But when Nathan Road switches from time-sharing to ownership, it will buy from R&S its software and a Point 4 minicomputer identical to the one it has been using on a time-sharing basis. One of the data lines linking the two companies will also be left in place, so R&S can continue to provide maintenance support, troubleshooting the Nathan Road system by means of a terminal.
This kind of arrangement is becoming increasingly common, with many service bureaus beginning to function as original equipment manufacturers. They will purchase hardware and package it along with their own software for sale to clients as a complete -- or turnkey -- system.
Swarth did not find time-sharing more cost-effective than ownership; rather he saw the bureau's service as a useful intermediate step. But some companies -- even with their number dwindling as microcomputers become more powerful and affordable -- see time-sharing as the most economical way to get a job done. Most users who find a dollar advantage in time-sharing are, like Kelly Goff, batch customers who have routine tasks to perform that require more memory capacity or data processing expertise than they would care to purchase or manage.
Goff, owner and president of Kelgo International Ltd., a consumer electronics wholesale operation based in Atlanta, turned to a local service bureau after two separate attempts at leasing minicomputers. Neither of the leased machines gave him enough memory to maintain and classify the lists of customers and prospects that form the basis for Kelgo's monthly, 6,000-piece direct mailings. "They just weren't fast enough or efficient enough," says Goff, who now pays the bureau from $1,000 to $1,200 a year for processing, labels, and a detailed breakdown that shows whom he is reaching, by account number, zip code, and purchase history.
"They have software that we couldn't possibly afford, software that allows us to milk our data in a multitude of ways," Goff says. "And besides, with the service company there are no hidden expenses and no headaches. I just wish I could run the rest of my business that way."
Goff does, in fact, run one other part of the Kelgo operation on a batch basis. The bureau also handles the company's monthly 15-person payroll at $21 a run, less than a third of what Goff estimates it would cost him to do it himself.
In weighing time-sharing against purchase, consultant Walter Ulrich warns that it is still a mistake to discount either the price or the headaches of computer ownership, although both have abated considerably. "One of the miscalculations that people make is in thinking that, if they invest $25,000 in a computer, their expenses and their problems will be over. Too frequently it turns out that all they ever get out of the system is frustration, aggravation, and a half-million-dollar headache." Buying a Material Requirements Planning System based on the best techniques available may, for example, be ill-advised, unless your inventory management conforms to the same exacting standards. If it doesn't, you may spend a lot of time and money changing your business procedures to conform to system requirements.
Robert Underwood, controller of the Hoosier State Bank, in Hammond, Ind. says that his institution, an average-size community bank with assets of $130 million, was fleeing another kind of headache in 1976, when it decided to give up its in-house computer system and hand over its processing chores to a batch service bureau. His problem with ownership, he says, was personnel. Not only did the bank's data processing staffers turn over frequently, they were often openly antagonistic in their dealings with other bank employees. "We couldn't find people who knew the banking business," says Underwood, "and the ones we did hire weren't interested in hearing the bank's side when issues arose."
Underwood is now considering another try at ownership. But this time he is putting only some of his operations on his own equipment. He recently purchased a Radio Shack microcomputer and off-the-shelf VisiCalc software, modified to process the records of discrepancies of individual tellers. The price for the entire system, including software modification, was about $7,000, cheaper, in the long run, says Underwood, than any quote he received through a service bureau. But high-volume tasks, such as keeping track of customer checking accounts, savings accounts, and certificates of deposits, would require a more extensive investment and another try at managing a data processing staff. So for these jobs, Hoosier will continue to use its local service bureau.
Mixing time-sharing with in-house systems may, in fact, be the wave of the future. At Prism, a $20 million subscription television service in Philadelphia, payroll, accounts payable, general ledger, and generation of various financial statements are handled on a batch basis by one service bureau. Film inventory management -- a complex process requiring the tracking of myriad details for each film-takes place on terminals that are on-line to another bureau. And the company's vice-president for finance and administration, Donald Heller, has just ordered a microcomputer so he can construct his own financial models. "There are a lot of technologies out there," says Heller, "and you have to look at what each on can do for you."
