France’s new Prime Minister, Mme Edith Cresson, is shaping up to cause Groupe Bull SA major headaches by demonstrating a fundamental lack of understanding of the computer industry. Bull wants to integrate Bull HN Information Systems Inc completely into the parent company, but NEC Corp has a 15% stake in Bull HN. The proposal had […]
France’s new Prime Minister, Mme Edith Cresson, is shaping up to cause Groupe Bull SA major headaches by demonstrating a fundamental lack of understanding of the computer industry. Bull wants to integrate Bull HN Information Systems Inc completely into the parent company, but NEC Corp has a 15% stake in Bull HN. The proposal had been that NEC should swap its 15% of Bull HN for 5% of the parent company, but Mme Cresson is bitterly opposed to Japanese trade practices, and according to Le Monde is considering not only putting a bar on NEC acquiring a 5% stake in the state-owned Compagnie des Machines Bull SA, but ordering the company to sell its 15% stake in Bull HN – despite the fact that Bull, with losses of $1,200m last year and needing large, and probably illegal under European Community law, French state subventions to keep it afloat at all. To force NEC to sell its stake in Bull HN would violate the accords between the Japanese company and Bull, in particular the agreements under which NEC provides the top-end DPS 9000 mainframes that represent an important proportion of Bull’s entire customer base – in the UK alone, several Scottish local authoirties and Eastern Electricity Plc are among the major users. Were NEC to cut off the supply of processors to Bull, the French company would have nothing at all to offer those customers – the design team that created their Honeywell-built predecessors is long since dispersed, and even if it were financially healthy, Bull could ill-afford to put a new design team together and design and build top-end processors from scratch. But were it to be rebuffed, NEC would not simply retreat to Japan and lick its wounds – it showed that when its licence arrangements with Bull and Honeywell Inc ran out in the early 1980s. Having no further need of the Western companies’ expertise, but with two hungry mainframe lines of its own to support, it decided that the best way to gain a bigger market and spread development costs would be to start raiding the Honeywell user base, starting with the biggest customer of all, General Electric Co’s GE Information Services, whose Mark III time-sharing service is based on mainframes running the GCOS 8 operating system. Honeywell had relied on GE to give its mainframe manufacturing the critical mass to justify continued development, and now that it was under threat, it raced back to Tokyo to negotiate a new deal with NEC. That deal sounded the death knell for Honeywell mainframe manufacturing because the only deal NEC would agree is that it would supply the top-end models of the line on an OEM basis. Soon the only customers for GCOS 8 left were those needing the largest machines, and a few years later, Honeywell abandoned mainframe manufacturing and took its full GCOS 8 requirement from NEC. But the threat to which Mme Cresson is exposing Bull is that this time around, NEC won’t simply seek to supply GCOS 8 users direct without using an intermediary.
Unfortunately for Bull, NEC builds fully compatible analogues of Bull’s flagship DPS 7000 mainframe line as well, and in order to make looking after GCOS 8 customers financially viable, it would seek to defray some of the cost by going after Bull’s DPS 7000 customers as well – and while it might find the going tough in France, in the rest of the world it would likely find customers falling into its lap like ripe plums. C’mon, you may say, how could NEC possibly build up a viable worldwide marketing and support network for mainframes from scratch? The answer lies in another major change in the computer industry over the past three years, the rise and rise of the systems integrator. Remember that Hitachi Ltd chose Electronic Data Systems Corp, gran’daddy of the systems integration business, as its partner in Hitachi Data Systems. GE Information Services looks a likely partner, although by no means the only one, and the opportunity to deploy some integration skills outside the cutthroat IBM Corp world – with all the risk borne by NEC – would almost certainly appeal to a whole string of integra
tors, who would not find it difficult to recruit people skilled in Bull software from the ranks of the disaffected employees of the struggling French company itself. If all these things are explained to Mme Cresson in words of one syllable, she may well conclude that President Lyndon Johnson after all had a point when he suggested in vulgar terms that it was better to keep prickly partners with objectionable habits inside the tent.