Informatics General Corporation

Informatics General Corporation, earlier Informatics, Inc., was an American computer software company in existence from 1962 through 1985 and based in Los Angeles, California. It made a variety of software products, and was especially known for its Mark IV file management and report generation product for IBM mainframes, which became the best-selling corporate packaged software product of its time. It also ran computer service bureaus and sold turnkey systems to specific industries. By the mid-1980s Informatics had revenues of near $200 million and over 2,500 employees.

Computer historian Martin Campbell-Kelly, in his 2003 volume ''From Airline Reservations to Sonic the Hedgehog: A History of the Software Industry'', considers Informatics to be an exemplar of the independent, middle-sized software development firms of its era, and the Computer History Museum as well as the Charles Babbage Institute at the University of Minnesota have conducted a number of oral histories of the company's key figures. Historian Jeff Yost identifies Informatics as a pioneering "system integration" company, similar to System Development Corporation. The ''Chicago Tribune'' wrote that Informatics was "long a legend in software circles".

Informatics General was acquired by Sterling Software in 1985 in what was the first hostile takeover in the software industry. Immediately, Sterling Software became a member of the largest corporations within the software industry, with $200 million in revenue.

Background and founding

Walter F. Bauer (1924–2015), the main founder of Informatics, was from Michigan and earned a Ph.D. in mathematics from the University of Michigan in 1951. His early work was at the Michigan Aeronautical Research Center; the National Bureau of Standards, where he programmed the early digital SEAC computer; and for Boeing's BOMARC interceptor missile. He became a manager at the Ramo-Wooldridge Corporation in charge of a unit with 400 employees and two computers, an IBM 704 and a UNIVAC 1103A, and in 1958 joined the merged Thompson Ramo Wooldridge company. Bauer later said that he "was never a green eyeshade programmer" nor a "strong technologist", but being a systems person and a manager gave him a good grasp of computer systems and their capabilities.Yost, ''Making IT Work'', p. 108.

Another key founder was Werner L. Frank (1929–),Yost, "Werner Frank". who during 1954–55 had done programming work on the ILLIAC I at the University of Illinois at Urbana–Champaign. He was then recruited by Bauer and joined Ramo-Wooldridge in 1955, where he did numerical analysis and programming in assembly language and FORTRAN. Working with pioneers of scientific computing such as David M. Young, Jr. and George Forsythe, Frank published several important articles on numerical analysis in ''Journal of the ACM'' and other publications. By 1958, Ramo-Wooldridge had been acquired by Thompson Products, Inc. and come to be known as TRW Inc.; Frank then did early programming on several defense industry computers, including the AN/UYK-1, and spent long stretches of time in Washington, D.C.

The third founder was another TRW colleague, Richard H. Hill, who had been a professor at UCLA and an assistant director of a joint data center between that university and IBM.Yost, ''Making IT Work'', p. 109.

In January 1962, Bauer approached Frank and Hill to start a new independent company that would provide software services.Campbell-Kelly, ''From Airline Reservations to Sonic the Hedgehog'', p. 65.Frank, "Achieving the American Dream", pp. 39–40. At the time, it was an unusual move since few people saw software as a viable business. "Primarily, we were going to develop systems for large-scale computer systems, probably of a military nature. That was our first objective," stated Bauer in a later interview. Despite a lack of any kind of business school training, Bauer put together a business plan for the new company.Johnson, "Oral History of Walter Bauer" (1995), pp. 4–5.

Venture capital was hard to locate for such start-ups in that era and Bauer met with several rejections. He and the others then decided to join forces with Data Products Corporation, a newly formed manufacturer of computer peripheral equipment.Campbell-Kelly, ''From Airline Reservations to Sonic the Hedgehog'', p. 81. The co-founder of Data Products, Erwin Tomash (1921–2012), was from Minnesota and had earlier worked at Engineering Research Associates, a pioneering computer firm from the 1950s. He had known Bauer and thought that the two new efforts being formed together would provide a hedge against either one of them encountering start-up difficulties.
Informatics was thus created as a wholly owned subsidiary of Data Products.
The new software firm was capitalized at all of $40,000, of which Data Products contributed $20,000, Bauer $10,000, and Frank and Hill $5,000 each.

