How it started for private Companies or Bridging the gap

The MIT Press Series in the History of Computing, back in 1986 started with fourbooks:

  1. Memories That Shaped an Industry
  2. Memoirs of a Compter Pioneer
  3. IBM’s Early Computers
  4. The Computer Comes of Age

Perhaps with the first three, because the fourth appeared before as a translation separately.

I haven’t so far had or read the first one, which as it can be seen in the title, although it is a pun, is concerned with ferrite memories.  It seems to me that it is a detailed account of what is already at those listed here and perhaps it is redundant. If price is no objection, what it is not my case, it should be bought. Perhaps a word of caution about these books. Maybe there is an excessive emphasis on the technological side what makes it incomprehensible if not boring for the average reader. But contains information that if properly filtered, as I think I am doing here, it is not only accurate, but brings up a correct perspective on the subject, specially on what it may contain of truth.

Although, as it says at the opening of the foreword of the IBM’s Early Computers a technology centered account and not a business history, it provides excellent light on how business sort of commanded the technological aspects of those early computers and eventually took over the design, i.e., the first mass produced computer, the 1401, was basically designed with customer needs in mind.

There is a tendency to imagine IBM a giant, if not bigger, such as General Motors, Ford, GE and the like. Including that for a number of years, perhaps a whole generation, IBM was the most valuable brand in the world and today (2018) it still ranks around 80 billion dollars in the first five.

Before discussing the image of IBM and how it got to be, what I will do at the end of his post and in the next,  let’s discuss its growth and how it got first big and then got the image. By the way it is not and it never was what it seems to be… How come and what do I mean?

In  1925 it had a mere 3698 employees and a gross income of 13 million dollars worldwide.

Let’s take an example of the Big Ones. Ford had only in the USA 14000 thousand employees and a gross income in the 100 million dollars range. When facing financial trouble in the 20’s, it managed to amass almost 30 million cash demanding his distributors to pay cash on delivery of its automobiles. After that, it is what it is well known up to WW II.

On the other and, by 1935, right on the eye of the Depression, IBM had 8654 employees and a gross income of 21 million and it was and would remain for some 50 years one of the very best places to work with

I should quote from History of IBM on Wikiwand

1930–1938: The Great Depression

Year Gross income (in $m) Employees
1930 19 6,346
1935 21 8,654

The Great Depression of the 1930s presented an unprecedented economic challenge, and Watson met the challenge head on, continuing to invest in people, manufacturing, and technological innovation despite the difficult economic times. Rather than reduce staff, he hired additional employees in support of President Franklin Roosevelt’s National Recovery Administration plan – not just salesmen, which he joked that he had a lifelong weakness for, but engineers too. Watson not only kept his workforce employed, he increased their benefits. IBM was among the first corporations to provide group life insurance (1934), survivor benefits (1935) and paid vacations (1936). He upped his ante on his workforce by opening the IBM Schoolhouse in Endicott to provide education and training for IBM employees. And he greatly increased IBM’s research capabilities by building a modern research laboratory on the Endicott manufacturing site.

With all this internal investment, Watson was, in essence, gambling on the future. It was IBM’s first ‘Bet the Company’ gamble, but the risk paid off handsomely. Watson’s factories, running full tilt for six years with no market to sell to, created a huge inventory of unused tabulating equipment, straining IBM’s resources. To reduce the cash drain, the struggling Dayton Scale Division (the food services equipment business) was sold in 1933 to Hobart Manufacturing for stock.[55][56] When the Social Security Act of 1935 – labeled as “the biggest accounting operation of all time”[57] – came up for bid, IBM was the only bidder that could quickly provide the necessary equipment. Watson’s gamble brought the company a landmark government contract to maintain employment records for 26 million people. IBM’s successful performance on the contract soon led to other government orders, and by the end of the decade IBM had not only safely negotiated the Depression, but risen to the forefront of the industry. Watson’s Depression-era decision to invest heavily in technical development and sales capabilities, education to expand the breadth of those capabilities, and his commitment to the data processing product line laid the foundation for 50 years of IBM growth and successes.

