My reading of the Hard Drive today takes me to one of the
pivotal moments of Microsoft’s history where Microsoft seized the deal to supply
the operating system for its project with IBM to develop the personal computer.
It was a feat as they had to beat Gary Kildall from Digital Research, a
competitor who was then the market leader of the operating system with his CP/M,
and how Microsoft managed to do it was nothing short of an entrepreneurial
sleight of hand. This deal cemented Microsoft’s dominance in the operating system
market that we see today and in the process, made Bill Gates the richest man in
the world.
The representative from IBM, Jack Sams, had met up with
Gates to talk about the operating system for the new PC. IBM wanted Microsoft
to supply it with not only BASIC but also languages such as FORTRAN, COBOL, and
Pascal. Stand-alone BASIC could function without an operating system, but
Microsoft’s other languages could not. IBM had initially desired to deal only
with Bill Gates, but in the end decided that they needed the 16-bit CP/M and
arranged for an appointment with Gary Kidall of Digital Research whose firmed
owned the CP/M which was the dominant operating system in the market at that
time.
The book describes the background history of the business
relationship between Bill Gates and Gary Kildall, which started off well but
soured. Initially the business relationship between Bill Gates’ Microsoft and
Gary Kidall’s Digital Research was synergistic and cooperative in nature.
Microsoft started off as a language company, and supporting different
microcomputer operating systems was a business nightmare. Each operating system
had its own way of doing things, such as managing memory and file systems. If
Microsoft’s programmers could write software for the same operating system on
each computer, all they would have to do was modify their code slightly for
whatever specific devices a customer’s computer might have. Gates hence
supported Kildall’s CP/M to become the industry standard, and would refer
hardware customers who wanted to run BASIC or any of their products to go
licence CP/M and get that up on their machines so that Microsoft’s stuff would
run on it. And Gary would do likewise. If someone went to him to licence CP/M
and they were looking for languages, he would refer people to Microsoft.
At page 176 - “In fact, there was an unwritten agreement
between Gates and Kildall that Microsoft would stay out of the operating system
end of the business, and Kildall would not get into microcomputer languages.”
But in the late 1979, the synergistic relationship
between Microsoft and Digital began to unravel after Kildall packaged his
operating system with a BASIC that had been developed by Gordon Eubanks, one of
his students at the Naval Postgraduate School. Eubanks’ CBASIC had been on the
market for about two years, and it represented the only real alternative to the
BASIC offered by Microsoft.
Gates was not happy. In reaction, he went to AT&T and
licensed its UNIX operating system, which Microsoft sold at a discount under
the name XENIX.
At page 178 – “Such was the state of affairs between
Microsoft and Digital Research in September of 1980 when Gates picked up the
phone and called Kildall. Once again, he was sending business to someone he now
considered a competitor, but now he had no choice. IBM wanted CP/M as an
operating system for its first personal computer.
The popular tale amongst the computer industry that has
become the stuff of legends is how Kildall squandered his chance by flying in
his twin-engine plane while the men in blue suits from IBM were waiting on the
ground. At page 182 – “Regardless of what really happened that day, most of
those in the computer industry believe Kildall’s actions helped make Microsoft
the software giant it is today.”
Moreover, the IBM personnels were not pleased with Gary
Kildall’s lack of ability to develop the operating system according to their
tight schedule. Jack Sams of IBM says that he and others at IBM could not get
Kildall to agree to spend money to develop a 16-bit version of CP/M in the
tight schedule IBM required. They thus threw the operating systems problem in
Gates’ lap.
At page 182 – “Luck once again would shine on Bill gates.
An operating system for the 16-bit Intel chips had just been developed by Tim
Paterson at Seattle Computer Products, not more than a twenty-minute drive from
Microsoft.” Gates bought Paterson's program, called QDOS, for $50,000, renamed
it DOS, improved it, and licensed it to IBM for a low per-copy royalty fee. And
the rest was history.
In this businessweek article
here, there is an interesting inquiry into the counterfactual about how the
computer industry could have been if Gary Kildall had succeed instead.
“Would history have taken a different path if Kildall
triumphed in those early days? "I'm convinced," says John Wharton, a
tech consultant and Kildall pal. He believes the industry would have been more
collegial and innovative if Kildall rather than Gates sat at the crossroads of
computing. But others say Kildall didn't have what it took to lead an industry.
"Bill succeeded because he was a tenacious businessman," says lawyer
Davis. "Gary was not tenacious."”
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