The Model 20 supports only a subset of the System/360 instruction set, with binary numbers limited to 16 bits and no floating point arithmetic.

Developed by IBM in Böblingen, Germany,[2]: pp.217–218, 352  the system was intended for data processing and as a replacement for tabulating equipment.

John Haanstra had wanted a low-end machine that could execute IBM 1401 instructions.

The final result was a compromise where cost concerns predominated: the system leased for under $2000 per month (equivalent to $19,648 in 2023) including Multi-Function Card Machine and line printer, compared to around $3000 (equivalent to $29,472 in 2023) for a comparable 1401 system.

According to Pugh "The number of Model 20 processors installed by the end of 1970 in the United States exceeded 7,400.

Due to its reliability problems, often involving card jams, the acronym was frequently interpreted as referring to many less favorable names.

IBM's announcement proclaimed the 2560 as providing "a card-handling capability never before possible on a single pass through the system.

"[8][7]: 13 [9] Since all I/O is performed by the processor, the system is particularly suited to controlling timing-dependent devices such as the 2560, where a card can be read, punched into, printed on, and sent to a specified output stacker with tight timing requirements if full rated speed is to be maintained.

Additional capabilities are provided on systems with 8192 bytes of main storage, and still more with four or more magnetic tape drives.

Despite having been sold or leased in very large numbers for a mainframe system of its era, only a few of System/360 Model 20 computers remain.