Martin Banks, Personal Computer World 07/81 - checked

July 1981

I was sitting in the kitchen earlier today (I am writing this quite late at night as it happens - which it usually does). From where I was sitting I could see a wondrous panorama of that jewel of English architecture, Luton. Watching a beautiful sunset of blues and reds that followed on a day when it had rained, blown a gale and done most of those things that are generally unconducive to thinking wonderful thoughts, it occurred to me that there was some form of symbolic parallel between the weather and the UK microsystems industry. Then I thought that perhaps I was taking the idea a little too far - you know what I mean, the industry being damp, full of wind and quietly fizzling out in a well stage-managed and terribly dignified demise.

I decided in the end that I was right but not completely so, some of the original symbolism hung together somewhere and so I thought about it some more. And then. . . and then. It came back to me. Over recent weeks several events have occurred in and around the industry that have changed the longer-term perspectives on the micro scene and changed them not just in good old Blighty but throughout the world.

The things? One is the Japanese presence, another is the position of the existing major computer manufacturers; another is the existence or not of a new consumer market and products to fill it. Each and any of these would have a significant impact on the shape and feel of the micro world. Put them together however, and the changes are likely to be fundamental, long term, and very painful for some people and companies.

But for whom, I hear you ask will they be painful? Well, I'll tell you. The people and companies that are likely to suffer most are the very companies that began the whole business in the first place - the Commodores, Apples Tandys, Cromemcos, etc etc, which manufacture the hardware that the dealers and retailers sell in this country. They are the ones in danger of suffering the glowing sunset of dignified demise. And there is evidence to suggest that part of the reason will be the fact that elements of the distribution chain essential to their success - the dealers and retailers - appear to think they are full of the symbolic water and wind.

Let's start by looking at the Japanese and the effect they are likely to have. For reasons that are much too long, complicated and contentious to go into here, Japanese industry has been able to organise coherent and cohesive plans for targeting selected market areas, developing well-engineered products suitable for the market and then manufacturing them and marketing them in sufficient volume and with sufficient skill to acquire significant shares of that selected market.

Japanese companies have done this in shipbuilding, motor manufacturing, consumer electronics and semiconductors They are also doing it in computers starting at the mainframe end with kit that is plug-compatible with IBM and then working down.

Having seen the growth in the market for microcomputer systems, the Japanese are now ready to move in in a big way. To do this, of course, means not only having the right products but also having the distribution networks. Here the Japanese have a distinct advantage over the American and European manufacturers. Through the way they have taken over the consumer electronics marketplace they have learned all the good and bad points of running a distribution network. They now seem intent on using that knowledge to the full in the micro business - and many dealers can hardly wait.

Dealers are naturally reluctant to be quoted on their views but rebellion against the dominant US manufacturers is growing in their ranks and fond eyes are being turned Eastward. 'We welcome them with open arms', one said to me. 'They trade differently. They don't want to put you out of business.' He went on to say that Japanese suppliers could easily make dealers change their current allegiances on the question of suppliers.

Another said he knew of several who would probably dump their US suppliers when the Japanese got going properly and waxed lyrical about such items as support and reliability. Several dealers talked about the 'paternal' attitude of the Japanese towards them about the Japanese wanting to work in partnership. Closer to reality, they also mentioned the better margins on sales that the Japanese provided, allowing the dealers themselves to offer better support to the customer.

A measure of the expectations held out for the Japanese by the dealers is the fact that all were convinced that a Japanese company will be number one supplier in the UK within two years. This against a background of unanimous agreement that none of the Japanese are yet ready or in a position to assume that mantle.

The current leading contender in the UK is Sharp, with its MZ-80K, selling at the rate of around 500 a month and climbing. This is being followed to market by the 3201 business system and the MZ-80B scientific system. Sharp's manager, Paul Streeter, who concurs with the generally held view of the company's fourth position in the UK marketshare rankings, says that this has been achieved with a system not suited to the main growth market in the country the small business and 'occupational' sector.

'The keyboard is wrong,' he says of the '80K, 'and until we got CP/M running there wasn't much of the right software.' with the new 3201 he hopes to have this last fault corrected. The provision of suitable software is seen by everyone as the one factor holding back the Japanese rush. And though Sharp is currently the leading contender, there are and will be others. There are some smaller Japanese companies already pitching in the market and the likes of NEC and Matsushita are preparing to jump in.

Bob Gleadow, UK general manager at Commodore doesn't feel they will go for the business market, preferring to wait for the emergence of the consumer market proper, He also states that they have been able to take advantage of the market development work put in by the American companies. 'They have learned from our mistakes in the market,' he says, 'but we are capable of operating at their standards of products and support. The marketplace demands an increase in support in many areas.'

Despite this, Sharp's new 3201 and NEC's 8000 series machines show that the Japanese want a share of the business market as well as the consumer one. The American manufacturers are in for a tough fight and it looks as if they may not be able to count on too much support from their dealers.

The question of dealers and distribution brings me to the second point: the position of the existing computer manufacturers. Companies like IBM, Digital Equipment and Xerox have quietly sat on the sidelines watching the cut and thrust of the micro market and watched it develop from the non-important area of funsters and hobbyists into a big money operation that is beginning to take marketshare away from them. As one Digital Equipment supplier in this country put it to me recently: 'I visited a small company the other day that was running invoic ing on a PET and it worked.'

All three companies are now dabbling in the distribution end of the business, opening retail outlets at least in part to learn the rules of the game. It can be assumed that they will be tolerably quick learners and it can be taken as a certainty that they will have suitable products. Take IBM, for example. The company, and I quote, 'never speculates on future developments' but it now has two shops in the UK, has been playing with its own personal computer system for around two years and has been talking to Matsushita in Japan about buying a small system from them. Take DEC; it has been working for over two years on a single-chip LSI-11 processor.

With companies like these it is not so much a case of them becoming like horse-drawn coaches - superseded by events - even though there are several industry observers who contend that this is possibly the case. Instead, it is more likely to be a case of waiting to see how things develop in the marketplace and then being ready to make a move. I am not suggesting that once they do make their moves, these companies will have a divine right to the micromarket (if no-one else does the Japanese will ensure that) but only a fool would undervalue their chances.

The third point is the consumer market - whether it exists and what products will serve it. One man who feels the time may be right to test the water is HB Computers director Mike Hambly, who has decided to set up the aptly-named Computer Supermarket in Corby, Northants. He is aware of the gamble he is taking, saying quite blithely: 'In two years time I will be a millionaire, or have fallen flat on my face' The gamble is, in fact, two-fold, for not only is he taking on the trials and tribulations of setting up a new company in a business noted for its fatalities, but he is setting out to create a sector of the market that has palpably failed to materialise so far.

The consumer sector represents, at best, only ten per cent of the marketplace and the general frailty of user users when it comes to subjects like software has effectively blocked concerted attempts to merchandise micros.

This situation will certainly change in time and there are signs that the changes are on the horizon - speech I/O, expensive use of firmware, use of the public telephone system, etc - and some of them are now beginning to appear, or at least be talked about with some certainty. Then, the consumer micro market will be as significant as the pocket calculator was ten years ago. I cannot say with any confidence that I feel it has happened yet.

One thing is certain, however. When it does occur it is likely to be the Japanese companies that come up with the goods.

Put all these points together and it becomes possible to see why I suggest that changes are round the corner. The changes are both in the products themselves and the mix of companies that manufacture them. The small companies that started this business have had to struggle to get going, and some have become tolerably large companies in succeeding. By succeeding, however, they have also started to tread on some painful corns. Some will survive but they won't all be Davids against the Goliaths.

end