About life in the last third / Technology / The Flight of a Wild Duck

Was the Personal Computer Industry Inevitable?

While writing my book, The Flight of a Wild Duck, I couldn’t help but speculate on alternative realities. So much of one’s life is driven by random events. So it was easy for me to imagine how things could have unfolded differently. One of the possibilities that intrigued me was derived from the significant shift in the computer industry resulting from the introduction of the IBM Personal Computer in 1981, mainly because this had a profound impact on my career.
Before its introduction, the computer systems industry comprised Mainframe Computers, with IBM having the majority of the market and Mini Computers with Digital Equipment Corporation. In addition, personal computers were a tiny market serving hobbyists and computer enthusiasts.

In 1980, Apple had started to develop a business market driven by the introduction of VisiCalc, the first spreadsheet. IBM noticed and decided that they wanted to participate and even dominated the nascent personal computer business market. However, in their haste to get to market quickly, in less than 12 months, they failed to protect the architecture of their personal computer, which allowed companies like the newly formed Compaq Computer to develop fully compatible computers. IBM saw the personal computer as a new opportunity but failed to understand it would evolve and eventually take away market share from Mainframes and Mini Computers.IBM was not alone in this. No major technology company foresaw the titanic shift that would turn the computer industry on its side.

IBM, the dominant player in the computer industry, began to suffer significant losses and had to exit the personal computer market and eventually restructure as a service company. In addition, minicomputer companies like Digital Equipment started to suffer substantial losses. Ultimately, Digital was acquired by Compaq, one of the leaders in the personal computer market. The driver of the personal computer industry was standards, mainly when it came to application software. The result was that PC manufacturers had difficulty differentiating themselves from one and another. Lead by Compaq Computer Corporation, manufacturers of IBM-compatible computers, known as clones, successfully competed against the very personal computer market that IBM had created. Eventually, Asian manufacturers entered the market with lower-cost versions, putting great pressure on IBM and American clone manufacturers.

Microsoft and Intel had a virtual monopoly on the personal computer’s two most essential parts, the operating system and the microprocessor, two critical suppliers to the PC industry. While they had done little initially to develop the personal computer industry, they were successful in taking over its leadership. In the process, they extracted all the profit from the personal computer industry, resulting in becoming two of the most valuable companies in the world.
As the personal computer began to dominate the computer industry, Andy Grove, then CEO of Intel, made an important observation. The computer industry had moved from a vertical organization in which computer companies developed and manufactured all the key elements of their computer products to a horizontal industry where there were different leaders amongst all the crucial components such as discs, software, semiconductor components, and even distribution. Andy thought not only was this very profound but that it was more or less a permeant shift. He describes this in his book Only the Paranoid Survive (page 44).

Not only was Andy convinced, but most of us in senior roles in the computer industry agreed with him. By that time, the only significant vertical manufacture of personal computers was Apple with the Macintosh. Apple had a tiny market share made up of devoted users mainly from the creative community. Most thought that Apple would eventually fail, and it almost did. But it would turn out to be Apple and Steve Jobs that would once again turn the computer industry on its side, returning to the vertical model. Looking at the world of mobile devices that dominate computing, we can see the leading player, Apple, is vertical although out-sourcing its manufacturing and some key components, but they are proprietary. In the Android world, the operating system is an independent component similar, but otherwise, major suppliers like Samsung operate similarly to Apple. So I take it to be that the development of the personal computer industry was not a given. IBM with the PS/2 and OS/2 tried to return to the vertical model, but it was too late.

What was inevitable with that computers would be designed for the individual? Yes! Changes in technology such as semiconductors, Winchester disks, and networking would have driven the computer industry to create computers that would have looked a lot like the IBM PC and the computers that followed. More and more people were getting exposed to using computers. But it would have also been likely that the key computer companies like IBM and Digital Equipment Corporation could have developed proprietary systems much in the way that companies like Sun and Silicon Graphics did for graphic workstations.

In 1980, when I proposed developing the Professional Series Computer to the Operations Committee at Digital Equipment, I had knowledge workers in mind, including individuals working in small offices. Rather than break with the computer systems that Digital was offering, I saw the Professional as an extension to the ecosystem that Digital had already developed. I wanted to develop a computer designed for the individual but compatible with the company’s other computer offerings, able to run the same application and utilize the same communication network. Even though the Professional was based on the PDP-11’s 16-bit architecture, we came up with a way to run application software on it which was designed for the VAX line of computers. Years later, I would discuss this with Don Estridge, the person generally credited with the development of the IBM PC. He told me that the Professional was the personal computer that had concerned him. But he had nothing to worry about as the Professional would end up a failure.

There were many reasons for the failure of the Professional, and I am responsible for a number of them. But the foremost reason was the advent of the IBM PC which would upend the entire computer industry, including IBM. In addition, the arrival of the IBM PC provided an opportunity for other groups within Digital to challenge my strategy. In particular, one of the company’s product lines proposes a practice similar but not fully compatible to the IBM PC, The Rainbow. Another, the Word-processor Product Line, run by Ken’s brother Stan, decided to build a dedicated Word processor, DecMate II. Ken Olsen, the CEO, loved internal completion. He was delighted to have three products and their teams going after each other. Like most new products, there were some serious flaws with the initial implementation of the Professional. It was way over-engineered, causing it to take too long to develop. It had performance problems and was too expensive. But had the IBM PC not come along when it did and had Ken Olsen not decided to end up with three competing products (He said “Let the market decided” and I said “they did. They bought IBM’s product”, I think the Profession could have been successful.

4 thoughts on “Was the Personal Computer Industry Inevitable?

  1. This was the first business decision that I ever saw: in their haste to get to market quickly, in less than 12 months, they failed to protect the architecture of their personal computer >


  2. AVRAM : I haven’t read your new book yet, but I do hope it will be available on Audible. As a life long duck hunter in No. California, you should know that all ducks are wild ! The only domesticated ducks ( 5-6 mallards ) I’ve ever seen are @ the historic Peabody Hotel in Memphis & live on the roof & every day come down to the lobby in the elevator & then jump in the pond in the lobby. Aloha, Paul

    Paul H. Stephens
    Chairman & Partner
    Stephens Investment Management ( SIM )
    Belvedere office : 415-677-5441
    Kona office : 808-325-1174
    Mobile : 415-265-7900


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