Why the Indian Computer Failed

in 1967 the Indian government founded a computer company ecil their goal was to produce an Indian computer completely Indian from the ground up hardware and software and for a few years in the mid-1970s ecil led the market thanks to a government mandated Monopoly but they ultimately failed to field a competitive product when the Indian government liberalized the market sales and the dream of an Indian computer collapsed in this video we're going to look at the failure of the Indian computer but first let me talk about the Asian Armory patreon Early Access members get to see new videos and selective references for those videos before their release to the public it helps support the videos and I appreciate every pledge and I recently added an annual subscription as well thanks and all with the show India imported their first computer all the way back in 1955 and hec2m built in London and imported for use by the Indian Statistical Institute around the same time India developed their first domestic computer the typhrak produced by the Tata Institute of fundamental research in Mumbai completed in 1959 the computer was judged to be Leading Edge as of 1954 perhaps because of its use of ferrite memory cores so the country did seem to have some domestic ability with regards to computer production however the government didn't have much of a computer industrial policy much of India's early Computing needs were supplied by Foreign multinationals the most significant were America's IBM and Britain's ICT which later became ICL in 1962 India and China fought a brief war the sino-indian war which India lost upon self-reflection prime minister nehru decided that one of the reasons the Chinese won was a deficiency in equipment particularly Electronics India needed to upgrade its competency in this area of growing importance thus in 1963 the government established the electronics committee better known as the Baba committee after its chairman homi Baba the father of the Indian nuclear program Dr Baba sadly passed away in a plane crash before his commission finished the report but they laid out an ambitious 10-year plan towards domestic production of small to medium-sized computers not only the computers but also their essential components this was pretty ambitious which they recognized but they reasoned that even if Indian industry fell short it would still have managed to upgrade indigenous capacity in computer system design and manufacture for the long term critically however the Baba committee did not provide an estimate of how much the government might need to spend in order to produce such results a second rude awakening occurred in 1965 when India and Pakistan went to war again over the territory of Kashmir the United States constantly irked by India's non-aligned foreign policy was allies with Pakistan they sold weapons to the pakistanis believing that India was intent on nuclear weapons technology the Americans haltered the exports of electronic equipment like computers to India this attitude was only reinforced when Nixon imposed further restrictions when India went to war with Pakistan again in 1971 and tested their first nuclear weapon in 1974. one of the Baba committee's recommendations was for the creation of a company for domestic production thus in June 1967 the government set up Electronics Corporation of India limited or ecil and Hyderabad this public sector company started off within Department of atomic energy receiving 300 scientists and technicians from the organization in 1969 the department commissioned them to produce the trombay digital computer 12 or TDC 12 a 12-bit real-time mini computer that would be India's first domestically produced digital computer a logical first way to build domestic competence would be to Leverage The multinationals working in the country already this means IBM and ICL the Indian government leaned on the two IBM especially to use more Indian domestic parts ship more advanced computers and most importantly share ownership in 1966 the government asked IBM to share equity and IBM declined citing the need for centralization in 1968 the Government tried again IBM again resisted finally saying that they would rather exit India entirely than share Equity the Indian government backed down for now by 1970 India's most popular computer was the IBM 1401 with 80 installations around the country nice but the computer was a year away from being phased out in the United States the average computers imported into India was nearly five years old so IBM did not even send over their latest machines yet those machines were being leased to Indians at an unreasonable price IBM Justified this by saying that India did not need Advanced Computers right off the bat but instead needed to gradually develop such a need over time a paternalistic explanation that did not quite please policy makers in February 1970 the government set up a department of electronics or doe to coordinate and execute Electronics policy they appointed Professor MGK Menon of the Tata Institute to run this powerful Department functioning directly under then prime minister Indira Gandhi Menon faced a menacing challenge the Baba committee not only wanted India to produce all of its computers domestically but also all those computers components and subsystems too imagine the complexity of building an entire computer supply chain equal to that of the Americans from scratch the Americas not only had a massive technological Head Start they were backed by a huge demand Market in 1966 the American computer industry was valued at 2.2 billion dollars the American government spent over 500 million dollars a year on office Computing an accounting machine r d alone perhaps India could benefit from the fact that their Manpower cost less the time was of the essence and unfortunately the committee wasted a lot of time perhaps due to menin's academic penchant for debate and slow deliberation his caution was in part Justified the concerns surrounding computer automation's impacts on a society with as many unemployed as India had were legitimate it reminds me of the talks we're having right now around Advanced artificial intelligence in 1972 the dandakar committee on automation named after its chairman v m dandakar proposed limits on computer