Are We Chinese Compatible Yet?

 

 

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Moore's Law, the doubling of computing power every couple of years, may give way to the greater laws of physics at some point, but for the moment it is an economic metric to be reckoned with.

If we slide the scale back a little more than 12 or so Moore's Law cycles, we find the IBM Corporation at the pinnacle of international business domination, hegemonic leaders of the world's fastest growing industry. At this point on the scale, even IBM watching is a major industry and bookstore shelves are crammed with best selling business tomes lauding the unassailability of the IBM Way. Signs hung on the walls of IBM executives smugly mock the outside world with the company motto: "Think Ahead"

One problem the company faces however is a limited market. Big Blue's big iron is so expensive to lease and maintain that only large corporations, governments and institutions can afford one of their own.  

For everybody else, there is "time sharing" on somebody else's mainframe or the outsourcing of specific tasks like accounting and payroll.  In the niche left under big iron, companies like Digital Equipment Corp and others supply mid-sized companies and, in some cases, corporate departments, with so called  "mini-computers".  Mini's and mainframes have the same characteristics: users sit at "dumb non-graphic terminals" logged into central computer servers stored behind closed doors in sterile, specially acclimatized areas tended by white-frocked technicians from the DP (or Data Processing) department.

Back then all access and processing activity on the system was controlled by a DP department regularly serviced by crisply white-shirted, blue-suited, teams of IBM reps and technicians.  It was generally a relationship more cozy than strained though everybody recognized, if push came to shove, that the supplier was boss; for instance, should a department in an enterprise want to bring in a mini-system for a particular application, say engineering or word processing (Wang), IBM could usually expect the DP department head to follow IBM's marching orders. 

One tactic the company brought to a fine art came to be called FUD; If IBM announced it would be launching a competing engineering application; DP would lead the fight to resist the purchase of the rival machines.  Often, Departments, through their own budgets, would have to go around DP to get their own cluster of mini-based workstations.  And this could sometimes leave them flying solo, without DP support.  In corporate DP pop culture it was oft repeated: "no one ever got fired for buying an IBM"

But there was also emerging a tiny cottage industry in the mid to late 1970's reserved for hobbyists and other genres of nerds working in kitchens, dens and garages.  They had perhaps graduated from kits bought at Radio Shack to manufactured monitor-less computers from companies --a keyboard and an attachment to cassette reader-- like Texas Instruments, Commodore, and Atari.  By this time also, a start-up out of a small town on the peninsula south of San Francisco had begun shipping the Apple 1.       

Around 1980, viewing even this flea speck of a market as a potential opportunity, a small team inside of Big Blue working under the code-name "Acorn" was given the go-ahead to come up with its own version of a "personal computer".  The launch of such a machine, we now know, signaled the real starting line for the second computer revolution.

According to Mary Bellis  writing in About.Com:

The first IBM PC ran on a 4.77 MHz Intel 8088 microprocessor. The PC came equipped with 16 kilobytes of memory, expandable to 256k. The PC came with one or two 160k  floppy disk drives and an optional color monitor. The price tag started at $1,565, which would be nearly $4,000 today. What really made the IBM PC different from previous IBM computers was that it was the first one built from off the shelf parts (called open architecture) and marketed by outside distributors (Sears & Roebucks and Computerland). The Intel chip was chosen because IBM had already obtained the rights to manufacture the Intel chips

That's right, it all started in 1981 with two floppy disks, 16KB of RAM and a 4.77Mhz processor!  The PC also came with the programming language BASIC, produced by the same tiny company that supplied IBM with the DOS operating system for the system.  But IBM was not the only major company to want to enter into the fledgling small business oriented, desktop personal computer market: the IBM PC was very quickly followed by rivals from DEC and others.  There were also ready-made application companies ready to jump into the fray with word processing, spreadsheet and DBMS's.  For example, Xerox, which was at the height of its innovative powers in those days, was one of several companies that offered a dedicated word processing system.  What they were to find out is that PC-DOS users could easily buy or pirate a word processor called WordStar.

But priced at the equivalent of today's $4- or $5-thousand, when you count in the printer and color ASCII monitor, it's not surprising that the first purchasers of the personal computer were hardly the same hobbyists who bought Ataris. Before not too long, IBM had come out with an upgraded PC it called the XT, with a 5MB hard drive and the real race was off and running. Now it was possible for small businesses to think about installing an accounting or merchandise-tracking package.

What quickly emerged much to the chagrin of players like DEC, HP, Xerox and other rivals with their own proprietary or rival DOS operating systems was the deadly mantra "IBM compatible".  Since the IBM PC, to achieve speed-to-market, offered something truly revolutionary: an "open architecture" --a concept that no doubt brought shudders to the mainframe side of the business-- a number of "100% IBM compatible" imitators, like Compaq Computer, began to emerge. Having licensed DOS, done some significant reengineering and built on the Intel 8088 architecture, these companies could claim to be 100% IBM compatible. And so a new standard was born and even though IBM began to face serious competition in the personal computer space from a more agile and innovative Apple Computer, that borrowed heavily from work done at Xerox's expense, IBM could rest comfortably on its reputation in the business world and a growing number of equally creative suppliers in the open computing space for software and hardware products that were, of course, 100% IBM compatible.

