How 75 thousand dollars changed the fate of Microsoft

Imagine a time when personal computers had just emerged and the concept of a graphical user interface was still a distant dream. This era marked the rise of MS-DOS. For nearly fifteen years, DOS was the basis on which thousands of application programs depended, running on millions of IBM PCs and PC clones.

In this article we will look at how MS-DOS appeared. We'll tell you why the creator of MS-DOS was accused of plagiarism, how IBM made a huge commercial mistake, and what allowed Microsoft to take a leading position in the software market.

Failed negotiations and the commercial mistake of the century

In 1980, IBM decided to break into the personal computer market and launched a project to create its first PC – IBM PC. Instead of using highly specialized parts, the company decided to go a different route – to assemble a computer from standard commercial components. They chose as the central processor Intel 8088. This approach allowed us to reduce costs and speed up the development process, which turned out to be very important in the context of the rapid development of the market.

IBM used the same principle when selecting software. Instead of developing the system from scratch, the company decided to partner with an outside firm with experience in this area. To do this, they turned to the market leader – the company Digital Research Inc. (DRI).

DRI was founded in 1973 by Gary Kildall, who developed the operating system CP/M (Control Program for Microcomputers). The system became incredibly popular: by 1980, the company had sold more than 250,000 copies, making CP/M the market leader in microcomputer operating systems.

In August 1980, IBM representatives went to Digital Research to discuss the possibility of using the CP/M-86 for the new IBM PC. CP/M-86 was supposed to be a version for the 16-bit Intel 8088/8086 processor, but at that time it had not yet been developed.

However, it was not possible to reach an agreement. Why? There are several conflicting accounts of how the meeting between IBM and Gary Kildall took place.

According to one version, Gary Kildall was unable to attend the negotiations because he was traveling. As a result, the meeting was conducted by his wife and business partner, Dorothy McEwan. However, she refused to sign IBM's proposed unilateral non-disclosure agreement (NDA).

According to another version, Kildall and DRI employee Tom Rolander were busy delivering software to a client at the time, leaving negotiations to Dorothy. She considered the terms of the NDA too harsh and decided to wait for her husband's return. When Kildall returned, the versions differed: some claim that he signed an NDA, others that he never participated in further negotiations.

Kildall said he met with IBM representative Jack Sams during the flight and reached a tentative agreement. However, Sams denied this claim. As a result, the deal was never concluded.

IBM negotiators went to Seattle and met with Bill Gates, who proposed an alternative solution for the IBM PC operating system. This situation became a turning point in the history of Microsoft.

Microsoft's move

Don Estridge, who led the IBM PC project, noted that one of the key reasons why IBM chose Microsoft was the huge number of users of Microsoft's BASIC. While the IBM version of BASIC was not so common.

In the book “Fire in the ValeIt is mentioned that when IBM CEO John Opel heard about the collaboration with Microsoft, he exclaimed, “Oh, this is Mary Gates' son's company?” The fact is that Opel and Bill Gates' mother worked together on the national board of the United Way, so the choice in favor of Microsoft could not have been accidental.

One way or another, IBM turned to the small company Microsoft, which at that time had already established itself as a supplier of programming languages.

IBM had already signed a contract with Microsoft to supply a BASIC interpreter for its new PC and then asked the company to consider developing an operating system.

Bill Gates' company didn't have an operating system to offer. But Microsoft co-founder Paul Allen remembered his friend Tim Paterson, who worked at Seattle Computer Products (SCP).

SCP was selling microprocessor boards and needed a suitable OS for its equipment. Digital Research's 16-bit version of CP/M was delayed, so Tim Paterson developed an operating system for the new Intel 8086-based computer, which he called QDOS (Quick and Dirty Operating System). A little later, QDOS was renamed 86-DOS.

Microsoft, realizing the potential this system has in the context of cooperation with IBM, decided to license it. In December 1980, Microsoft signed an agreement with SCP and paid $25,000 to license 86-DOS.

However, it soon became clear that full ownership of 86-DOS opened up much more opportunities for licensing it to other manufacturers. So Microsoft bought all rights to the operating system for an additional $50,000.

When SCP signed the licensing agreement with Microsoft, they were not entirely sure who exactly Bill Gates was working with. Paterson later admitted:

“We all had suspicions that Microsoft was dealing with IBM, but we didn't know for sure.”

SCP later sued Microsoft, claiming that it hid its ties to IBM in order to obtain the operating system at a lower price. As a result, the dispute was resolved peacefully, and Microsoft paid SCP almost $1 million.

In 1981, Paterson left SCP and joined Microsoft. On his first day in a new place, he was surprised to note: “Hey! This is IBM.” Indeed, over the next 11 months he interacted extensively with IBM engineers who were developing the personal computer in Boca Raton.

DOS 1.0, developed by Paterson, consisted of approximately 4,000 lines of assembly code. This code was quickly refined and submitted to IBM for evaluation. Ultimately, IBM agreed to use the operating system proposed by Microsoft.

