Sometimes history is tangible, something you can literally hold it in your hand. Like this 1922 document I ran across in our holdings. It very well may be the earliest formal outline of Cloud at IBM.
They didn’t call it Cloud in 1925. It was the Tabulating Machine Service Division (TMSD) in this proposal presented to IBM CEO Thomas J. Watson, Sr. But at its core, TMSD was Cloud – the provision of data processing capability to clients who couldn’t or wouldn’t invest in building an internal data processing infrastructure.
In this proposal, TMSD would target several opportunities in the data processing marketplace. It was to “be utilized for rendering Tabulating Machine facilities to non-users and the small concerns who are not sufficiently large to install Tabulating Machines, for taking care of peak load requirements of present users, and for rendering assistance to existing installations where special service is requested.”
In these cases, the thinking was that the clients would move to having machines put in when the business grew sufficiently large to warrant it. “The Service Department will supply the means of educating a future user to the benefits of Tabulating Machines, preparing them for the installation of equipment when the volume of their work amounts to sufficient to justify recommending the ordering of machines.”
In addition, TMSD would help preserve the existing client base, as “discontinued customers will be followed up actively,” and “those planning reduction of expense through the elimination of machines or changes in methods will offer special opportunities to the service salesmen.”
The price of those opportunities was certainly right. The proposal estimated the cost for generating a single report of a thousand cards, up to 4 sorts and 1 total, was $5.68. IBM’s profit? One third – $1.42. The proposal even offered the 1920s version of sending data to the Cloud … it included retaining the client’s punched cards for a year.
The TMSD concept took a decade and a global economic collapse to come to fruition, but in 1932, at the height of the Great Depression, IBM opened the first of what is now called Service Bureaus. Watson, Sr., later recalled that the Depression re-prioritized the original business rational for the service – in 1932 the most important objective of the Service to preserve the existing client base by taking over the data processing for firms who, due to a downtown in their fortunes, could no longer afford a tabulating machine installation of their own.
Regardless of what business need the Service Bureau targeted, the end result was that clients responded to the flexibility it the concept offered them. By 1946, the Bureau had contracts ranging in value from $10 to $250,000 for a three million card project for Western Union. And it was well positioned to take advantage of the explosion in data processing as the world emerged from the Second World War.