Werner Frank

Introduction

Werner L. Frank, born June 4, 1929, in the small southwestern German town of Eppingen, was a pioneering figure and longtime contributor to the United States and international computer industry. In 1937 his family, which was Jewish, immigrated to the United States to escape Nazi Germany. Frank had early exposure to the young field of digital computing serving in the U.S. Army in the early 1950s. His education and work in computing continued as a graduate student at the University of Illinois as he programmed on the famed-ILLIAC digital computer, at his first professional position, on the technical staff at Ramo-Wooldridge Corporation beginning in 1955. In 1962 Frank and two Ramo-Wooldridge colleagues left to launch Informatics General Corporation (hereafter Informatics). Informatics rapidly became a prominent provider of computer services to government, corporate, and other organizational clients. Informatics also became a path-breaking early producer of software products in the 1960s—refining and selling identical code as a package to multiple customers. For a number of years, the firm’s Mark IV was the leading software product in the world and defined this early industry that is now dominated by such corporate giants as Microsoft, SAP, and Oracle.

Family and Ethnic Background

Werner’s father, Arthur Frank, was born in Eppingen, a small town near Heidelberg in the state of Baden-Württemberg, on January 19, 1885. In 1928 Arthur married Bertha Weingartner, who was from Bretten, a small neighboring town. Werner remembered his family environment in his early childhood as stable, secure, and steeped in Jewish-German tradition. The Frank family—Werner, his parents, and his younger sister Hilda—communicated in a Jewish-German dialect often referred to as Judendeutsch, or Judeo German.[1]

The ritual of the preparations for and engagement in the worship of the Sabbath were deeply engrained as some of Werner’s earliest memories—from his mother’s Thursday bread making, the formal Friday dinner, and home religious service to the Sabbath services at the town synagogue on Saturday morning and formal mid-day Saturday meal. There were only twelve Jewish families in Eppingen, and it was a very close-knit Jewish community. While worship and tradition dominated family life, Werner later learned from his parents that discretion and avoiding conspicuous “objectionable” behavior (to the dominant non-Jewish majority of this 3,500 person town) was ever present for the Franks and the other Jewish families. The Frank family and other Eppingen Jews made efforts to blend in as much as possible, and to distance themselves from their Eastern European Jewish brethren.[2]

The Frank family was comfortable, but not wealthy. Arthur Frank had excelled throughout his early schooling—studying geography, arithmetic, natural history, French, German, and music. At the age of fifteen he followed in his father’s footsteps to begin as an apprentice in the grain business. Arthur Frank volunteered and served in the German Army during World War I, before becoming a successful grain and feed merchant.[3] The Frank family’s comfortable existence, however, was shaken by the Nazis’ rise to power. While some non-Jews in Eppingen remained their friends and continued to treat them well, others harassed and discriminated against the Franks and the town’s other Jewish families. Werner Frank remembers as a seven-year-old cheering out the window at a procession of Nazi soldiers marching to music on the street outside their home. His parents did not stop him, or let him know what was wrong, but soon the harassment and rising fear of what might come led them to make plans to leave their nice house and the town they had loved to immigrate to the United States.[4] Just like the apparent “parade,” much of what was happening was unknown to young Werner, though by his last couple years in Germany he did recall his non-Jewish friends withdrawing from playing with him and his sister.[5] Ordinary German citizens were pushed to participate in discrimination, though he did recall exceptions. His third grade teacher stood out in refraining from making him salute “Heil Hitler” when they met on the street, and was one of the people his parents referred to as the “good Germans.”[6]

Youth, Education, and Developing an Identity in America

The rise to power of the Nazi party in Germany in January 1933 resulted in ever harsher institutionalized discrimination against Jews with each passing year. The escalating oppression reached a tipping point for Arthur Frank when the economic boycott in the mid-1930s prevented him from buying grain wholesale or selling it retail—his business was rendered worthless and he had no way to earn a living. He quickly investigated the process of moving his family to the United States. A special affidavit was needed to emigrate. It required a sponsor in the U.S., a means test, and mental and physical tests for the whole family. Germany restricted the amount of currency transfers and also heavily taxed all transfers. Drawing on the help of cousins—the Jonas Gelder family of Michigan, who officially sponsored the Franks, and the Alfred Maier family of New York, which temporarily transferred funds into an account under Arthur Frank’s name—the Frank family was able to move to the United States in late 1937.[7]

The Franks moved to the Hyde Park neighborhood in Chicago, a segregated area near the University of Chicago where only certain blocks were open to blacks or Jews. The Great Depression had economically crippled the nation and jobs were scarce in the late 1930s. Arthur Frank drew on a family connection to secure a $12/week laborer’s job with a paper distributor.[8] Despite his experience in Germany as a successful businessman, he would be a blue-collar wage earner the rest of his working life. Both Werner and Hilda worked throughout their school years to contribute to the struggling household finances. Werner Frank delivered the Saturday Evening Post and Ladies Home Journal, and later worked as a delivery boy for cleaners and florists, before graduating to assembly line leather factory work in high school.[9] Frank still found time to be active in scouting, and to play “kick the can,” street baseball, and other games with neighborhood friends.[10]

