" of both
users and the industry as a whole. A combined public procurement policy at
Community level can be an important instrument for gettting such standards
applied (§34-35).

IS. Collaboration or joint action will be needed in a number of other fields,
Including education, training of personnel, fundamental research, protection of
software, and support for leasing. The Commission will make appropriate pro-
posals at a later stage ( § 36-37 ) .

19. The Commission intends to follow closely the evolution of the structures
of employment, implied by the implementation of a Community policy, taking
special acount of the needs of regional policy ( § 38) .

20. A wide debate is necessary on the suliject of the privacy and protection of
the citizen, with a view to the development of a Community policy in this field.
Public hearings are recommended ( § 39) .

21. In the light of this situation, the Commission proposes that the Council
resolve to encourage and support further associations between the companies, to
give a Community orientation to policies for encouraging and promoting data-
processing, notably by collaborating in procurement policy, standards and
applications, and to decide on a limited number of major common development
projects in the field of applications before the end of 1974. The Commission will
present a progress report on the evolution of the sector before the end of 1975
( § 40 to 45 and resolution) .

Exhibit 3. — Turnover of main European computer companies in millions of dollars

Name of company
Unidata : 197S

Siemens .105. 6

Philips 180. 5

C.I.I. 138. 8

Total Unidata 625.

I.C.L. 404. 6

Note : — At 1973 rates of exchange.

AFTERNOON SESSION

Senator Hart. The committee will ibe in order.

Our first witness this afternoon will be Alain ISTicolaidis. He is the
scientific attache of the Embassy of France. Today he will deliver
the statement prepared by Maurice Alleo-re. "We are sorry that ^Tr.
Allearre could not testify personally, but we are grateful to him for
the preparation of the statement. I appreciate further the coopera-
tion of the French Government in permittins: us to have its view of
this important industry.

We welcome vou, sir.



8 See footnote § 1.3 Document I.



5349

STATEMENT OF ALAIN NICOLAIDIS, SCIENTIFIC ATTACHE, COM-
PTJTERS, EMBASSY OF FEANCE, WASHINGTON, B.C., ON BEHALF
OF MAURICE ALLEGRE, DELEGUE A L'INFORMATIQUE, FRENCH
GOVERNMENT

Mr. NicoLAiDis. Let me start off, Mr. Chairman and members of the
subcommittee, by saving that Mr. Allegre is very sorry not to be able
to appear before you himself. Since Vm scientific attache m charge of
the computer held at the French Embassy in Washmgton, Mr. Al-
legre asked me to read the statement that he had prepared; and if
you wish, to answer your questions about the computer market and
industry in France, on behalf of the Delegue a I'lnformatique, which
is, as you know, the government agency in charge of computer policy
for France. As vou will see, this statement is not related directly to
a monopolv problem; not against IBM, despite Mr. Katzenbach^s
statement about the two fellows from overseas; but explains the trends
of French policy in the computer field because we think that what is
known in France as the '']^lan calcul" is an interesting approach to
the problem risen by the domination of a very powerful firm on a
specific sector of the industry.

This is Mr. Allegre's statement :

Prepared Statement of Maurice Allegre, Delegue a l'Informatique,
French Government

In the first place, France wishes to stay in the leading group of advanced
countries, and must therefore develop the efficient use of computers coherently
throughout her economy. Next, as an industrial nation our country must develop
a computer industry just as, in the first half of the century, she felt it essential
to learn how to harness electrical energy. Thirdly, and finally, we intend to
make clear the role our country must and can play in the world effort.

To start with, I shall develop the first proposition: That an efficient and
coherent policy on the use of computers is indispensable to the growth of a
country wishing to develop itself.

This idea is relatively recent in France, and it was only in 1966, with the
creation of the "Delegation a l'Informatique", that such a mission was en-
trusted to a government organization in our country. Up until then, comput-
ing had developed spontaneously — indeed, anarchically — in the whole of our
economy and particularly within the administration.

The technique certainly hasn't grown under ideal conditions, Imt even so we
have in France today more than 10,000 computers installed, worth some $4
billion.

The computer industry being largely in the nature of a service, accompanies
economic development and must contribute to making it more efficient and — •
what is often forgotten — more human. These considerations apply directly to
the use of computers in the administration, which represent about 20 per-
cent of all installed capacity.

In certain circumstances the use of computers can usefully lead economic
development rather than follow it. In medium to small businesses, for example,
we are promoting their use in cooperation with the Secretary of State for
Medium and Small Industry.

