Nervous System: The Osborne Effect

Related to a pioneering line of portable computers in the early 1980s, the phrase “Osborne Effect” took root to describe the phenomenon of current technology being prematurely abandoned in anticipation of a future upgrade.

If I told you that a much better version of this article would come out next month, would you be willing to pay for this lesser draft? The Osborne Computer Company encountered that problem in the early 1980s. Company founder Adam Osborne had grandiose plans for personal computers and touted the features and improvements he expected to bring to his next-generation machines. This public relations strategy, though, only served to destroy his company.

It is difficult to exaggerate the impact of the first-generation Osborne computer. The legendary Osborne 1 debuted in April 1981 with an unprecedented set of specifications. It was not the fastest or most advanced computer, but it was pioneering in an entirely new way. It was portable.

Admittedly, being a portable computer in 1981 meant something different than it does today. For one thing, the Osborne 1 expected to be plugged into a wall outlet (although aftermarket batteries were available from third-party vendors). It also weighed in at roughly 25 pounds, packed in an injection-molded plastic case that resembled a small suitcase. However, users could take that suitcase-sized contraption with them and even fit it under an airplane seat. For a computer in 1981, that alone was revolutionary.

The lid opened up to reveal a 5-inch monochrome screen capable of displaying up to twenty-four rows of text, twin floppy disk drives, and a set of both parallel and serial connector ports suitable for attaching peripherals such as a printer or a modem. Inside the fold-down lid was a full-size keyboard.

As further enticement to prospective buyers, the Osborne 1 came with a suite of preinstalled software. That package included WordStar word processing, a spreadsheet application called SuperCalc, a dictionary, a grammar checker, various business ledger tools, and a couple of games. The overall price tag of $1,795 was not far off the cost of buying those programs alone. It was as if a buyer got the computer tossed in as a freebie.

As sales of the Osborne 1 soared, the Osborne Computer Company started publishing the monthly magazine The Portable Companion to cultivate a sense of community with customers.

Riding high on this early breakthrough success, the company developed a higher-end version called the Osborne Executive. With a retail price of $2,495, the Executive would boast a larger screen and higher-capacity drives to compete with the KayPro personal computer.

Meanwhile, engineer Philip Bourgeois developed a third-generation product called the Osborne Vixen. The Vixen promised all the attributes of the Executive but at a fraction of the manufacturing cost.

This, however, is where it all went so disastrously wrong that the “Osborne Effect” became an enduring byword for a very specific kind of failure.

Word spread about the perceived superiority of the next-generation machines, but they were years away from appearing in stores. The design of the Executive was still in flux, and Osborne had yet to make more than a prototype of the Vixen. Nonetheless, buyers started canceling orders for Osborne computers to save their cash for better options yet to come.

Desperate to win back those canceled sales, Osborne slashed the prices of the Osborne 1. It was too late. The Osborne 1 had been rendered obsolete by a replacement that did not even exist yet. By 1985, Osborne went into bankruptcy.

The precipitous failure of the Osborne company was not entirely due to the PR snafu. Computer historians have noted the fierce competition from the KayPro computer line, which offered better capabilities at competitive prices. Miscrosoft’s DOS soon overtook Osborne’s CP/M operating system, such that any product line dependent on that operating system was destined to be left behind. To top it off, the company had foolishly invested at great expense in retooling defunct manufacturing lines to use up an inventory of circuit boards that otherwise would have gone to waste. Together, these factors called into question whether Osborne could have weathered the mid-1980s in any event.

Nevertheless, the distinctive way in which sales of previously popular Osborne computers were dramatically suppressed by the promotion of next-generation technology caught the public imagination. The phrase “Osborne Effect” took root to describe the phenomenon of current technology being prematurely abandoned in anticipation of a future upgrade.

Curiously, the phrase took hold even though this was not even the first example of the phenomenon. A few years earlier, North Star Computers had announced an impending upgrade of its disk controllers for floppy drives. The new controllers would supposedly enable a doubling of disk capacity from 80k to 160k. The company had not built any new controllers, but a 1978 announcement promised to sell the improved technology at the same price. The pre-release publicity apparently suppressed sales, and North Star barely escaped bankruptcy.

Although the Osborne 1 is remembered in part for its unfortunate “own goal” failure, its less-noted legacy was the notion of bundling software with hardware as a single package. This clever marketing ploy would prove to be a lasting, positive influence that remains effective today.

The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions, position, or policy of Berkeley Research Group, LLC or its other employees and affiliates.