Throughout Frank’s youth in America, religion remained central to his life and he always observed the Sabbath, attended weekly synagogue services, and continued Hebrew and Judaic studies. His neighborhood was largely Jewish and most of his friends were of Jewish ethnicity and faith. He was active in the Jewish Youth League (JYL) while in high school, and he became president of the Hyde Park Chapter of the JYL. He attended a number of JYL camping trips, including Camp Avodah in Buchanan, Michigan. In 1946 he was a counselor-in-training and in 1947 he served as a counselor at this summer camp—which included several weeks of work as Victory Farm Volunteers on nearby Michigan farms. This camping experience further solidified Frank’s Jewish identity. JYL experiences in high school were a critical part of his social life and also were his first opportunities to exhibit leadership.[11] Though his German heritage was meaningful to him later in life, Frank’s identification with Judaism, and as an immigrant Jew from Europe, was far stronger. After he retired, Frank retraced his German roots and he self-published a large family history book. However, Frank’s Judaism and support for Israel, rather than his German heritage, was what was central to his adolescence, network of friends, education, adult social life, and many of his retirement activities.[12]

In school Werner developed a strong interest in mathematics and statistics, despite being told by his Jewish high school math teacher that, given discrimination, there was no place for Jews in the U.S. insurance industry (a major employer of college/university mathematics graduates).[13] Frank excelled in mathematics throughout high school and was a member of the school’s elite mathematics club, which placed second in a Chicago-wide mathematics contest.[14] Frank received a scholarship to Illinois Institute of Technology where he majored in mathematics and minored in education and economics—choosing education as one of his minors because schools were the other major employer for mathematics graduates.[15]

Military Service, Work, Social Life, and Early Adulthood

Werner Frank believes he owes everything he later accomplished in the computer industry to his military experience and training.[16] This set him up for the valuable educational and work opportunities that followed. In the summer of 1952 Frank joined the U.S. Army and was briefly stationed at Fort Meade, Maryland, before moving to Fort Bliss in west Texas.[17] At Fort Bliss, he gained valuable experience in its computing laboratory, where he worked on a Bell Relay Computer and an IBM 604 Calculator. These were less powerful systems than Remington Rand’s UNIVAC and several other million dollar machines that had recently been developed, but provided a rich basic education in computer logic to Frank. He soon moved into a unit that worked on debugging electrical equipment for an air defense system.[18]

Prior to the military, Frank had no notion of what a computer was and how such a system could be useful. Upon completing his military service in June 1954, he had considerable computing skills that helped set him apart in this rapidly growing field as the computers first began to be used for business applications in the mid-1950s. Frank immediately secured a job at Statistical Tabulating Services Company in Chicago for the summer of 1954, where he worked as a punch card operator for several months and learned to wire various computer boards.[19] Statistical Tabulating Services was one of the early computing service bureau corporations that competed with giants such as IBM’s Services Bureau Corporation. Such bureaus sold computer time, and basic data processing services. Early on he “botched” a major card-sorting job and was temporarily fired, before being quickly called back—an experience that taught him a valuable lesson about attention to detail in the computing field.[20] Frank’s strong grades and his experience in both the military and at Statistical Tabulating Services helped gain him admittance and a research assistantship to study at one of the premier institutions for digital computers in the United States, the University of Illinois. He began this MS program in mathematics (computer science did not yet exist) in September 1954.[21]

Back in the early 1940s the U.S. Army funded a project at the University of Pennsylvania’s Moore School of Electrical Engineering, led by J. Presper Eckert and John Mauchly, to build a digital computer to compute ballistic firing tables.[22] This general-purpose programmable computer, the Electronic Numerical Integrator and Computer (ENIAC), became the first meaningful digital computer in the United States when it was completed early in 1946. Brilliant Hungarian-born mathematician John von Neumann consulted on the latter stages of the ENIAC project and wrote up a famous report on plans for its successor in 1945.[23] This report defined the stored program concept—that computer memory would store both data and instructions, what became known as the von Neumann Architecture (the dominant architecture for computers ever since).[24] In the early 1950s von Neumann led the effort to build such a computer at Princeton’s Institute for Advanced Study (IAS), a system that was fully operable in the summer of 1952. In the early to mid-1950s roughly a half dozen government laboratories and defense research contractors built computer systems based on von Neumann’s report—these included Aberdeen Proving Ground’s ORDVAC, RAND Corporation’s JOHNNIAC (named after von Neumann), and Los Alamos National Laboratory’s MANIAC.[25] The seemingly unlimited budgets of these defense entities facilitated the creation of these million-dollar computer systems. Only one pioneering university stood out for matching this effort and investment (and was among the first with a working system). The University of Illinois’s ILLIAC was completed and operable by September 1952.

