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Economic Perspectives on the History of the Computer Time-Sharing Industry, 1965-1985
January-March 2008 (vol. 30 no. 1)
pp. 16-36
The history of the computer time-sharing industry is one of the unwritten chapters in the overall history of computing. In this article, we show that the time-sharing industry constituted a major sector of the computer services industry until the early 1980s, when time-sharing was made obsolescent by the personal computer.

1. "On the decline of the time-sharing industry in the early 1970s, see for example: N. Foy, Hard Recession in Software," Management Today, Apr. 1971, pp. 95-97, 136; , Datapro Research Corp., All About Computer Time-sharing Services, Delran, N.J., 1972, p. 70G-900-01c, Charles Babbage Institute (CBI) archives; GE Information Services, "20 Years of Excellence: Special Edition Commemorating the Twentieth Anniversary of General Electric Information Services Company," GE Information Services Spectrum, Dec. 1985, p. 8; http://www.computerhistory.org/cybermuseum/corphist.
2. M. Campbell-Kelly and W. Aspray, Computer: A History of the Information Machine, Westview Press, 2004, pp. 186-187.
3. "For example: R.M. Fano and F.J. Corbató, Time-Sharing on Computers," Scientific Am., Sept. 1966, pp. 128-140.
4. Campbell-Kelly and Aspray, Computer, pp. 196-197.
5. "For example: M. Greenberger, The Computers of Tomorrow," Atlantic Monthly, July 1964, pp. 63-67.
6. GE Information Services, "20 Years of Excellence: Special Edition Commemorating the Twentieth Anniversary of General Electric Information Services Company," GE Information Services Spectrum, Dec. 1985, http://www.computerhistory.org/cybermuseum/corphist.
7. J.G. Kemeny and T.E. Kurtz, "Dartmouth Time-Sharing," Science,11 Oct. 1968, pp. 223-228.
8. "To a degree, time-sharing can be considered a multisided market. Many time-sharing vendors encouraged software developers to write library programs to stimulate the consumption of interactive services by regular users; third-party developers were usually remunerated by a slice of the revenues generated by the use of their software. This was, however, a marginal and complex phenomenon beyond the scope of this article. For a discussion of time-sharing applications software, see M. Campbell-Kelly," From Airline Reservations to Sonic the Hedgehog: A History of the Software Industry, MIT Press, p. 131.
9. "The rate of growth was roughly 38 percent in real terms."
10. "The rate of growth was roughly 45 percent in real terms."
11. M. Phister, Data Processing: Technology and Economics, 2nd ed., Digital Press and Santa Monica Publishing Co., 1979, Table II.1.20, p. 243.
12. "The rate of growth was 43 percent in real terms."
13. Phister, Data Processing, Table II.1.21, p. 251. The average value of general-purpose systems shipped increased after 1965, however. It was $808,000 in 1970. On the other hand, the average value of "mini" systems shipped decreased after 1965-it was $30,000 in 1970
14. F. Fisher, J. McKie, and R. Mancke, IBM and the U.S. Data Processing Industry: An Economic History, Praeger, 1983, p. 308, 312, 371.
15. "See Phister," Data Processing, p. 28ff.
16. Phister, Data Processing, p. 29.
17. Phister, Data Processing, Table II.1.26a, p. 610.
18. Phister, Data Processing, Table II.1.20, p. 243, and Table II.1.26, p. 277.
19. Auerbach Corp., A Jointly Sponsored Study of Commercial Time-Sharing Services, 2 vols., 1968, CBI archives, CBI 30, box 79, folders 9-10; Auerbach Corp., Auerbach Time-Sharing Reports, 2 vols., 1969, CBI 55, box 69, folders 8-11; Auerbach Corp., Auerbach Computer Technology Reports: Time Sharing, 1979, CBI 55, box 67, folder 11; Datapro Research Corp., All About Computer Time-Sharing Services, 1972, CBI 55, box 72, folders 3-4; Datapro Research Corp., All About Remote Computing Services, 1975, CBI 55, box 74, folder 64.
20. Auerbach, A Jointly Sponsored Study, 1968, pp. 1-2.
21. Ibid., pp. 1-2, 1-3, 2-5-2-13.
22. Auerbach, A Jointly Sponsored Study, 1968, pp. 2-1-2-5.
23. M. Gort and S. Klepper, "Time Paths in the Diffusion of Product Innovations," Economic J., vol. 92, 1982, pp. 630-653.