Similarly, computers are as obviously useful to certain developing countries
as are airplanes where no roads exist. They can make a decisive contribution to
indispensable exchanges of information where present methods are inadequate.
In this respect. France is keen to foster, and has effectively initiated, an original
cooperation with certain of those countries on computing matters, and believes
this to be a most useful international contribution.



5350

Finally, one cannot neglect the very fundamental problem of training com-
puter specialists. Without going into detail, the policy of the Delegation is closely
coupled to that of the national education, and has two main aims :

To integrate teaching about computing into the whole educational system as
a general cultural discipline. In this connection the Ministry of National Educa-
tion has taken a most important decision to progressively bring into teaching
at the secondary level introductory courses in computing.

And, to adopt quantitatively, and above all qualitatively, the supply of special-
ists to the needs, particularly the substantial needs, of business users.

The second proposition that I put forward earlier can be summarized as
follows :

A computer industry is a major factor in the development of a modern
economy.

It combines three characteristics not often seen together. It is at once a mass-
production industry, a high-technology industry, and a key industry.

A mass-production industry by virtue of its 1973 worldwide revenues of around
$30 billion.

A high-technology industry because the very rapid technical evolution of the
industry has been both the result of and the reason for research expenditure of
between 10 and 25 percent of revenues according to the size of business involved.

A key industry for two reasons : Because the use of computers is becoming
more and more important to decisionmaking, it is more and more a high-level
activity. The industry has an impact on a great number of activities which it
supplies, and itself diffuses effects to its suppliers. Thus, a country which fails to
master its computing technology gives away to a considerable degree the future
of the electronics components industry and even of the electronics industry
itself.

This is why, besides foreign industries operating in our country, we think it
is necessary to have a truly national computer industry. To this aim, the Gov-
ernment has maintained close liaison with private industry for the last 7 years ;
promoting, on strategic grounds, the growth of a national computer industry,
which was, sadly, lacking in 1966.

Before launching what quickly became known as the "plan calcul" some pre-
liminary thinking — the correctness of which has been since demonstrated —
was necessary to define the aims to be achieved. It was essential to avoid cer-
tain impossible choices, despite their seductive appearance. The first such im-
possibility would have been to concentrate on software, at the expense of hard-
ware. Some advocated a national policy of support for software, exclusively,
since hardware could easily be procured from foreign suppliers. Not only would
this deprive industry, and particularly the electronics industry, of the irreplace-
able stimulus afforded by the use of computers but also it would lead rapidly
to the software firms becoming closely dependent on the manufacturers. Keeping
them in a state of controlled backwardness would be all the more damaging
because the manufacturers are. of necessity, the most important suppliers of
applications software. Hardware and software constitute two facets of the same
industry. They are inseparable and each as important as the other. The object
must be to end up mastering the whole technique of information systems for
the future.

The second impossibility was to choose a specialized strategy by. for example,
supporting only small computers, more suited to our capacity at the time, and
offering a better chance of success and profit.

Such a strategy would not have been acceptable to France any more than to
Europe as a whole. Such a choice would prevent a country such as ours from
assuming the major responsibilities its industry must undertake.

The French computer industry must be capable of designing, building, and
selling competitive products in a very competitive international market. The
"plan calcul" is not a prestige operation. Its aim is to develop a private indus-
try able to keep its place in the world scene.

The "plan calcul" is essentially an industrial operation, based on a new mech-
anism for state intervention, but using the minimum of direction by the state.
This form of intervention is exercised through the Delegation de I'lnformatique
under the authority of the Minister of Industry and Research.

The aim of developing a viable private industry has been mainly promoted
by the public sector through support of CII — Compagnie Internationale pour
I'lnformatique. This objective was first given to the company in April of 1967
and has been endorsed and enlarged in scope since August of 1971, when the
state agreements with CII v'>re negotiated for a further 5 years.



5351

Here let me briefly review what has been achived. In 5 years, CII, a subsidiary
of a consortium of Thompson-CSF — who provides the management — Compagnie
Generale d'Electricit^, and Schneider, lias realized both qualitatively and quan-
titatively the aims of the first agreement in launching on the market a range
of computers of medium and large size, oriented toward business use. which
represents three-quarters of current computer applications ; has been alile to
get roughly 20 percent of the French market for new shipments in II'T^^. ; has
grown very rapidly, and now, with an effective work force of more than 8,000
people, can see attractive prospects opening up outside France, which I shall
come back to in a moment.