Many of the greatest programming minds in the world, including the United Kingdom’s Maurice Wilkes, David Wheeler, and Stanley Gill had spent considerable time at the ILLIAC laboratory at Illinois in the years just prior to Frank’s arrival.[26] In addition to having access to unparalleled hardware, Frank’s professors exposed him to the pioneering coding concepts of single-address symbolic programming notation and the utility of subroutines.[27] Frank took a number of courses in hardware design as well as numerical data at the University of Illinois.[28] On the ILLIAC he learned to program and refine code to maximize efficiency. He also learned that problems with computing systems were almost always the result of programmer errors—forever instilling in him the value of carefully designing, refining, and checking code, as well as the great value of tightly coded subroutines.[29]

In graduate school, Frank became active in the Hillel Foundation, the Jewish student organization on the University of Illinois campus. It was there that he met Phoebe Ann Mannel in 1954. Unlike his high school and college girlfriend, who like him was an immigrant, Phoebe was third generation Jewish-American. Frank was taken by her beauty, intelligence, quick wit, and decisiveness and they quickly fell in love. They were married as he concluded graduate school, and Frank’s first job presented an opportunity for their California honeymoon.[30]

As Frank was wrapping up his MS degree in early 1955, he began exploring employment options at a number of computer companies (IBM, Burroughs, Remington Rand) and aerospace firms (Hughes, Lockheed), the latter being the earliest industry in the U.S. to adopt computers. A fortuitous meeting with Dr. Walter Bauer, a contact of one of his professors, led Frank to sign on as a numerical analyst and programmer with Ramo-Wooldridge Corporation where Bauer headed the Computation and Data Reduction Center. Ramo-Wooldridge, located in Los Angeles, the epicenter of the nation’s aerospace and defense industry, had secured the contract for management and systems integration for the development and deployment of the Air Force’s Intercontinental Ballistic Missile Systems program. Frank’s primary job in his early years at Ramo-Wooldridge was to provide numerical analysis and programming services (checking and refining code) for engineers who monitored contractual efforts of the many different Air Force aerospace suppliers.[31]

Within several years Frank was promoted to become the head of Ramo-Wooldridge’s Numerical Application Section, the first managerial assignment of his career. He had eight technical staff members who reported to him. Ramo-Wooldridge was academically oriented, and Bauer’s credentials and predilections further instilled this atmosphere of valuing research within the Computation and Data Reduction Center.[32] Frank had the rare luxury in a corporate setting of being able to use valuable computer time on the UNIVAC, and later the IBM 704 and IBM 709 systems for his own research, and he published a series of articles on numerical analysis. He was also very active with professional organizations and computer user groups. He was an early member of both the Association for Computing Machinery and the IEEE’s subcommittee on Large-Scale Computing. He frequently attended the meetings of IBM’s user group, SHARE, and Sperry-Univac’s user group, USE, where he had interaction with a variety of early computer users. This gave him broader perspective on the fast-growing computer industry, and the emerging computer services industry.[33]

In addition to Frank’s Jewish heritage, which he has identified strongly with throughout his life, his experience in the military, and the opportunities he had, instilled in him a strong sense of and appreciation for American freedom and American patriotism. His continuing success in the computer industry furthered this as he viewed the United States as a land of great opportunity. His German roots were never forgotten, but more dominant in his life was his identification as an American and Zionist. In the half decade after their marriage, Werner and Phoebe Frank had two daughters and a son: Judi, Dori, and Daniel. Despite his long hours and strong focus on his career, Werner always maintained great dedication to his family and religious practice.[34]

An Entrepreneurial Turn

In 1958 Cleveland firm Thompson Products Corporation, a longtime leader in producing automotive engine valves, acquired Ramo-Wooldridge Corporation to form Thompson Ramo Wooldridge Corporation, Inc., or TRW. Frank remained a technical staff member of TRW’s new Ramo-Wooldridge Division and this acquisition did not meaningfully disrupt any of his work. One of his key work assignments after the merger was overseeing the development of a National Military Command System for the Department of Defense—a large graphical display intelligence system. For this work Frank spent a number of months working in Washington DC. Despite the fact that his work carried on with much continuity, a near-term, self-imposed change would alter the trajectory of his career.

