FROM THE ARCHIVES OF PRAGPUB MAGAZINE, DECEMBER 2018
The Big Boys Move In — A Moment in the History of the Computer: the Coming of the IBM PC
by Michael Swaine
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In this latest installment in his computer history series, Mike discusses the IBM PC, CP/M, and the reaction of the hobbyist community to the arrival of the Big Boys.
This series on the history of the personal computer takes a light approach, including fictional scenes meant to put you in the moment. Fictionalized might be a more accurate description: in some cases, the scene is consistent with what might have happened, and in other cases, the scene represents an actual conversation that took place between the individuals, but with dialogue that I improvised based on what I know.
Scene: The Oasis, Menlo Park, California
Bob Marsh and Lee Felsenstein are drinking beers at the Oasis, the favorite watering hole of the members of the Homebrew Computer Club.
Although Bob is now president of a computer company raking in millions of dollars and Lee is the designer of the company’s computer, they still hang out and share technical insights with their friends — who are also frequently their competitors — at the club meetings. Tonight, Bob is worried.
Bob: They’re coming, you know.
Lee: [Looks around the crowded bar] It looks like they’re already here.
Bob: I mean the Big Boys. They’re going to jump into the market one of these
days.
Lee: Ah, right. Attracted by the seductive aroma of money.
Bob: It’s been fun, brainstorming with the other Homebrewers and building
a company. And cashing the checks. But it’s all going to change. And soon.
Lee: No question. The question is, who’s going to survive after IBM or Commodore or National Semiconductor comes out with their personal computer and crushes our little hobby companies.
Bob: That’s why we have to get really big really fast, Lee. The
Lee: I remember what Texas Instruments did to Ed Roberts in the calculator market.
Bob: Who do you think it will be? Which big company is going to move in on us first?
Lee: Could be any of them. Oh, god. Let it be anybody but TI!
The Big Boys
A group picture of the executives of the personal computer industry at the end of the 1970s would show mostly young male electronics hobbyists. Some would be wearing suits, with wide lapels and wider ties, some would be in short-sleeved shirts with multiple pens in pocket protectors, some in t-shirts and jeans, possibly one or more barefoot. It was still an industry of self-styled hackers, but they were starting to wonder how long that would be the case. They could almost see the gate closing. It was becoming way too obvious that there was money to be made here. Apple was seeing to that.
Steve Jobs, as the public face of Apple, would be out in front of this imaginary
group picture. Apple was firmly rooted in this hobbyist community, but it was
playing the game like a big company. There was that quarter-million dollar
Markkula investment and his aggressive business plan. Markkula seriously
intended to turn Apple into a Fortune 500 company in five years, and it looked
like if anybody could do it, he could. Then there were the ads, big,
attention-grabbing ads in attention-grabbing places, like Playboy magazine.
Executives at Texas Instruments might not be reading Kilobaud, but they
probably were familiar with Playboy. If only for the ads.
Apple hardly needed to advertise: the press was happy to write about them, usually in glowing terms. Their computer, the Apple ][ — yes, they spelled “Two” with reversed brackets — looked nothing like the metal boxes everybody else was selling: they had sprung for a sleek, beige plastic case, designed by an actual industrial designer. Apple in every way conveyed that personal computers, theirs at least, were serious consumer products. Home appliances, not toys for hobbyists. And Apple was selling enough Apple ][s to prove that this niche market of “personal computers” was the real thing. In fact, Apple was creating a nice market for add-on products. Software, especially, was a growing market. The spreadsheet program VisiCalc was the breakthrough product, proving that personal computers could be useful for business.
To Apple and all the other players, it felt like only a matter of time before the big boys came in and spoiled it all. Ed Roberts and Lee Felsenstein were not the only ones who remembered how Texas Instruments, or TI, had stepped into the calculator market a few years earlier, cut prices to the bone, and destroyed the business of TI’s own customers. It could happen again. Why wouldn’t it? Intel, it’s true, had made it clear from the start that they were opposed to competing with their own computer company customers. But TI had already demonstrated that it had no such qualms, and there were already rumors of a possible TI computer. National Semiconductor was another semiconductor company supposedly working on a computer. When any one of these big boys stepped in, it was all over.
