Computer Makers Vie for New Markets as PCs, Workstations Converge

Personal computers, little more than toys just a decade ago, have become the General Shermans of office computing, laying waste to the minicomputers and even some of the large mainframes that once dominated corporate America.

But though growing more powerful every day, PCs may finally have met their match: high-performance desktop systems commonly known as workstations. While PCs and workstations have traditionally served distinct groups of customers, those distinctions are blurring and a major competitive battle is now brewing over the narrow but strategically vital market where the two worlds meet.

The everyday computer user is almost certain to emerge a winner, with access to a broad range of computer capabilities once reserved for specialists, albeit at a premium price. And the outcome could determine the balance of power in the computer industry for many years to come.

“Personal computer vendors are trying to figure out how to protect themselves against the workstation vendors two years from now,” says Richard Shaffer, publisher of Technologic Computing Letter. The emergence of standard machines that combine the power of a workstation with the convenience of a PC, he adds, could mark “a turning point in the industry.”

The so-called convergence of PCs and workstations has been a much-discussed topic in the industry for some time. But a confluence of longstanding trends and recent business developments--including reports last week that a consortium of powerful computer companies may work together on a new, high-powered PC--has given the issue new urgency.

Perhaps most important in setting the stage for the PC/workstation collision is the fact that desktop computers connected by networks have assumed many of the functions that were once reserved for large, centralized computers. That has stimulated the development of ever-more-powerful PCs and created a new market for workstations, which only a few years ago were used exclusively for technical and engineering tasks.

Simultaneously, a new computing technique known as RISC (reduced instruction set computing) emerged. That made it possible to create much more powerful microprocessors, which form the brain inside desktop computers. Workstation maker Sun Microsystems’ clever exploitation of RISC technology has made it the fastest-growing company in the Fortune 500.

Together, these two developments have exposed the limitations of the standardized design that has underpinned the personal computer revolution. That design is commonly referred to as “IBM-compatible” but it’s really based on two key components: a microprocessor from Intel and a software operating system from Microsoft Corp.

As the standard-bearers for the personal computer mainstream, Intel and Microsoft are not standing still. Intel is continuously pushing its microprocessor family, known by the code numbers 286, 386 and 486, to a higher level of performance. And Microsoft’s Windows 3.0 program has vastly extended the capabilities of the standard DOS software operating system.

“Intel so far has delivered the goods in terms of performance, and it will be very hard for anyone to displace Intel in the mass market,” said Russ Werner, general manager of systems marketing at Microsoft. “The high end is growing, but the numbers are much, much smaller. The mid-range is where we see the interesting mass market.” Microsoft, he added, intends to serve that market with Windows.

But that doesn’t mean Microsoft is ignoring the high end. In fact, it decided several years ago to develop a new, far more sophisticated operating system known as OS/2 in conjunction with IBM. To the surprise and disappointment of many, OS/2 has sold very poorly, contributing to a deterioration in the relationship between IBM and Microsoft.

IBM has now assumed responsibility for OS/2 as it exists today, and Microsoft has developed a complicated strategy for a new high-end operating system that will incorporate elements of OS/2 and Windows and will still remain compatible with the software written for DOS. In addition, this new operating system will be “portable,” meaning that, unlike DOS and Windows, it will work on microprocessors other than those made by Intel.

And those other microprocessors are RISC microprocessors, which proponents say are two to three times more powerful than Intel’s. RISC chips have come from nowhere in a few short years to completely dominate the workstation market, and workstation vendors IBM, Hewlett-Packard and Sun each have their own brand (as well as their own brand of Unix, the software operating system that workstations use).

There is also another player on the RISC scene, a Silicon Valley start-up company called Mips Computer Systems. Mips’ RISC chip is used by Digital Equipment Corp., Silicon Graphics and other workstation companies, but has not achieved anywhere near the penetration of Sun’s so-called Sparc chips. Intel and Motorola also have RISC products, but they have not been successful.

IBM and H-P use their RISC technology only in their own products, while Sun and Mips have attempted to get as many manufacturers as possible to use their RISC design and their version of the Unix operating system. A broad product base is important to persuade software companies to write programs that will work on the machines.

