Partner with IBM on the 'Chess' Project

Setting

IBM, the giant of the computer industry, decides to enter the personal computer market. They approach Microsoft initially for languages (BASIC). They need an OS. They tried to buy CP/M from Digital Research (Gary Kildall), but negotiations failed (the famous "flying planes" story). IBM comes back to Microsoft.

People

• Responsible: Bill Gates, Steve Ballmer
• Approvers: IBM Executives
• Consulted: Paul Allen
• Informed:

Alternatives

Option A: Stick to Languages (BASIC, COBOL, etc.)

Pros:

• Core competency.
• Less risk.

Cons:

• Misses the chance to control the platform.

Option B: Commit to Providing the OS

Pros:

• Puts Microsoft in the center of the IBM PC ecosystem.
• Infinite upside if IBM PC succeeds (which it will).

Cons:

• Microsoft doesn't have an OS.
• Massive pressure and tight deadline (IBM moves fast for this project).

Decision

Chosen: Option B

Rationale: "We want to be the IBM of software." Partnering with the biggest player validates the PC market and, critically, Bill Gates negotiates to retain ownership of the OS and license it to IBM non-exclusively.

Consequences

Positive

• +The deal of the century.
• +Microsoft becomes the standard OS provider.
• +When IBM clones appear (Compaq, etc.), Microsoft can license the same OS to them, commoditizing the hardware and monopolizing the software.

Negative

• −Becomes beholden to IBM's timeline.