20 - SYMBIONICS, A COMPUTER UTILITY

by BERNARD A HODSON

At a reception, held in 1967, I became acquainted with Mr. Mclandress of Richardson's (an investment firm in Winnipeg, Manitoba) and explained the possibilities of a computer utility for the Province of Manitoba. A computer utility is a centrally located computer which distributes computer power in the same analagous way as electricity is distributed by a power company. Mr. Mclandress became interested and the two of us developed various possibilities. The final outcome was a general outline for a Government, University, industry group computer utility, which seemed to offer the best means for a viable enterprise. The Richardson family is one of the few families that make up the Manitoba "establishment" (the equivalent of the "upper crust" in the UK). Canada and the USA have just the same class problems as in the United Kingdom (without the Titles).

This was proposed but a discussion between the University and George Richardson (the head of the Richardson family) decided against going ahead on what I believe was a possible conflict of interest situation (it turned out later the Richardson's were planning to finance Riley's Data Share International, in Calgary, and my proposal would have been competition for them). My proposal was turned down in November of 1967. Had it proceeded at that time it would have been the first in Canada and was believed viable at that time along the lines proposed.

In the Spring of 1968 Mr Edson Boyd joined the Richardson group and became interested in the idea once again. I went through in detail what the philosophy of the computer utility was and Richardsons arranged for a New York consultant to visit and discuss the situation. The consultant endorsed my ideas as sound.

A committee was then formed between the Vice President Academic of the University, Lawson of the Richardsons (another establishment figure), and a senior member of the Government. Although not having been in the drivers seat at all the VP Academic(in his typical fashion, even though he knew very little about computers) decided that he would be the only one to follow it through and asked that I have no further communication on the subject with the Richardsons. In the meantime I had asked one of my staff to prepare a study of which computer would be capable of being the proposed utility.

In November of 1968 The VP Academic and the Richardsons seemed to be dragging things on interminably (I now believe purposely because of the potential conflict with their Calgary interests) and I decided to fellow up an invitation by the Philip's group in Eindhoven to investigate possibilities in The Netherlands. Just before going to Holland to spend a week as Philip's guest I addressed the Winnipeg Rotary Club and gave a forceful presentation on what a computer utility might do for Manitoba and what it would cost the Province not to have one. At the conclusion I was asked, if I felt so strongly about it, why didn't I form my own company to do just that. I explained that I had tried to do this for 2 years with the Richardson's and was finally giving up the idea. I went to Eindhoven and came back from Holland with offers of' 2 senior positions at Philip's, one to head up their computer science research, the other to establish for them a world wide medical capability. On my return from Holland I vas told that it was likely that seed money could be found for a computer utility, outside the Richardson's. On this basis I turned down the very lucrative job offers from Philips and decided to see what might transpire. I had also advised the VP (who few of us trusted) by letter that I no longer wanted to be involved with the earlier group, which had done nothing but drag its feet.

In the early part of 1969 a group of "operating founders" and a group of "financial founders" got together some $200,000 to provide base funds in order to establish a public company. Because of the competitive situation with the Richardsons, which a manufacturers representatives advised me of, and because of a mistrust of the VP, based an certain actions of his in some unrelated situations, the formation of the company was kept secret until it had been formally approved by the Federal Govt. In consequence the University of Manitoba, where the 3 operating founders were employed, was not informed until the day on which a public announcement was made. Unfortunately there was a slip up in the timing of a meeting with the University administration and the press release came before the meeting with the University.

Following the public announcement some members of the Manitoba establishment, for reasons best known to themselves. phoned Mr Holden. the Chairman of the Board of the new company (called Symbionics), and launched a vindictive, libellous and personal attack against me, which resulted in Mr. Holden deciding not to proceed with the company. At this point some thirty or more people in senior company positions across Canada, who knew me, phoned Mr. Holden and said that everything the Manitoba establishment had said was a pack of lies. They indicated that the information passed to him was completely false, vindicating me and my technical competence and ability. As a result of the positive information received in these phone calls. Mr Holden reversed his decision and the organisation of the company proceeded.

However it soon became evident that the situation was far from resolved and that the Establishment group had been phoning various organisations with whom the new company hoped to do business, advising them not to go ahead and do business with the new firm. In particular the VP persuaded Atomic Energy of Canada, who had previously given full assurance that they would use the new utility, to decline to use our services. The reason given for their withdrawal was the "political climate". The same climate was also sensed in approaches to industrial and other organisations. In addition, a decision by the Winnipeg School division to postpone its computerisation, along with a general slowdown in business, made the Winnipeg situation and outlook bleak, when compared with initial projections.

