Informatics General Corporation, earlier Informatics, Inc., was an American computer software company in existence from 1962 through 1985 and based in Los Angeles, California. It made a variety of software products, and was especially known for its Mark IV file management and report generation product for IBM mainframes, which became the best-selling corporate packaged software product of its time. It also ran computer service bureaus and sold turnkey systems to specific industries. By the mid-1980s Informatics had revenues of near $200 million and over 2,500 employees.

Computer historian Martin Campbell-Kelly, in his 2003 volume From Airline Reservations to Sonic the Hedgehog: A History of the Software Industry, considers Informatics to be an exemplar of the independent, middle-sized software development firms of its era, and the Computer History Museum as well as the Charles Babbage Institute at the University of Minnesota have conducted a number of oral histories of the company's key figures.^[2] Historian Jeff Yost identifies Informatics as a pioneering "system integration" company, similar to System Development Corporation.^[3] The Chicago Tribune wrote that Informatics was "long a legend in software circles".^[4]

Informatics General was acquired by Sterling Software in 1985 in what was the first hostile takeover in the software industry. Immediately, Sterling Software became a member of the largest corporations within the software industry, with $200 million in revenue.

Walter F. Bauer (1924–2015),^[5] the main founder of Informatics, was from Michigan and earned a Ph.D. in mathematics from the University of Michigan in 1951.^[6] His early work was at the Michigan Aeronautical Research Center; the National Bureau of Standards, where he programmed the early digital SEAC computer; and for Boeing's BOMARC interceptor missile.^[6] He became a manager at the Ramo-Wooldridge Corporation in charge of a unit with 400 employees and two computers, an IBM 704 and a UNIVAC 1103A, and in 1958 joined the merged Thompson Ramo Wooldridge company.^[7][6] Bauer later said that he "was never a green eyeshade programmer" nor a "strong technologist", but being a systems person and a manager gave him a good grasp of computer systems and their capabilities.^[8][6]

Another key founder was Werner L. Frank (1929–),^[9] who during 1954–55 had done programming work on the ILLIAC I at the University of Illinois at Urbana–Champaign.^[10] He was then recruited by Bauer and joined Ramo-Wooldridge in 1955, where he did numerical analysis and programming in assembly language and FORTRAN.^[11] Working with pioneers of scientific computing such as David M. Young, Jr. and George Forsythe, Frank published several important articles on numerical analysis in Journal of the ACM and other publications.^[12] By 1958, Ramo-Wooldridge had been acquired by Thompson Products, Inc. and come to be known as TRW Inc.; Frank then did early programming on several defense industry computers, including the AN/UYK-1, and spent long stretches of time in Washington, D.C.^[13]

The third founder was another TRW colleague, Richard H. Hill, who had been a professor at UCLA and an assistant director of a joint data center between that university and IBM.^[9][14]

In January 1962, Bauer approached Frank and Hill to start a new independent company that would provide software services.^[15][16] At the time, it was an unusual move since few people saw software as a viable business.^[17][9] "Primarily, we were going to develop systems for large-scale computer systems, probably of a military nature. That was our first objective," stated Bauer in a later interview.^[14] Despite a lack of any kind of business school training, Bauer put together a business plan for the new company.^[7] Indeed, throughout his time with the company, Bauer embodied the personality characteristics of entrepreneurship.^[18]

Venture capital was hard to locate for such start-ups in that era and Bauer met with several rejections.^[9] He and the others then decided to join forces with Data Products Corporation, a newly formed manufacturer of computer peripheral equipment.^[19] The co-founder of Data Products, Erwin Tomash (1921–2012),^[20] was from Minnesota and had earlier worked at Engineering Research Associates, a pioneering computer firm from the 1950s.^[21] He had known Bauer and thought that the two new efforts being formed together would provide a hedge against either one of them encountering start-up difficulties.^[22] Informatics was thus created as a wholly owned subsidiary of Data Products.^[23] The new software firm was capitalized at all of $40,000, of which Data Products contributed $20,000, Bauer $10,000, and Frank and Hill $5,000 each.^[16]

