Wednesday, June 12, 2024

Comparing Apple’s impact to IBM’s RTP launch in the mid-1960s

Last week, Apple announced that it is going to open a campus in Research Triangle Park with at least 3,000 employees and 1 million square feet on the Wake County side of the park.

Apple’s announcement was compared to the 7,000-acre park’s biggest early milestone – the arrival of International Business Machines in the mid-1960s. “Just as we saw IBM transform a region,” said State Sen. Dan Blue, “we will see the same kind of benefit from this decision by Apple.”

There are a lot of folks here who weren’t born in 1965, when IBM announced it was coming here. There are a lot of folks who just came to Raleigh-Durham in the last decade. When they saw the IBM reference, they may not have understood its significance.

And, actually, when I heard the Apple deal being compared to IBM, I didn’t agree, not because the Apple project isn’t big, but because the IBM arrival was historic. When it came here, North Carolina was a mostly rural state known for its textiles, tobacco and furniture, but not technology.

Over the past week, I have warmed up to the comparison a little. But folks should know what IBM meant to the Raleigh-Durham area, because it changed the region and put Research Triangle Park on the map.

“It was an inflection point,” says Dr. John Hardin, executive director for the North Carolina Board of Science, Technology & Innovation. Not only did IBM bring jobs, but it gave the young industrial park, back then mostly forest, credibility that it “could actually be something.”

“Most people had never heard of it,” says Hardin. “And most people doubted that it could actually be a real, vibrant research park. IBM coming did that. So, when I think of Apple, what’s different now is that RTP has a brand, and it’s a worldwide brand.”

Today, RTP’s 300 companies – from tiny startups to large employers like IBM and Cisco – have some 50,000 employees here. When IBM announced 56 years ago, RTP had Chemstrand, a textile lab, and a few small organizations. A federal environmental health agency was on the way.

But the park had financial challenges. “They had had to go to a consortium of banks to get a loan in order to keep the doors open,” recalls Liz Rooks, a retired, long-time Research Triangle Foundation official. “The sale of those 400 acres to IBM enabled them to pay off the mortgage that they had on all of the RTP property. So that was one big impact of IBM.”

The park not only survived, but a few months after the IBM announcement, the Durham postmaster announced RTP would be getting its own postmark and zip code. The park was now an official place.

What IBM was

In 1965, IBM was a technology colossus. It is still a very large company, with more than 345,000 employees worldwide and probably 8,000 here (down from its Raleigh-Durham peak of 13,000 to 14,000.) But in the late 1950s and 1960s, IBM was the face of the emerging computer industry.

North Carolina companies and government agencies were big buyers of IBM office machines and computers. IBM was driving a scramble to automate, to convert paper records to digital with punch cards being fed into new computers.

This early generation of IBM technology was everywhere. Newspaper classifieds were filled with want ads for people who could operate IBM machines. North Carolinians were flying up to New York to learn the new-fangled things. “Mr. and Mrs. J.R. Kirby leave Monday for Endicott, N.Y., where he will be in training at the IBM corporate for some time,” read a 1958 item in the Raleigh paper.

The Dairy Herd Improvement Association was transferring handwritten farm records to an IBM machine. It was costing farmers 10 cents per cow per month, but the reports were paying off in better herd management and higher profits.

IBM was selling more than equipment here. It was luring many of our best young scientific, engineering and mechanical talent to plants out of state. IBM was running big ads in the Raleigh paper, advertising good-paying jobs in upstate New York, Kentucky, Minnesota and San Jose. The company had a local sales office on Hillsborough Street in Raleigh where it was interviewing a mile from N.C. State.

What IBM was doing was precisely why a succession of North Carolina governors — chiefly Luther Hodges but then Terry Sanford and Dan Moore — were so focused, starting in the mid-1950s, on creating and nurturing RTP.

There was a serious brain drain. We had three top-notch universities that formed a triangle – N.C. State, UNC Chapel Hill and Duke – but their technology graduates had few places to land here.

The more farsighted North Carolina leaders knew that textiles, furniture and tobacco were vulnerable to foreign competition, and the state’s mills and farms were not delivering enough good-paying jobs for its citizens. North Carolina in the 1950s was one of the poorest states in the country. The mechanization of agriculture — tractors, combines — had released a vast pool of labor from the farms. Would they go to work in the mills, or do something more?