Back to IBM’s Early Computers

One very important aspect not quite well understood: A huge amount of IBM’s money came for some 50 years from the punched card itself and machines projected, developed and built around its logic. Since a punched card is basically a memory unit, anything related to memory means of storing information was always screened with that in mind… Despite of that, these machines could, if properly wired, do scientific computation. It is worth mentioning that the paper tape width which feed the MARK I was 3.25 inches exactly that of the punched card.

Watson would continue to gamble on the future, footing the bill of Mark I and keeping a full fledged laboratory at Endicott for research and development. But the experience left four sets of problems that would be in the back of Watson Sr.’s mind:

  1. As a novel machine, the first problem was to find a suitable characterization. News paper called it “Super brain”, “algebra machine” and Harvard University issued a press release using: “Algebraic super brain”
  2. Aiken submitted a press release only to the US Navy, which by arrangement had the sole use of the calculator and it read: “In charge of the calculator is the inventor Commander Howard H.Aiken, USNR, who worked out the theory which made the machine possible.’ This twice outraged Watson, first for the slight he suffered and second for the implied insult  to his men in the singular use of the term inventor. This cooled any further collaboration between IBM and Harvard.
  3. A third quandary concerned on how to portray of the ASCC Mark I power when compared to other systems. Comparisons tend to oversimplification and practicality and can only provide rough indication of relative system speeds. The basic reference was a manual operator clerk equipped with a desk calculator of the day which might take close to a minute to enter a multiplier, with perhaps 15 seconds for the product and copy the result. This was ten times more than what an IBM Type 601 took to multiply and punch a card. The ASCC Mark I would do it 100 times faster than the manual calculator and would do it for long periods of time without fatigue. If used on a 24 hour a day schedule, it could produce in a day what a manual calculator would produce in 6 months..
  4. The name. Convenience and the English language calls for short name or pronounceable acronym. The Mark I, followed by II, III and IV was Aiken’s idea and Harvard’s ASCC came to be known as Mark I.


These factors were behind the idea of Watson Sr. to surpass the ASCC Mark I, because the events challenged him. He gave order to McPherson, his engineering director, to create a calculating instrument faster than the ASCC. Vacuum tubes or Radio tubes were the option as a result of wartime developments.

IBM Engineering was heavily bent toward mechanical design. It would take a while and hundreds of novel circuits which granted patents and made IBM perhaps the most prolific patent aplications company in history. After successful creation of electronic flip flops, counters and finally an Electronic Multiplier, IBM was set to create such a machine as Watson Sr. had in mind and it was to be the SSEC, the Super Calculator.

It is very interesting that the fact that a machine could perform calculation by means of electronics was a novelty for IBM and impressed very much “Tom” Watson Jr, eldest son of Thomas Watson Sr. His interest and support provided impetus for the production of the first 50 machines,  designated IBM 603 Electronic Multiplier, demonstrated at the National Business Shoe in N Y City late September 1946. It was the first electronic calculator ever placed in production. It was followed by the IBM 604 Elecronic Calculator.

The Genesis of the SSEC is rather long to be discussed here, but summing it up, with the end of the war with Japan in August 1945, IBM’s engineering organization was abain free to runt its energies to peace time projects.

At the summer of 1945, Robert R.”Rex” Seeber, a Harvard graduate of 1932, long interested in computation, joined IBM. He had spent as a civilian in the Navy Department a year and a half in operations research and worked under Aiken, which rejected his suggestions about how a computer should be designed, which included the storing instructions and operating on them as data, as it is well known  is the idea of von Neumann and would take over the computer industry. He disparaged with Aiken, which was stubbornly  impervious to such idea and eventually entered IBM still determined to test his ideas. His disagreement with Aiken found him sympathetic toward IBM. This set his leaving Harvard and going to IBM.

About two months Seeber joined IBM, there was a meeting held in Poughkeepsie about the Super calculator, or how it was then referred, the “Sequence Calculator”, and Seeber described from his experiences with the Mark I, its shortcomings:

  • Lack of compatible instruction and data formats (and hence inability to operate on its own instructions);
  • Inflexibility of subroutine control;
  • Inability to record in large-scale (paper-tape) storage;
  • Inadequate speed of table look-up

A lot of effort took place and many extremely competent and creative people helped to create a working model of the SSEC which was then transferred from Endicott to 590 Madison Avenue headquarters of IBM in New York, with the engineering moving in together with it.