Walter Bauer, a gifted Ph.D. engineer and experienced manager at TRW, was struck by the slow movement of the giant mainframe computer firms—IBM, Sperry-Univac, and Burroughs—into programming services and systems integration (complex work to enable large-scale hardware and software to work together efficiently and effectively as a system).[35] By far the largest programming and systems integration task in the world in the early post-World War II period was the Semi-Automatic Ground Environment (SAGE)—a radar and computer air defense system. IBM provided much of the computer hardware for SAGE in the second half of the 1950s, but passed on the contract for SAGE programming and systems integration. Ultimately the United States Air Force had no choice but to ask the largely Air Force funded nonprofit research and development corporation, RAND Corporation, to launch a new division to program and integrate SAGE. This initially was RAND’s System Development Division, but was soon spun off as a new nonprofit research corporation, System Development Corporation (SDC). Given the enormity of the SAGE programming effort, SDC quickly grew larger than the sizable RAND Corporation. Ultimately thousands of programmers worked for SDC on SAGE, making up a substantial portion of the total programmers in the entire country in the late 1950s.[36] With SDC headquartered in Santa Monica, California, Bauer likely took note of what was happening with SDC, and was definitely aware of several much smaller for-profit programming services start-up firms of the mid-to-late 1950s, C-E-I-R, Computer Usage Corporation (CUC), and Computer Sciences Corporation. From Bauer’s perspective the tremendous need for programming services and integrating complex computer systems far outweighed the nation’s existing labor force for such work. In the earliest days of digital computing, programming was often merely an afterthought. In the second half of the 1950s and early 1960s only a handful of visionaries saw the importance and intense labor needs for programming in systems and applications, and even fewer acted upon this opportunity.

Bauer shared his perspectives with Werner Frank, who had witnessed the same phenomenon and learned of many of the great programming challenges outside of Ramo-Wooldridge through participating in the nation’s most prominent computer user groups SHARE and USE. Bauer envisioned leaving TRW to launch a computer services and systems integration start-up corporation, and in 1961 he asked two individuals whose technical abilities and leadership had impressed him to sign on as co-founders, Werner Frank and Richard Hill.[37] Hill had been a faculty member at UCLA and had been assistant director of the joint IBM-UCLA Western Data Processing Center before joining Ramo-Wooldridge.

Frank immediately saw the potential, and was flattered to be selected by Bauer, but leaving the security of being a senior technical staff member at TRW’s Ramo-Wooldridge Division was a “scary proposition.” He discussed it with his wife Phoebe, and with her encouragement and confidence in him, Frank chose the risky path of becoming an entrepreneur in pioneering a new technical field. The decision not only meant taking an initial pay cut, but also investing a portion of the modest amount of money the Franks had saved.[38] Hill, too, left the stability of TRW to join the venture. The resources of the three founders were far from sufficient to launch such a company. The availability of venture capital for an information technology start-up in the early 1960s was sparse. Bauer made proposals to several established computer industry leaders, but these fell on deaf ears. A new opportunity, however, arose early in 1962 when Bauer held discussions with his friend Erwin Tomash, who was just in the process of launching his first entrepreneurial venture. Tomash, as a Remington Rand sales manager in the mid-1950s, had sold computers to Bauer’s center at Ramo-Wooldridge.[39]

In the late 1940s, Erwin Tomash became an engineer at pioneering digital computing firm Engineering Research Associates, which was acquired by Remington Rand in 1952. In 1955 Remington Rand merged with Sperry Corporation, whose combined computer division became Sperry-Univac.[40] Shortly after this merger, Tomash left for a computer memory supplier, Telemeter Magnetics, where he quickly rose to become president. This firm was taken over by Ampex, a larger computer memory supplier, where Tomash served as a vice president before leaving to start his own company.[41] Tomash sought to take over a struggling division of Telex Corporation, which had both a faltering computer memory project as well as a struggling computer printer project in the works. He and several other secondary founders put up roughly $250,000 and raised $1,250,000 from banks for the new company, Data Products Corporation (soon renamed as Dataproducts).[42] Tomash proposed to Bauer, Frank, and Hill to start their enterprise as a wholly-owned subsidiary of Dataproducts Corporation—they would get Dataproducts stock in exchange for their modest initial investment (most of which came from Bauer), and Dataproducts would provide capital and infrastructure (insurance, legal, marketing, and back office support) for the launch of Bauer, Frank, and Hill’s enterprise, Informatics General Corporation.[43] Tomash’s past executive experience (and his risking a substantial amount of his own funds) enabled him to raise more than a million dollars from banks in a tough economic environment. Tomash’s experience also was attractive to Bauer, Frank, and Hill, as he served as an early mentor to these three entrepreneurs who had far less managerial expertise.[44] Bauer, Frank, and Hill agreed to Tomash’s proposal and Informatics General Corporation was born in 1962. Around this time, Bauer, Frank, and Hill approached Frank Wagner to leave North American Aviation to join the new venture. He signed on and rounded out the Informatics founding executive team.[45]