The company's name came from the founders' desire to base it on "-atics", a Greek suffix meaning "the science of".^[26] Their first thought was "Datamatics", but a form of that was already taken by an early computer from Honeywell/Raytheon; Bauer and the others settled on "Informatics", meaning "the science of information handling".^[26][16]

At the very same time, March 1962, French computer pioneer Philippe Dreyfus came up with the name "Société pour l'informatique appliquée" for a new firm of which he was co-founder, thus creating a French version of the same name.^[26] However, in France, the term "informatique" soon became a generic name, meaning the modern science of information handling, and would become accepted by the Académie française as an official French word.^[26] The term then came into common use in a number of other European countries, adapted slightly for each language.^[16]

In the United States, however, Informatics fought any such use as an infringement upon their legal rights to the name; this was partly in fear of the term becoming a brandnomer.^[26] Bauer later recalled that at one point the Association for Computing Machinery, the leading academic organization in computer software, wanted to change its name to the Society for Informatics, but the company refused to allow that use.^[26] Eventually the generic usage of the term around the world caused the company to reconsider and, according to Frank, was the reason for the 1982 name change to Informatics General.^[16]

Informatics, Inc. began operations on March 19, 1962, in Frank's empty house in Woodland Hills^[16] in the San Fernando Valley area of Los Angeles.^[4] In addition to the three founders, the fourth initial employee was a secretary, Marie Kirchner.^[16] An important early hire was Frank Wagner, a North American Aviation executive who was past president of the IBM user group SHARE and had many contacts among that community.^[9][27] Data Products, which served as the Informatics back office, was located in nearby Culver City at that time.^[9]

The company struggled at first, winning only a few small contracts, until it improved its presence in government circles and finally, in early 1963, won a $150,000 contract with the Rome Air Defense Center.^[28] This was a forerunner of several large contracts it would have with that U.S. Air Force facility in years to come, and several other defense sector contracts soon followed.^[28] By its second year, Informatics was profitable and had 37 employees; by the third year it was growing well.^[29][9] Informatics was one of the major companies of the time involved in the software contracting business.^[30] An early description of the company used in press releases was "Informatics provides analysis, design and consulting services for users of digital processing equipment."^[31]

At the time Informatics did little marketing, mostly relying upon its network of personal contacts.^[28] The firm was one of forty or fifty software companies started in the early 1960s (many of which are little known to history).^[30] Two other prominent firms were Applied Data Research (ADR) and Advanced Computer Techniques (ACT).^[30] All three are credited by Campbell-Kelly as firms that succeeded because, and gained awareness due to, the personality of their principal founder; in this case it was Bauer who "succeeded in combining his entrepreneurial activities with his role as a leader in the technical computing community."^[30]

Meanwhile, Data Products, which had moved its office to Sherman Oaks, California in 1964 and renamed itself slightly to Dataproducts,^[9][32] was suffering from falling behind IBM on disk drive technology; its eventually successful printer business had not yet taken off.^[29] In order to placate its subsidiary, the three Informatics co-founders were given 7.5 percent of Data Products stock in 1965.^[19] As Tomash later said, "To satisfy them, we deliberately took the step that we knew would separate us in the long run."^[29]

In May 1966 there was an IPO of Informatics stock, priced at $7.50 per share, that brought in $3.5 million.^[19] Only the third software company to have stock issued for it and thus becoming a public company,^[5] it was listed on the over-the-counter market, based in New York.^[33] However, 60 percent of its stock was still held by Dataproducts.^[34] At that time Informatics had revenues of $4.5 million and a net income of $171,000, and the number of employees was around 300.^[19] By 1967 Informatics had something possessed 3% to 4% of the total market for custom-built software.^[28]

During the mid-1960s the U.S. stock market went through what was known as the "go-go market" boom, and computer companies become special darlings of traders.^[35] Informatics was no exception; its price–earnings ratio rose from 25 at the time of its IPO to 200 by mid-1968 and over 600 by early 1969, despite the company having only $40,000 in earnings for the previous year.^[19] Informatics used the proceeds from additional offerings during this period to fund development of its Mark IV product and to create a Data Services Division.^[19]

