The U.S. computer industry began with the marketing of the Univac, designed by J. Presper Eckert and John Mauchly in the early 1950s. The first computers were made one at a time and only as ordered, and the market for the huge, expensive machines was thought to be limited to government agencies and the largest corporations. However, astute marketing by Sperry-Univac, Burroughs, and particularly, International Business Machines (see ibm) convinced a growing number of companies that modern data processing facilities would be essential for managing their growing and increasingly complex business (see mainframe).
The mainframe market was controlled by a handful of vendors who typically provided the complete computer sys-tem (including peripherals such as printers) and a long-term service contract. (Eventually, third-party vendors began to make compatible peripherals.) Companies that could not afford their own computers began to contract with service bureaus for their data processing needs, such as payroll processing.
By the 1960s, transistorized circuitry was replacing the vacuum tube, and somewhat smaller machines became practicable (see minicomputer). While these computers were the size of a desk, not a desktop, models such as Digi-tal Equipment Corporation’s PDP series and competition from companies such as Data General provided computing power for engineers and scientists to use in factories and laboratories. During the 1970s, the dedicated word pro-cessing machine marketed by the Wang Corporation began the digital transformation of the office. By the end of that decade, the first general-purpose desktop microcomputers were marketed. The Apple II made a modest inroad into business, fueled by VisiCalc, the first spreadsheet program.
This new market attracted the attention of IBM, viewed by many microcomputer enthusiasts as a dinosaurlike relic of the mainframe age. Uncharacteristically, IBM manage-ment gave the developers of their personal computer (PC) project free rein, and the result was the IBM PC introduced in 1981. The machine had two major advantages. One was the IBM name itself, which was comforting to executives contemplating a bewildering new technology. The other was that IBM (again, uncharacteristically) had followed Apple’s lead in designing their PC with an “open architec-ture,” meaning that third-party manufacturers could mar-ket a variety of expansion cards to increase the machine’s capabilities. By 1990, about 10 million PCs worth about $80 billion were being sold annually (see ibm pc).
Although IBM tried to prevent other manufacturers from “cloning” the IBM chipset itself, it was unable to prevent companies such as Compaq from creating “IBM compatible” PCs that often surpassed the capabilities of the IBM mod-els. (IBM introduced its microchannel architecture in the late 1980s in an unsuccessful attempt to regain proprietary advantage.) By the 1990s the IBM-compatible PCs (some-times called “Wintel,” for the Microsoft Windows operat-ing system and Intel-compatible processor) had become an industry standard and a commodity manufactured and marketed by everything from the big name brands such as Dell and Gateway down to the corner computer store’s backroom operation.
The announcement of Apple’s Macintosh computer in 1984 made a vivid impression on the public (see Macin-tosh). With its fully graphical user interface, mouse, draw-ing program, and fonts, it seemed light-years ahead of the text-based IBM PCs. However, the Mac’s slow speed, rela-tively high price, and closed architecture limited its pen-etration into the business market. The Mac did attract an enthusiastic minority of consumer users and achieved a lasting niche presence in education and among graphics and video professionals. Gradually, as Microsoft’s graphical Windows operating system improved in the early 1990s, the Mac’s advantages over the IBM-compatible machines diminished.
During the 1990s, desktop computers came with a series of increasingly powerful series of Pentium proces-sors, matched by offerings from AMD and Cyrix. Multime-dia (including high-end graphics and sound capabilities) became a standard feature, particularly on consumer PCs. Increasingly, the business PC was being connected to a local area network, and both business and consumer PCs included modems or broadband access to online services and the Internet. The need to manage network files and ser-vices (such as Web servers) led to the development of server PCs featuring high-capacity mass storage. At the same time, high-end PCs also challenged the graphics workstations made by companies such as Sun. The traditional minicom-puter and high performance workstation category began to melt away. By 2002, an estimated 600 million personal computers were in use worldwide, with about half of them in homes.
The personal computer also grew smaller. The suitcase-sized “luggable” computers of the 1980s gave way to a range of laptop, notebook-sized, and palm-sized computers. Today wireless networking technology allows users of diminutive machines to access the full resources of the World Wide Web and local networks.
The idea of “appliance computing” has also been a recurrent theme among industry pundits. Proponents argue that there are still many people who feel intimidated by a standard computer interface but have become comfortable with other consumer electronic products such as televi-sions, CD players, or microwaves. If computer functions could be built into such devices, people might use them comfortably. For example, WebTV is a box that allows the user to surf the Web from the same armchair where he or she watches TV, using controls little more complicated than those found on a regular TV remote. Kitchen appliances might be transformed, with the microwave providing reci-pes and the refrigerator keeping an inventory and automati-cally ordering from the grocery store. However, as with the fully automated “wired home,” featured in Sunday news-paper supplements, the appliance computer has remained difficult to market to consumers (see smart buildings and homes).
The Software Industry
Hardware is useless without software. Since the operating system (OS) is the software that enables all other software to access the computer, the OS market is a key part of the computer industry. Through a historical accident, a young programmer-entrepreneur named Bill (William) Gates and his Microsoft Corporation received the contract to develop the operating system for the first IBM PC. Micro-soft bought and adapted an existing operating system to create MS-DOS (also called PC-DOS). Until the end of the 1980s, DOS was the dominant operating system for IBM-compatible PCs (see ms-dos). In the early 1990s, Microsoft introduced Windows 3.0, the first successful version of its graphical operating environment (see Microsoft Win-dows). The dominance of Windows became so complete that a federal antitrust case against Microsoft resulted in the company having to provide competitors greater access to the operating system.
