Informatics General

~ the goodbye ~

The company began operations on 19 march 1962 in Werner Frank's empty house in Woodland Hills, at the western end of the San Fernando Valley. There were four people, counting the secretary. Walter Bauer had put together a business plan with no business school training behind it and been turned down by everyone he showed it to, because in 1962 the idea of an independent company selling software was not obviously a business. He ended up taking money from Data Products, a new peripherals manufacturer, which put in twenty thousand dollars against the founders' twenty and owned the whole thing.

The name was chosen from the Greek suffix meaning the science of something. Their first choice, Datamatics, was already taken by a Honeywell machine, so they settled on Informatics, meaning the science of information handling. In march of that same year, entirely independently, a French computer pioneer named Philippe Dreyfus coined informatique for a company of his own. That coincidence became a problem the American company spent twenty years losing.

What made Informatics is a product it did not invent and paid nothing for. In may 1964 it acquired a small Hughes subsidiary whose file management system had been through three versions already, and Hughes paid Informatics $38,000 to take it away. John Postley championed a fourth version for the new IBM 360 line and could not get his own management to fund it, so he went out and recruited five customers to put in a hundred thousand dollars each. Mark IV was announced in 1967 and sold 117 installations in its first year.

The word this company tried to own is the ordinary word for my entire field in most of Europe. In Turkish it is bilişim, which came from a different root and owes nothing to either the Latin or the Greek route, and I have used it my whole working life without any sense that it was ever anyone's property. Informatics fought the Association for Computing Machinery over the term and won, which is the kind of victory that gets you a trademark and costs you the language. By 1982 they had given up and renamed themselves Informatics General.

~ the chronicle ~

~ mark iv ~

Mark IV was a batch product for IBM mainframes that combined file handling with report generation, and it was designed on the theory that a non programmer could use it. You filled in a paper form by hand and somebody keypunched it into a job. That worked up to a point. What actually happened is that the features got more capable every year, ordinary staff could not follow them, and the people who got real value out of it were the programmers it had been designed to bypass.

The customers organized themselves into a user group called the IV League, which was drawing 750 people to meetings by 1972 and had chapters in Europe and Japan. Between 1968 and 1976 the product went into about 1,100 installations and took $50 million. The base price sat at $30,000 for years, with the good features sold as separately priced add ons. A full configuration on a large mainframe eventually ran past $100,000. For the first four years Informatics did not charge for support at all, because nobody had worked out yet that support was a product too.

IBM unbundling software from its hardware in 1969 turned Mark IV from a good business into a very large one. Along with Applied Data Research's Autoflow, it is one of the two products usually named when anybody argues about which software product came first and mattered.

~ the takeover ~

By 1985 Informatics General had made more than thirty acquisitions and had seventeen divisions, several of which nobody could explain. Revenue was still climbing, at $191 million for 1984, but earnings had fallen to $4.7 million with two divisions losing money outright, and the stock had come off a high of $34 down toward $14. A 1984 book on the coming industry shakeout described the company as doing too many things and none of them well, and called Bauer autocratic and sixty. Wall Street read all of that as an invitation.

Sterling Software was a four year old rollup run by Sterling Williams and Sam Wyly, with $20 million of revenue against Informatics General's $200 million. It offered $25 a share on 15 april 1985, raised to $26 a week later, and when the board refused both it went hostile with a proxy fight, full page advertisements in the Wall Street Journal, and financing from Michael Milken at Drexel Burnham Lambert. This had never been tried on a software company, on the received wisdom that you cannot buy a firm whose assets go home every night and might not come back.

Bauer won the proxy vote on 9 may 1985 by seventy percent to thirty. It did not save him. Seventy percent of the stock had changed hands during the fight, which told him his shareholders wanted out, and no white knight appeared. On 21 june the board agreed to $27 a share, $135 million in total, and the shareholder approval process closed on 13 august 1985.

~ what got buried with it ~

Sterling Software went overnight from $20 million to $200 million in revenue, which a Computerworld writer described at the time as the guppy swallowing the whale. The entire Woodland Hills head office was let go including Bauer, who had been chief executive for all twenty three years of the company's life and believed that was a record for a founder at the time. In september about forty percent of the staff at the Canoga Park site went, on a day the survivors called Black Thursday.

Divisions were sold off to pay down the takeover debt. The Ordernet business survived, got expanded into electronic data interchange, then went out on its own as Sterling Commerce in 1996. The Informatics name lasted longest on a legal software division that Sterling sold in 1986, which passed through two more owners and ended up inside Wang Laboratories, still trading under a name whose company had been dead for years. Wang went bankrupt in 1992 with it.

Sterling Software itself was sold to Computer Associates in 2000, which is now part of Broadcom. Bauer spent the rest of his life pointing out that any one of the circumstances that lined up in 1985 could have gone differently, and that the company might otherwise still be there. He also said he had been associated with a lot of firsts in the software industry, and this was one he could have done without.

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