The SRI ERMA Project

Introduction | Development Begins | The ERMA Computer | The Infallible Reading of Account Numbers and Final Hurdles | The Team

Development Begins

SRI's "whiz kids" get to work.

In 1950, the Bank of America was the largest bank in the world. S. Clark Beise, a senior vice president, was an active leader for machine-based innovations. He recognized that check handling and customer satisfaction were the major factors limiting the growth of bank business. An experienced bookkeeper could post 245 accounts in an hour, about 2,000 in an 8-hour workday, and approximately 10,000 per week. Automation was essential to keeping pace with the growing business. However, business-equipment manufacturers were not interested in the investment necessary to create a whole new electronic banking system.

Through an introduction by SRI's Weldon B. "Hoot" Gibson to Thomas H. Morrin, the SRI Director of Engineering, Clark Beise realized that SRI could act as the Bank's R&D arm and prove to manufacturers that automation could be done, and perhaps even build the prototype.

At that time, Bank of America's checking accounts were growing at a staggering rate of 23,000 per month and banks were being forced to close their doors by 2:00 p.m. to perform the proofing and processing necessary to finish daily postings. In a five-year relationship, SRI and Bank of America collaborated to redefine conventions and automate the handling and posting of checks.

In July 1950, Bank of America asked SRI to embark on a feasibility study of an electronic bookkeeping machine that would streamline the check handling process. Performance attributes would also be stressed: the speed dictated by the banking time schedule, the handling of all the information needed for storage, processing and printing, and the ability to provide up-to-date balance information to customers. The work was client private-at SRI and the Bank, only those working on the project knew of it.

The "whiz kids," as the Bank called the SRI team members, went to work weighing the requirements of the new bookkeeping system against the available technology. The few computers in existence had nothing to do with accounting. Transistors were just becoming available but were very unreliable, and large and fast enough magnetic media were limited to magnetic drums. There was a lengthy discussion about the kind of technology that would be feasible.

SRI immediately called attention to the fact that the blank checks used at that time carried no individual identification and were, in fact, passed around for anyone to use. Because accounts were kept alphabetically, any additional account caused an awkward reshuffling of the entire account listings. The check itself required changes and at SRI's urging, the Bank yielded to the use of account numbers and their being preprinted on every check. Each new account, then, would simply be added to the end of an account list while all preceding numbers were left intact. Once the Bank accepted this new concept, the formerly unmanageable and separate processes of proofing and bookkeeping were combined.

Through much of the initial feasibility study, SRI did not foresee itself in the role of actually building a system. In September 1950, SRI reported that an automatic bookkeeping system meeting the Bank's requirements could be built and called the new system an Electronic Recording Machine-ERM. Tom Morrin proposed a three-phased approach to continue:

• Study the banking procedures external to the machine
• Do the general logical design
• Build the system and test it

An equipment manufacturer would execute the last step. Effective mid-November 1950, the Bank awarded SRI $15,000 over six months to complete the first two phases. Even with an added $5,000 in April of 1951, it seems like a minimal sum for such a large undertaking. The interim report was delivered on time, on April 30, 1951.

But even with this new insight, the Bank of America still could not convince its traditional industrial providers of the opportunity ERMA offered. Therefore, the Bank convinced SRI to build a demonstration system. SRI signed a contract for $875,000 to complete the project's third phase in January 1952.

Keep reading: The ERMA Computer