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Entrepreneurial Capitalism and Innovation:
A History of Computer Communications 1968-1988
By James Pelkey

Entrepreneurial Capitalism & Innovation:
History of Computer Communications
1968 -1988
By James Pelkey

This history is organized by three co-evolving market sectors and also standards making.
An overview of the schema is presented in the Introduction.

Ch. 1: Emergence
Ch. 3: Competition
Ch. 5: Market Order
Ch. 11: Adaptation

Ch. 2: Vision
Ch. 4: Arpanet
Ch. 6: Diffusion
Ch. 7: Emergence
Ch 8: Completion
Ch. 10: Market Order

Ch. 9: Creation

Ch. 12: Emergence



Chapter 10
Networking: LANs 1983 – 1986
LANs Over Data PBX

10.32     In Perspective

Entering 1983, Networking firms had just slugged their way through a disappointing year, when collective sales totaled only $229 million, and stared into a year of unmitigated competition and customer confusion. Only the most optimistic of forecasters, or, as it would turn out, the prescient, believed Networking sales would reach $1 billion in 1986. Or that the crowded field of over 200 firms would collapse to an oligopoly of 11 LAN firms controlling 68% of the market by 1985 and, in 1986, the data PBX market would collapse.

Driving these changes was the phenomenal growth in the number of computer networks. By the end of 1986, there were an estimated 100,000 computer networks. Most of these nascent networks were cobbled together from department or computer-computer centered networks, not some grand organizational design. When the value of having users on these different networks share information or communicate with each other became important for businesses, they discovered that it was not as easy as they might have believed. So as long as their fledgling networks were from the same vendor, and the vendor supported both personal computer and terminal server networks, they had a chance. Yet that was not enough. Corporate buyers had no desire to once again live under the tyranny of a vendor as they had with IBM. The interconnecting of these islands of networks into enterprise networks is the story of the next two chapters.

Yet even as the growth in the creation of computer networks drove sales upward at 80% per annum, one sector flagged in comparison. MAP, or factory automation, sales totaled a disheartening $30 million in 1986, a far cry from the billion-dollar market assumed in 1982-1983. Those firms that had made big bets on MAP, such as Ungermann-Bass and Concord Data Systems, suffered the effects. On the other hand, 3Com that had focused on the robust personal computer market prospered, even including a strategic diversion. Not that betting on personal computers was a certain recipe for success, witness Sytek. The firms dominating Data Communications, Codex and Micom, struggled to understand the importance of LANs and the impact of the personal computer, and had to either OEM product from a LAN vendor or acquire such a firm. Other firms, such as Interlan, and soon to be many more, discovered that too little, too late, did not make for success and willingly sold themselves to larger, more endowed firms.

The phenomenon of the growth in computer networks was not the only compelling dynamic in corporate communications during 1983-1986. Corporations were also beginning to privatize their data and voice networks. After the break-up of AT&T on January 1, 1984, AT&T and the RBOCs began pricing digital T-1 circuits to corporations so attractively management began building their own “telephone” networks. The existing Data Communication firms, and a new breed of start-ups, jumped on the opportunity to sell T-1 multiplexers. The story of the rise of corporate networks is the following chapter.