The concept of computer networking is one that even the experts concede is confusing, costly and ”arcane.”
Yet, many of the companies that provide local-area networks (LANs), especially those networks that tie together personal computers, are enjoying the sort of hypergrowth that has become common in some parts of the high-technology world.
”The battle for the desktop is shifting to the wiring closets in the copier room,” said Bill Krause, president of 3COM Corp. in Mountain View, Calif., a leading LAN company in the personal-computer segment.
A local-area network is a data communication system that ties together a number of independent computers and allows them to communicate with each other through electronic mail systems and, with more powerful devices, through mainframe-to-micro links. They can also share data and software programs, as well as expensive peripheral equipment such as laser printers and hard-disk drives.
Some of the LAN companies, many of which are located next door to each other in California`s Silicon Valley in an area becoming known as ”LAN Lane,” or ”Coax Corridor,” are growing at double-digit and even triple-digit rates each year.
Yet, most industry observers say the market, which is expected to hit slightly more than $450 million in total revenues this year, hasn`t even begun to peak.
In fact, some feel the trend toward networking has been slowed by International Business Machines Corp.`s delay in bringing out its already publicized Token Ring Network, a specific type of local-area network, which is already destined to be the industry standard when it does arrive.
(IBM earlier this summer began shipping its PC Network, a stopgap local-area network that may not be entirely compatible with the more comprehensive Token Ring, which is still in development.)
”Networking is the industry of tomorrow, and tomorrow isn`t here yet, but some of the small local-area-network companies are making a lot of money at it,” said Richard Shaffer, editor of the Technologic Computer Letter.
One of those companies is 3COM, the firm founded by Robert Metcalfe after he developed for Xerox Corp. a network called Ethernet, probably the most popular LAN on the market today.
According to 3COM`s Krause, his firm had revenues for the fiscal year ended May 31 of $46.3 million, up 178 percent from $16.7 million the year before. Operating income more than tripled to $7.9 million from $2.3 million. At Ungermann-Bass Inc., a company that makes networks for everything from personal computers to mainframes, a bumpy first quarter slowed down its rise; nonetheless, second-quarter revenues were 48 percent higher than in the year- earlier period.
Dataquest, a San Jose-based research firm, reported that 3COM had 12.2 percent of the total networking market in 1984, the largest share of any of the companies that deal with the personal-computer segment of the network marketplace. Next was Ungermann-Bass, with 8.2 percent.
”We`re growing as fast as we can,” Krause said, though admitting that the industry is still in an early stage of development. ”We`d welcome a little maturity in the cycle.”
”LAN companies are benefiting from two windows of opportunity right now,” he said. ”The first is the new technology. The second is the fact that IBM is at an awkward stage in its product cycle, and doesn`t have products out to compete with us. It`s affecting all the communications companies, the data PBX firms, the micro-to-mainframe connection companies and the LAN companies. We`re all leeching off the lack of products from IBM.
”In this early stage of market development, success can mask the real dangers,” he warned. ”We can`t just continue to supply the boards, boxes and cables that physically tie things together. We have to become like the systems houses and provide a total solution that includes software that brings the functionality of mini-computer applications to the PC LANs.” He calls personal computer LANs the ”minis of the 1980s.”
Not only has the confusion resulting from IBM`s delays and diverse entries prevented the industry from settling on one definite standard but the lack of multiuser software has been a drawback to networking as well. A standard single-user program will not simply run on a network, which requires a different kind of operating system. Networking software must be able to control the access to files, and the updating of them by multiple users.
But that problem should gradually diminish now that networking companies and software houses have had time to accept as a standard Microsoft Corp.`s networking operating system, (called PC DOS 3.1) which was introduced by IBM last summer. Shaffer said he expects to see networking versions of most popular software titles on the market in the next year.
From the user`s standpoint, the array of hardware and software needed to tie all the personal computers in a company`s division to each other, and then to link these small departmental networks to corporate mainframes and remote information sources, is difficult to grasp. When equipment from a variety of vendors is involved, networking becomes even more complex.
Furthermore, the payback for such costly networks, which average $1,000 per connection, is something that is largely intangible.
Yet, according to Mark Tebbe, a networking consultant, there`s a motivating factor that is driving companies to look into networking, despite the headaches involved. It`s the overwhelming need to share information among work groups, he said.
As a result, a whole industry of consultants who serve as ”network nursemaids” has grown up to design networking systems for corporations, large and small.
Tebbe, of Chicago-based Langer, Tebbe & Associates, says that his firm, which originally specialized in helping corporate clients select, install and train employees to use microcomputers, now devotes about 60 percent of its time to networking.
”Networking is a difficult topic, especially for those making the decisions,” he pointed out. ”Some companies present their networks as providing one big, happy solution. It`s not that easy. The lines of communication and the methods of sharing data, programs and peripherals have to be the most effective for each individual office. Often new software must be written. Sometimes, networking isn`t the best solution in a very small office; it depends on each situation.”
The most typical network in use today, he said, is the small cluster of 6 to 10 personal computers within a single department.
He points to a recent installation in which a local law firm installed a local-area network of 10 personal computers, at a cost of about $1,500 for each connection, which included new word-processing software.
”It was a case of a group of 10 young lawyers within the corporate-taxation-practice area, who wanted to get input from each other in their analyses and preparation of briefs. They also shared about $5,500 worth of peripherals, but that`s not significant. It was the information sharing and increased productivity they were after,” he said.
From the retailing side, Businessland, one of the few thriving retail computer chains, identified the trend about two years ago and began training its sales force to hawk the diverse products on the market today.
”It`s one of the largest growth areas in the microcomputer industry,”
said Russ DiOrio, manager of the Businessland store scheduled to open in northwest suburban Rolling Meadows in October. ”And with IBM and American Telephone & Telegraph Co. both jumping in, it can`t go anywhere but up.”
DiOrio estimated that 10 to 20 percent of the chain`s business involves networking equipment ”and it is growing every month.” He anticipates that networks will become 25 percent of Businessland`s revenues in the next couple of years.
But the growth curve for network companies is neither infinite nor steady in the short term, said Randy Sherman, a market research analyst with Creative Strategies in Cupertino, Calif.
”There`s going to be a lot of competition from enhanced PBXs (private-branch exchange systems, which are customer-based telephone switches) over the next few years. PBX companies are going to develop networks that integrate the telephone into the system, which is going to reorganize market shares,” he said.
There are even those analysts who–ever mindful of IBM`s purchase last year of Rolm, a leading PBX manufacturer–suggest that part of the reason IBM hasn`t introduced its network is that it is waiting for an interface that will allow it to integrate both voice and data.
”The LAN vs. PBX controversy is alive and well,” said a spokesman for Arthur Andersen & Co. in Chicago. ”I see the decision come up often for our clients. By the end of the decade, I see the two merging into one product that supports an integrated workstation instead of a personal computer and a telephone.”