When the operating system was officially released with the IBM PC in August 1981, it was called PC-DOS (version 1.0).

However, Bill Gates did not grant IBM an exclusive license for DOS. The agreement prohibited IBM from licensing DOS, but did not impose any restrictions on Microsoft itself.

When Microsoft first discovered Paterson's system, Gates asked IBM:

“Do you want to buy QDOS or do you want me to buy it?”.

Since IBM had already decided to use an open architecture, they suggested that Microsoft do everything. And this became IBM's first commercial mistake.

IBM's second mistake cost the company dearly. Under the contract, IBM agreed to pay Microsoft a total of $430,000. IBM probably expected Bill Gates to ask for more money, but instead he wanted to be able to sell DOS to other companies. And IBM agreed.

This contract provision allowed Microsoft to license the operating system generically as “MS-DOS”. In the months following the deal, other companies, especially Japanese ones, began approaching Gates with proposals for DOS.

Microsoft gained a huge source of income. But IBM started having problems after some time. Other companies began creating clones of the IBM PC and purchasing the MS-DOS operating system and the BASIC programming language from Microsoft. IBM was unable to maintain its position in the market and faced serious financial losses.

Accusation of plagiarism

The similarities between the CP/M and MS-DOS operating systems have caused much controversy. The 16-bit version, developed by Tim Paterson, used similar commands and some of the interfaces of the 8-bit CP/M.

Because of this, the borrowing debate between DOS and CP/M continued for many years. Gary Kildall and his company Digital Research Inc. (DRI) argued that QDOS, created by Paterson, was simply a copy of CP/M.

Kildall always spokethat most of the QDOS was stolen: “Ask Bill [Гейтса]why function code 6 ends with a dollar sign. Nobody in the world knows this except me.”

Paterson, in turn, denied these accusations. In interviews, he claimed that he only used documentation and not Kildall's source code. He told the authors “Hard Drive: Bill Gates and the Making of the Microsoft Empire”:

“I told Kildall at the time that I didn’t copy anything. I just took his printed documentation and did the same. This does not violate any intellectual property laws. If you follow a recipe from a book, it does not infringe the copyright of the recipe.”

Paterson's goal was to make it easier for developers to port their applications from the 8080 to the new platform, so he used Intel's and Digital's CP/M manuals to adapt the instructions.

“By translating these programs, my operating system could perform CP/M functions in the same way,” Paterson explained. “To do this, you didn’t need to have the CP/M source code, the Digital manual was enough, and based on it I wrote my operating system. I never looked at Kildall's code, only his documentation.”

Three decades later, Bob Seidman, a programmer and intellectual property expert, conducted a detailed analysis of the QDOS, CP/M, and PC-DOS code. His findings showed that QDOS was not copied from CP/M. However, it is worth noting that during that period Zeidman worked with Bill Gates, albeit on other projects.

DRI Davis Attorney claimedthat experts proved the existence of code borrowing, but in 1981 the possibility of litigation on copyright issues was limited, although the law on the protection of copyright in software was adopted back in 1980.

There is a version that Kildall was dissuaded from filing a lawsuit, offering instead to license CP/M for the IBM PC.

However, IBM sold CP/M for $240 per copy, while PC-DOS cost only $39.95. IBM claimed that this was because Kildall asked for too high a license fee. As a result, CP/M sales were low while PC-DOS continued to grow in popularity.

Publication

When IBM announced their personal computer, they planned for it to support three operating systems: MS-DOS, CP/M-86 And p-System SofTech Microsystem. But at the start of IBM PC sales, only MS-DOS was ready for use.

In 1981, nine out of ten popular programs ran the CP/M-80. The CP/M-86, which became available about six months after the release of the IBM PC, seemed to be the favorite operating system for most writers and reviewers in the trade press.

MS-DOS was constantly compared to CP/M-80 and CP/M-86, and the main issue was compatibility. Back then, no one thought that MS-DOS would not only catch up, but even surpass CP/M.

Even Bill Gates himself spoke:

“Our most optimistic view of the number of machines running MS-DOS did not match what actually happened”

The IBM PC was much more successful than expected. In the first year, IBM sold 30,000 computers per month, which turned out to be a real success.

In addition, IBM began shipping all of its programming languages ​​and applications in MS-DOS format. This pushed developers to create software specifically for MS-DOS, thereby forming an entire ecosystem of programs available only for this system.

For several years, Microsoft competed vigorously with Digital Research's CP/M-based operating systems. But Microsoft remained a leader in programming languages, giving the company control over which operating systems would work best with their languages.

Microsoft was slow to release versions of its languages ​​for CP/M-86, and even when they were released, their price was 50% higher than similar products for MS-DOS. In addition, BASIC for CP/M-86 did not support graphics, which added complexity to the developers.

According to the book “Market Dominance: How Firms Gain, Maintain, or Lose Dominance and How It Affects Economic Performance”by December 1984, MS-DOS had already taken a leading position in the operating system market. By June 1986, MS-DOS accounted for half of Microsoft's revenue, amounting to $60.9 million.

