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Microsoft's future

18 April 2013

Everyone thinks of Microsoft as a software company, but that's not really how they started and it's unlikely that's what they'll be in a decade or two's time.

Way back in "the good old days", IBM decided to get in on the microcomputer business and came up with a fairly lacklustre piece of hardware called the IBM PC. In order to use this machine, you needed an operating system -- which IBM didn't have.

Of course IBM could have written their own but that would have meant investing more time, money and resources to the PC project -- something they were reluctant to do. It must be remembered that back in the early 1980s, microcomputers were scoffed at by "real" computer engineers. There was no way these "toys" could ever compete with the "big iron" that IBM manufactured and sold -- so the whole PC thing was just an attempt to dip a toe in the water.

It made sense therefore, to simply go out and buy an OS from some other company - which is what IBM did.

Around this time, "the" microcomputer OS was CP/M, a primitive, clunky but usable operating system that provided a consistent interface across a wide range of different hardware.

Digital Research, the company who wrote CP/M had just released a version for the then very-new Intel 16-bit processors. This OS was known as CP/M-86 (surprise, surprise) and it was this bit of code that IBM had planned to purchase for their new PC product.

The head of Digital Research, one Garry Kildall, wasn't quite the business-man he ought to have been and although the details seem shrouded in folklaw and legend, it seems that on the day that IBM wanted to meet with him and buy his product, he was too busy to see them and had refused to sign an IBM NDA.

Now when you are "the" computer company (IBM) and some upstart "toy computer" software company doesn't jump to attention when you enter the room, bad things happen.

So IBM effectively dismissed the CP/M-86 option and went in search of an alternative.

About that time, Bill Gates and IBM had a meeting where the prospect of supplying an OS for the PC was discussed.

Bill didn't have an OS -- his claim to fame was a version of the BASIC language that had become the standard language for these microcomputer things -- but Bill was a far more savvy businessman than Garry so he took a punt and promised to deliver the requested OS to IBM.

This left Bill with a bit of a problem -- he'd sold an OS that he didn't actually have -- but, in true entrepreneurial style, he found an OS called QDOS (sometimes referred to as "Seattle DOS") and he scooped it up, along with Tim Paterson, the guy who wrote it.

Further proof of just how savvy Bill was became evident when he convinced IBM (who were still arrogant enough to dismiss these microcomputer-based systems as being unimportant) to sign a non-exclusive license for this new OS, leaving Microsoft free to market their 100% compatible "MSDOS" to a huge array of clone makers that soon sprang up in the wake of the PC's success.

So as you can see, Microsoft's real start in the big-times wasn't down to having developed some really cool and valuable software -- it was down to some clever intellectual property wheeling and dealing on the part of Bill Gates.

Let's move forward some 30 years to today...

Reports are flooding in that Microsoft's sales of Windows (its flagship software product) are falling in the face of lacklustre desktop sales and the rise of tablets which are based on alternatives such as iOS and Android.

Attempts to get into the tablet and mobile phone markets have also whithered and died -- so where to from here for Microsoft?

Well it seems that they're going back to their roots and placing an increased focus on leveraging their IP for profit.

Just this week, MS has announced that they've signed a licensing deal with Foxconn, the huge Taiwanese company that makes a very significant percentage (40%) of the world's consumer electronics devices. Under the terms of this license, Foxconn has agreed to pay Microsoft a licensing fee for the patents it holds that are used by Google's Android and Chrome operating systems.

Once again, Microsoft is making money from licensing rather than code-cutting and I suspect that this is the future for the boys in Redmond.

Microsoft's software is still very widely used but it is rapidly finding itself stuck in a cul de sac -- unable to turn around and follow the trends that others are exploiting to generate growing profits.

Yes, there will always be a place for desktop computers running a nice GUI OS and Office-like apps - but that market is shrinking rapidly as people opt to use smartphones and tablets and open-source alternatives.

Microsoft used to be the world's most powerful software company -- just as, 30 years ago, IBM used to be the world's most powerful computer company.

Nothing lasts for ever though -- eh?

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