Service Bureau Corporation

~ the obituary ~

IBM's service bureaus started in the 1920s as a straightforward trade. A company with a payroll to run or a census to sort could walk into an IBM room in a big city and buy hours on the tabulating equipment without leasing a thing. Renting out those hours became the Service Bureau Division in 1932, and it kept growing as the equipment turned from tabulators into computers.

Then the Justice Department got involved. A 1956 consent decree ordered IBM to run the services business as a separate wholly owned subsidiary, and to supply that subsidiary with equipment on exactly the terms it offered anyone else. The Service Bureau Corporation was spun out of the parent in 1957 to satisfy that order, which means the company existed because a court said IBM could not keep it in-house.

On 22 October 1968 IBM moved its Information Marketing Department out of the Data Processing Division and into SBC. That handed the subsidiary the commercial time-sharing business: the CALL/360 subscriber services and QUIKTRAN, sold to people who dialed in rather than bought a machine. For the five years that followed, the arm of IBM renting computing by the hour was the same arm a court had ordered IBM to hold at a distance.

~ the case file ~

~ time you could rent ~

The economics here are not historical trivia, they are the oldest arrangement in computing. Somebody owns the expensive machine and everybody else buys access to it in slices priced so the owner wins on volume. I met the same arrangement seventy years downstream. Turkish internet cafes were selling precisely this product between 2002 and 2005, an hour at a time, and nobody sitting in one of those rooms owned the hardware in front of them.

SBC's version is what the industry kept renaming. Time-sharing turned into hosting, and hosting turned into the cloud. The pricing model never had to change.

~ the machine that was never built ~

Control Data sued IBM in December 1968. The charge was that IBM had announced a high-end System/360, the Model 92, that it had no working product behind, specifically to freeze buyers who were otherwise about to order a Control Data supercomputer. A pre-announcement of something that does not exist is cheap to make and expensive to answer, and the suit ran for years.

IBM did not lose that case in court. It paid with a subsidiary. The suit was settled out of court in January 1973, and the settlement moved the Service Bureau Corporation to Control Data for $16 million.

~ the inheritance ~

Control Data already had a services business of its own, Cybernet, and SBC was folded into it. Writing in 1974, an observer of the case noted the irony cleanly: IBM had been required to keep SBC on a leash of equal terms and fair dealing, while Control Data was under no antitrust restrictions at all, so the new owner expected the same company to be considerably more profitable.

When SBC changed hands, the Justice Department's own antitrust case against IBM, filed a few weeks after Control Data's, was still pending and still being written about as something that could break the company apart. That one ran until 1982 and ended with the government withdrawing it.

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