Informatics and the Early Computer Industry

Informatics’ capital requirements were a small fraction of the capital needs for its parent Dataproducts because of the nature of the computer services business. Computer services companies only needed to invest modest resources to develop proposals and bid for contracts, and only after receiving them would they scale up their labor force. In the initial phase—costing projects and securing contracts—geography, contacts, and the expertise of the small staff (at the start just Bauer, Frank, Hill, Wagner, and a secretary) was critical. In the next phase—as contracts were secured—successful project management and highly challenging systems integration work was essential. Located in Dataproducts’ initial headquarters of Culver City, California (but moving to nearby Sherman Oaks, California in 1964, and later Woodland Hills, California), Informatics was within the heart of the nation’s aerospace industry—metropolitan Los Angeles—providing a major geographical advantage over some of their few early competitors. Early Informatics contracts included the Jet Propulsion Laboratory (JPL) and Scientific Data Systems (SDS), allowing the firm to bootstrap and grow.[46] Frank’s leadership on the National Military Command System for Ramo-Wooldridge built invaluable respect with key figures within the defense establishment in Washington DC. This allowed Frank to take the lead, in 1963, in securing a major five-year contract with the Office of Naval Research (ONR) for U.S. Navy tactical data systems. The contract expanded over time and resulted in well over $1 million in revenue.[47] Bauer had tried to dissuade Frank from this complex undertaking, but it proved very beneficial to both Informatics’ reputation and the bottom line—and for Frank it proved to himself that he could be a highly effective salesman.[48]

With the ONR contract, Informatics established a Washington DC office. Frank led this effort and Informatics president Walter Bauer named Frank Vice President of Eastern Operations in 1963, while Frank Wagner became Vice President of Western Operations. Shortly after the Washington DC Informatics office was formed, Frank launched a New York City-area office, in nearby New Jersey.[49] Frank and his family relocated to New Jersey, and he helped the company to transition from a regional firm focused heavily on aerospace to a diversified national firm with a fast growing government services business. The geographical lines were less rigid than the type of business—Wagner oversaw the contracts with aerospace firms, and Frank all the federal government business. They both coordinated and sought out government and corporate clients in Europe and Asia. The company grew steadily from thirty-seven employees in 1963 to 357 employees by 1966.[50] By the latter year, Informatics was larger than CUC and C-E-I-R, but smaller than CSC and fellow 1962 start-up Electronic Data Systems, a Dallas, Texas, firm founded and led by H. Ross Perot that initially focused on facilities management—or taking over a firm or organizations’ entire data processing needs. In the mid-1960s Informatics added facilities management to their cadre of computer services businesses, but programming services and systems integration continued to be the firm’s core.

Hiring the right technical staff to carry out contracts was an organizational capability Informatics had from the start—Bauer had been doing this at Ramo-Wooldridge for years, and Frank and Wagner had substantial experience in this area as well. This drew in part on hiring staff away from some of the earliest firms to employ, and in many cases train, a substantial number of programmers and systems analysts such as System Development Corporation, IBM, and the major aerospace giants like Northrup Aircraft. There were close networks of aerospace industry programmers and systems analysts in which Bauer, Frank, and Wagner participated. These networks were in part spawned and perpetuated by leading software user group IBM SHARE, which was formed in Los Angeles in 1955 by aerospace industry users of IBM 701 mainframe systems.[51] Nevertheless, it became increasingly challenging as the domestic and international demand for programmers grew more rapidly than supply in the 1960s. The trade press frequently referred to this as the “software crisis” in the latter part of the 1960s and into the 1970s.[52] The greater challenge for Informatics, as Frank identified and presented to the firm’s Corporate Board of Directors in 1966, was the skill to obtain future contracts.[53] Securing future waves of contracts was necessary to avoid having technical staff “on the bench” rather than completing fixed-priced contracts or generating billable hours. Too many people “on the bench” could quickly eat up profits. Frank emphasized the need to avoid going after small contracts (which often were as much work to obtain as larger ones) and the long-term need to effectively hire additional managerial staff capable of developing proposals and negotiating complex contracts. Bauer, Frank, and Wagner had to do nearly all proposal generation and contract negotiations themselves in the company’s first half decade.[54]

The mid-1960s represented a time of fundamental change for Informatics as it helped pioneer a new form of software, and with it, an entirely new industry: software products. Most early software systems Informatics created by necessity were unique—such as Informatics’ ONR contract to develop tactical information systems. Increasingly in the late 1950s and throughout the 1960s corporations, and government and non-government organizations, began to use computers for more common, mundane work such as payroll processing, accounts receivable, accounts payable, and inventory management. In the mid-1960s a handful of pioneering programming services firms insightfully shifted to try to refine and standardize software code as a product—to sell the exact same code, for common applications, to multiple customers. Computer services firm Applied Data Research was the first to do this with a product called Autoflow in 1964, a product for automatic flowcharting to meet requirements for documenting software design and structure.[55]

