066 – An OS for the IBM-PC – 1982

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Gary Kildall was one of the original pioneers of the PC revolution. Bill Gates

In proposing the IBM-PC team should select a 16-bit MPU, Bill Gates knew that Digital Research CP/M OS had only been released for 8-bit MPUs, although it was working on the CP/M-86 16-bit version.  IBM’s non-disclosure agreement insisted that signatories should not release any proprietary information, so Microsoft had sufficient reason not to mention this knowledge.

As a result Microsoft agreed to supply IBM with both an operating system and a BASIC language.  This was a major departure for them and broke an unwritten belief, held by Kildall, that Digital Research operated with OSs and Microsoft with languages.

 In its central role Microsoft was also involved in every decision on the hardware.  Whether it was the keyboard layout, the way graphics were formatted, how sound was handled – all needed to be handled by the OS.  In fact Gates suggested that they ended up making many decisions for IBM along the way.

Microsoft had BASIC of course, but no OS product.  Paul Allen knew of a system produced by Rod Brock’s nearby Seattle Computer Products.  Originally called QDOS, quick and dirty operating system, and written in just two months, it was renamed 86-DOS.

SCP had been in the S-100 expansion-board market and developed an early computer kit based around the 16-bit Intel 8086, but found sales were slow due to the lack of an OS.  To them Digital Research appeared to be taking its own sweet time about delivering CP/M-86.

Tim Paterson was charged to develop SCP’s own operating system.  He encountered microcomputers while at Seattle Uni and influenced a room-mate to buy an IMSAI 8080 – so he could use it!  Working in a local computer store he met Rod Brock of SCP whose S-100 cards the store sold; he was soon appointed as a consultant.

He based QDOS upon CP/M but also enhanced it where he saw shortcomings, in particular in file management.

Microsoft paid for a non-exclusive licence for 86-DOS and directly contracted Paterson to accommodate it onto the IBM-PC – of course without identifying it as such.  A few months later Microsoft bought all the rights from SCP for $50,000.

1982 Tim Paterson completed MS-DOS/PC-DOS and returned to SCP.  He stayed there briefly while founding his own operation, Falcon Technology.  For their work on the development of DOS both SCP and Falcon were granted royalty-free rights in DOS by Microsoft.

When SCP realised that Microsoft had acquired its operating system for the IBM-PC and saw the revenues, it took legal action; Microsoft settled with an additional $1m payment to SCP.

Gary Kildall’s company Digital Research claimed that MS-DOS/PC-DOS infringed its CP/M operating system.

It used the threat of legal action to persuade IBM to offer CP/M-86 as an alternative OS for the IBM-PC.  With MS-DOS priced at $60 and CP/M-86 at $170 this proved a pyrrhic victory.

Intriguingly, while Microsoft was recompensed for its consulting role and received licence revenues from its software, its efforst were not judged worthy of an invitation to the formal launch of the IBM-PC. 1986 Once MS-DOS really took off Microsoft moved speedily and acquired Falcon for c$1m to recover its rights in the software and followed up in December by paying SCP $935k to buy back its rights in the OS from them too.

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