pub. Pitman 1973
State of the Industry
A classic among computer stories in the USA is that of
Viatron, who went bankrupt in 1971. They succeeded in
accumulating 40 million dollars of losses, although their
total sales were a mere 3 millions. The company's
founder is in business again now, this time not in
electronic data processing but in energy machinery.
There are many other grotesque cases in the American
Britain has not had the United States' plethora of
gee-whizz young computer companies, drinking away
money under a glare of publicity and promotion. Here,
we concentrate on the solid, steady drinkers, old timers
who have been making computers and losing money at it
for a decade. A company's inability to make a success of
computer manufacture, since it is taken to signify a lack
of corporate potency, is usually concealed from the
world. It would be bad for the image to confess a failure
to cope with the product of the future. Instead the
company subsidizes its computer losses with government
money or with profits from more mundane products like
power transformers, punched cards or tractors.
I.C.L., the latest blend of nearly all computer manu-
facturing in Britain, is propped up by increasingly
heavy government subsidies as it lurches into the future.
C.T.L., one of Britain's few whizz-kid computer com-
panies, now receives much of its income from I.C.L., who
channel some of their government money to it. Big fleas
have little fleas upon their backs to bite 'em, and so on.
The big flea is the government, or more accurately, you,
the taxpayer. Since America's I.B.M. spent an estimated
*See also Datamation, 15 May and 1 July 1971.
Where are we now?
two thousand million pounds putting its 360 series of
computers on the market, or twice the latest total cost of
Concorde, we can see that the 50 millions or so that the
British government has so far pumped into I.C.L. could
be a fleabite compared with what is to come.
Systems International, the Rolls-Royce backed com-
puter company, and the two and a half million pound
Interact service of Baric, the joint Barclays and I.C.L.
company, both failed.*
The Department of Education and Science has setup a
two million pound, two-year project to research and
develop computer-assisted learning. This is Britain's
venture into a field which in America has already eaten
up billions of dollars without many visible benefits. A
recent article in The Times Educational Supplement
dismisses the educational value of the project, and
suggests that the chief purpose may be to pump more
government money into Britain's own lame-duck
computer combine, I.C.L. It's a delightfully circular
argument: applications for computers must be invented
to create the funds for a computer industry, whose
products are, of course, very necessary in many
One of the funniest applications I came across was in
the USA eight years ago, when the State of Illinois was
linking all its schools to a central computer. I was told that
the system would have many applications, although curi-
ously no one would give me any examples. The next
stage in this game is being enacted in 1973, with the
linking of all universities in the USA via data links to a
central monster computer called Illiac 4. Even the Uni-
versity of Hawaii will be tied in via satellite. Mel Pertle.
the man in charge of the forty million dollar (at the last
count) Illiac 4 computer project, told me it was "kinda
exciting", and said that he flew to Hawaii every month to
discuss the satellite link with the local engineers. It is
surprisingly difficult to establish what information will
*See The Times, 18 October 1971.
General State of the Industry
flow along these data links, this time between univer-
sities. Mel told me that he foresaw the later linking up of
universities around the world, I would guess using
NATO funds. I expect you'll recall who provides those.
Many millions of pounds of British taxpayers' money
have been spent, and many more will be spent, on an
ill-starred project called Linesman/Mediator,* a
computerized attempt to control air traffic and at the
same time give early warning of nuclear attack on this
precious realm. There is no possibility whatsoever of this
project being successful — a fact which was clear to me
after spending only two hours studying one murky
feature of the mammoth enterprise. Mr Leslie
Huckfield, M.P., has called the project "one of the
biggest confidence tricks ever perpetrated in Britain."
So these are some of the people who are building the
computer myth, and some of their dubious
achievements. We'll hear more as we explore deeper.
Since a computer is so expensive, the idea arose of buying
a computer and renting out time to a number of
customers. Initially, universities which had been given
money to buy computers would rent out some time for
pin money, but later they became more heavily involved
in this activity. Private companies were set up to run
computer bureaux, but as elsewhere in the computer
business, the glamour attracted over-investment, too
many bureaux chasing too small a market, and then
The time-sharing utility followed, a central computer
with direct data links to a number of customers. Of these,
Autonomies went bankrupt shortly after commencing
operations, with the loss of five million pounds; Reed
were reported as wanting to sell off I.D.H., their com-
puter service department; and other on-line computer
utility companies in London are also in trouble.** The
*See Hansard, e.g. 12 April 1973, col. 1539.
**See Financial Times, 29 February 1972.
Where are we now?
same pattern can be seen in the USA where time-sharing
companies are folding up their terminals.
The employees who staff computer bureaux are a curi-
ous in-between kind of group, with very little lovaltv to
anyone. Corners are cut as the economic position of the
bureau deteriorates. For instance, a customer mav
be guaranteed that the information stored for him on a
computer cannot be damaged, but this is not necessarily
true. If the customer's vital information is later destroyed
in some little everyday accident in the computer, he is in
no position to sue, because his case would sound verv
obscure in the courts. Besides, if he pressed his case. the
computer bureau would probably fold anyway.
When the employees of one large computer utility
which was already nine months overdue in becoming
operational were told that, unless the machine was
operational within three weeks the division would be
closed down, they met the crisis promptly b\
commencing operations. They had no real alternative
consistent with continuing to draw their salaries.
However, what the half-completed system did to
information fed in by their early customers was
anybody's guess, and a number of customers lost vital
records. As always, the early birds choked on their
worms. This dilemma — "Con the customer or you're
fired" — is faced all too frequently by computercrats.
However, although owners and users of bureaux are
in trouble, it would be premature to assume that the
customer solves his problems by buying a computer, as
we shall see.
A 1969 report by top management consultants McKinsey
and Co. Inc. said that from a profit standpoint, computer
projects in all but a few exceptional American companies
were in real, if often unacknowledged, trouble. The situa-
tion is similar in Britain. An endless list of unsuccessful
computer projects could be made. At least 50 per cent of
companies are unhappy with their computer installa-