The name

The company's name came from the founders' desire to base it on "-atics", a Greek suffix meaning "the science of".Bauer, "Informatics and (et) Informatique". Their first thought was "Datamatics", but a form of that was already taken by an early computer from Honeywell/Raytheon; Bauer and the others settled on "Informatics", meaning "the science of information handling".

At the very same time, March 1962, French computer pioneer Philippe Dreyfus came up with the name Societe pour L'Informatique et Applique for a new firm of which he was co-founder, thus creating a French version of the same name. However, in France, the term " informatique" soon became a generic name, meaning the modern science of information handling, and would become accepted by the Académie française as an official French word. The term then came into common use in a number of other European countries, adapted slightly for each language.

In the United States, however, Informatics fought any such use as an infringement upon their legal rights to the name; this was partly in fear of the term becoming a brandnomer. Bauer later recalled that at one point the Association for Computing Machinery, the leading academic organization in computer software, wanted to change its name to the Society for Informatics, but the company refused to allow that use. Eventually the generic usage of the term around the world caused the company to reconsider and, according to Frank, was the reason for the 1982 name change to Informatics General.

Early history

Informatics, Inc. began operations on March 19, 1962, in Frank's empty house in Woodland Hills in the San Fernando Valley area of Los Angeles. In addition to the three founders, the fourth initial employee was a secretary, Marie Kirchner. An important early hire was Frank Wagner, a North American Aviation executive who was past president of the IBM user group SHARE and had many contacts among that community. Data Products, which served as the Informatics back office, was located in nearby Culver City at that time.

The company struggled at first, winning only a few small contracts, until it improved its presence in government circles and finally, in early 1963, won a $150,000 contract with the Rome Air Defense Center. This was a forerunner of several large contracts it would have with that U.S. Air Force facility in years to come, and several other defense sector contracts soon followed.Campbell-Kelly, ''From Airline Reservations to Sonic the Hedgehog'', p. 66. By its second year, Informatics was profitable and had 37 employees; by the third year it was growing well.Webster, ''Print Unchained'', p. 123. Informatics was one of the major companies of the time involved in the software contracting business. An early description of the company used in press releases was "Informatics provides analysis, design and consulting services for users of digital processing equipment."

At the time Informatics did little marketing, mostly relying upon its network of personal contacts. The firm was one of forty or fifty software companies started in the early 1960s (many of which are little known to history). Two other prominent firms were Applied Data Research (ADR) and Advanced Computer Techniques (ACT). All three are credited by Campbell-Kelly as firms that succeeded because, and gained awareness due to, the personality of their principal founder; in this case it was Bauer who "succeeded in combining his entrepreneurial activities with his role as a leader in the technical computing community."

Meanwhile, Data Products, which had moved its office to Sherman Oaks, California in 1964 and renamed itself slightly to Dataproducts, was suffering from falling behind IBM on disk drive technology; its eventually successful printer business had not yet taken off. In order to placate its subsidiary, the three Informatics co-founders were given 7.5 percent of Data Products stock in 1965. As Tomash later said, "To satisfy them, we deliberately took the step that we knew would separate us in the long run."

In May 1966 there was an IPO of Informatics stock, priced at $7.50 per share, that brought in $3.5 million. Only the third software company to have stock issued for it and thus becoming a public company, it was listed on the over-the-counter market, based in New York. However, 60 percent of its stock was still held by Dataproducts. At that time Informatics had revenues of $4.5 million and a net income of $171,000, and the number of employees was around 300. By 1967 Informatics had something possessed 3% to 4% of the total market for custom-built software.

During the mid-1960s the U.S. stock market went through what was known as the "go-go market" boom, and computer companies become special darlings of traders. Informatics was no exception; its price–earnings ratio rose from 25 at the time of its IPO to 200 by mid-1968 and over 600 by early 1969, despite the company having only $40,000 in earnings for the previous year. Informatics used the proceeds from additional offerings during this period to fund development of its Mark IV product and to create a Data Services Division.

Dataproducts sold off the last of its Informatics stock in 1969, and in doing so Informatics thus became fully independent. For its initial investment of $20,000 in Informatics, Dataproducts had gained about $20 million in return.Yost, "Computer Industry Pioneer: Erwin Tomash", p. 5. By 1969, Informatics had revenues of over $11 million with earnings of $561,000.

