An in-depth analysis of how word processing will reshape the corporate office
Editor's Note: This article originally appeared in the June 30, 1975, issue of BusinessWeek.
The office is the last corporate holdout to the automation tide that has swept through the factory and the accounting department. It has changed little since the invention of the typewriter 100 years ago. But in almost a matter of months, office automation has emerged as a full-blown systems approach that will revolutionize how offices work.
At least this is the gospel being preached by office equipment makers and the research community. And because the labor-intensive office desperately needs the help of technology, nearly every company with large offices is trying to determine how this onrushing wave of new hardware and procedures can help to improve its office productivity.
Will the office change all that much? Listen to George E. Pake, who heads Xerox Corp.'s Palo Alto (Calif.) Research Center, a new think tank already having a significant impact on the copier giant's strategies for going after the office systems market: "There is absolutely no question that there will be a revolution in the office over the next 20 years. What we are doing will change the office like the jet plane revolutionized travel and the way that TV has altered family life."
Pake says that in 1995 his office will be completely different; there will be a TV-display terminal with keyboard sitting on his desk. "I'll be able to call up documents from my files on the screen, or by pressing a button," he says. "I can get my mail or any messages. I don't know how much hard copy [printed paper] I'll want in this world."
The Paperless Office
Some believe that the paperless office is not that far off. Vincent E. Giuliano of Arthur D. Little, Inc., figures that the use of paper in business for records and correspondence should be declining by 1980, "and by 1990, most record-handling will be electronic."
But there seem to be just as many industry experts who feel that the office of the future is not around the corner. "It will be a long time—it always takes longer than we expect to change the way people customarily do their business," says Evelyn Berezin, president of Redactron Corp., which has the second-largest installed base (after International Business Machines Corp.) of text-editing typewriters. "The EDP [data-processing] industry in the 1950s thought that the whole world would have made the transition to computers by 1960. And it hasn't happened yet."
But everyone agrees that office systems are coming. So the real question is: How does American business get to George Pake's office of the future when many companies still are having real trouble changing their offices to accommodate the first generation of standalone editing typewriters?
Getting there means finding the answers to a host of very complex questions. Can desk-top terminals be made "friendly" enough so that executives will use them? Should a lot of powerful machines be moved together with central libraries and thus break up traditional working relationships? Will office systems get needed computer power by depending on the machines already in EDP centers doing accounting and financial work? Says Pake's boss, Jack E. Goldman, Xerox chief scientist: "I don't think anyone can really know which is the way to go now."
If the office of the future is a collection of these electronic terminals linked to each other and to electronic filing cabinets, "it will change our daily life," Pake says. "And this could be kind of scary." This is what most concerns Pake and a growing number of other researchers and users. "We have just really discovered the enormity of the problem," Pake admits. "How well we succeed," he says, "depends on how well we understand the human interface and the thought process as they go through the daily work process."
To most planners, the task is even bigger than it was in the early days of the computer revolution. "This is a tougher job of planning than data processing," says Robert B. LaDue, IBM's marketing director for word processing systems. EDP initially zeroed in on accounting applications, he says, and it did not have the broad effect on people that word processing, which reaches everyone, will have.
Some in the business bridle at such assertions. "This scare talk about drastic changes in the office structure, which is worrying potential users, is an IBM misconception," declares Robert Hendel, 32-year-old president of LCS Corp., a small supplier of word processing systems. "IBM tries to make word processing complex so that people will think they need an IBM to help them," he maintains. "But that kind of talk is just gobbledygook."
Just for the present, Hendel may have a point. Most office automation products are being sold as stand-alone equipment, machines that operate independently and are not connected to other machines. This provides a secretary, for example, with a more productive typewriter. But this hardware is only the first step toward the office of the future. Gaining the most from automation demands that the new office machines be linked together to form integrated systems. And few would argue that setting up such systems without disrupting an office is going to be a simple task.
Undoubtedly it will be Xerox and IBM that will find the way. "The entire industry knows that the office environment is moving toward the integrated system, but it will be hard to define," says Jonathan Pugh III, marketing head of Lexitron Corp., a builder of display text editors. "IBM and Xerox will dictate the future because of their marketing power," he says. Timothy C. Cronin, president of Inforex, Inc., an office-equipment supplier, agrees: "With IBM and Xerox pouring out $1.5 billion yearly in R&D, they will control the pace of technology in their interest."
