R M Price CDC speeches Charles Babbage Institute

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V$-"*' CONTRO^JMTASTRATEGIC THREATS & RESPONSES

.

An Overview

Business Segments

I. Computer Systems

L,fA r Products - supercomputers, medium to large scale. computers,

^[y>^[Loi2^ Markets - scientific and engineering applications

&&•<$ II. Peripherals

Products - memory devices, memory mediaMarkets - OEM, end user

III. Computer Services

^p Markets - end users of computer applications in four(^r-T market areas:

TwW fc*x~f^"^/ Commercial - e.g. Arbitron, BIS, FIS, SBSê^J^sUx^^-) Engineering - e.g. CIM, Cybernet

Education & Healthcare - e.g. USSA, MedlabOther - Ticketron, BTC division, Ag Services

In addition, the international markets for services hascharacteristics sufficiently distinctive that from a productand market strategy viewpoint, it must be treated separately.

R. M. Price

January 1, 1985

R M Price CDC speeches Charles Babbage Institute <www.cbi.umn.edu>

I. Computer Systems - super computers/ETA

Development perspective, historical; technology andarchitecture:

CDC Other

6600 Atlas

6800/7600 Stretch8600/Cray 1 Lark205/? Illiac IV

TI

360-9X

Development costsGF-10 technology risk, time/market risk,implications of possible delays; building the basein '85, '86Base building - marketing costs are additionalexpenses on the front end which in turn increasesthe total financial risk

Financing

Computer Systems - medium to large scale computers

Historical Perspective; Start and evolution of majorproduct lines. Current status of market shares. Changefactors - IBM, Japanese, small special purposecompanies. Historical (10-year) view of Control Data'skey ratios and indicators - number of units, averageprice, marketing costs (percent of revenue), technicalcosts (percent to revenue), reliability, maintenancecosts, gross profit (percent to revenue).

Responses

* a) narrower product and market focus* b) increased technical expense

c) cooperationd) marketing methodologies

•

Outlook; 5-year, 10-year prospects, 5-year extrapolationof 10-year key ratio trend lines

♦Primary responses prior to 1983

R. M. Price

January 1, 1985


II. Peripherals

Historical Perspective: Why Control Data begandevelopment of peripherals; development and growth of thebusiness; current status of competition - IBM, Japanese,small companies; technological and competitive impact onperformance and costs.

Response to Opportunities and Threats

* a) cooperation* b) narrower product focus* c) increased technical expense

d) market segmentatione) total product cost focusf) marketing methodologies

Outlook: 5-year, 10-year prospects for the businesses

♦Primary responses prior to 1983

R. M. Price

January 1, 1985


Ill. Computer Services

Systems/peripherals threats clear by mid-sixties. Basicstrategic response wa to diversify into another less threatenedmarket, i.e. services.

Historical Perspective: The beginning of computerservices, evolution

Characteristics of Service Businesses: Case histories -

Arbitron, CDI, Cybernet/Systems interplay, ups and downs,Ticketron,FIS

Current Status: Competition/market share in four majorsegments - commercial, engineering, education andhealthcare, other

Outlook

R. M. Price

January 1, 1985


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RMP's notes re March Board

March Board - Strategic Threats and Responses

Medium to large scale computers

The Beginnings:

1604 - Scientific & Engineering orientedUnivac 1103 - Repeat fltg pt. multiply - add

Demonstrate use in applied mathMany applications involve this operation

Matrix multiplication - wing stresses48 Bit word

160,160-A used as "satellite" - 6600 concept3600 3200 6600

Upper 3000 Lov/er 3000 Super Comp.1 2 oper. Systems 2 Oper. Sys.

