This week marked the 45th anniversary of a pivotal event in Microsoft history: Nov. 6, 1980, the date the then-fledgling company signed a contract with IBM to develop an operating system for the IBM PC. IBM paid Microsoft $700,000 in the deal. This week’s Tech Time Warp takes a closer look at the pivot that powered Microsoft.
The rise of MS-DOS
Behind the scenes, one finds both software innovation and shrewd business dealings; and importantly, the business dealings may have been the stronger source of the secret sauce. The program that became MS-DOS was the brainchild of Seattle Computer Products (SCP) and called “QDOS” for “Quick and Dirty Operating System.” It had been developed for the standalone motherboard SCP had released for the IBM PC.
Transparency vs. secrecy
When SCP initially released QDOS in April 1980, programmer Tim Paterson told Bill Gates about it, and Gates recognized QDOS was the system Microsoft needed for the super-secret project for which he was in talks with IBM. Microsoft bought QDOS from SCP for a flat fee of $25,000. The number was based on an agreement to pay SCP $15,000 for each QDOS license Microsoft sold, plus an initial $10,000 start-up fee. The contract between Microsoft and SCP stipulates that Microsoft does not have to disclose its customers. In agreeing to the deal, SCP didn’t know two important facts. First, there was only one potential customer. Second, the potential customer was IBM. The next year, on July 27, 1981, he sold QDOS, now known as 86-DOS, to Microsoft outright for $50,000.
Legacy and aftermath
Microsoft renamed it MS-DOS and went on to earn $200 million per year from the system by 1991. Ultimately, following the dispute over Microsoft’s concealment of IBM as the potential partner, the two parties settled out of court.
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This post originally appeared on Smarter MSP.