Lessons from the Past: The Worst Business Decision of All Time

Lessons from the Past: The Worst Business Decision of All Time

The year is 1980 and IBM is a giant in the IT industry, with the majority stake in computer technology. IBM is the first company to introduce personal computers to the mass markets and they want their IBM PC to become the standard for personal computers.

In an interview in 1983 the president of IBM’s Entry Systems Division explains his decision not to proceed with the BASIC in-house software. Instead he decides to reach Microsoft for help since BASIC already has thousands of users around the world. IBM decides to meet with two young entrepreneurs named Bill Gates and Paul Allen. They own a small software company called Microsoft that is doing well with its software, Basic. Back then IBM was 3000 larger than Microsoft. The below graph found in an article by New York Times shows how big IBM was back then.

IBM’s new product IBM PC should have its own operating system. Microsoft seemed like the most appropriate company to develop it. Microsoft acquires 86-DOS from Seattle Computer Products and develops MS-DOS in just six weeks. Going forward all IBM PCs will run MS-DOS. And IBM sold many PCs as you can see.

However, a small detail helped Microsoft become dominant. By including a savvy clause in their agreement, Microsoft was able to secure their position as a major player in the technology industry. This clause gave them the ability to sell the operating system they developed for IBM to other companies under the name MS-DOS. This strategic move would prove to be a game-changer, altering the course of technology history and paving the way for Microsoft’s dominance during the PC era. IBM had many regulation issues back then with their monopolistic position. They decided not to have exclusivity over the operating system. That decision would prove to be a costly mistake, maybe the biggest ever made.

With the ability to sell their operating system to other companies, Microsoft was able to expand their reach and influence beyond the initial partnership with IBM. This move allowed them to tap into new markets and solidify their position as a major player in the industry. As other companies began to adopt MS-DOS, Microsoft’s brand became synonymous with personal computing, and their products became the industry standard.

The year is 1993. Microsoft’s products are the standard for personal computers. More and more companies sell personal computers, and all of them use Microsoft products. IBM is facing many financial issues, while Microsoft has become bigger in terms of market share. Most computers all over the world run on Microsoft products and now Microsoft is dominant.

It’s clear that this clause was a critical component of Microsoft’s success during the PC era. By leveraging their expertise in software development and making a strategic business move, they were able to establish themselves as the dominant technology company of their time. The impact of this decision can still be felt today, as Microsoft remains one of the most influential and successful companies in the world of technology.