X . X

NPL ^'

(Across the board)

1973 (1972?) Product Strategy Task Force

Power of AppleIBMPC

1604

3360

3300

6600

Cyberl70Cyber 18 0

CYBER7 0

7600


16 THE NAKED COMPUTER

would get two million miles to agallon ofgasolineMind-boggling? No more thari watchesthatZv^ r ,

electronic bartenders cars that talk h^h i 7y ,pace lnvad^,

name 6o£s ud in a mm*,,*** *• J c secom- lhe average citizen's

beS,mmg of „sznZX^fJXni^tr th<Pater capacity will have doubled again ' '"^"^ "**•

Apple Computer was incorporated in 1977 tâ jj u , • •first Radio Shack TRS-80 ^ûntiims^J^V^t *shipped over two million mmt»!* u together they haveshifted. computers by now-more than IBM has ever

crowtde f^lLTZklsrzi d;rsed m,other **«* «*•nalsmissilr ^^^^âiiST1*of progress or usUo ZchZ^t^7°" 2"™^ ^m «&*»»

notmk£ jsl-s forrfor computers in i94s *«-there were thirteen nXn corn 7 "" t0° SmaU- By the end of ^83billion will SvTLTZt buTnTS '" ""J" *e W°r'd Atotal «f $200them run. BetweenTândigSf S ' ^ "T7 m°re billions makl"gdoubled; between 1982 and 1^^ ""ôf comP"ters in the worldIBM shipped more of its ilon.l *f5^ ****• In *** ™^sshipped vtoV*} C°mP CrS tHan aH tHe COmPuters » had

than"" ^SSVS vfKWe!ih<W mUCh trCndi- - I* ^t

pushing forty, Jerry's turnedncss Networking Salon at Sbusiness professionals fromreal estate, and such—can ebers in an atmosphere thatvention. Some of New Yorl

computer professionals nowsalon, held on December Idance. Part variety show, paputers: Even the BPs (Beau!

Maybe attending a combad after all, especially if yotion WIND of Chicago hasruns on an Apple computerers. Instead of handing the 1receives incoming calls, canscreen. The host can determ

The first French restaursValenciennes, France. In 19the famed Ecole PolytechnicCustomers now order by pusentree, hors d'oeuvres, etcchoices. Customers seem to

Technology may save rocklar 45rpm recordings—over1947—now takes up sevenrPaul Mawhinney, owner ofstarted collecting the informthousand singles, which he1978; now the data base is socarry it. When laser disks relast available oracle for deteshe-bop. Or the ram in ram

The first home computer':Honeywell H316 "Kitchen Ccatalog. The $10,600 systemcould be programmed for meluding keeping track of golfinvestments.


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/>//"•

Personal ComputersAn account of their hardware, software, applications and current

proliferation. By making computers accessible to untrained peopletheypromise to bring about the long-heralded computer revolution

by Hoo-min D. Toong and Amar Gupta

If the aircraft industry had evolved asspectacularly as the computer industry over the past 25 years, a Boe

ing 767 would cost $500 today, and itwould circle the globe in 20 minutes onfive gallons of fuel. Such performancewould represent a rough analogue of thereduction in cost, the increase in speedof operation and the decrease in energyconsumption of computers. The cost ofcomputer logic devices is falling at therate of 25 percent per year and the costof computer memory at the rate of 40percent per year. Computational speedhas increased by a factor of 200 in 25

years. In the same period the cost, theenergy consumption and the size ofcomputers of comparable power havedecreased by a factor of 10,000.

The result is the advent of the personal computer, which for less than $500can put at the disposal of an individualabout the same basic computing poweras a mainframe computer did in the early 1960's and as a minicomputer did inthe early 1970's. Twenty years ago thecost of a computer could be justifiedonly if the machine met the needs of alarge organization. The minicomputersintroduced in the 1970's are appropriate

CASSETTE INPUT/OUTPUT KEYBOARD INPUT/OUTPUT

SLOTS FOREXPANSION

MODULES

EXPANSIONSOCKET

RANDOM-ACCESS

MEMORY (RAM)

SPEAKER

OUTPUT

READ-ONLYMEMORY (ROM) TIMER

O

or

D DDDDOaODiDDDDDDDD DDDDDOODinDDDDDDD OOOOQDQQlQQDDDDDD DDDDDDQD!DDDDDDD

INTEL" MICROPROCESSOR

AUXILIARY-PROCESSOR SLOT

• CLOCK CAPACITOR

. CLOCK OSCILLATOR

SYSTEM-CONFIGURATIONSWITCHES

INPUT/OUTPUTPORT

_ DIRECT MEMORYACCESS

TIME DELAYS,DEVICE DECODERSAND OTHER SUPPORTCIRCUITRY

MAIN CIRCUIT BOARD of the IBM Personal Computer is shown in the photograph on theopposite page and its major elements arc identified in the drawing above. The size of the hoardis 8'/v by 12 inches. To it arc attached a large number of silicon chips carrying integrated circuits; each chip is about a quarter of an inch square and is encased in a rectangular plastic package titled with electrodes. The chips and elements such as resistors and capacitors are interconnected by conductors printed on the board. The microprocessor, the 16-bit 8088 made by theIntel Corporation, has 20,000 transistors and operates at a frequency of almost five million cycles per second. "System programs" arc stored permanently in the read-only memory (ROM);random-access memory (RAM) stores programs and data that change from time to time.