24. Datapro, All About Computer Time-Sharing, 1972, p. 70G-900-01b.
25. Datapro, All About Remote Computing, 1975, p. 70G-900-01c.
26. Auerbach Corp. (1979),, "Time Sharing—What Is It?," p. 1.
27. Datapro, All About Remote Computing, 1975, p. 70G-900-01b.
28. Datapro, All About Remote Computing, 1975, p. 70G-900-01r and ff.
29. Auerbach, Computer Technology Reports: Time Sharing, 1979, "Time Sharing—What Is It?," p. 6. For details on the companies, see Auerbach Corp. (1979), "Specification Chart: U.S.- and Canadian-Based Remote Access Services—Companies A–K," document 952.0000.510, pp. 1-22, and "Specification Chart: U.S.- and Canadian-Based Remote Access Services—Companies L–Z," document 952.0000.511, pp. 1-19.
30. Auerbach, Auerbach Computer Technology Reports, 1979, "Specification Chart: U.S.- and Canadian-Based Remote Access Services—Companies A–K," document 952.0000.510, pp. 1-22, and "Specification Chart: U.S.- and Canadian-Based Remote Access Services—Companies L–Z," document 952.0000.511, pp. 1-19.
31. "University Computing Corp., annual reports, 1965, 1966, 1968, CBI archives, CBI 12, box 47."
32. "Tymshare Inc., annual reports, 1970, 1971, 1974, 1976,1979, CBI archives, CBI 12, box 46."
33. Assoc. of Data Processing Service Organizations (ADAPSO), The Computer Services Industry: 8th Ann. Report to ADAPSO, Quantum Science Corp., 1974, CBI archives, CBI 172, box 1, folder 5.
34. "See Ref. 30. This assumes that General Electric had installed one GE-235 model and GE Datanet-30 model in each one of its operating centers."
35. Ibid., "The PDP-8 was a mini system, whereas the PDP-10 was a large mainframe. See Campbell-Kelly and Aspray," Computer, 2004, p. 198ff.
36. Datapro, All About Remote Computing, 1975, pp. 70G-900-01r-70G-900-01kk.
37. "The CPU performance measures are taken from Cost of CPU Performance through Time 1944–2003; http://www.jcmit.com/cpu-performance.htm."
38. "CSC News—25th Anniversary Issue," CSC News, Apr. 1984, pp. 14-15, 29, CBI archives.
39. "Computer Sciences Corp., annual report," 1984, pp. 10-12, CBI archives, CBI 12, box 11.
40. J. Martin, "Future Developments in Telecommunications, Prentice-Hall, 1971, pp. 107–122; G. Bylinsky, Here Comes the Second Computer Revolution," Fortune, Nov. 1975, pp. 134-138, 182.
41. Auerbach Corp., Tymnet Inc. Value Added Common Carrier, 1979, pp. 1-2, CBI archives.
42. L.G. Roberts, "The Evolution of Packet Switching," Proc. IEEE, vol. 66, 1978, pp. 1307-1313.
43. Auerbach Corp., Telenet Communications Corp. Packet Switching Network, 1979, p. 1, CBI archives, CBI 12, box 44.
44. Phister, Data Processing, p. 548ff.
45. The 1968 and 1969 Auerbach reports tell us that the typical time-sharing customer was a company that had set up 2 or 3 time-sharing terminals and spent roughly $600 per terminal per month. The 1968 report counts 10,000 installed terminals at about $7,200 per terminal per year, equivalent to annual time-sharing revenues of about $72 million. (See Auerbach, A Jointly Sponsored Study, 1968, pp. 2–5.) This seems consistent with the data in Phister, Data Processing, Table II.1.26 and Table II.1.26a. Phister estimated total interactive online revenue at $50 million for 1967 and $110 million for 1968. If we assume that the $7,200 per terminal/year and the 2–3 terminals/company remained roughly constant for a few years, then there were about 46,500 time-sharing terminals installed in 1971 (i.e., $335 million in industry revenue / $7,200). Thus there were roughly 23,250 companies with access to time-sharing at 2 terminals per company, or 15,500 companies at 3 terminals per company. There were 3.7 million establishments in the US economy in 1971, equivalent to roughly 3.06 million firms, at 1.21 establishments per firm (see Phister, Data Processing, p. 447).
47. Auerbach, A Jointly Sponsored Study, 1968, pp. 1-4, 1-5.
48. Ibid., pp. 1-5, See also pp. 3-3 through 3-8.
49. Ibid., pp. 3-7 and 3-8.
50. Phister, Data Processing, p. 29.
51. Auerbach, A Jointly Sponsored Study, 1968, pp. 1-3.
52. Ibid., pp. 2-20.
53. "We express these figures in terms of company plans because some companies had more than one plan on offer for their customers."
