Business: A Growth Industry Grows Up

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IT was only 20 years ago that the world's first commercially sold computer, a Univac Model I, was installed at the Bureau of the Census in Washington. Today hardly any type of commercial or human activity in the U.S. goes unrecorded, unpredicted or unencumbered by computers. The machines keep track of almost every bank check, reserve nearly all scheduled-airline seats, scrutinize every federal income tax return. Computers help to diagnose illnesses, plan radiation therapy, and map a path for the brain surgeon's scalpel. One computer has synthesized the tone of a trumpet so authentically that experts cannot distinguish it from a genuine trumpet blast. In fact, the cybernetic sweep has reached so far that one harassed Manhattanite placed an ad last week in the New York Times begging computers to spell his name correctly: Ruben Morris.

As unmistakably as the computer has altered the character of everyday life, it is changing the shape of the computer business itself. For the past three years, one-tenth of new U.S. investment in plant and equipment has gone into computers, enough to make electronic data processing the nation's fastest-growing major industry. Last year computer-industry revenues rose 17%, to some $12.5 billion. Still, the computer industry may in some ways be a victim of its own success. Computer technology has raced ahead of the ability of many customers to make good use of it. Not long ago, the Research Institute of America found that only half of 2,500 companies questioned felt that their present machines were paying for themselves in increased efficiency.

Price War. Despite such doubts among their customers, the major producers of computer hardware—IBM, Burroughs, Control Data, RCA, NCR, Sperry Rand—have all brought out new products within the last year. Many of them are so-called "fourth generation" computers: incredibly complex instruments of astronomical calculating power. In fact, they make the original Univac I look like an abacus by comparison. Last week Honeywell-G.E. introduced its Series 6000 line of fourth-generation models (price: up to $4,500,000), which can execute 1,000,000 instructions a second.

Simultaneously, the first big price war has flared in the computer industry. Under antitrust pressure, IBM last year decided to abandon the single-price, machine-plus-service package that had helped the company gain 70% of the U.S. computer market. The "unbundling" left IBM customers free to shop around for bargains in systems-engineering, programming and employee education. Customers had always been able to buy peripheral equipment—the storage and retrieval units that speed data into and out of the machines—from competitors offering prices up to 15% below IBM's. But unbundling illuminated the disparity. By year's end, the scrappy independents had grabbed an estimated 15% of the computer industry's prime growth market in such periperals as disk and tape drives.