It didn’t even have to be a semiconductor company. There were other big boys. Like the mainframe and minicomputer companies, who you just knew had to be looking at this personal computer market and thinking, this is our rightful domain, even if it is currently occupied by scruffy squatters. Or the big electronics companies, with their established distribution channels or their own stores. They weren’t just rumors, they were existing threats. Commodore International had released a personal computer called the Pet that was popular in schools. Radio Shack was also already in the market. They were a retailer with a network of stores but no track record in manufacturing. Nevertheless, they had launched a personal computer and were competing well in the market, with sales comparable to Apple’s. The hobbyist personal computer market hadn’t yet been crushed, but it had definitely been invaded.
The Key Component
If the personal computer was a target, it was a well-defined one. A consensus definition of what constituted a personal computer was emerging.
In 1945 John von Neumann had defined the architecture of a computer: a
processing unit consisting of an arithmetic logic unit and processor registers,
a control unit containing an instruction register and program counter, a memory to store data and instructions, external mass storage, and input and output mechanisms. This architecture definition still held sway, but the personal computer industry was converging on some refinements: Von Neumann’s memory was implemented as semiconductors, specifically random-access memory chips, or RAM. His external mass storage was increasingly realized as a magnetic disk, played like a phonograph record of the day, by a disk drive, either built into the computer or external. Von Neumann’s arithmetic logic unit and processor registers and control unit functions were all integrated into one integrated circuit, the microprocessor, the CPU chip. Semiconductors also interfaced with the primary I/O devices, which were in every case a keyboard and a cathode-ray display.
There was one more element that had become essential: an operating system.
If you don’t remember Gary Kildall, you should. This Naval Postgraduate School instructor had been consulting with Intel in the earliest days of its microprocessor development. Kildall had written two programs for the Intel development system. Both were impressive accomplishments, and both had been written for his own non-commercial purposes: to help him educate himself about Intel’s 4004 and 8008 and later microprocessors, to support his students who were learning along with him, playing with the Intel development system that Intel had let him set up in the back of his classroom, and most of all, for fun.
One of these programs was an implementation of a programming language, called PL/I, for the Intel chips. This was an ambitious undertaking, and that was really his primary motivation: to prove that he could do it.
The other program was more practical: it allowed him to connect the Intel microprocessors to external devices, manage storage of data in memory and on disks, and handle the startup activities of getting a computer running.
Kildall offered both programs to Intel. They took him up on the language but declined the other program, which he called CP/M. CP/M would prove to be by far the more important of the two, one of the most important pieces of software in the history of the personal computer. CP/M was the first portable operating system for personal computers.
An operating system is a basic element of any modern computer system,
managing the computer’s hardware and software resources and providing basic services for higher level programs. The earliest personal computers didn’t have one. Getting elementary things like reading a character from a disk was a task left to the application programmers. So for Kildall to create a personal computer operating system was a worthy accomplishment. But to create a portable one was to change the industry fundamentally.
A critical element of the CP/M operating system was what Kildall called the basic input-output system, or BIOS. The BIOS encapsulated all the machine-specific parts of CP/M, the components that interface directly with the hardware. The BIOS was software but it lived on a piece of hardware, a non-volatile memory chip. The idea was that it would be the first program that the computer would run on starting up, and that it would handle startup operations and then stick around to take orders from the rest of CP/M, doing the low-level hardware interfacing for them. The BIOS would be supplied by the computer manufacturer, and the rest of CP/M could be generic. So all you need to do is change the BIOS and the same copy of CP/M will work on a different machine. So long as the manufacturer wrote the (relatively simple) BIOS code and put it on a ROM chip that was accessed on startup, CP/M could step in and do all the system work for you. A truly portable operating system.
💡 Aside: Kildall’s insight has a kind of parallel in the design of processors within Intel. Up to 1978, every new Intel processor had a different instruction set. It was John Warton who, in the design of the 8051 chip, showed how to abstract out the I/O capabilities, and in the process, invented an architecture that has survived half a century.
Scene: Microsoft Headquarters, Bellevue, Washington
Bill Gates is talking nervously with Paul Allen about the upcoming meeting with IBM.