The source of emerging challenges to Windows comes not from another desktop vendor but from the Internet, where Java offers the potential of delivering applications through the user’s Web browser, regardless of whether that user is running Windows, the Macintosh OS, or Linux, a variant of UNIX that has been embraced by many enthu-siasts. However, Java applications and Linux still represent only a tiny fraction of the market share held by Windows (see Java and Linux).
The 1990s saw considerable consolidation in the office software arena. Microsoft’s Office software suite over-whelmed once formidable competitors such as WordPerfect and Corel. Packages such as Microsoft Office create their own mini-industries where developers create templates and add-ins. However, the widespread use of high-speed Inter-net access (see broadband) has made it practicable to offer many office software functions online, providing workers with convenient access from any location. The most signifi-cant offering here has been Google Apps, which includes calendar and communications features as well as Google Docs & Spreadsheets. In turn, Microsoft has been prompted to offer added-value online features to Microsoft Office.
Outside the office there is considerably more competi-tion in the software industry. Today’s consumers can choose from a wide variety of software that fills utility or other niche needs, including shareware (“try before you buy”) offerings. In educational software and games some once-major innova-tors have been bought out or consolidated, but there is no one dominant company. Thousands of specialized software packages serve scientific, manufacturing, and business needs. While the general public is unaware of such pro-grams, they make up much of the strength of the software industry.
Other Products and Services
By the 2000s there were many new niches in the computer industry landscape. Powerful dedicated game machines such as the Microsoft Xbox 360 and the Sony PlayStation 3 make for a vigorous software industry that potentially goes beyond games (see game consoles). Portable media players such as Apple’s iPod are ubiquitous (see music and video players, digital). The personal digital assistant (see pda) and the cell phone have largely merged and morphed (see smartphone), capable of running a variety of soft-ware including e-mail, Web browsing, games, and music. Meanwhile, digital cameras have virtually replaced film for all but the most high-end and specialized applications (see photography, digital). The convergence and proliferation of all of these devices is continuing at a rapid pace, and competition is fierce.
The services sector of the computer industry lacks the visibility of new hardware products, but provides most of the industry’s employment and much of its economic impact. In addition to the hundreds of thousands of pro-grammers who provide business-related, consumer, and specialized software, there are the legions of help desk employees, computer and network technicians, creators of software development tools, writers of technical books and training products, industry investment analysts, reporters, and many others whose livelihood depends on the com-puter industry.
International Computing
The computing industry came of age mainly in the United States. By the 1960s IBM had extended its dominant posi-tion to Britain and Europe despite the efforts of indigenous companies and government initiatives. Japan was consider-ably more successful in developing a competitive electron-ics and computer industry under the long-term guidance of MITI (Ministry of International Trade and Industry). The Japanese became dominant in industrial robotics and strong in consumer electronics, including game machines (Sony), digital cameras (Sony and Fujitsu), and laptop computers (Toshiba). They have been less successful in desktop com-puters, Internet-related technology, and commercial soft-ware. China has become an increasingly important player in the components and peripherals industry. The growing importance of Asia in the international computer industry is also underscored by the large number of programmers, engineers, and support personnel being trained in India (see globalism and the computer industry).
Major Internet industry players such as Google and Yahoo! as well as hardware giant Dell have become heavily involved in the Chinese market, which boasted about 100 million users in 2006, second only to the United States.
A number of initiatives are helping spread computing even in the limited economies of many countries in Africa, Asia, and Latin America (see developing nations and computing). While illicit copying has hindered the mar-keting of commercial software in many countries, the alter-native model of open-source software and very inexpensive laptops (the One Laptop Per Child initiative) may offer a viable path to the true globalization of computing.
Emerging Trends
As the 2000 decade has progressed, a number of trends continue to reshape the computer industry. These include:
• The recovery from the “bust” years of 2001–3 was fol-lowed by more modest but significant growth, with rapid growth in particular sectors such as mobile devices, Web applications (see Web 2.0), and security.
• Desktop PC sales were strong through 2005 (about 200 million that year) but now appear to be stagnat-ing (in the United States at least) in favor of laptops, smaller portable computers, and smart phones.
• Although a new generation of multicore proces-sors and the resource-hungry Microsoft Windows Vista operating system may eventually speed up the replacement of older PCs, businesses have been tend-ing to keep slightly obsolescent machines and operat-ing systems longer.
• Free or lower-cost alternative software and operating systems (see open source and Linux) are attracting considerable publicity, but it is unclear how much penetration they will achieve in the mainstream home and small-business computing sectors.
• Besides cost consciousness and other priorities (such as networking and security), the trend toward Web-based applications may be shifting sales away from hardware and traditional operating systems and soft-ware suites. (See application service provider.)
• Outsourcing of many IT functions is continuing, including network administration, managed backup and storage, and even security. Meanwhile, there has been concern about lack of sufficient U.S. graduates in computer science and engineering.
While the computer hardware, software, and service industries are likely to continue growing vigorously, the boundaries between sectors and applications are blurring, making it harder to consider the industry as a whole as opposed to specific sectors and applications (see e-commerce).
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