Like Microsoft, the personal computer hardware companies and, most importantly, Compaq Computer, have been eyeing the RISC phenomenon--and especially the massive success of Sun--with trepidation.

As long as Sun was strictly in the technical market, it was not a big concern. But now Sun gets 35% of its $3 billion in revenue from commercial applications, typically networks of Sun machines used for specialized tasks in industries such as financial services.

And IBM’s new RISC workstation, the RS6000, has been far more successful than anticipated, in part by gaining some acceptance in commercial markets.

“Compaq has not been in that business,” observes Stewart Alsop, editor of the PC Letter. “But there’s a lot of opportunity for a PC company. They’ve observed this phenomenon and say: ‘How do we take advantage of this?’ ”

In addition, Compaq, which will not comment on its RISC plans, has an interest in breaking free from complete dependence on Intel microprocessors. Yet it must move cautiously, in part because it doesn’t have a direct sales force or a support organization to distribute and service a RISC workstation.

And it also must move in conjunction with other players in the industry, since it doesn’t have either a RISC chip or a software operating system. But there are other companies whose interests intersect with Compaq’s: Mips, Digital Equipment, Silicon Graphics, Microsoft and the Santa Cruz Operation, a Unix software company that supplies operating systems for high-end Intel-based personal computers.

Mips needs big computer companies to adopt its chips. Digital Equipment, late to join the RISC bandwagon, has been burned in both the PC and workstation markets. Silicon Graphics, which specializes in high-end three-dimensional graphics workstations, wants to push its graphics technology into cheaper machines and is reportedly discussing a broader business relationship--possibly even a merger--with Compaq.

Microsoft wants to prevent the emergence of Unix as a broad-based operating system alternative for the desktop. And Santa Cruz Operation needs to expand beyond its relatively narrow base in the high end of the Intel-based PC market.

Therefore these companies have been in discussions aimed at developing a standard design for a new PC/workstation that could compete with Sun and IBM and provide office computer users with a high-powered RISC machine that could use either Microsoft’s new OS/2 or Unix software.

This system probably wouldn’t be available for at least two years, and opinion is sharply divided on how big an impact it might ultimately have on the market. “Assuming the consortium comes together, I see no reason why it could not over a period of time take over leadership in the PC market,” says Robert Herwick, a workstation analyst at Hambrecht & Quist.

Peter Tiege, an analyst at the market research firm InfoCorp, is far more cautious: “It remains to be seen whether there would really be demand for that kind of thing. You can’t easily get away from something as massive as the Intel installed base.”

Sun Chairman Scott G. McNealy says he’s flattered that “everyone is now saying, well, I need a RISC-Unix (computing platform).” He points out that there have been a number of joint efforts to slow his company’s juggernaut, including a Unix consortium that counts nearly all the big companies in the industry among its members. But none have succeeded.

“Those who can, do. Those who can’t, consort,” he declares.

Whether or not the consortium gets off the ground, it’s clear that computer buyers will end up with more choices. The raw speed, the ability to work on several tasks at once, and the sophisticated networking, graphics and multimedia capabilities that once characterized expensive, hard-to-use workstations will gradually become widely available on desktop machines in the $5,000 range.

By then, no one except computer company executives will care whose chips and whose software are making it all possible. And the desktop computer--call it a PC or a workstation--will be poised to conquer even bigger chunks of the ever-expanding computer world.

Workstations vs. PCs Competitive strategies of workstation makers versus personal computer makers Workstation makers Low volume High support Direct sales emphasis Moving downscale; lower margins Complete solutions Dependent on software developers Application specific PC makers High volume Low support Dealer sales emphasis Moving upscale; higher margins Selling boxes more than solutions Independent of software vendors Generic; non-application-specific Source: InfoCorp THE GROWING PC MARKET Value of key segments of the U.S. personal computer marketplace, in billions of dollars. Includes desktop and portable PCs as well as single-user workstations. 1991-94 are estimates.

1989 1990 1991 1992 1993 1994 IBM and compatible machines $18.97 $20.75 $21.57 $22.32 $24.25 $25.57 Apple Macintosh 3.13 2.92 3.71 4.18 4.39 4.49 Workstations using RISC chips 0.58 1.74 2.24 2.97 3.73 4.28

Source: International Data Corp.