i

for a department or a working groupwithin such an organization. Today thepersonal computer can serve as a workstation for the individual. Moreover,just as it has become financially feasibleto provide a computer for the individualworker, so also technical developmentshave made the interface between manand machine increasingly "friendly," sothat a wide array of computer functionsare now accessible to people with notechnical background.

The first personal computer was puton the market in 1975. By the end ofthis year more than a million personalcomputers will be in service in the U.S.alone. In 1981 total sales of personalcomputers and their accessories in theU.S. amounted to $2.2 billion; sales areexpected to surpass $6 billion in 1985.There has been talk of a "computer revolution" ever since the electronics in

dustry learned in the late 1950's to inscribe miniature electronic circuits on a

chip of silicon. What has been witnessedso far has been a steady, albeit remarkably speedy, evolution. With the proliferation of personal computers, however, the way may, indeed be, open for atrue revolution in,how business is conducted, in how rJeoplc organize theirpersonal affairs anil perhaps even inhowpeople think. , t

Anatomy of a Computer

A computer is essentially a machinethat receives, stores, manipulates andcommunicates information. It does so

by breaking a task d()wn into logical operations that can be carried out on bina

ry numbers—strings of 0's and Pa—anddoing hundreds of thousands or millions of such operations per second. Atthe heart of the computer is the centralprocessing unit, which performs the basic arithmetic and logic functions andsupervises the operation of the entiresystem. In a personal computer the central processing unit is a microprocessor:a single integrated circuit on a chip ofsilicon that is typically about a quarter of an inch on a side. Other silicon

87


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CHAPTER 1

THE INVASION:Computers by the Zillion

3^

Picture ENIAC, the first computer. In 1946 it was the scientific marvel of the day, a thirty-ton triumph, standing two stories high andcovering fifteen thousand square feet. A boxcar could fit inside it. Yettoday, a $1,500 Radio Shack TRS-80 computer, smaller than a stereo, can add and subtract twenty times faster. Just the cost of theelectricity to run ENIAC for a week could buy a couple of RadioShack computers; an hour's worth could buy its computational equalin hand-held calculators.

The human equivalent of today's average computer is one millionmathematicians working twenty-four hours a day doing sums, consuming a ton of scratch paper a second. The level of miniaturizationin today's computer memory matches that of inscribing the Bible onthe head of a pin.

Had automobile technology advanced at the rate ofcomputer technology over the past thirty years, a Rolls-Royce would cost $2.50 and

15


A-Market Shares1983 shipments by 2 digit 5K code1984 shipments by 2 digit 5K code1985 shipments by 2 digit 5K codeCompetitive shipments - can we get the data?

-Trends/Ratios

-Major Thursts —Specialized computers

"workstations"

IBM

JapaneseTake markets from A above and point out unique strengths andweaknesses

-Key success factors - outlook -Modest revenue growth - 5-10%/yr?Profitability outlook modest

ROIC below company averageWhy continue? a. Technology will allow

foster/specialized designsCAD, custom LSI

b. Cooperation with semi-condmfgrs (who?) can give useconomies of scale

It is market expertise that only comes with years of effort/learning. The problem is to rapidly shift the vehicle ofdelivering that expertise.

In that sense "services" (which conventional wisdom still seesas the delivery of "cycles" through comm. lines and dumbterminals) and "systems are rapidly merging and will beindistinguishable lines of business for Control data by 1990."Hardware" will be VLSI, integration of same. Onlysemiconductor mfgrs, IBM, Japanese companies will be in thehardware business. That does not mean we will not deliver

products as part of rendering a service. In fact for the lastfive years the greatest weakness of our services businesses isthey couldn't figure out how to adapt and market hardwaredevices as part of their service.

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R M Price CDC speeches Charles Babbage Institute