Besides CII, I should underline the existence of well-developed companies
offering services and consultancy on computing, and of small- and medium-size
companies making small computers, peripherals, and terminals. Some of these
companies show remarkable enterprise and their activities liave already gone
beyond the national framework. At the same time, public support of research
has been accentuated.

These, then, are the proofs that a French computer industry really exists
today.

I have tried to show why our country could not do without such an industry.
Seven years of work, received at best with a condescending smile and more often
with harsh criticism, enable me to say that today the French computer industry
exists, not by chance, but by necessity.

But the future of the French computer industry can only be properly appre-
ciated in an international context.

Our country has a role to play in the world development of computing.

The size of the financial resources and number of people needed to create a
major computer industry, and the evident necessity to reach a critical level of
importance, has put about the idea that a medium sized country cannot alone
build up such an industry. Moreover, the importance of such a development lias
long been contested ; as a technique transcending national boundaries, computing
requires an internationally based industry and, in support of this argument, the
exemplary success of the very powerful American company which dominates the
world industry is cited.

In this connection, a new word has been coined : the word "multinational".

Allow me a brief personal digression : Before being in computing. I was in the
oil business tind the terminology then reserved for those large businesses which
produced and refined oil in the four corners of the planet was "an international
company."

AVhat was and is still — of course — the essential characteristic of those com-
panies? An industrial and commercial business internationally distributed but
directed from a main decision center situated in one country alone. I see no
reason to call them "multinational." Nevertheless, one such company does act
diffei-ently : Royal Dutch Shell, which has two decision centers, one in London
and one in the Hague, cooperating closely, but with distributed responsibilities,
so that neither is subordinate to the other.

In my opinion, it is this characteristic which should distinguish a multi-
national company from an international company.

Royal Dutch Shell is, in my sense of the word, a multinational group or, more
precisely, "l)inational," which should serve as a model for a European computer
industry.

A strategy comparable to the "plan calcul" is not the prerogative of our coun-
try. Britain, Germany, and Japan have all done something similar. This economic
strategy has aifirmed the right of a national computer industry to exist, as a
necessary guarantee of the independence of a country and of its autonomy to
grow.

It doesn't deny the necessity of international cooperation, but two conditions
are necessary : That such cooperation is conducted as between equal partners
and that it does not end finally in a loss of control by one of them of the key
elements of its computer industry through, for example, their transfer al>road.

In other words, if one day a truly multinational industry is to exist, it can do
so finly on the basis of national firms.

In 5 years, CII has established itself in France as a titily national computing
firm, endowed with all the attributes of a major firm.

The second "plan calcul," which started olficially on August 2, 1971, with the
signing of a new agreement between the state and CII, has seen the creation
of the first truly multinational group in European computing.



5352

An authentic miiltinational group must combine the advantages of both a
national and an international company while eliminating the weaknesses and
inefficiencies of each.

Its constitution must result from the association of firms of different nationali-
ties whose level of development and size are comparable.

The firms making up such a multinational group must accept a common view
of their growth strategy, and this must involve sharing responsibilities eqiially
for research, production, and marketing, while each firm keeps its own personality
and retains in its own country control over the key points of its development.

In this way national aspirations are able to continue within a more extensive
international framework.

This aim, which could be regarded as merely theoretical, took a practical form
last year with the signing in .July of an agreement between CII. Siemens, and
Pliilips — giving birth to Unidata — which fully endorses the criteria for true
multinationality set out above. This was an important event which laid the
foundations for a group both multinational and European in the computer field.

Thus, having started out with a national policy which was not nationalistic,
•we emerge with a truly multinational policy on a European scale, which we hope
"Will broaden its base, particularly by tying in with the British.

Tlie resolution of the EEC Minister's Council in Brussels a few weeks ago,
giving a strong support to such policy, shows that French, German and British
were right when they decided to set up their own "plan calcul" policy.

So Europeans intend to bring to maturity a large industrial group, able to take
place in the worldwide competition on a sound eocnomic basis.

In conclusion, a single path was open to France to play an eminent role in
world computing affairs, a path that certainly seemed difficult, but today's
results speak for themselves. We have just turned an important page in the
register of births of European computing. Our hope is to contribute in this way
;to the building of Europe itself.

Senator Hart. Thank you very much.