As Terry Sanford said in 1963, when he persuaded the legislature to create the Science and Technology board: “We missed the Industrial Revolution, and our people have suffered for it. We don’t want to miss out on the new revolution in science and technology.”

IBM’s arrival started to change all that. It was hiring not only four-year graduates, but technicians with two-year degrees, exactly what the new community college system was producing. The announcement also accelerated the pace of companies looking at RTP.  Meanwhile, the announced number of employees – 1,000 – soon became 2,000. Public school officials worried that there wouldn’t be enough classrooms. The airport started looking at expanding its ticket counters and gates. Dan Moore promised IBM a better road and that’s why that stretch of Interstate 40 between Raleigh and RTP opened in 1971.

Real estate listings began adding the words “convenient to IBM.” New homes started popping up outside the Beltline – “IBM neighborhoods.”  Cary, a Wake County town of 4,000 near RTP, started a massive growth spurt (its population, now over 170,000, was subsequently boosted by software giant SAS, which started in the mid-1970s, and now by Epic Games).

In 1967, IBM held an open house for its new manufacturing and lab facilities that drew 40,000, an impressive turnout in a three-county region of 400,000 (compared to 1.6 million today.)

What they were seeing was a complex dedicated to IBM’s newest, boldest product, the System/360 mainframe computer. Dick Daugherty, the retired IBM senior executive for North Carolina, described it this way in a 2004 essay: “This was the first commercial, fully integrated mass-produced computer system . . . The System/360 was literally a ‘bet-your-company’ product.” IBM invested billions in developing it, building plants like the one in RTP, and hiring thousands of employees.  “In 1964, the world had never seen anything like the computing power of the System/360,” wrote Daugherty.  “Sales were more than double company projections. The cost of a system ranged from $2,700 to $115,000 a month, depending on the model and configuration.”

IBM’s success with the System/360 and subsequent products helped fuel its growth at RTP over the next 20 years, as well as operations in Charlotte geared towards the growing financial services industry. But by the late 1980s, the mainframes were being challenged by cheaper desktop computers and servers. IBM competed aggressively in the PC space (Inventing the popular ThinkPad), but still racked up huge losses in the early 1990s that threatened its survival.  IBM pivoted from hardware to services, managing large enterprise computer systems for other companies. The PC division was sold to Lenovo. Several former IBM buildings in RTP were turned into the new Frontier complex now filled with startups.

What is remarkable is that IBM survived massive changes in technology that made many other IT companies disappear, including some of the biggest names at RTP. It had the resources to buy Raleigh-based Red Hat (co-founded by a one-time IBM employee) for $34 billion two years ago, which has allowed it to compete more effectively for the cloud business that has become, more than 50 years on, the new mainframe. After years of stagnant revenues, it is growing again.

Apple as IBM

I still believe that Apple will have to go some to match IBM’s impact on my region.  But in one sense, Apple is already transformational, even before it has started construction. Just as IBM’s announcement was an inflection point, so is Apple’s.

RTP was created in the early days of relatively isolated, suburban research parks. You can still drive up I-40 and through the park’s roadways and only catch a glimpse of many companies through the trees. You will see a few people, but not a lot. RTP has been working for a decade to change this, to compete with downtowns in places like Raleigh and Durham that have a millennial-friendly vibe.The first building of the new Hub RTP could be completed next year, which would be a significant “live-work-play” departure from your grandparents’ park.

“To their credit,” says Hardin, “RTP is changing that model. And I think because they’ve been changing it, and actively changing it for almost a decade now, I think that’s one reason Apple is here.”

Apple gives RTP a similar kind of credibility that IBM gave the park in the 1960s, he says. “For a whole new generation, two generations later. ‘Hey, this long-standing research park is still in there and it’s fighting and it’s reinventing itself and becoming RTP 2.0 or 3.0.’”  The Apple announcement “has really changed a lot of peoples’ perceptions and will, going forward.

“Apple in 2021 is kind of like what IBM was in 1965.”




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