Dataproducts sold off the last of its Informatics stock in 1969, and in doing so Informatics thus became fully independent.^[34] For its initial investment of $20,000 in Informatics, Dataproducts had gained about $20 million in return.^[32] By 1969, Informatics had revenues of over $11 million with earnings of $561,000.^[34]

The history of what became Mark IV goes back to 1960 when GIRLS (the Generalized Information Retrieval and Listing System) was developed for the IBM 704 by John A. Postley (1923–2004),^[36] an engineer who had worked for many years in the aerospace industry; the first customer for GIRLS was the Douglas Aircraft Company.^[37][38] Postley was working in the Advanced Information Systems subsidiary of Electrada Corporation along with Robert M. Hayes and others.^[39]

In April 1963, Advanced Information Systems was purchased from Electrada by Hughes Dynamics,^[40] an early 1960s subsidiary of the Hughes Tool Company that provided computerized management and information services.^[41] Subsequent versions of GIRLS were called Mark I and Mark II; made for the IBM 1401, they were increasingly stronger in their capabilities.^[42][43] Under Hughes, Mark III was in development, with key performance improvements.^[44][45]

Hughes Dynamics then decided it wanted to exit the activity of making software.^[42] While accounts later told by some Informatics executives imply that Howard Hughes himself was aware of, or played a role, in what was going on,^[43][46] Hughes biographers suggest that in the secretive world of his empire, it appears that Hughes was never informed of the existence of Hughes Dynamics until a couple of years after its creation; once he found out about it, he had it shut down.^[47]

In any case, in May 1964, Informatics acquired Advanced Information Systems from Hughes Dynamics.^[31] For this it paid essentially nothing: Hughes actually paid Informatics $38,000 to take it, but in doing so Informatics assume some existing customer obligations of about the same amount.^[46][42]

Within Informatics, Postley became the champion of making another version, Mark IV, that was for the new IBM 360 computer line.^[42] Mark IV was not the first file management system/report generator; indeed there had been several efforts in the late 1950s towards this end, including one from SHARE called 9PAC.^[48] Indeed, it is possible Bauer and Wagner, who were both active in SHARE (Wagner had been a chair of it), were influenced as to the value of such a product by their exposure to previous efforts in that users group.^[48] But only Postley had the full vision of what a software product might be;^[44] Informatics as a whole was reluctant to finance the development cost, which Postley estimated to be half a million dollars.^[42] So Postley recruited five companies, each of whom provided $100,000: Sun Oil, National Dairy Industries, Allen-Bradley, Getty Oil, and Prudential.^[49] Existence of the new product was first announced in 1967.^[50]

Mark IV found quick success as a product: during 1968, its initial year of availability, it garnered orders for 117 installations and sales of nearly $2 million.^[51] But IBM then decided to unbundle software from its mainframes in 1969, which helped facilitate the growth of the commercial software industry in the 1970s and beyond.^[42][52] This accelerated sales of Mark IV severalfold from what Informatics had anticipated.^[51]

In 1968, Informatics announced it was acquiring a New Jersey firm, Computing Technology Inc.,^[53] a transaction that closed during 1969.^[54] This became the Informatics Inc. Computing Technology Company, a wholly-owned operating unit of Informatics that was located in River Edge, New Jersey.^[55] Within this subsidiary was the Communication Systems Division, and it developed a communications system for the Federal Reserve Bank of New York.^[56] This was one of several large contracts the River Edge division had with Wall Street firms for joint development of bank transfer systems and related services, with those other firms including Dun & Bradstreet and Dean Witter.^[57]

The Federal Reserve Bank effort had begun in 1968 and involved using advanced techniques for store-and-forward-based message switching and similar needs.^[58] The implementation was based around the SDS Sigma 5 computer from Scientific Data Systems, a computer line which had been acquired by Xerox Corporation.^[59] The Sigma 5 had a Communication Input/Output Processor that handled up to 128 communication lines at speed from 110 to 9600 baud.^[60] The communications system was a success and Informatics and Xerox made a joint agreement to market it to other customers,^[59] with the Informatics product being named the ICS IV/500.^[61]