Mr. Chumbeis. ]Mr. Chairman, before ]Mr. Xash gets started with
questions may I interjet. Mr. Nicolaiclis, you stated that "The resohi-
tinn of the EEC Minister's Council in Brussels a few weeks ago,
givino- a strong support to such policy, shows that French, German,
and British were right when they decided to set up their own plan
calcul policy." Now unless I misunderstood I think ]Mr. Nash asked
the previous witness the question. What would EEC do if a cartel
type of arrangement was made between the three companies as
Unidata says. Is that inconsistent with what the previous witness
^states ?

Mr. NicoLAiDis. Yes; it was just the kind of policy we made through
the plan calcul because there was no agreement at that time, from
the European point of view, that it was the right policy. So now,
not only is it a national policy but it could be considered as a Euro-
pean policy.

]Mr. Chumbris. In your view, do you feel that you would not be
violatin.T anything tl^at would bring the wrath of the EEC upon you?

]Mr. XicoLAiDis. I don't think so.

Mr. Xash. Just for the record I wanted to clarify your problem <

;Mr. Chumbris. It's not my problem. It's the sul)committee's problem.

^Ir. Nash. Just for the record I want to note the plan calcul of
the French is not cartel in the traditional sense of the \yord "carteL"

Mr. Chumbris. I thought that's the word you used when you said
it earlier.

Mr. NicoLAiDis. I think when you speak about cartel you have to
have one center of decision. That is not the case. It is just a point
venture in the marketing organization and the decision to build a
full compatible line of computers. For example, the first computer
-which was announced by Unidata was made by Philips. It is a small



5353

one. And two others will be annonnced in October — one built by CI I,
the largest one; and another one built by Siemens. But the main char-
acteristic is that they are all compatible.

Mr. Chumbris. You answered my question. As far as you are con-
cerned you believe that you Avill not be violating anything under EEC
laws and regulations. We will have to let the record speak for itself
as to the colloquy between Mr. Nash and the previous witness.

]\Ir. Nicoi.AiDis. Yes. I think the issue is the share of the market
you can have within Euroj'JC itself. At this moment it is far from
having a dominant position in Europe.

Mr. Chumbris. Thank you.

Mr. Nash. Mr. Nicolaidis, it would be helpful for the record if
you would indicate the relative market shares of the French com-
puter market held by some of the other companies. You can start
with the market shares held bj^ the largest and work in descending
order. We would appreciate that.

jSIr. Nicolaidis. In France ?

Mr. Nash. In France.

INIr. Nicolaidis. If you are speaking about installed base I have these
figures. At the beginning of the year 1974 : IBM has 56 percent ; Honey-
well, 15 percent ; Unidata, 11.8 percent ; Control Data, 4.5 ; Univac 3.5 :
Burroughs, 3.5 ; ICL, 2.2 ; and NCR, 1 percent. This is for the installed
base. If we speak about the shipments during 1973, in France : we have
IBM, 53 percent; Unidata, 18 percent; Honeywell, 14 percent; and
Univac, Control Data, Burroughs, ICL, NCR — altogether — have 13
percent of the market.

Mr. Nash. You indicated that prior to 1966 France had no national
strategy designed to promote the computer industry and plan calcul
was then developed with that aim. It has been our impression that
around 1966, or shortly before then, the U.S. Government declined to
grant an export license for the sale of Control Data Corp. computers
that the French Government had sought to purchase for utilization in
its nuclear development program.

Mr. Nicolaidis. That is true.

Mr. Nash. I was wondering if you could indicate the extent to which
that refusal of export license was a factor in the decision made by the
Government of France to develop a national computer industry.

]Mr. Nicolaidis. I think it is certainly one of the reasons why France
started plan calcul. Because, at that time, the French Government
needed these big computers to develop nuclear weapons, and of course,
the refusal of the United States to allow Control Data to sell them was
one reason. Another reason was the overtaking by General Electric of
Bull, which was a French firm with a pretty good share of the market —
European market — at that time. So, suddenly, France was without any
national computer industry in the main-frame business. I think these
are two reasons ; but I think, above all, the feeling that a country cannot
accept having no control at all over a key industry was, in fact, a major
factor. Because, for example, the two first reasons didn't exist in (xer-
many or England and they have launched a kind of plan calcul. So I
think that the main reason is the problem of — as ]Mr. Allegre explained
in his statement — ^tlie necessity of having a possil^ility of control over
a key sector of the industry. And, for example, INIr. Katzenbach, him-
self, recognized in his statement that the aims of the French Govern-



5354

ment and those of IBM are not supposed to be the same in any circum-
stance ; and that is true.



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 47 of 140)