The original forecast on which the company was founded had indicated that revenues would come from Manitoba and from outside the Province in roughly equal amounts. The initial reaction to the company operation in Manitoba suggested that expected revenues from Manitoba would be considerably less than forecast, because of the political climate. It did, however, look. a little more promising if the company could develop an "on-line" capability for business. As President I pointed out to the Board that, in view of initial Manitoba reaction, there was a need to concentrate marketing effort where the anticipated marketing revenue lay, which now seemed to be outside Manitoba. In this, however, I was over-ruled, the Board insisting that the bulk of the marketing effort be concentrated in Manitoba. I also advocated allocating a budget for new staff to develop an on-line capability for business applications, and was finally allowed to have 2 staff, half of my request. Even so, considerable delays were encountered in the discussion and decision making process, extending through July, August and September of 1969. This type of Board indecision and lack of understanding plagued the company throughout its existence, the President not being allowed to lead the company in the ways in which he knew it might most profitably operate.

Realising that a viable on line system capability for business was perhaps the only solution to solving the revenue problem resulting from the Boards misguided insistence that almost all resources be concentrated in Manitoba, I personally wrote a major time sharing software package, to become known as SOLIS (Symbionics On line Information System), a pilot version of which was available in December 1969, and which was a forerunner to GENETIX. It was demonstrated to be viable and an additional man was allocated to the software development in addition to the President, along with another individual who had spent a portion of his time developing a teletype interface program for the big computer. All other staff were involved in building up local revenues. In addition one or two staff started to develop business applications based on the SOLIS concept. As a result of this activity a modest cash flow started to develop.

The Solis software package was available in March 1970 and was put in operation. Because of software failures by Control Data Corporation (CDC, the supplier of the computer utility) all timesharing based on SOLIS and on a time sharing system supplied by the manufacturer, known as Respond, had to be postponed until CDC solved some disc problems they were having, in which customer files or their operating system would be occasionally destroyed. Eventually they found the problem, which involved some timing consideration with their disc unit, but it was not until September that the company could resume its time sharing operation, having to rely on batch operations in the meantime. Several customers in Alberta and elsewhere were lost on this account. Initial clients were on line accountants, RCA and a major business credit bureau.

It became evident to me that the company had to get a stable base and that it was unlikely to get this from Manitoba (due to the actions of the Manitoba establishment). In particular I was concerned that most of our revenue was from one customer, Manitoba Hydro, a most unhealthy situation. I suggested two possibilities for merger designed to increase our revenue, one with a company called CDP in Calgary, the other with Datamation Centres operating in both Calgary and Edmonton, with a view to putting their customers on line to Winnipeg, These proposals , made early in 1970, were very coolly received by the Board, although I told them that it was preferable to work out some joint operation with one of those existing companies than going to the time and expense ( but especially the time) of building up a capability within the company. In the meantime the investment in a Calgary remote terminal operation was just beginning to show promise and a similar venture into Edmonton was discussed. The Board finally came around to accepting the idea of exploring the possibilities with Datamation Centres about the time of the Equinox, resulting in an acquisition of that company in July 1970.

In addition one member of the University's Faculty of Medicine had been making insiduous remarks about the company, information on this being received from New Jersey and San Francisco as well as in a letter to me from the president of a large Toronto Company. Fortunately for the company the Medical School doctor involved was so obviously emotional that anything he said had been disregarded.. This was also protested to the University, who innocuously replied, and to the hospital concerned, which chose to ignore the matter. These developments occurred during 1970, at a time when we were close to break even.

It became increasingly evident that additional working capital would need to be raised later in the year. Not only was this needed by us but also by several other computer utilities which had been founded about the same time as ours, in Toronto and Ottawa, with a smaller version in Calgary.

As a long term project the company had commissioned a low cost survey of the market opportunities in France, a unique opportunity having presented itself. During this low cost study, made in France but with some work also in England, it became evident that the company had a potentially valuable and very saleable product in its SOLIS software, some major companies expressing very considerable interest. These interests included the Midland Bank in the UK, who evaluated the software technically, liked what they saw and indicated interest in a joint venture operation. This obvious interest resulted in several seminars on the software being given, presented in France and England.