introduction into government and the banks these limits would impede the future pace of Bank computerization but anyway all the while the indian-american computer Gap grew wider in the six years from 1967 to 1972 India's national champion computer maker ecil held about three percent share of the Indian computer Market IBM on the other hand had 73 percent in 1971 ecil presented A Five-Year Plan for commercializing their series of Indian mini computers the plan begins with ecil's tdc-12 computer completed in December 1970. it was said to be similar to the pdp-8 produced by the American mini computer maker digital Equipment Corporation it used vacuum tubes which were later replaced by transistors in an updated model TDC 312-312 because it was said to be a third generation model 12. that in 1974 they would have a general purpose 16-bit tdc-316 computer capable of using tape and disk drive memory this computer was said to be equivalent to an IBM 1401 which was first sold in the United States back in 1959 but is India's most popular system so it was highly anticipated a year later in 1975 ecil planned to bring out the TDC 32 a 32-bit system roughly equivalent to an IBM 360 40 computer system the 36040 was first introduced in 1964 so the system would close the Indian American Computer Gap in about nine years if delivered in time ecil would not only Advance the country's goals they projected that they would make money doing it over the five years from 1971 to 1976 ecil budgeted production costs of something like 10 million dollars USD 1971 dollars to produce 145 mini computer systems selling these systems would produce 25 million dollars in Revenue good for a 21 net return irr after taxes and the company would directly employ over 2 000 Tradesmen engineers and scientists jobs jobs in the end the doe decided that it would allow some imports of large computers into the country but only with a license but what about the mini computer outside of India many computers were rapidly gaining on traditional computers in power to Performance ratios they were the most exciting field yet in the Computing industry so in June 1972 the doe set up a microcomputer panel to survey this high potential industry they said the level of technology and know-how available within the country are such that many computer Mainframe manufacturer can take place in India without any know-how being imported from abroad but who should be allowed to make them the panel estimated that the Indian mini computer industry would be worth about 450 units a year by 1979 so the market could maybe support six to eight companies producing about 50 mini computers a year several private entrepreneurs desired a chance to compete in this growing space but ecil argued for a mini computer Monopoly in order that we do not waste our time and talent and material resources we must pool our efforts initially into a single unified project of sufficient size that will sustain self-contained growth in many ways they were right the key limiting factor was foreign exchange at this time India was incapable of domestically producing the advanced semiconductors and peripherals these computers needed I covered the Indian semiconductor industry in a prior video worth checking out anyway this meant that India had to purchase its semiconductors from abroad the country lacked available foreign exchangers reserves to do this a situation exacerbated by the 1973 oil crises it is here that ecil emphasized their promises to build indigenously emphasizing their use of domestically produced designs Assembly labor and materials for instance their printed circuit boards ecil reported that they had close to domestically sourcing a critical raw material for producing these in the end ecils arguments and business strategy made sense in the context of the existing restrictions and so the company got the mini computer Monopoly it desired ecil's market share soared during this brief period ranging from 40 to 53 percent between the years 1973 and 1977. IBM's market share Crash from its prior 73 in the 1967-72 period to about six percent in the 1973-77 period but it is not hard to see how this Market structure might produce insufficient results the high-end computer import control policy nicknamed the permit Raj gave the doe a lot of power and they unfortunately did not wield it well important licenses took a long time to be issued the private sector very quickly realized that the best way to get one was to get the attention of the central decision makers encouraging corruption more than a few people suspected that the doe deliberately dragged things out to give ecil more time to advance its computer lineup they were probably not wrong sadly ecil failed to make good with the time it had been granted critically their Engineers significantly underestimated how much effort it would take to produce software for its mini computers ecil said that they would not purchase any software from abroad but rather develop it all themselves operating system basic Fortran compilers text editors online debugging system IBM 1401 simulator update utility tape dump and so on not to mention the many software packages for users too engine testing for gas turbines database systems for policing criminal investigation data acquisition systems for the atomic energy Department packages for banking companies insurance companies Coal Miners Dairy Farmers and so on the reasoning for all this internal development was one patriotism and two the mistaken belief that software was Manpower intensive which played right into India's strengths to help produce these packages ecil recruited 100 software Engineers while also bringing in outside programmers from the Tata Institute and the Indian Institute of Technology kanpur even so it took three years to develop the software for the 312 and another three for the 316. by the time the software was done the computers are already out of date compared to imported Alternatives worst of all the programmers never gave any thought to upwards compatibility so you can upport your expensive software to newer computers as you would might be able to with an IBM system 360. considering India's present strengths and software and I.T these struggles are a little bit ironic like rain at your wedding day we share acknowledge the enormity of