Origins of Mark IV and the software product business

The history of what became Mark IV goes back to 1960 when GIRLS (the Generalized Information Retrieval and Listing System) was developed for the IBM 704 by John A. Postley (1923–2004), an engineer who had worked for many years in the aerospace industry; the first customer for GIRLS was the Douglas Aircraft Company.Haigh, 'A Veritable Bucket of Facts', p. 79. Postley was working in the Advanced Information Systems subsidiary of Electrada Corporation along with Robert M. Hayes and others.

In April 1963, Advanced Information Systems was purchased from Electrada by Hughes Dynamics,
an early 1960s subsidiary of the Hughes Tool Company
that provided computerized management and information services.
Subsequent versions of GIRLS were called Mark I and Mark II; made for the IBM 1401, they were increasingly stronger in their capabilities.Johnson, "Oral History of John Postley", p. 5. Under Hughes, Mark III was in development, with key performance improvements.Campbell-Kelly, ''From Airline Reservations to Sonic the Hedgehog'', p. 104.

Hughes Dynamics then decided it wanted to exit the activity of making software.Swedin and Ferro, ''Computers'', p. 76.
While accounts later told by some Informatics executives imply that Howard Hughes himself was aware of, or played a role, in what was going on, Hughes biographers suggest that
in the secretive world of his empire, it appears that Hughes was never informed of the existence of Hughes Dynamics until a couple of years after its creation; once he found out about it, he had it shut down.

In any case, in May 1964, Informatics acquired Advanced Information Systems from Hughes Dynamics. For this it paid essentially nothing: Hughes actually paid Informatics $38,000 to take it, but in doing so Informatics assume some existing customer obligations of about the same amount.Johnson, "Oral History of Walter Bauer" (1986), p. 7.

Within Informatics, Postley became the champion of making another version, Mark IV, that was for the new IBM 360 computer line.
Mark IV was not the first file management system/report generator; indeed there had been several efforts in the late 1950s towards this end, including one from SHARE called 9PAC.Haigh, "How Data Got its Base", p. 13. Indeed, it is possible Bauer and Wagner, who were both active in SHARE (Wagner had been a chair of it), were influenced as to the value of such a product by their exposure to previous efforts in that users group.
But only Postley had the full vision of what a software product might be; Informatics as a whole was reluctant to finance the development cost, which Postley estimated to be half a million dollars. So Postley recruited five companies, each of whom provided $100,000: Sun Oil, National Dairy Industries, Allen-Bradley, Getty Oil, and Prudential.Campbell-Kelly, ''From Airline Reservations to Sonic the Hedgehog'', p. 106.
Existence of the new product was first announced in 1967.

Mark IV found quick success as a product: during 1968, its initial year of availability, it garnered orders for 117 installations and sales of nearly $2 million.Campbell-Kelly, ''From Airline Reservations to Sonic the Hedgehog'', p. 116.
But IBM then decided to unbundle software from its mainframes in 1969, which helped facilitate the growth of the commercial software industry in the 1970s and beyond.
This accelerated sales of Mark IV severalfold from what Informatics had anticipated.

Equitable Life Assurance Society relationship

Beginning in 1970 the computer industry hit a downturn that lasted several years. Software houses of the time tended to suffer from unprofitable contracts, failed ventures, and slowing demand.Fishman, ''The Computer Establishment'', pp. 277–278. Informatics' creation of a Data Services Division, and with it the acquisition of a number of computer service bureaus as a means of providing utility computing, did not go well. In May 1970 Informatics announced a $4.2 million loss, its first since 1963.Campbell-Kelly, ''From Airline Reservations to Sonic the Hedgehog'', p. 85.

But in a time when many software firms did not survive, the more conservatively managed Informatics did.
By 1974, Informatics revenues were up to $33 million.

In 1974, Informatics became a subsidiary of The Equitable Life Assurance Society of the United States, with the goal of gaining the ability to grow organically and to acquire other businesses. This followed a joint venture, called Equimatics, that Informatics had formed with Equitable in 1971 to establish a data services business that would provide such services to Equitable and others in the insurance industry. But in many respects the choice to become a subsidiary was forced by the inability of Informatics, in the gloomy early 1970s, to find investment capital.

For the year 1976, Informatics had revenues of $58 million. It had some 1,800 employees at locations around the world. From around 1976 through to the end in 1985, Informatics corporate headquarters was located in an office along Ventura Boulevard