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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



0.4   Three Revolutions in Computer Technologies and Corporate Usage 1968-1988

In the middle ofmid 1960s, corporate America began using computers in earnest. Executives, though intrigued by the cost savings and productivity gains promised by the manufacturers of computers, had often shied from the risks of implementation until International Business Machines (IBM) introduced its System/360 computer in 1965. Although not fully living up to its billings until roughly 1968, the System/360 changed corporate computing forever and marked the beginnings of the first revolution in computers: the Mainframe. The Mainframe revolution represents an example of corporate capitalism, not entrepreneurial capitalism. In 1969, the Mainframe market consisted of eight large firms: IBM and the Seven Dwarfs (General Electric, RCA, Burroughs, Control Data, Honeywell, National Cash Register, and Sperry Rand's Univac division.) Two more computer revolutions – to be driven by entrepreneurial capitalism - await in the future: the Minicomputer and Personal Computer.

The Mainframe wave of computer usage suited the highly centralized corporations of the day. One big computer, the Host computer, sat in a raised-floor, air-conditioned, often high-security, room with terminals and printers and other peripherals directly wired to the Host computer in essentially a star configuration. The Host was the boss and every other device was a slave. This centralized architecture was perpetuated by the dominant firm in computers, IBM, and gave a great deal of power to their corporate clients, the Data Processing (DP) or Management Information System (MIS) departments.

At first all the slave devices were local, but following the success of the IBM System/360, corporations wanted to locate terminals and printers at remote locations. To do so required sending the bits over the analog circuits of the telephone system. That drove the need for modems, the products that converted the bits to sounds and then back to bits. Modems and multiplexers - products that enable more than one computer device to share a telephone circuit - are the products of the first wave of computer communications: Data Communications. Modems and multiplexers were highly co-evolving technologies, yet only a handful of firms mastered both.

In the late 1970s, the Minicomputer wave of computer usage blossomed. The minicomputer was originally introduced in 1965 when Digital Computer Corporation, a company financed by one of the earliest Boston venture capital firms, announced its PDP-8. Then in 1968, entrepreneurial capitalism took seed in the field of minicomputers and by 1972 ninety-two competitors had announced products. Corporations began employing minicomputers for two primary reasons: they were significantly less expensive than another mainframe, and application software became available commercially, making it possible to solve problems outside the corporate DP departments without having to wait the long, uncertain times for software to be created or changed on the Host computer(s). Soon personnel needed to access multiple computers. That meant having multiple terminals. But desktops were not large enough to accommodate multiple terminals, to say nothing of the hassle of using multiple terminals, or the extra wiring needing to be pulled through ceilings and walls. Products connecting one terminal to multiple computers were needed. This need drove the coming-into-being of the second wave of computer communications: Networking. Networking was engulfed quickly in competitive chaos with over two hundred firms offering competitive products. Our focus will be on products developed by the existing Data Communications firms - the data PBXs - and the products introduced by a flood of start-ups - local area networks (LANs).

The Personal Computer wave, the third wave of computer usage, surged through Networking like a tsunami. (The Personal Computer was really a powerful manifestation of the microcomputer revolution.) When networking first emerged, the need was to interconnect “dumb” computer terminals to multiple computers. The communication speeds were slow and the amount of data sent back and forth was modest. Personal computers would change those dynamics for they could transfer data at significantly higher interconnection speeds and the application software drove the needs for vast amounts of data. When IBM quickly developed and introduced its personal computer in August 1981, corporations went on a buying spree and within two years, more than twice as many personal computers were being bought as terminals. By 1988, it had become clear that the personal computer was giving rise to a new model of corporate computing, client server computing, with the mainframes and minicomputers functioning as data servers, in some sense as slaves, for the desktop personal computers. How the Networking firms focused on terminal interconnection adapted, or not, to the needs of personal computers will be another focus of this history.

The third wave of computer communications, Internetworking, emerged out of the conditions of networking. Corporations soon discovered they had proliferating numbers of networks: isolated islands of computers. Interconnecting their network islands into larger enterprise-wide networks became the next focus. Fortuitously, these corporations were in the midst of building their own voice communication networks, appropriating the switching and circuits they historically had acquired from the telephone companies. Adding data to these wide area networks (WANs) was relatively easy because the technology was digital. But controlling WANs using circuit switching was still not optimal and again the advantages of packet switching prevailed as more advanced networking routers were introduced to interconnect LANs over WANs. The emergence of Internetworking reflected the growing use of computers, and even more directly, the growing number of networks.


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