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IBM "Bets the Farm" with the System/360 Series

IBM 360 Advertisement 1964 - LINK

 I think there is a world market for maybe five computers.
- IBM Chairman Thomas Watson, Sr., 1943

Starting in the early 1950s, although IBM had an enormous punched card and tabulating machine business, it had only about twenty five percent of the existing computer business.  Remington Rand Corporation had a sizable portion of the remaining seventy five percent.  Remington Rand had so much of the computer market that most people in those days called computers "Univacs" which was Remington Rand’s name for their computers.

One reason why IBM was slow getting into the computer business was that Tom Watson, Sr. was unsure the computer business would ever grow beyond just a few government, military, scientific, and large corporate users.

But when his son Thomas J. Watson, Jr. Became CEO in 1956 all that changed.

Tom Jr. Became convinced there was a lucrative and expanding market for computers.  But up until then IBM had manufactured a hodgepodge of incompatible models with virtually no upward compatibility.  To compete effectively, Tom Watson, Jr. correctly surmised that what was needed was a family of truly upward compatible computers even if it meant overnight obsoleting the existing line of IBM computers.

So the unveiling of a family of compatible mainframes, also known as System/360, on April 7, 1964, was a major breakthrough in computer technology that forever changed the industry.  The 360 announcement was touted as the most important product announcement in company history at press conferences held in sixty three US cities and fourteen foreign countries. Thousands of computer users and prospects located worldwide showed up for briefings. 

But despite all the fanfare, the System/360 was a tremendous gamble by IBM costing about $5 billion which is more that $30 billion in today's dollars and at the time only second in size to the huge NASA project.

The System/360 announcement heralded the arrival of a revolutionary line of computers for use in business science, and government.  IBM Chairman Thomas Watson Jr. said at the introductory press conference "the term "mainframe had been used by other technology companies to describe big computers, but the introduction of the System/360 has essentially redefined the mainframe as a computer that performs multiple tasks at the same time on a single machine." Before then, a user would have to schedule time on the company computer to do a single specific task, whether to process inventory, payroll, or make financial calculations.

To manufacture and create the software for the new product line, IBM hired 60,000 new employees.  The company expanded it's plant in San Jose where IBM made disk drives and storage controllers for mainframes.  But the gigantic project got off to a shaky start.  One big problem was that far too many programmers were involved which bogged down software production and caused nightmarish red tape problems.

But these bottlenecks were gradually resolved and IBM’s computer market nearly tripled from twenty five percent share to well over seventy five percent to put IBM on the map as one of America’s largest and most successful corporations.

The System/360 reinvented the computer industry and it was Thomas J. Watson’s greatest triumph.  And to his immense relief, System/360 mainframes rapidly became Big Blue's hottest product, as the company's revenue jumped from $3.2 billion the year it was introduced to $7.5 billion in 1970.

Thomas J. Watson, Jr. Curtesy of Time Magazine May 28, 1955

General Electric and several other manufacturers produced mainframe computers from the late 1950s through the 1970s. In those "glory days" they were called "IBM and the Seven Dwarfs": Burroughs, Control Data Corporation, General Electric, Honeywell, NCR, RCA, and UNIVAC. IBM's strength grew out of their previous domination of the unit record and punched card equipment business and their later development of the IBM System/360 mainframes. Notable manufacturers outside the USA were Siemens and Telefunken in Germany and ICL in Britain.

By about 1968 IBM had captured more than 70 percent of the computer business. IBM's rapid growth in the mid-1960s led to inquiries as to IBM antitrust violations by the U.S. Department of Justice, which filed a complaint for the case U.S. v. IBM in the United States District Court for the Southern District of New York, on January 17, 1969. The suit alleged that IBM violated the Section 2 of the Sherman Antitrust Act by monopolizing or attempting to monopolize the general purpose electronic digital computer system market, specifically computers designed primarily for business. Litigation continued until 1983, and had a significant impact on the company's practices.

A few years later the advent of desktop computing and other factors led to a significant decline in IBM's earnings. However, in spite of competition from desktop and "mini" computers, a mainframe market rebound emerged in the late 1990s as corporations found new uses for their mainframes. They offered web server performance similar to that of hundreds of smaller machines, but with much lower power and administration costs. The growth of e-business has also dramatically increased the number of backend transactions processed by tried-and-true mainframe software as well as the size and throughput of databases.

As of late 2004, IBM's mainframe revenues increased and presently the company continues to dominate the mainframe computer business.

International Business Machines Corporation (IBM, or colloquially, Big Blue) - LINK

Click Here to learn about Unit Record Equipment and Punched Cards - LINK