Excerpt from The PC Pioneers
On this day in 1981, Microsoft acquired QDOS from Seattle Computer Products to create PC-DOS aka MS-DOS.
IBM’s secretive ‘Acorn’ product to develop its own PC had a rushed deadline and of course it needed available software to annexe all the current software out there. IBM assessed that the required software was readily available in the marketplace and drew the obvious conclusion that what they needed to do, given their haste, was to acquire an existing operating system and software language.
CP/M was the most attractive OS of the moment with widespread adoption and a host of third party software released based upon it.
Perhaps because Microsoft produced a hardware card that enabled CP/M to function with the Apple II, the IBM team was somehow confused as they first called at Microsoft to acquire the operating system for Acorn.
Gates must have wanted to bite off his tongue but he did correct the error and direct them to meet up with Kildall at DRI.
IBM’s other purpose with Microsoft was to acquire a ROM-based BASIC which of course was known as Microsoft’s forte. This was when it became clear to Microsoft that IBM was seeking an 8-bit solution.
Gates recommended they should instead adopt a 16-bit processor approach and this opened up a new ‘can of worms’ for IBM, and somewhat conveniently a new front for Microsoft to exploit. It knew that at the time CP/M had only been released for 8-bit microprocessors.
Microsoft was certainly aware that Digital was working on a 16-bit version called CP/M-86, targeted at Intel’s 8086 and 8088 microprocessors. But IBM’s own NDA had insisted that signatories should not release any proprietary information of which they were aware, so Microsoft had sufficient reason not to mention this knowledge.
Microsoft had no such OS product, but Paul Allen knew of another operating system produced by a nearby organisation called Seattle Computer Products (SCP). It was originally called QDOS (quick and dirty operating system). It had been written in just two months and was later renamed more elegantly the 86-DOS.
SCP had been in the S-100 expansion board market and then developed one of the early computer kits based around the 16-bit Intel 8086 microprocessor. But they found that sales were slow because of the lack of an operating system. To them DRI appeared to be taking its own sweet time about getting its CP/M-86 developed to address this market.
Tim Paterson, then a bright 24-year old, was charged by SCP to develop its own version. He certainly based his QDOS upon CP/M but also diligently set about enhancing it where he saw shortcomings, in particular in file management.
He had met microcomputers while at Seattle University and had a room-mate whom he influenced to buy an IMSAI 8080 – that he could then use. He took a job in a local computer store where he met Rod Brock of SCP as the store retailed his S-100 cards. Regular meetings led to him being appointed a consultant at SCP. Paterson is quoted as saying about the OS task that he was given,
‘I was waiting for Digital to come out with CP/M-86. I thought they would have it real soon. If they had beat me I wouldn’t have taken the trouble. I had always wanted to write my own operating system. I’ve always hated CP/M and thought I could do it a lot better.’
Microsoft agreed to supply IBMwith both an operating system and BASIC; this was a major departure for them and broke an unwritten belief that had been held by Kildall, that DRI did the OSs and MS did languages.
Microsoft initially paid for a non-exclusive licence for 86-DOS from Rod Brock of SCP and directly contracted Paterson himself to accommodate it onto the IBM PC; of course without identifying it as such. A few months later Microsoft bought out all the rights to it from SCP for just $50,000. The resultant OS was named MS-DOS by Microsoft and supplied on a non-exclusive basis to IBM as PC-DOS.
When SCP realised that Microsoft had acquired its OS for the IBM PC and watched the massive revenues they were achieving, it took legal action. Microsoft eventually settled this with an additional $1 million payment.