Informatics had hopes for the ICS IV becoming a strategic product for them, and while it was sold to General Foods and Japanese National Railways, it proved a very high-priced, low-volume market and there was an effort to find a less expensive alternative. Informatics was contracted by Bankers Trust to develop a version of the system that ran on the DEC PDP-11 minicomputer with a Sigma 5 emulation unit. However, the project was not successful, and by the mid-1970s Informatics departed this communications space.^[62]

Subsequently, the Computing Technology Company subsidiary produced the Accounting IV package.^[63] This was a group of integrated financial applications for companies.^[64]

Beginning in 1970 the computer industry hit a downturn that lasted several years.^[65] Software houses of the time tended to suffer from unprofitable contracts, failed ventures, and slowing demand.^[66] Informatics' creation of a Data Services Division, and with it the acquisition of a number of computer service bureaus as a means of providing utility computing, did not go well.^[67] In May 1970 Informatics announced a $4.2 million loss, its first since 1963.^[67] But in a time when many software firms did not survive,^[66] the more conservatively managed Informatics did.^[68]

In 1971, Informatics and The Equitable Life Assurance Society of the United States announced a joint venture, Equimatics, Inc., headed by Werner Frank, that would develop and sell computer-related products for the insurance industry.^[69] In particular, Equimatics, sought to establish a data services business that would provide such services to Equitable and others in the insurance industry.^[70]

While Informatics revenues did increase during this period,^[34] in many respects choices about the direction of the business were forced by the inability of Informatics, in the economically gloomy early 1970s, to find investment capital.^[67] Accordingly, in September 1973, it was announced that Informatics would be acquired by Equitable Life Assurance Society, for $7 per share in cash.^[71] The deal closed in March 1974.^[72] Thus Informatics became a subsidiary of Equitable Life, with the goal of gaining the ability to grow organically and to acquire other businesses.^[34]

For the year 1976, Informatics had revenues of $58 million.^[34] It had some 1,800 employees at locations around the world.^[34] From around 1976 through to the end in 1985, Informatics corporate headquarters was located in an office along Ventura Boulevard in Woodland Hills.^[73]

Seeking to capitalize on the brand of its most known entity, some other Informatics products were named with a "IV" in their title, including "Production IV" for planning in manufacturing and "Accounting IV" for the financial sector.^[34] Additional products included Life-Comm and Issue-Comm for the insurance sector, Minicomm and Intercomm for teleprocessing and communications, and CSS, for corporate shareholder processing.^[34] In addition to packaged software, Informatics continued to make custom software and engage in professional services contracts.^[34]

The relationship with Equitable did not work out well, and by the late 1970s Informatics sought to be an independent company again.^[74] It had a second IPO and starting in 1979 began trading as an Over-the-counter stock with the symbol IMAT.^[74] Then on June 7, 1982, the recently renamed Informatics General Corporation began trading on the New York Stock Exchange under the symbol IG.^[74] It was only the second software company ever to be listed on the NYSE.^[5]

During the late 1970s and early 1980s, the company broke its revenues down into three sources: software products, professional services, and information processing services; from 1978 through 1982, the three were in rough balance, with each of the three comprising anywhere from 26 to 39 percent of the total.^[75] Beginning in 1982, the company categorized revenues as coming from cross-industry customers versus vertical market segments;^[75] by 1983, the verticals, which included products and services for the legal, accounting, insurance, and other industries, had eclipsed cross-industry revenues.^[76] These changes reflected complicated, and frequently changing, reporting structures within the company.^[77]

Informatics continued to grow, both organically and via acquisition. Indeed, by the early-mid-1980s Informatics General had made more than thirty different acquisitions along the way.^[178] Depending upon when and how the counting was done, the company had some seventeen divisions within it, and sometimes subdivisions within those; some of these were small-sized businesses that revealed a lack of focus within the overall company.^[179] The divisions were organized into groups, and these groups were sometimes independent entities unto themselves.^[180]

Werner Frank had a parting of the ways with Informatics management and left the company at the end of 1982, with some acrimonious relations taking place between him and Bauer.^[181]