54. Auerbach, Timesharing Reports, 1969, "Service Summary Charts: Service Fees.".
55. "See Phister," Data Processing, pp. 164-165.
56. Ibid., p. 164.
57. Auerbach, Computer Technology Reports, 1979, "Time-Sharing Services versus In-House Computing," p. 2, discusses comparative labor costs of remote and local computer operations. The report points out that the advantage of time-sharing from this perspective is twofold—first, the person supervising the time-sharing operation does not need to be a computer programmer and, second, she can devote a portion of her time to other tasks.
58. "The computer pundit Herb Grosch estimated that computing power p increased as the square of the cost c, that is p = kc2, where k was a constant. See Grosch's Law," Encyclopedia of Computer Science, 3rd ed., A. Ralston and E.D. Reilly eds. , van Nostrand Reinhold, 1993, p. 588.
59. Auerbach, A Jointly Sponsored Study, 1968, pp. 3-7.
60. Phister, Data Processing, pp. 126-127.
61. Auerbach, Computer Technology Reports, 1979, p. 2.
62. Ibid., 1979, p. 3.
63. Ibid., 1979, pp. 3-4.
64. Ibid., 1979, p. 5.
65. Ibid., 1979, pp. 5-6.
66. Phister, Data Processing, Table II.1.21, p. 251, and Table II.1.21a, p. 600.
67. Ibid., In fact, if we compare growth rates in 5-year intervals, we find that shipments grew at their lowest rate in 1965–1970, precisely when time-sharing revenues were skyrocketing at an annual rate of growth of about 74 percent. As the growth rate of time-sharing revenues settled to a more reasonable pace (34 percent in 1970–1975 and 19 percent in 1975–1978), the growth rate of shipments seems to have slowly picked up speed again (to 26 percent in 1970–1975 and in 1975–1978).
68. Phister, Data Processing, Table II.1.21, p. 251.
69. Phister, Data Processing, Table II.1.21a, pp. 600-601.
70. "A computer network consists of a set of communication channels interconnecting a set of computing devices and nodes that can communicate with each other. These nodes may be computers, terminals, workstations or communications units of various kinds distributed in different locations—Networks, Computer," Encyclopedia of Computer Science, pp. 924-929.
71. "See, for example, Tymshare annual report, 1970."
72. "See Tymnet: A Distributed Net," Datamation, vol. 19, no. 7, 1973, pp. 40-43.
73. "See Auerbach," Tymnet Inc. Value Added Common Carrier, 1979, CBI archives
74. "See Tymshare, A Tymshare Presentation for the New York Society of Security Analysts 18 June 1979, CBI archives, CBI 12, box 46."
75. IDC, 1984 Value-Added Services Reference Book, Int'l Data Corp., 1984, p. 45, CBI archives.
76. Campbell-Kelly, Airline Reservations to Sonic the Hedgehog, p. 238.
77. IDC's 1984 Value-Added Services Reference Book lists 48 firms in the US remote processing services industry. In this list Ross Systems would have ranked midway in the 30 second-tier firms with annual revenues in the range $1 million to $20 million.
78. Ross Systems Inc., Annual Report 1985, p. 3, CBI archives, CBI 12, box 39.
79. L. Johnson, "Interview with Tom O'Rourke, Founder of Tymshare, 13 Mar. 2002," Information Technology Corporate Histories Project; http://www.computerhistory.orgcorphist/.
80. M.A.C. Fallon, "McDonnell Douglas Changes its Aim with Tymshare," San Jose Mercury News,5 Nov. 1984, p. 3C.
81. "Examples of recent writings on the mainframe industry include A.L. Norberg," Computers and Commerce: A Study of the Technology and Management of at Eckert-Mauchly Computer Company, Engineering Associates, and Remington Rand, 1946–1957, MIT Press, 2005, and R.M. Price, The Eye for Innovation, Yale Univ. Press, 2005.
82. J.M. Utterback, Mastering the Dynamics of Innovation, Harvard Business School Press, 1996.
83. Campbell-Kelly, Airline Reservations to Sonic the Hedgehog, p. 167.

Index Terms:
Time sharing computer systems,History,Computer industry,Industrial economics,Microcomputers,Operating systems,Information systems,Personal communication networks,Heart,Costs,time-sharing computer systems,computer networks,computer services,economics
Citation:
"Economic Perspectives on the History of the Computer Time-Sharing Industry, 1965-1985," IEEE Annals of the History of Computing, vol. 30, no. 1, pp. 16-36, Jan.-March 2008, doi:10.1109/MAHC.2008.3
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