Technical features and versions of MS-DOS

The first version of MS-DOS 1.0 consisted of 4,000 lines of assembly code and could run in just 8 KB of memory. The system had DEBUG, EDLIN and FORMAT utilities, as well as three main files. The first, IBMBIO.COM, was responsible for interacting with the ROM BIOS and providing I/O from disk and characters. The second, IBMDOS.COM, contained the DOS kernel. The third – COMMAND.COM – acted as an external command processor.

MS-DOS allowed programs written for CP/M to be transferred to the IBM PC. It was possible to automatically translate source code from the 8080 processor to the 8086.

Like CP/M-80, MS-DOS used file names of up to eight characters and three-character extensions, and also had similar floppy drive designations on command lines. But she wasn't just a copy of CP/M. Microsoft wanted MS-DOS to be able to easily adapt to new hardware solutions, such as different types of disks and processors.

MS-DOS made data input and output independent of devices. Each device was assigned a reserved name: CON for the console, PRN for the printer, and AUX for the serial ports. These names directed commands to devices rather than files, making things easier.

MS-DOS introduced the ability to work with files of any size, which made it possible to maintain logical records of the required size. The COMMAND.COM command processor became a separate relocatable file, allowing MS-DOS to flexibly manage resources.

MS-DOS used the system to manage files FAT (File Allocation Table). This allowed the operating system to quickly find and load files, including large ones.

The system has improved error handling, enabled automatic disk logging, and file date and time stamping. MS-DOS could also intercept the Control-C interrupt command, which allowed it to protect against accidental termination of programs or ensure graceful shutdown if necessary. When changes were made, disk memory information was automatically updated, reducing the number of errors.

Applications and programs on simpler systems were deleted from memory upon completion. However, MS-DOS could load programs and store them in memory, even while using other programs.

In total, MS-DOS had eight major versions and about twenty intermediate updates. First version PC DOS 1.0was released in August 1981.

In 1982, MS-DOS 1.24 was released, which added support for double-sided 5.25-inch 320 KB floppy drives, file attributes now included the last modified time, and the COPY command added the ability to concatenate files.

With the release of MS-DOS 2.0, the system acquired support for hard drives and a hierarchical file structure like UNIX/XENIX.

In 1984, MS-DOS 3.0 appeared, designed for IBM PC/ATwhich already supported 20 MB hard drives and 1.2 MB 15-sector drives. It also became possible to execute programs from another directory and support for virtual disks in RAM.

In version MS-DOS 4.0, support for volumes larger than 32 MB appeared and a visual shell was added.

With the release of MS-DOS 5.0, the system became much more user-friendly. We added a full-screen Edit text editor, a QBASIC programming environment, and a Help help system.

The last standalone version of MS-DOS, 6.22, was released in 1994. All subsequent versions of MS-DOS have already become part of the Windows operating system.

The emergence of Windows and the evolution of MS-DOS

The gradual decline of the DOS operating system began in the mid-90s, when graphical user interfaces (GUIs) began to gain popularity. The first in this direction was Apple Lisa in 1983, and then a successful Macintosh. Microsoft, seeing the success of other companies, began to develop its own graphics solutions, and thus Windows was born.

At first, Windows was just a graphical shell running on top of DOS. Microsoft Windows was first discussed in the article “Window Wars!” dated February 25, 1986, which discussed alternatives for DOS such as DESQview.

The real breakthrough occurred with the release of Windows 95. This event became significant and was accompanied by a large-scale advertising campaign. Windows 95 introduced a Start button, and advertising featured the Rolling Stones track “Start Me Up.” Windows 95 appeared on the cover of PC Magazine several times and set a new interface standard that lasted until the release of Windows 8 in 2012.

With the release of Windows 95, the era of DOS as an independent operating system ended. This version integrated MS-DOS 7.0, which supported long filenames and merged the MSDOS.SYS and IO.SYS code.

MS-DOS 7.1 became part of Windows 95 OSR2 and Windows 98, and the latest version, MS-DOS 8.0, was included in Windows ME, but had limited functionality. It was also used for emergency booting in Windows XP and later versions.

MS-DOS meaning

The success of 16-bit microcomputers depended on a single operating system, because it was difficult for developers to create programs for several different operating systems. Microsoft wanted to make MS-DOS the standard, so it chose a hardware-independent architecture so that the OS could easily adapt to different hardware.

The launch of MS-DOS marked the beginning of a new era in the computer industry. Before its introduction, personal computers were used primarily by enthusiasts, but MS-DOS made computers accessible to a wider audience. With its compatibility with the IBM PC, MS-DOS set a standard for hardware, giving software developers the opportunity to reach a more mainstream market.

MS-DOS set standards for the command line, the file system, and became the basis for the first versions of Windows. Over time, it gave way to more modern operating systems, but its influence on the industry is undeniable. It made computing accessible to millions of people, set standards that are still used today, and turned Microsoft into one of the leading technology companies.

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