There were attempts to change the structure of Informatics' management, such that Bauer would be less involved in operations.^[118] Accordingly, in February 1983, Bruce T. Coleman was named president of the company.^[182] He had originally been hired in 1978 as a group vice president.^[183] However, during a large-scale reorganization of the company in August 1984, which involved the selling off of some unprofitable businesses, Coleman departed and Bauer resumed being both chairman and president.^[125] Coleman later said that Bauer had fired him after Bauer disagreed with his proposals to sell off several pieces of the company.^[184]

The company continued to have strong revenue growth, moving from $129 million in 1982 to $152 million in 1983 to $191 million in 1984.^[125] Profits followed the same path for most of the time, with seven straight years of increasing earnings through 1983,^[4] including moving from $5.4 million and $1.49 per share in 1982 to $8.5 million and $1.67 per share in 1983.^[125] But then in 1984 earnings declined to $4.7 million and 82 cents per share, with two of Informatics' ten divisions showing an outright loss.^{[4][125][185]} The performance of Informatics stock became erratic, as exemplified by a market close in December 1983 where the New York Times wrote that Informatics General was the "big loser" of the day when its stock fell 5+5⁄8 to 20+7⁄8 after a poor earnings forecast was put out,^[186][187] or by a drop of 4+7⁄8 to 15+3⁄8 on a day in July 1984 when another a forecast for a break-even quarter was released.^[188]

By 1985, Informatics General had some 2,600 employees and offices in 30 cities in North America and in nine other locations around the world.^[125] It was the fourth largest independent software company in the world.^[5] Informatics had a solid cash position and almost no long-term debt.^[189] However the company and its stock was considered, in the words of the Los Angeles Times, a "chronic underachiever" and "a lackluster performer on Wall Street".^[125][189] Overall the stock had fallen from a one-time high of $34 per share to around $17,^[190] with a low point of $14.^[4] In the 1984 book The Coming Computer Industry Shakeout, writer Stephen T. McClellan had characterized Informatics General as "Doing too many things, none of them well."^[191] He criticized company management, saying further said that "Bauer, the longtime chairman, is 60 years of age and has managed the firm too autocratically and too monotonously for too long."^[192] As a result, Wall Street analysts considered the company a prime target for acquisition, with the expectation that new management could make it a better.^[125]

Sterling Software had been founded in 1981 by executive Sterling Williams and investor Sam Wyly and found growth via a series of acquisitions, becoming public in 1983.^[193] Wyly had a controversial background with both successes and failures, the latter including a $100 million loss in attempting to establish Datran, a U.S. nationwide digital network in direct competition with AT&T.^[4] Werner Frank had begun consulting for Sterling Software almost as soon as he left Informatics and became an executive vice president of Sterling in October 1984.^[193]

Sterling Software saw Informatics General as a possible acquisition, but Informatics management decided it did not want to be acquired, and especially not by Sterling Software.^[4] On April 15, 1985, Sterling offered $25 per share for Informatics, then when that was rejected by the Informatics board, on April 22 increased the offer to $26 per share.^[194][195]

When that too was rejected, the acquisition attempt became an overt hostile takeover that was later described by one Informatics executive as "an all-out war", with both financial interests and pure ego driving it.^[4] Sterling deciding to stage a proxy battle, taking out full page advertisements in newspapers such as the Wall Street Journal and the Los Angeles Times to try to convince shareholders to elect Wyly and Williams to the Informatics board at an upcoming shareholders' meeting.^[194][195]

This was the first hostile takeover attempt that the software industry had ever seen.^[196] Until then received opinion had been that it would be counterproductive,^[4] due to the rationale, as Wyly later said, that "nobody can do a hostile takeover of a software company because the talent will walk out the door."^[107] However, Wyly felt that in this case, the staff in question would view more competent management coming in "not as conquerors but as liberators."^[107] Financing for the takeover attempt came from Michael Milken and the "junk bonds" of Drexel Burnham Lambert.^{[107][190][189]} Bad feelings ensued all over, including a lawsuit by Informatics that in part charged that Sterling had benefited from confidential information from Frank, a charge that many people gave credence to but that he always strongly denied.^[4][197] (In Bauer's later rueful estimation, the main beneficiaries of the takeover struggle were lawyers and investment bankers, who received millions of dollars in fees no matter the outcome.^[4])