The long-anticipated battle between the two giants will occur in this market. And it could be difficult for either of them to control the pace of change. "IBM and Xerox are jockeying for position now, and the battleground is the office," Cronin declares. "How they plan to attack will unfold over the next two years, and it will be one of the most significant factors shaping the office of the future. "
The Struggle for Cost-Control
Word processing was used originally by IBM as a marketing umbrella for its broad line of office products, and some people still call it a "buzz word." The definition that makes most sense is that word processing (WP) is the manipulation of words, sentences, and paragraphs by advanced hardware, while data processing (EDP) is the manipulation of numbers. But even if the definition is not sharp, most everyone agrees that WP is sweeping into the office now and will be the springboard from which the office will automate.
Word processing is coming on strong because businesses no longer can afford the custom approach to doing office work. Paperwork is growing explosively, and in the traditional "one-on-one" office arrangement—the secretary-boss combination—productivity is largely dependent on how fast the secretary can move her hands and feet.
"Costs in the office are running uncontrolled," declares Alan Purchase, senior industrial economist at Stanford Research Institute, who recently made a major study of future office equipment markets. "Where office costs used to be 20% to 30% of the total in a company, they have now grown to 40% to 50% of all costs." Rising salaries and demands to process more information are growing at geometric rates. IBM says that the average secretary's salary is 68% higher, and the cost of turning out a business letter is 40% more than it was 10 years ago.
More important, Purchase says, "the current recession has brought a real awareness by companies that they have to identify and control office costs and improve productivity." A Quantum Science Corp. survey showed that while the recession had forced a cut in overall office spending, it was also responsible for increasing text-editing typewriter installations. Nearly one-fifth of all offices surveyed, and 39% of the larger ones, either planned or had recently added automatic typewriters.
But the office's productivity problems have been developing for a long time. "Many offices are not even held accountable for productivity," notes David L. Holzman, Xerox' market development manager. "In studies we've made, 50% of all offices are just a part of the overhead." Further, the shift of the U.S. economy to service-based industries (they will employ 47% of all U.S. workers by 1980) and the growth of clerical employees are colliding with soaring clerical labor costs, growing shortages of skilled personnel, and changing social attitudes.
"This climate is almost forcing the revolution in the office," declares Robert E. Verrando, marketing chief for Xerox' Office Systems Div. But word processing is a tough sell, particularly since it so often changes the traditional secretary-executive relationship. "The biggest problem we face is the office wife," says Lexitron's Pugh. "She likes giving total loyalty to one boss, and he likes getting it."
But increased productivity from the addition of new hardware requires restructuring and reorganizing the office. To many, the willingness of office workers to make such changes and to discipline themselves to a system is the major factor in determining how quickly WP catches on.
But business may not be able to wait. "People will adapt nicely to office systems—if their arms are broken," says William F. Laughlin, IBM vice-president, only half facetiously. "And we're in the twisting stage now," he adds.
Top managements have to look at the cost of handling paperwork in the same way that they view the factory environment and data processing, says Pugh of Lexitron. So far, they have not. And this is why the service sector shows high annual increases in cost—in the 5% to 7% range—while annual unit labor costs in the manufacturing sector steadily decline from a very low base.
Factories achieve their cost savings by investing capital to replace labor in production. "But we haven't brought technology to bear on the office," declares Robert J. Potter, president of Xerox' Office Systems Div. "We have invested only peanuts in capital equipment for the office." Investment in capital equipment per office worker is only about $2,000 annually, far lower than the $25,000 spent for each manufacturing employee, figures SRI's Purchase. But he sees the amount being spent annually on the office per white-collar worker growing to $10,000 or more by 1985. This would produce a significant market. "There's some speculation that WP will be bigger than data processing in 10 years," says James N. Mills, president of Litton Industries, Inc.'s Royal Typewriter Co.