Though ADR was the first to market with a software product, several other firms were developing software products simultaneously to ADR. One such enterprise was a small information technology unit of Howard Hughes’ firm Hughes Aircraft. In the early 1960s Hughes Aircrafts’ Hughes Dynamics Division acquired a tiny computer services operation (of roughly ten people led by John Postley), Advanced Information Systems (AIS), of the Burroughs Corporation. Hughes Dynamics’ AIS, under Postley’s leadership, soon created a custom file management program for Douglas Aircraft in 1962—Generalized Information Retrieval and Listing System, or GIRLS.[56] Postley sought to refine this custom software as a software product that went through several iterations between 1962 and 1963, MARK I and MARK II. The third iteration, MARK III, was under development in April 1964 when Walter Bauer decided to acquire AIS for Informatics. The time was ripe as Howard Hughes wanted to divest in this non-core business. With the deal, Informatics actually received $38,000 for assuming some modest contractual liabilities of AIS.[57] Bauer sought this acquisition because he insightfully saw tremendous possibilities for the future of software products. The marginal production cost of selling additional units of the same software code was negligible, so software products, unlike computer services, offered the potential of growing revenue far faster than a firm’s labor force. Growing a computer services business presented increasing managerial challenges as the labor force expanded, while software products potentially could scale up more easily and become more lucrative/achieve higher profit margins. There was, however, a downside. The upfront cost of perfecting code to the point that it could become a product, and building in flexibility so customers could customize it to a degree, was expensive. The economics were similar to making a new movie or developing a new pharmaceutical drug: initial development costs dwarfed unit production costs. Frank, like Wagner, was too busy running Informatics’ increasingly challenging computer services business to become heavily involved in the acquisition of AIS.

Bauer wanted to add a software products business and thought Postley and AIS was a great opportunity—he, Frank, and Wagner had known Postley for years and respected his programming and systems analyst skills. At the same time Bauer was cautious about overinvesting in the development of a software product.[58] While unit costs would be negligible, there was great uncertainty in the mid-1960s about what a customer would pay for a useful software product. Sometimes the giant computer firms had bundled in software to sell more hardware. This gave many in the user community the notion that software was free. Further, in the late 1950s and 1960s user groups such as SHARE and USE were mechanisms for sharing programs and subroutines, furthering the notion that software was free. IBM, which had more than 60 percent market of the computer industry, bundled all its software into hardware contracts (software was not priced separately) until the end of the 1960s. At that time, anticipated Department of Justice anti-trust litigation against IBM and pending competitor lawsuits led IBM’s leaders to announce the company would unbundle its software and price it separately.[59] This lent great momentum to the young software products industry, as it leveled the playing field and dispelled notions that software was free.[60]

Because Tomash initially opposed Informatics entering the software products business, Dataproducts was not an option to fund the heavy upfront software product development costs. MARK III, which was near completion at the time of the acquisition, was completed in 1965, but Postley and others recognized it had to be significantly expanded and refined to be a robust product. Postley estimated his team needed a half million dollars to develop MARK IV. He figured that he could sell it for $100,000, but with no history of any software product selling for even $10,000, Bauer and others on the Informatics leadership team remained skeptical.[61] Tomash suggested an alternative and highly innovative product development funding scheme: getting a small group of customers to also sign on as investors to receive royalties on future sales of the product. Between 1966 and early 1967 Postley and Informatics succeeded in raising $451,000 from several future corporate customers (for both the product and a modest royalty of future sales), including Prudential Insurance, Tidewater Oil, and Getty Oil.[62] Bauer and Tomash agreed to put up the final $50,000 from Informatics and Dataproducts. This was likely the first such funding mechanism in software products where early customers were formal investors. Postley and his team created MARK IV in 1967 and installations began at the sponsoring customers early in 1968.[63]

MARK IV was the most impressive software product on the market in 1968. A highly refined file management and report generation system represented a very useful tool for corporations and other large organizations—essentially it was a database system with the flexibility to generate many useful types of reports from the database. Informatics hired a consulting firm to research how to price MARK IV and then selected a price point in the middle of the suggested range to come up with its $30,000 price tag.[64] Informatics provided initial installation and testing at each customer site. By its third year, MARK IV had generated more than $6 million in revenue for Informatics and had begun to generate annual net profits. In 1973 MARK IV was generating $7.5 million in revenue and $2 million in net profit.[65] MARK IV was the emerging software products industry’s first runaway hit and demonstrated the strong viability of the software products industry. MARK IV’s sales and profits dwarfed all other software products of the late 1960s to mid-1970s and it was the first software product in the world to generate cumulative sales of $1 million, $10 million, $50 million, and $100 million. Informatics and MARK IV, more than any other firm and any other product, launched the software products trade, an industry that developed into a giant, achieving annual revenue of more than $200 billion by 2010.[66]

Tomash, who served as chair of the Informatics board, recognized Informatics was becoming increasingly diverse with its complicated array of computer services offerings and new software products business. This was different from the more straightforward core businesses of Dataproducts in computer printers and computer memory. The leaders of Informatics, Bauer, Frank, and Wagner had valued Tomash’s early mentorship and his generosity in making the firm’s launch possible, but increasingly wanted to directly benefit from Informatics’ success rather than just indirectly through shares of Dataproducts. In 1966, Tomash and the Informatics’ leaders reached an agreement and Dataproducts divested in Informatics in stages over the succeeding three years. Informatics ceased to be a subsidiary and was spun off as a completely independent publicly traded company by 1969.[67]