Oracle on 57th street


Then came the IBM 604

The IBM 602 was IBM’s first machine that did division. (The IBM 601, introduced in 1931, only multiplied.) Like other IBM calculators, it was programmed using a control panel. Input data was read from a punched card, the results could be punched in the same card or a trailing card.

IBM 603 First Commercial Electronic Calculator

IBM 604 Electronic Calculating Punch


The bridge between the  SSEC and those machines was to be brought about under the Magnetic Storage Calculator project, in Endicott, because there was a growing influence in the company’s affairs creating a need for marketing and product support of scientific computing. It should be a reduced capacity SSEC and it was to be offered by the sales force to people interested in doing technical calculations on IBM machines.

At the Endicott Scientific Computation Forum in the summer of 1948, Beech Aircraft Corporation presented a paper describing three dimensional flutter analysis of aircraft structures and other engineering applications done with a 601 and a  405. IBM people never heard of that and they set at the spring of 1949 a “Scientific Sales Program” hiring four men to do it. Among then was Walter H. Johnson, who would establish IBM’s Technical Computing Bureau in New York City, which would perform contract service for performing scientific and engineering computations. The centerpiece was the IBM 604. To that it was added new post with promotion of technical computation as a principal responsibility. Cuthbert C. Hurd, who had presented a paper at the 1948 Forum, was assigned to this new job. Hurd was a mathematics professor for 10 years, having had extensive experience with IBM machines, specially for statistics. He used his experience to install similar services for the US Coast Guard Academy. He also set up a technical computing service at the Oak Ridge National Laboratory, concerned with production of Uranium when he had a chance to perform the computation needed for the famous John von Neumann diffusion process. These jobs tended to be long slow computations and Hurd perceived that computing machinery was about to become a significant element in society. With that in mind he asked for a job to Mr. Watson, Sr, who accepted him and he started to work at IBM on March 1rst 1949.

Hurd was pleased to find that Frank Hamilton in Endicott had been working for a year on the Intermediate Sequence Calculator for technical applications. But Watson, Jr.’s, redefinition of the machine in May 1949 as an improved 604 for business applications was a pointed reminder that the bulk of IBM’s business derived from applications outside the scientific field. When the CPC was announced, therefore, Hurd decided to make it the focus of his activities. He began a description of the CPC for the 1949 Scientific Computation Seminar, which he had been asked to organize, and supervised the writing of the CPC instruction manual. 36 In this period Hurd established a one-week session in Endicott during which customer personnel could program and run problems on the CPC prior to delivery of their own machine.”
The 1949 Scientific Computation Seminar attracted so much advance interest that two sessions were scheduled, one of three days in November and a second of five days in December. Watson, Jr., by now executive vice-president, was pleased by CPC orders, which reached over two dozen by year end, and by the customer list, which was a who’s who of the airframe industry and of important government agencies and laboratories. Soon after the November meeting, Watson Sr., made Hurd the director of a new department, Applied Science, with responsibility for the Technical Computing Bureau and instructions to hire and train as many “Applied Science Representatives” as were needed to demonstrate and promote the technical computing capabilities ofIBM machines. Thus the Scientific Sales Program was reborn, this time with support from the top.” Hurd recruited actively on college campuses in 1950, participated in making the CPC modifications demanded by some users, and sought ways to extend the benefits of information exchange – so apparent at the 1948 and 1949 Scientific Computation forums he had attended – to more users. He acted on a suggestion of Dunwell, who after visiting ten prospective CPC customers in the spring of 1949,40 had proposed a “national department in a position to visit this type of customer regularly and to prepare special bulletins” from which customers could learn of “methods developed by others with similar problems. In June 1950, the first issue of the IBM Applied Science Department Technical Newsletter appeared. An informal publication, it contained four papers describing useful IBM 604 general-purpose, control-panel wiring arrangements. In effect, these were 604 “programs” for calculating frequently used sets of mathematical functions, which, in the form of wired control panels, could be used for the solution of a variety of specific problems on the 604 an the CPC. One of the papers was by an IBMer, the other three by CPC customers.