What really got the IBM-standard going, however, was the introduction of a product called Lotus 123.  Lotus 123 was supposed to combine all three of the major applications, a database or DBMS, spreadsheet and word processor, in one package.  Along the way, it greatly improved on a math-driven application, the spreadsheet that was being successfully sold by a company called VisiCalc.  Lotus 123 was the first of what we now know of as "killer apps", application software that spawns industries.  Lotus 123 had a very primitive but original graphing capability.  It could make bar charts and pie charts, for example even though a standard ASCII monitor could not display graphics.  But the PC came with expansion slots with open, published, specifications.  Soon companies were selling hardware that fit into one of these slots and that could convert a monitor into a graphic display.  With an adaptor, PC users could now see their pie charts in color on their IBM-compatible graphic displays.
 
If the word processor liberated writers from the tyranny of carbon paper and the labor intensity of edits, 123 more significantly made variable but repetitive calculations a thing of the past for bean counters of all stripes.  What was creating the first tectonic shockwaves was the growing recognition inside major corporations that Lotus 123, with its graphical capabilities, was far better than any software that IBM offered on its humongously expensive mainframes. Much to the displeasure of the DP department and IBM's mainframe salespeople, IBM PC's were being smuggled in droves through the backdoor into the country's leading institutions. 
 
Around the same time, a tragic airplane accident occurred in which the top level of the Entry Systems Division founding PC team at IBM was lost.  For many of the mainframers, this was probably seen as something less than a business setback, since it was already clear that the puny "toy" PC was causing disruptions in mainframe sales.  Big iron budgets were being "cannibalized" by a new class of more powerful desktop workstation computers.  Something IBM planners had clearly not foreseen.  

The next and truly fatal blow to the IBM standard was dealt, of course, by Microsoft, when Bill Gates and company managed to sabotage IBM's plans to establish its next generation OS2 operating system software in place of Microsoft's MS-DOS.  Parallel to its efforts to build OS2 for IBM, MSFT hastily built its own Windows operating system.  At the same time it developed its new line of Office software for MS-Windows that could closely rival Lotus's and Word Perfect's market leading offerings.  The makers of Lotus and Word Perfect, following IBM's marching orders, were busy retooling their products for an OS2 launch.

 All Microsoft had to do was drag its feet with OS2 while bringing Word and Excel for Windows to market. In one mere tick of the cycle, Microsoft, of course, had emerged the winner; Word Perfect, Lotus, Ashton Tate and others would fall by the wayside and slowly the IBM-compatible mantra would pass to MSFT and Intel.  In one of the greatest coups in business history, MSFT had wrested control of the IBM standard from Big Blue, though it would still take many years for the phrase IBM compatible to die out.

For IBM, the crisis was catastrophic, by this time, it was no longer even the largest seller of PC's.  That mantle had been taken over by Compaq.  But IBM was not yet ready to throw in the towel in the business they had invented.  They still had an enormous business customer base and unrivaled technological resources. Rebounding they regenerated their PC business by way of an impressive, sleek, new line of notebook computers called the ThinkPad.

  The Cycle Hits Home 
 
With the sale this week of its PC business including the IBM brand name to the Chinese, analysts might argue that IBM has strengthened its corporate competitiveness and gained an important Chinese partner for the expansion of its integration business in the world's largest country and fastest growing economy.  After all, the main business of the company had long ago been reinvented not as a manufacturing party but as a service company providing high priced consulting and integration services to other global entities.
 
Not insignificantly, as a major systems integrator IBM has also become an important proponent of the Linux operating system.  Linux is an open source (meaning, the source code, regulated by a non-profit organization, can be licensed at no cost) product that has benefited from a truly impressive, international volunteer collaboration.  Not coincidentally, Linux and the open source movement now pose the first significant threat to Microsoft's entrenched, pre-eminent position.
 
As for the 10,000 or so US-based employees in the IBM PC division who now work for Lenovo (IBM owns an 18,5% stake in the merged Beijing headquartered company),  the message has to be pretty clear:  most of your jobs are fairly safe for a while as the Chinese get their arms around the advanced technology and design aspects that have made the Notepad line of notebooks so successful among business users. But it might not be a bad time to dust off that resume or think about the early retirement program while it still exists.
 
What the Chinese get for their $1.8 billion, besides a going business and an incredible brand name, is access into yet another layer of leading edge technology and know-how.
 
 It may be just a coincidence that practically on the same day that the IBM /Lenovo deal was announced, a study was released showing that US high school students ranked near the bottom in math and science skills when compared with their peers living in the other 20 or so highly industrialized countries.
 
For as many cycles as Moore's Law has been in effect, the braindrain has worked in the US' favor. Now, a falling dollar, a worldwide Internet communication system that reconfigures the importance of borders and time-zones and shrinking tech opportunities in the US will only exacerbate the situation as comparable pay scales rise in more stable currencies. The reaction to Bin Laden has also served to choke off the supply of thousands of eager Asians who come to study and remain to work in the country.
 
Nearly 3 quarters of the world's population lives in Asia.  It's said that a billion Chinese (half the population) have not yet made a telephone call.  But the base Asian population figures are so great that a still truly impoverished country like India with half the population of China can have more people in its middle class than the US.  If the relative success of Asian-American students in the US is any indication, we can expect to see these countries turning out relatively massive numbers of high-tech trained graduates. 
 
In Moore's Law time, changes occur rapidly.  Certainly, there will be pauses and even setbacks as economic conditions contract and expand but, all told, it might be a good time to check on the real significance of being 100% Chinese compatible and, thinking ahead, always in Moore's Law time, how long even that yet unestablished standard might last.
 

 

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