The Rise of the IBM PC… and of Microsoft

In 1981 IBM introduced the IBM PC in an attempt to gain share in the microcomputer market. It was such a huge success that in the end it turned against its creator and undermined IBM’s market dominance. What IBM did at the time was sharply at odds with its previous corporate culture. To shorten the development cycle, it chose to integrate components from different vendors instead of using proprietary components from IBM itself. It also published detailed documentation of the PC’s internal architecture, so other companies were able to create their own expansion modules. There’s nothing wrong with those practices, except when they clash with (or even undermine) your own business model.

One of those components was the CPU: IBM used the Intel 8088 microprocessor. This allowed other computer manufacturers to create compatible computers, collectively known as PC clones. And there was also the operating system: MS-DOS, from Microsoft. Bill Gates and his company had a brilliant idea: instead of selling their OS to IBM, they only licensed it. They thus reserved their right to license the OS to other hardware makers—namely the ones that were already cloning the IBM PC.

So the only identifiable components that remained the same across all these computers were the processor and the OS. Eventually the “Wintel” duo (short for Windows and Intel) began replacing “IBM PC” as the brand of the new revolution. The dream of “a PC on every desktop” running Microsoft software spun off in a thousand directions from that point onwards.

Independence from any particular hardware provider and the freedom to license its OS to different manufacturers has been the foundation of Microsoft’s success with Windows. The hardware and the OS evolved, from XT to Pentium, and from MS-DOS to Windows, but the underlying business model remained the same (with an ever-stronger arm to force deals as Windows became more popular). Microsoft became one of the most salient examples of a closed and proprietary software business model.