The stage was set to the conversion of IBM from a mechanical relay oriented kind of machinery to a electronic tube oriented kind of machinery.

There was a lot of quarrel and discussions on how to combine properly the vital elements which make a successful product come to existence:

  1. A consistent set o figures on manufacturing costs
  2. Projected rentals
  3. market forecasts spelling profit
  4. A genuine interest of a corporate or marketing executive of the company

By late 1952 IBM 604 and IBM CPC  were on the verge of obsolescence having no chance to compete with the small stored program computers which were being offered by competitors as replacement to IBM CPC. (Consolidated Engineering Corporation 30-201, Computer Research Corporation 102-A  and Underwood Corporation Elecon 100). The 604 was being threatened by Remington Rand 409.

There was no agreement inside IBM Engineerign on what to do.

Thomas Watson, Jr, took over and decided on the Magnetic Drum Calculator project, which would become the IBM 650 Magnetic Drum Calculator which would become IBM 650 RAMAC and there is a contention wheter if it was the first mass produced computer or the 1401. Besides being solid state, in cheer numbers, the 1401 is the Ford Model T of the computer industry.

On paralel, IBM was developing a Tape Processing Machines program.

Quoting again from History of IBM on Wikiwand

1946–1959: Postwar recovery, rise of business computing, space exploration, the Cold War

Year Gross income (in $m) Employees
1950 266 30,261
1955 696 56,297
1960 1,810 104,241

IBM had expanded so much by the end of the War that the company faced a potentially difficult situation – what would happen if military spending dropped sharply? One way IBM addressed that concern was to accelerate its international growth in the years after the war, culminating with the formation of the World Trade Corporation in 1949 to manage and grow its foreign operations. Under the leadership of Watson’s youngest son, Arthur K. ‘Dick’ Watson, the WTC would eventually produce half of IBM’s bottom line by the 1970s.

A new IBM emerged in the 1950s. With the death of Founding Father Thomas J. Watson, Sr. on June 19, 1956 at age 82, IBM experienced its first leadership change in more than four decades. The mantle of chief executive fell to his eldest son, Thomas J. Watson, Jr., IBM’s president since 1952.

The new chief executive faced a daunting task. The company was in the midst of a period of rapid technological change, with nascent computer technologies – electronic computers, magnetic tape storage, disk drives, programming – creating new competitors and market uncertainties. Internally, the company was growing by leaps and bounds, creating organizational pressures and significant management challenges. Lacking the force of personality that Watson Sr. had long used to bind IBM together, Watson Jr. and his senior executives privately wondered if the new generation of leadership was up to challenge of managing a company through this tumultuous period.[96] “We are,” wrote one longtime IBM executive in 1956, “in grave danger of losing our “eternal” values that are as valid in electronic days as in mechanical counter days.”

Watson Jr. responded by drastically restructuring the organization mere months after his father died, creating a modern management structure that enabled him to more effectively oversee the fast moving company.[97] He codified well known but unwritten IBM practices and philosophy into formal corporate policies and programs – such as IBM’s Three Basic Beliefs, and Open Door and Speak Up! Perhaps the most significant of which was his shepherding of the company’s first equal opportunity policy letter into existence in 1953, one year before the U.S. Supreme Court decision in Brown vs. Board of Education and 11 years before the Civil Rights Act of 1964.[98] He continued to expand the company’s physical capabilities – in 1952 IBM San Jose launched a storage development laboratory which pioneered disk drives. Major facilities would later follow in Rochester, Minnesota; Greencastle, Indiana; Kingston, New York; and Lexington, Kentucky. Concerned that IBM was too slow in adapting transistor technology Watson requested a corporate policy regarding their use, resulting in this unambiguous 1957 product development policy statement: “It shall be the policy of IBM to use solid-state circuitry in all machine developments. Furthermore, no new commercial machines or devices shall be announced which make primary use of tube circuitry.”[99]

Watson Jr. also continued to partner with the United States government to drive computational innovation. The emergence of the Cold War accelerated the government’s growing awareness of the significance of digital computing, and drove major Department of Defense supported computer development projects in the 1950s. Of these, none was more important than the SAGE interceptor early detection air defense system.