It was decided to convert the software to a European computer for demonstration purposes and ICL. of England, co-operated with us through their French subsidiary (ICL France). As a result of a demonstration made in France ICL concluded an agreement that we would supply the time sharing software in the event that they obtained a contract with a major French firm called SOFINCO. The Board was kept informed of these developments and of the potential value to the company, of this interest, which if correctly exploited could potentially reverse the negative cash flow situation which had developed, particularly as RCA had also chosen SOLIS as its vehicle for hospital information systems. Various memos to the Board, indicating the potential value of software sales to augment the time sharing revenues were written by me between March and August 1970 but the Board showed considerable reluctance in committing itself to anything other than data centre operations, which I had demonstrated as being incapable of solving the short term cash flow position (because of Establishment hostility), particularly as the Board insisted that Manitoba was the market to be pursued.

A minimal budget for software exploitation was approved but only for a trivial amount. As a result I felt obliged to write a strong protest letter to the Board. which was discussed in September 1970. In August I had also written to the Board Chairman suggesting that, in view of what I felt were fundamental policy disagreements, it was probably in the best interests of the company if a suitable formula could be worked out for my departure. This letter was not acted upon by the Board Chairman.

In the meantime Datamation Centres had been acquired and the integration of the two Companies was proceeding. It was found that in the period between an audit in March and one in July, that their accounts payable had lapsed and close to $100,.000 had to be injected into that company to avoid a serious situation developing, aggravating the total cash flow position. This was a serious drain on the Symbionics cash reserve. In October, however, our underwriter had advised that interim bridge financing had been arranged and I left for a short visit to Europe, to finalise some agreements in regard to SOLIS. Hardly had I arrived than I was summarily asked to return because the promised bridge financing was not forthcoming. I had, prior to my trip, developed a document outlining how the Company could become profitable.

It should be emphasised that for some time I had been concerned about the way the company was going and felt that only a drastic action, in which I had complete authority for all decisions, without delays caused by the Board, could save the company. The actions I recommended would have had the effect of cutting the negative cash flow to a small amount. I outlined to the Board what action I felt was necessary, the Board considering them rather drastic.

While the Board seemed to want to concentrate on selling time I suggested that one of the solutions was to form a separate software company for the exploitation of SOLIS. At this point there seemed to be a general agreement to go ahead on this basis but, for reasons not explained, the company decided to turn down the suggestion at this time. In my view this still remained an excellent way of injecting some needed cash quickly.

As I mentioned earlier every computer utility in Canada was seeking additional funds at the same time. Because of the cash crisis the underwriters negotiated a take over bid from some principals of Wingate Holdings in Toronto. Although the take over left the founders with no incentive, and virtually nothing from their initial investment, the Board had no option but to accept it. At the time of its acceptance I resigned, but obtained world rights to the software I had developed, including the intellectual property rights. I then left to try and regain something from the abandoned European trip, believing that all legal requirements for the take over had been completed. It may be of interest to note that all the presidents, except one, of the computer utilities in Canada, had to resign when new financing was arranged for their companies. We jokingly suggested to each other that we form an "ex-president's club".

Shortly after reaching Europe I received a telegram saying that the take over group had reneged and as a consequence the company might be forced into receivership. On my later return to Canada I found that the Board had refused to let the take over group renege but that, for some reason which was never explained, the underwriters had overruled the Boards decision. I should explain that much of the problem was caused by the underwriters who insisted that a debenture be issued (rather than shares be issued) for the expensive hardware. Had this not been done the company could have survived by mortgaging the hardware.

From December 1970 until June 1971 an Interim Manager ran the company with a net cash loss of less than $5000, showing, in effect, that had my drastic action been taken (actions which were close to those implemented by the Interim Manager), subject to some negotiation in regard to the debenture holders allowing the interest payment to accumulate, the company might well have survived. Had I had effective control from the beginning then the entire crisis could have been avoided completely.

It is also true that had the company not had to pay out more than $150,000 in sales tax on the computer, that the cash crisis could have been postponed, if not avoided altogether. In addition to the sales tax there was federal tax, which made a utility such as Symbionics unable to compete against companies in the USA, such as MacDonald Douglas, who strung their communication lines into "cream" areas such as Calgary, undercutting our company's revenue stream.

In this respect Canadian taxes were, and still are, the main reason why Canadians cannot compete in the world market place. All incentive is destroyed by the usurous and vicious Canadian business and personal tax laws (and their very vicious implementation) and Canada, in the new Millenium, year 2000, is taxed worse than the United Kingdom was taxed in the early years after WWII.

Add to this a grossly inefficient and incompetent bureaucracy, which hinders progress as much as it can, squanders money by the billions of dollars (more on this in a later chapter), is not unknown to commit perjury when it suits them, and harasses the Canadian public on everything it can, Canada is the place to avoid like the plague in terms of business opportunity.