1981: The ibm personal computer
We gave IBM a fabulous deal–a low, one‑time fee that granted the company the right to use Microsoft’s operating system on as many computers as it could sell. This offered IBM an incentive to push MS‑DOS, and to sell it inexpensively. Our strategy worked. IBM sold the UCSD Pascal P‑System for about $450, CP/M‑86 for about $175, and MS‑DOS for about $60.
Our goal was not to make money directly from IBM, but to profit from licensing MS‑DOS to computer companies that wanted to offer machines more or less compatible with the IBM PC. IBM could use our software for free, but it did not have an exclusive license or control of future enhancements. This put Microsoft in the business of licensing a software platform to the personal‑computer industry. Eventually IBM abandoned the UCSD Pascal P‑system and CP/M‑86 enhancements.
Consumers bought the IBM PC with confidence, and in 1982, software developers began turning out applications to run on it. Each new customer, and each new application, added to the IBM PC’s strength as a potential de facto standard for the industry. Soon most of the new and best software, such as Lotus 1‑2‑3, was being written for it. Mitch Kapor, with Jonathan Sachs, created 1‑2‑3 and revolutionized spreadsheets. The original inventors of the electronic spreadsheet, Dan Bricklin and Bob Frankston, deserve immense credit for their product, VisiCalc, but 1‑2‑3 made it obsolete. Mitch is a fascinating person whose eclectic background–in his case as a disc jockey and transcendental meditation instructor–is typical of that of the best software designers.
A positive‑feedback cycle began driving the PC market. Once it got going, thousands of software applications appeared, and untold numbers of companies began making add‑in or “accessory” cards, which extended the hardware capabilities of the PC. The availability of software and hardware add‑ons sold PCs at a far greater rate than IBM had anticipated–by a factor of millions. The positive‑feedback cycle spun out billions of dollars for IBM. For a few years, more than half of all personal computers used in business were IBMs and most of the rest were compatible with its machines.
The IBM standard became the platform everybody imitated. A lot of the reason was timing and its use of a 16‑bit processor. Both timing and marketing are key to acceptance with technology products. The PC happened to be a good machine, but another company could have set the standard by getting enough desirable applications and selling enough machines.
IBM’s early business decisions, caused by its rush to get the PCs out, made it very easy for other companies to build compatible machines. The architecture was for sale. The microprocessor chips from Intel and Microsoft’s operating system were available. This openness was a powerful incentive for component builders, software developers, and everyone else in the business to try to copy.
Within three years almost all the competing standards for personal computers disappeared. The only exceptions were Apple’s Apple II and Macintosh. Hewlett Packard, DEC, Texas Instruments, and Xerox, despite their technologies, reputations, and customer bases, failed in the personal‑computer market in the early 1980s because their machines weren’t compatible and didn’t offer significant enough improvements over the IBM architecture. A host of start‑ups, such as Eagle and Northstar, thought people would buy their hardware because it offered something different and slightly better than the IBM PC. All of the start‑ups either changed to building compatible hardware or failed. The IBM PC became the hardware standard. By the mid‑1980s, there were dozens of IBM‑compatible PCs. Although buyers of a PC might not have articulated it this way, what they were looking for was the hardware that ran the most software, and they wanted the same system the people they knew and worked with had.
It has become popular for certain revisionist historians to conclude that IBM made a mistake working with Intel and Microsoft to create its PC. They argue that IBM should have kept the PC architecture proprietary, and that Intel and Microsoft somehow got the better of IBM. But the revisionists are missing the point. IBM became the central force in the PC industry precisely because it was able to harness an incredible amount of innovative talent and entrepreneurial energy and use it to promote its open architecture. IBM set the standards.
In the mainframe business IBM was king of the hill, and competitors found it hard to match the IBM sales force and high R&D. If a competitor tried climbing the hill, IBM could focus its assets to make the ascent nearly impossible. But in the volatile world of the personal computer, IBM’s position was more like that of the leading runner in a marathon. As long as the leader keeps running as fast or faster than the others, he stays in the lead and competitors will have to keep trying to catch up. If, however, he slacks off or stops pushing himself, the rest will pass him by. There weren’t many deterrents to the other racers, as would soon become clear.
By 1983, I thought our next step should be to develop a graphical operating system. I didn’t believe we would be able to retain our position at the forefront of the software industry if we stuck with MS‑DOS, because MS‑DOS was character‑based. A user had to type in often‑obscure commands, which then appeared on the screen. MS‑DOS didn’t provide pictures and other graphics to help users with applications. The interface is the way the computer and the user communicate. I believed that in the future interfaces would be graphical and that it was essential for Microsoft to move beyond MS‑DOS and set a new standard in which pictures and fonts (typefaces) would be part of an easier‑to‑use interface. In order to realize our vision, PCs had to be made easier to use not only to help existing customers, but also to attract new ones who wouldn’t take the time to learn to work with a complicated interface.
To illustrate the huge difference between a character‑based computer program and a graphical one, imagine playing a board game such as chess, checkers, Go, or Monopoly on a computer screen. With a character‑based system, you type in your moves using characters. You write “Move the piece on square 11 to square 19” or something slightly more cryptic like “Pawn to QB3.” But in a graphical computer system, you see the board game on your screen. You move pieces by pointing at them and actually dragging them to their new locations.
Researchers at Xerox’s now‑famous Palo Alto Research Center in California explored new paradigms for human‑computer interaction. They showed that it was easier to instruct a computer if you could point at things on the screen and see pictures. They used a device called a “mouse,” which could be rolled on a tabletop to move a pointer around on the screen. Xerox did a poor job of taking commercial advantage of this groundbreaking idea, because its machines were expensive and didn’t use standard microprocessors. Getting great research to translate into products that sell is still a big problem for many companies.
