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How to Stay Ahead in a World of Disruptive Innovation: Part 2

Date posted: 30th October 2015

Part 2: How IBM’s 3rd generation never came back from the moon….

 “Some people don’t like change, but you need to embrace change if the alternative is disaster”. – Elon Musk

This past Wednesday we took a look at how the cloud and Amazon’s innovations has separated the new disruptive forces of today’s IT away from the Old-Guard OEMs (OGOs) and Value-Added Resellers (VARs) of yesteryear. It has become clear that despite the massive resources, funding and brand recognition of the OGOs their complacent hubris has already killed the VAR business model, and could even put the major OGOs themselves on death row in the near future.

Complacent hubris within IT giants is not a new concept though, the past 50 years of IT history is lined with examples of companies rocketing to market growth followed shortly after by flat lining or outright decline due to disruptive innovation in the market. Some of these companies survive; others don’t but the singular truth I’ve found in my years in the IT business is “if you are not innovating, you are not growing”

Today to end the week our series is going to take a step back to the early days of modern IT, the 1960s and 1970s. This 1960s saw the rise of IBM’s “3rd generation” mainframe the System/360. As we entered the 1970s the DEC mini mainframe provided an innovative alternative for the greater marketplace and at the same time Amdahl’s supercomputer became the powerful alternative for the higher end.

Going back to the origins of modern IT my experience begins back at one of the first Computer Science schools in the United States – Central State College in Edmond, OK. While at Central State I learned the Assembly, COBOL and FORTRAN programming languages on IBM’s System/360.

Following graduation from college my first job in the business of IT was the graveyard shift (11PM-7AM) computer operator using IBM S/360 at Oklahoma’s Department of Public Safety. My responsibilities included sorting and feeding punch cards into the reader, processing the data and printing the reports on high-speed line printers.

Since then my work experience and businesses that I have started have taken me through multiple areas including software development, product distribution and most recently cloud managed services.  Through my years of experience I have seen the ongoing evolution of IT from the days of punch cards and mainframes to today’s Cloud, Mobility, Social Networking and Big Data Analytics.

Let’s now take a step back 50 years to see how IBM, DEC and Amdahl set the stage for modern IT….

Big Blue Goes to the Moon…

IBM as a company dates all the way back to 1911 and are one of the best-known and earliest pioneers of the information age.  IBM holds credit for invention of the FORTRAN programming language, the UPC, the magnetic strip card, the hard drive, floppy drive, the relational database and more recently Watson artificial intelligence computer.

IBM’s 2nd president Thomas J Watson Jr. is credited with driving the 1960’s heyday of the company. Thomas was arguably one of the first to drive marketing of computers toward their business impact and in his tenure he drove IBM to become the leading computer company of the time.

Much of the 1960’s success of IBM is centered on the same machine that I used at Central State College, the “3rd generation” mainframe known specifically as the IBM System/360. This mainframe computer was the first in the world to use interchangeable software which empowered businesses to customize the computer for their specific requirements.  This revolutionary idea at the time powered IBM to become the industry standard at the peak having more than 70% market share in the United States.

That much you probably know but what you might not have realized is IBM also pioneered the concept we know today as “Cloud Computing” all the way back in the 1960s? They receive almost no credit for this publicly but their concept of “time sharing” invented in the 60s was one of the earliest examples of “the cloud”. Time sharing released in parallel with System/360 allowed multiple operators to share access to a computer system from separate “dumb terminals” that connected up to the mainframe. These “dumb terminals” of 50 years ago have once again come in vogue with the increase in Chrome Books and the death of the hard drive in consumer and business computing.

IBM pioneered the cloud and ended their greatest decade high-flying above the clouds. As part of the NASA Apollo program IBM computers and staff helped put the first men on the moon in July of 1969. This achievement re-enforced the success of the 3rd generation mainframe literally putting IBM on the moon.

While IBM is of course still a multi-billion dollar enterprise today, their pioneering days in the cloud and computing abruptly ended. What could have been the dominant monopoly of the information age was disrupted by a new competitor at the dawn of the new decade.

 IBM gets “stuck on the moon”….while innovation back on earth continues…

At the start of the 1970’s change was afoot at IBM and the United States computing industry. IBM thought they were entering another decade of market dominance with competitors such as NCR and Unisys barely registering on decision maker’s radar. However IBM’s reign as the monopolistic king of the mainframe was soon to end. While IBM was flying high in the 60s two major competitors were lining up to dominate the 70s. Digital Equipment Corporation (DEC) positioned themselves on the lower end of the market by offering lower cost innovative mini mainframes. At the same time Amdahl Corporation was ready to conquer on the higher end of IBM’s market with the Amdahl Super Computer released in 1975. All told when the 70s were over IBM’s market share had declined from a high of 70% in 1970 to a low of 32% in 1980.

DEC’s Great Invention – “but who would ever want to use one?”

DEC originally founded in Massachusetts in the late 1950s hit the big time in 1970 with the PDP-11 series. The PDP-11 series introduced several disruptive features to the computing world allowing its parent company DEC to intrude in on IBM’s now former customers.  This included custom peripheral support, independent instruction sets, support for multiple interrupt priority levels and a mass production smaller design lowering costs. Over its lifecycle DEC sold over 600,000 PDP-11 models making it the most successful product line in company history and cementing its place in the history of computing. DEC R&D followed up on the PDP-11 with an internal demonstration of what they considered to be a “microcomputer prototype” in 1977. This “microcomputer prototype” demonstrated at DEC would go on to change the world in the decades to follow as the personal computer (PC), however DEC wasn’t there to enjoy the success. In one of the biggest blunders in business history DEC founder Olson stated “There is no reason for any individual to have a computer in his home”. This would be the beginning of the end for DEC as their rejection of the PC allowed IBM to make a roaring comeback in the 1980s. The remainder of DEC’s history is a slow painful fade into irrelevance with the final chapter complete in 1998 when the sold the remnants off to Compaq (which was subsequently part of a damaging merger with Hewlett-Packard four years later)

Amdahl – a super footnote in IT history

Amdahl Super Computer originally founded in 1970 took IBM on in the higher end market with several innovations of their own plus a little assist from the United States government.  Innovations of this era include the first air-cooled mainframe eliminating the need for extra cooling pipes in the server room.  Higher end customers also benefited from variable speed on the CPU allowing increased performance on-demand.  These innovations combined with the US government’s 1969 antitrust suit against IBM allowed Amdahl to briefly position themselves as a major player in the high end mainframe market. However as with DEC the success at Amdahl was short lived. As the mainframe fell out of favor and original founder Gene Amdahl left in the 1980s the Amdahl Corporation was left with an IT business in rapid decline.  The history of Amdahl ended in 1997 when Japan based Fujitsu acquired the remnants of the 70’s era mainframe market disruptor.


Today we saw how the first two decades of the modern information technology age still parallels business of IT patterns over a half-century later.  If you are not innovating, you are not growing was a lesson for IBM in the 60s, and Amdahl in the 80s. DEC innovated of course with the un-credited invention of what would become the PC but their founding team’s comfort with the status quo led others to mass distribute the product that would change the world in the following decade. Come back to Netfast IT Business Review next week as we jump to see where NEC’s invention ended up in Part 3 “The Phoenix rises again, how IBM biting the Apple made it Personal”