On May 9, 1985, Informatics management won the proxy battle, by a 70-to-30-percent margin reelecting Bauer and another board member rather than electing Wyly and Williams.^[198] But Sterling also had a victory because some proposed enhanced anti-takeover measures were not approved.^[4] Furthermore, the fact that trading on the stock on Wall Street had become quite heavy, with some 70 percent of its issue changing hands during the battle, led to Bauer concluding that the company's shareholders actually did want to be acquired.^[198] Attempts by Informatics to find a white knight came up empty.^[4] A series of other possible proposals for Informatics soon emerged, however;^[190] these included two specific offers, one from a private leverage buyout proposed by Bauer, the other from an unidentified third party.^[189] But these were seen as inferior.^[189]

So finally, on June 21. 1985, it was announced that Informatics board of directors had agreed to be acquired by Sterling for $27 per share, meaning $135 million in total.^[189] The acquisition was approved by Informatics shareholders in a process that ended on August 13, 1985.^[199] At that point, as the Chicago Tribune later wrote, "the Informatics name, long a legend in software circles, was gone."^[4]

Overnight, Sterling Software became a $200 million in revenue company, up from $20 million, and one of the biggest firms in the software industry.^[196] One Computerworld writer referred to the takeover as "the guppy swallowing the whale."^[200]

The entire Informatics corporate headquarters office in Woodland Hills was let go, including Bauer.^[197] Bauer had been CEO of Informatics for its entire 23-year history, in what he believed was a record at the time for the longest period that a founding CEO had lasted in that position in a company.^[8] Bauer also believed he was the longest-tenured CEO in the computer industry at that time.^[8] Reflecting on the hostile takeover process a couple of years later, he said, "I've been associated with a lot of firsts in the software industry. This was one I could have done without."^[4]

Sterling Software management insisted in the first years after the acquisition, and later in oral histories, that the transition had gone well, that layoffs other than at the corporate office had been minimal, and that they had brought about better performance than Informatics management had.^{[4][107][201]} Informatics employees sometimes had a different perspective, as some 40 percent of the staff at the Canoga Park facility were laid off in September 1985, during a day employees called Black Thursday.^[4]

Sterling sold off several Informatics divisions as part of paying off the takeover financing.^[4] Other units became part of the core of Sterling Software going forward. The Ordernet business of Informatics was expanded greatly under Sterling Software as a series of e-commerce initiatives under the rubrics Electronic Document Interchange and Electronic Data Interchange, so much so that it was later spun off as its own company, Sterling Commerce, in 1996.^[134]

The Informatics brand name may have lasted longest in connection with one of its aforementioned legal software entities, the Professional Software Systems Division. Sterling Software renamed it as the Informatics Legal Systems division, then sold it in 1986 to Baron Data Systems,^[171] a company that made legal and medical systems.^[202] Advertisements from that entity stressed "Informatics" far more than "Baron Data".^[166] In 1987 Baron Data was acquired by Convergent Technologies, a computer maker;^[202] Informatics Legal Systems remained as the name of the subsidiary under Convergent.^[203] But the legal software still ran on Wang systems and thus was not a match with the parent, so in 1988 the Phoenix operation was acquired by Wang Laboratories itself.^[203] There it became known as the Wang Informatics Legal & Professional Systems, Inc. wholly owned subsidiary and was still based in Phoenix.^[204] Wang Informatics was still active in 1992^[173] when Wang Laboratories itself went into bankruptcy.^[205]

In 2000, Sterling Software was sold to Computer Associates.^[206] That same year, Sterling Commerce was sold to SBC Communications; it later became part of IBM.^[207]

Relations between Bauer and Frank did not remain completely sundered, and in 1999 Frank attended, along with Wagner, Postley, and three other early executives, a private "Informatics Retrospective" hosted by Bauer, where they could, in Bauer's words, "discuss what happened, good and bad."^[208]