ecil's tasks they managed to deliver a product with limited resources and did it relatively on time furthermore having an available supply of domestic computers free of export controls was a big deal for the military and government particularly in cases where American export controls prevented the use of foreign Alternatives atomic energy Atomic weapons and defense for instance the Indian Air Force's novel air defense ground environment system was powered by three TDC 316 computers but at the same time we also need to acknowledge that the product was not competitive and caused far more than what had been originally estimated the TDC 316 first introduced in 1976 had a list price of 800 000 rupees this was nearly four times higher than the cost of an equivalent American System ranging from 170 000 to 200 000 rupees two hundred ninety thousand at the worst the cost of that aforementioned air defense ground environment system 30 million rupees most significantly the company failed to make Headway into the Indian private Market their products sold the best to captive government and public Institute markets ecil produced and sold a total of 98 computers from 1971 to 1978 of which 67 were TDC 312s and TDC 316s out of those 98 computers 94 were sold to government agencies police or universities the atomic energy Department Tata Institute and ecil itself accounted for 31 of those sales in the private Market ecil machines were under marketed overpriced and lacked substantial useful software Indian buyers so preferred imported alternatives to even weather the brutal import licensing system the value of imported computers nearly doubled between 1976 and 1977 and nearly doubled again A year later a clear indication of intense pent-up demand by 1978 it was more than clear that ecil could not compete despite having the second largest number of computer installations with 99 of the country's 446 computers the company ran substantial losses taking a peak loss of 16.5 million rupees in 1979 faced with this fact ecil's managing director a.s Rao could only promise that they might be profitable in 1981. 1977 heralded massive changes for the Indian computer industry all the way back in 1973 the Indian government passed the foreign exchange regulation act which codified into law the notion that foreign computer companies can only own 40 of their Indian subsidiaries so in 1975 the Indian government went back to Market leaders IBM and ICL to enforce the law ICL finally agreed to reduce their Equity holding to 40 percent but IBM again refused that same year the American Computer maker Burroughs agreed to enter into a joint venture with Tata consultancy having both ICL and Burroughs now operating in the country probably gave the Indian government the feeling that they had the upper hand during negotiations IBM offered to share equity in its non-computer subsidiaries to fund an Indian Science Center and to export more computers out of India but in the end the Indian government felt that they could not budge on the 40 foreign Equity cap demands without poisoning its relations with other multinationals so in 1977 IBM announced that it would exit India entirely this was a momentous event in the Indian computer industry IBM's exit created a massive opportunity that people sought to fulfill If Only They had the chance in 1977 the congress party which had run the country since Independence was replaced by a new coalition government in December 1978 prime minister murarji Desai requested a review of the country's microcomputer policies noting the slow progress in India's computer development the Review Committee recommended reforms political pressure eventually made it impossible to continue the old policy the doe announced that they would start granting licenses for indigenous entrants to enter the computer space the Government tried to carefully moderate licensees this was in part to save jobs from being automated away for instance computer industrial capacity was limited in applications related to accounting billing and invoicing machines in an effort to protect ecil and the millions of rupees the government invested into it the department also attempted to limit their licensees computer production and capacity to prevent overlap nevertheless a 1978 liberalization policy was the end for ecil ecil's managing director a.s Rao retired that same year he had been one of the biggest proponents of the self-reliance development strategy his retirement was an acknowledgment of the government's philosophical change in Direction a dozen Indian companies entered the market the most notable of which were Deli cloth Mills or DCM data products and Hindustan computers limited or HCL these companies would form the Cornerstone of an Indian PC industry at least for a while the Unix operating system rapidly gained popularity in India's ecosystem this is thanks to its wide availability and the fact that the Reserve Bank of India adopted it as a standard for large Indian Banks then in 1984 the government further liberalized the market capacity limits on computers were removed and you could import any computer under 500 000 rupees or 8 000 USD duty-free almost immediately the market doubled in size while unit prices halved ecil still exists today producing computers and other electronic items like voting machines for the government but the company's Glory Days has a Leading Edge computer maker are long gone the fall of the Indian computer is a story of misplaced economic patriotism ecil single-minded pursuit of domestic self-reliance was admirable but ultimately mistaken computers were a fast-moving technologically advanced field populated by well-funded players with global reach yet with an exception of a single trip to Japan's Fujitsu in the 1960s neither managing director Rao nor ecil's other senior managers kept track of what was going on outside of India they knew nothing about what the market actually wanted in the end the industry swept them by rendering India's national champion and its products irrelevant all right everyone that's it for tonight thanks for watching subscribe to the Channel Sign up for the newsletter and I'll see you guys next time

Channel: Asianometry

Views: 195,015

Keywords: asianometry

Id: IZGARNV4Zuo

Length: 21min 13sec (1273 seconds)

Published: Thu Jul 13 2023