The arrival of software products did not obviate the need for computing services (or any of its major sectors, namely programming services, systems integration, and facilities management). For certain applications, many corporations and organizations needed custom code and standardized products could not replace the complex work of integrating large-scale systems. In the late 1960s and beyond, the number of firms in computer services expanded rapidly, both because of demand as well as the low barriers to entry in this industry. Computer services companies continued to outnumber software products companies by at least 2 to 1 throughout the 1970s and 1980s.[68] Most companies specialized in either computer services or software products. ADR, Informatics, and a handful of other firms stood out with major businesses in both fields. Overall revenue in computer services continued to be far larger throughout the 1970s, as both computer services and software products saw massive growth.

Under Frank and Wagner’s direct leadership, Informatics’ computer services business continued to thrive in the second half of the 1960s and into the 1970s. In the first five years of the firm, in addition to continuing substantial contracts for the Office of Naval Research and the Jet Propulsion Laboratory Informatics won major contracts to provide computer services to Western Union (for a message switching system), the U.S. Navy (for a tactical command and control system), the Department of State (for a Visa/Passport control system), Dean Witter (for a computerized accounting system), and RCA (as a subcontractor to provide a law enforcement data-telecommunications system for the State of California).[69] While both Frank and Wagner’s focus remained computer services, as part of the leadership team of Informatics they increasingly became involved in the larger strategic issues with the fast growing software products business as well. In particular, Frank secured one of the first customers for MARK IV after the initial investors, the Civil Aeronautics Board.[70] Informatics’ five-year plan in 1970 correctly predicted that within several years software products would generate more revenue than the firm’s various computer services businesses.[71]

Despite AIS (and the massive MARK IV revenue it eventually yielded), and some smaller acquisitions and joint ventures in both software products and services, Informatics was focused primarily on internal growth up until the early 1970s. Prior to that time the three leading officers, Bauer, Frank, and Wagner, were the principals involved in evaluating emerging acquisition and partnering opportunities. Frank, in particular, would create advanced models estimating how mergers, acquisitions, and more broadly any new businesses, would impact revenue, income, and cash flow. In the early 1970s Bauer pivoted Informatics’ strategy to focus more on growth by acquisition. In 1971 Informatics formed a separate company in partnership with Equitable Life, partially owned by Informatics and partially owned by Equitable Life, or “The Equitable.” Life insurance firms, like Equitable Life, had substantial data processing needs, and in most cases a vast internal data processing infrastructure. Equitable Life had approached Informatics with the idea of purchasing Informatics and entering the data services and software industries. New state laws (in this case New York) for the first time allowed life insurance companies to broaden into financial and information technology businesses. Bauer did not want to sell the firm and suggested a joint venture spin-off company as an alternative, to be called Equimatics (which would be a wholly-owned subsidiary of The Equitable). Werner Frank, situated in the New York City area and well versed in structuring deals, was appointed as the founding CEO of Equimatics at the end of 1971, and ceased to be an Informatics officer/employee.[72]

Early in 1972 Frank completed a major acquisition for Equimatics, the United States International, a Dallas, Texas-based software products firm that focused on the software tools for the life insurance industry. In the first few years Frank grew Equimatics rapidly to one hundred and sixty staff members and annual revenues exceeding $4 million.[73]

The “go-go years” of the late 1960s led to a huge run-up in share prices of software firms, much like the dot.com bubble three decades later.[74] The information technology stock bubble burst in 1970 (as it did in 2000), and Informatics’ capitalization plummeted in the early 1970s. As a result, three years after Frank left Informatics to become CEO of Equimatics, he investigated and began to orchestrate a deal to acquire Informatics. Informatics had $25 million in annual revenue but a capitalization of a mere $6 million as its stock dipped to about $3/share. The company appeared to Frank as a tremendous bargain for Equimatics. Frank negotiated with Bauer to make this a friendly acquisition, and in offering a substantial premium, Equimatics acquired Informatics in April 1974 for $12.47 million.[75]

Bauer and Frank had agreed to rename the combined firm Informatics, which was wholly owned subsidiary of The Equitable.Frank returned to the newly formed Informatics firm, which was privately held, and became executive vice president, second in command, and as he understood it, the anticipated successor to Bauer as future CEO. He moved back to the California headquarters after his decade in the New York City area. The following half decade brought a mixture of successes and failures as the private firm plowed profits back into the operation to develop new products and grow new businesses.[76] Soon the relationship with The Equitable became strained, until the parent finally agreed to divest in 1979 and Informatics again became a public company. Shortly thereafter Bauer, to Frank’s surprise and disappointment, restructured the management team and succession scheme and removed both Werner Frank and Frank Wagner from the board.[77]

