The Computer Society: Business: Thinking Small

Little whizzes raise the specter of buggy whips

No one took to the computer more eagerly or saw its usefulness more quickly than the businessman. Now, 24 years after General Electric became the first company to acquire a computer, these versatile machines have become the galley slaves of capitalism. Without them, the nation's banks would be buried under the blizzard of 35 billion checks that rain down on them annually, and economists trying to project the growth of the nation's $2 trillion economy might as well use Ouija boards. In the airline industry, computers make it possible to reserve a seat on a jumbo jet, pay for it by credit card, and enable the plane itself to fly. In many industries, computers design the products the companies sell. Automakers, for example, use computers to view a prospective new car from any angle; then the computers analyze the market to see if the design will sell.

In fact, the ravenous and growing appetite of U.S. companies for data-processing machines and control devices accounted for a major portion of last year's $41 billion computer business. Only 15 years ago, IBM was for all practical purposes the computer industry. But the explosive rise in demand has surpassed even IBM's ability to gobble up new orders. Though the company continues to grow at a healthy rate (its 1977 profits of $2.7 billion on sales of $18.1 billion were up more than 13% over the year before), the nation's other manufacturers of large computers — Control Data, Burroughs, NCR, Honeywell and Sperry Univac — are also booming. Mean while, the clamoring demand has created markets for smaller and younger companies that make minicomputers and peripheral equipment, such as data storage facilities and keyboard terminals, to be used with the big "main frames."

Now the arrival of the miracle chip has given a further boost to an already vital industry. Far from rendering the big computer obsolete, the miracle chip has opened the way for the design of custom-made supercomputers more powerful than any thing dreamed possible a few years ago. At the same time, the chips are radically lowering the cost of the minicomputers. These small computers, in turn, are being used for more and more of the routine functions that until recently had to be handled by main frames — at considerable cost to the user.

By spawning new computers in abundance, many industry experts believe, the chips will indirectly give rise to a whole new industry of "software"companies to develop and market the programs that computers need to perform their tasks. Explains Richard Melmon, director of marketing for Umtech Corp., a maker of home computers: "No one would buy a stereo hi-fi if he could not also buy records or tapes to play on it, and it's the same with computers. We soon will see the dawn of a whole new kind of publishing industry."

Benjamin Rosen, chief microelectronics analyst for New York's Morgan Stanley investment banking firm, sees the chips as the major technological development of our time. Says he: "It will have more impact on our society in the next 20 years than any other invention."

Though still in its infancy, the miracle chip has already given rise to one of the most astonishingly competitive and fastest growing industries the nation has ever seen.