Lifting Productivity Word processing began quite accidentally and inauspiciously in 1964 when IBM introduced its MT/ST (for magnetic tape, Selectric typewriter). IBM saw it only as an entry into the automatic letter writer market (repetitive typing of form letters), and it bravely forecast that 6,000 would be sold. But what turned the MT/ST into a smashing success was its use instead as a text editor. Secretarial productivity was vastly increased, since a letter had to be typed only once. This was done by capturing keystrokes in electronic form and storing them on the tape for fast, precise replay. Revising or correcting is done by typing over the word or sentence to be changed, with the machine rerecording the tape at that spot. There is also space on the tape to insert words. The mechanical text editors, which cost between $5,000 to $13,000, have most of the market today.
But sales are growing fastest in a second generation stand-alone model, and it is happening without the marketing muscle of a Xerox or IBM. These units, most of them produced so far by Lexitron and Vydec Corp., have a TV screen to display a page of text. The keyboard is separated from the typewriter so that a page can be typed automatically while the operator starts work on the next page.
The display text editor is catching on fast, even though it costs nearly twice as much, because it is much faster and easier to use. What the operator types shows directly on the screen rather than on a sheet of paper. Once the document on the screen is correct, the operator pushes a button to store the document in a tape or disk memory and to print it out on the typewriter.
Shipments of all editing typewriters have been growing at the rate of nearly 50% annually. Estimates of total units in the field vary widely, but it could hit 300,000 by the end of 1975. SRI's Purchase estimates that by 1981 the total will reach 910,000 or a "very strong average annual growth rate of 23.3%." The value of annual shipments should triple to more than $1.3 billion.
Before text can be edited on a word processor, it has to be originated, and the best way to do it still is by using dictating machines. But this has been a slow growth business, since most executives either need to write material in longhand or they like the idea of dictating directly to their secretaries for status reasons. "Even today, only 26% of the people who should use a dictating machine actually use it," says Gene W. Milner, president of Lanier Business Products, a major supplier.
But word processing has focused new attention on dictation because IBM and others feel it is a key to the WP center concept. Because of better new products and the emerging WP market, sales of dictation equipment will grow from $161 million in 1973 to $244 million in 1977, according to SRI.
Other techniques are being worked on to augment or supplant dictation equipment, but these developments seem to be well down the road. Optical character recognition (OCR) equipment, which can already automatically read typed text and convert it into machine-readable data, is getting better all the time. Some WP users already are considering it, but the main stumbling blocks are its high cost and the number of errors that OCR still makes.
Another part of future office systems is information storage and retrieval, which is now "very archaic and the most feeble" of all the office functions being handled independently, says Xerox' Goldman. "We don't know how this will shake out," he says, "but we do know that storage will be other than paper." The replacement for the filing cabinet could be magnetic or optical disks, and "don't rule out microfilm yet," he adds.
The soaring cost of paper has caused a surge of growth in the use of microforms (microfiche and microfilm), an older replacement for the filing cabinet. Bell & Howell Co.'s Richard L. Miller sees this market growing from today's $700 million to $2 billion by 1980 as companies begin using microforms for active business records as well as archival records.
But ADL's Giuliano is less sanguine: "In many ways microforms are inferior to paper. Special readers are required, images are poor, and they are hard to manipulate and can't be erased or annotated." He sees them as an interim solution.
Most WP equipment developed so far is designed to move information around faster inside the office. But the office also is gaining increasingly powerful links to the outside world via facsimile equipment. "After decades of high hopes and low performance, facsimile finally appears to have taken off in general business communications," International Resource Development, Inc., says in a recent study. And it estimates that Xerox accounts for 60% of the installed units and has 80% of current shipments. In the past two years, fax installations have more than doubled from fewer than 50,000 to more than 100,000 units.
Xerox expects to keep its momentum going with a new plain-paper Telecopier that combines a laser and xerography to send documents over ordinary phone lines at the rate of two minutes per page. "If you went to the top 100 companies, there would be a 50-50 chance that they'd have some sort of electronic mail—and that's just Xerox gear," says David Klein, Xerox' facsimile marketing head. "Some users have enough Telecopiers now—Washington law firms, for example—that they order one just like a phone."
Today's word-processing equipment exists largely as a conglomeration of stand-alone machines, each developed to do a specific task and not linked to other office equipment. Now the first links are just beginning to be made, merging the stand-alone units into embryonic office systems and leading on toward the office of the future.