Dating back to his Department of Defense contract work with Ramo-Wooldridge, Frank had been taken by the power of advanced graphics and individuals having personal interaction with computers (rather than turning over punched cards for computer operators to run in batch processing). As the first microcomputers became available in the mid-1970s, Frank recognized this as an inflection point for the computer industry—computers becoming personal tools—and encouraged Bauer to let him set up and run a “Micro” division. Bauer’s continuing resistance to this was the final straw for Frank and he decided to resign.[78]

Consulting and Sterling Software

Immediately after leaving Informatics in 1982 Frank formed a consulting operation, the Werner Frank Computer Group, to help contribute to the advancement of microcomputer software enterprises.[79] He had recently begun writing a regular column for one of the leading computer trade publications, Computerworld. In 1983 he published the book Critical Issues in Software: Guide to Software Economics Strategy and Profitability.[80] His writing further established his reputation and visibility as a software expert and helped Frank secure a range of clients. Frank also taught courses on microcomputers and Basic at Los Angeles-area colleges and universities.[81]

One of Frank’s early 1980s clients was MultiMate International, a small micro/personal computer software firm seeking to sell software products including word processing and spreadsheet applications. Frank helped the firm market these products, grow revenues, and expand the business. Frank was acquainted with the top management at one of the leading early personal computer software firms, Ashton-Tate Corporation and helped Multimate International negotiate a $20 million acquisition price when Aston-Tate acquired the company in 1985.[82]

An even more important client for Frank was Sterling Software, Inc. This company was founded in 1981 by two brothers Sam and Charles Wyly, and led by CEO Sterling Williams. Soon Frank was put in charge of its Systems Software Group, or SSG (for large-scale mainframe users). In 1985 Frank received a call from Walter Bauer asking if Sterling would be interested in acquiring its Answer unit, a struggling division of Informatics. This led to a meeting with Sterling Williams, Walter Bauer, and Werner Frank in which Williams proposed Sterling Software acquire the whole Informatics company. While Frank had been deeply disappointed by past decisions by Bauer regarding his removal from the board and not being allowed to launch and lead a micro division for Informatics, the two had remained in contact and outwardly cordial. Bauer was insulted by Williams’ proposition and talks quickly ended. Sam Wyly soon became very interested in following through on this acquisition. Wyly worked with famed junk bond financier Michael Milkin for a heavily-leveraged hostile takeover of Informatics. Both sides began a media campaign to win over shareholders. Through continually raising the offer until Informatics shareholders acquiesced, Sterling’s takeover of Informatics occurred later that year. It was a landmark leveraged buyout in the IT field, with Sterling, a company with annual revenue of only $20 million taking over a giant, Informatics, whose revenue by that time had reached roughly $200 million, for a purchase price of around $135 million.[83]

With this acquisition, Sterling’s SSG grew under Frank’s leadership, and for the first time in his career, he was rewarded with very lucrative stock options. By 1991 Franks SSG Division was generating over $100 million in annual revenue and became one of Sterling Software’s three largest divisions.[84] In 1994 Frank decided to retire from his operating officer position leading SSG, and for several years scaled back into semi-retirement and advised Sterling Software’s management on business development and strategy. He retained the title of executive vice president. For a time he returned to full-time work as he was heavily involved in orchestrating Sterling’s 1997 acquisition of Texas Instrument’s software division. In November 1998 Frank resigned as executive vice president. By that time Sterling had more than $500 million in annual revenue, 20,000 customer sites, and employed more than 3,500 people. In 2000 the third largest U.S. software company (behind Microsoft and Oracle), Computer Associates International, Inc., acquired Sterling Software for roughly $3.9 billion.[85]

Conclusion

Werner Frank was one of the true pioneers of the computer services and software products industry. He benefited from his introduction to digital computing in the U.S. Army and his opportunity to work on the ILLIAC computer (one of the most powerful computers in the world in the mid-1950s) at the University of Illinois in graduate school. His work at Ramo-Wooldridge provided rich opportunities and allowed Frank to further his strong business and leadership skills. When Walter Bauer selected Frank and one other colleague to join him launching a computer services firm, Frank made the bold move to sign on for this entrepreneurial venture, Informatics General. Informatics was one of the first significant providers of programming services and system integration and helped define and grow the emerging computer services industry. In the mid-1960s a key acquisition led Informatics’ pioneering move to add a software products business. Its MARK IV file management and report generator became the most significant software product of the late 1960s and 1970s. Frank provided key leadership to Informatics’ computer services business, and especially to its lucrative government computer services business. He saw the potential of microcomputers at a time when most pioneers from the mainframe and minicomputer eras saw the emergence of microcomputers as a curiosity at best—not a major business opportunity. Frank went on to make fundamental contributions to Sterling Software, which acquired Informatics several years after he left Informatics.

Notes