IBM 7090 installation

In 1952, IBM began working with MIT’s Lincoln Laboratories to finalize the design of an air defense computer. The merger of academic and business engineering cultures proved troublesome, but the two organizations finally hammered out a design by the summer of 1953, and IBM was awarded the contract to build two prototypes in September.[100] In 1954, IBM was named as the primary computer hardware contractor for developing SAGE for the United States Air Force. Working on this massive computing and communications system, IBM gained access to pioneering research being done at Massachusetts Institute of Technology on the first real-time, digital computer. This included working on many other computer technology advancements such as magnetic core memory, a large real-time operating system, an integrated video displaylight guns, the first effective algebraic computer language, analog-to-digital and digital-to-analog conversion techniques, digital data transmission over telephone linesduplexingmultiprocessing, and geographically distributed networks). IBM built fifty-six SAGE computers at the price of US$30 million each, and at the peak of the project devoted more than 7,000 employees (20% of its then workforce) to the project. SAGE had the largest computer footprint ever, and continued in service until 1984.[101]

More valuable to IBM in the long run than the profits from governmental projects, however, was the access to cutting-edge research into digital computers being done under military auspices. IBM neglected, however, to gain an even more dominant role in the nascent industry by allowing the RAND Corporation to take over the job of programming the new computers, because, according to one project participant, Robert P. Crago, “we couldn’t imagine where we could absorb two thousand programmers at IBM when this job would be over some day, which shows how well we were understanding the future at that time.”[102] IBM would use its experience designing massive, integrated real-time networks with SAGE to design its SABRE airline reservation system, which met with much success.

These government partnerships, combined with pioneering computer technology research and a series of commercially successful products (IBM’s 700 series of computer systems, the IBM 650, the IBM 305 RAMAC (with disk drive memory), and the IBM 1401) enabled IBM to emerge from the 1950s as the world’s leading technology firm. Watson Jr. had answered his self-doubt. In the five years since the passing of Watson Sr., IBM was two and a half times bigger, its stock had quintupled, and of the 6000 computers in operation in the United States, more than 4000 were IBM machines.[103]

1960–1968: The System/360 era

Year Gross income (in $m) Employees
1955 696 56,297
1960 1,810 104,241
1965 3,750 172,445
1970 7,500 269,291

On April 7, 1964, IBM introduced the revolutionary System/360, the first large “family” of computers to use interchangeable software and peripheral equipment, a departure from IBM’s existing product line of incompatible machines, each of which was designed to solve specific customer requirements.[127] The idea of a general-purpose machine was considered a gamble at the time.[128]

Within two years, the System/360 became the dominant mainframe computer in the marketplace and its architecture became a de facto industry standard. During this time, IBM transformed from a medium-sized maker of tabulating equipment and typewriters into the world’s largest computer company.[129]

The company began four decades of Olympic sponsorship with the 1960 Winter Games in Squaw Valley, California. It became a recognized leader in corporate social responsibility, joining federal equal opportunity programs in 1962, opening an inner city manufacturing plant in 1968, and creating a minority supplier program. It led efforts to improve data security and protect privacy. It set environmental air/water emissions standards that exceeded those dictated by law, and brought all its facilities into compliance with those standards. It opened one of the world’s most advanced research centers in Yorktown, New York. Its international operations grew rapidly, producing more than half of IBM’s revenues by the early 1970s and through technology transfer shaping the way governments and businesses operated around the world. Its personnel and technology played an integral role in the space program and landing the first men on the moon in 1969. In that same year it changed the way it marketed its technology to customers, unbundling hardware from software and services, effectively launching today’s multibillion-dollar software and services industry. See unbundling of software and services, below. It was massively profitable, with a nearly fivefold increase in revenues and earnings during the 1960s.

This is about the size and the Gross Income which IBM would stabilize and still remains (2018). This all happened under  Thomas J. Watson, Jr., who was effectively who turned IBM in to what it became. He was also responsible for the image the company has, what is rarely discussed and I take the opportunity to do it at:


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