Bill: Getting the contract to write software for IBM’s personal computer would be huge.
Paul: It would be the making of Microsoft.
Bill: I mean, IBM is a really big company.
Paul: The biggest. But I don’t understand why they aren’t doing their own
development. They’re IBM, for christ’s sake.
Bill: I know, Paul, but this Estridge guy is a hacker. He convinced them to let him do it his way. Our way.
Paul: Well, whatever they want from us, we have to agree to it. We can’t miss this opportunity.
Bill: [Reads the message from IBM.] They’re bringing five people. If IBM’s going to have five people in the room, we need to put five people in the room.
Paul: We don’t have five people. Not five people we can let in on this at this stage. You, me, Steve — maybe we have four people.
Bill: Call that lawyer you know downtown, see if we can get him in the room.
IBM Comes Calling
Bill Gates and Paul Allen had moved on from their work at MITS. Somehow managing to hold onto the rights to the Basic language implementation they had written for the Altair, they had leveraged that into a business. Returning to their native Seattle, they started a software company called Microsoft, focused on writing programming language implementations for computer companies.
It was a nice little niche business. Other companies had to hustle to sell to the
users of computers, but Microsoft just had to negotiate contracts with the
computer companies. They wrote languages, Gary Kildall’s company, Digital
Research, sold operating systems, and other companies sold word processing
and database management and accounting and game software. There was a
friendly sort of specialization in the personal computer software market.
💡 Aside: There can be such a thing as too friendly in business. Andrew Orlowski recounts a John Wharton story about Bill Gates pitching Intel on what sounded like a classic anti-trust carve-up: IBM gets enterprise computing, Intel gets embedded systems, and Microsoft gets personal computer software. All nice and friendly. Microsoft at the time had about 30 employees.
Then one day Gates got a call from IBM. IBM wanted to come to Seattle to talk to Microsoft. Gates checked his schedule and suggested a time the following week.
The IBM person said, “We’ll be on a plane in two hours.”
The next day Gates met with the IBM representatives. They had him sign an
agreement not to disclose any secrets — standard lawyer stuff — and they
asked him a lot of questions about Microsoft and its business and the features
that Gates thought were important in a personal computer. Then they left.
Gates thought it was weird.
A month passed and IBM called again and requested another meeting. This time there were more documents to sign, including a non-disclosure agreement. IBM was going to reveal a secret to Microsoft.
What Gates and his team saw that day were plans for a personal computer.
They were interested in Gates’s opinion about their design, and they were
interested in Microsoft’s software. Gates gave them his opinions and they
listened attentively. Then one of the IBM people said they’d heard of this
operating system called CP/M. Could Microsoft supply them with that?
Gates explained that CP/M was the property of another company, Digital Research, down in California. He could make an introduction, though. Which he did, calling Gary Kildall while the IBM people sat there. Soon, the IBM people were on a plane bound for California.
What happened next is the subject of debate in the industry. What is certain is that IBM and Digital Research did not come to an agreement, IBM returned to Microsoft, and Gates said, sure, we can supply you with an operating system.
💡 Aside: If you want to know what really happened when IBM came to call on Gary Kildall, Tom Rolander was there and can dispel the myths. Spoiler: Gary did meet with IBM that day.
The fact that Microsoft didn’t have an operating system didn’t bother Gates. They hadn’t had a Basic when they promised one to Ed Roberts. A local Seattle developer, Tim Paterson, had written an operating system inspired by CP/M called QDOS, for quick and dirty operating system. They approached Paterson.
💡 Aside: “Inspired by” is putting it delicately. Can I say that QDOS was a rip-off of CP/M without inviting a snippy letter from a lawyer? No? Then let’s go with “inspired by.”
Knowing nothing about the IBM deal, Paterson happily sold QDOS rights for peanuts to Microsoft, who adapted it for the IBM PC, retaining the right to license this “MS-DOS” to other companies. Microsoft was now also an operating system company, in direct competition with Digital Research, and they had an intimate relationship with the most important customer in the personal computer market. Make that in the computer market.
Microsoft would not have been on IBM’s radar except that IBM’s PC program was being run by personal computer users. Philip Don Estridge, known as Don, was an IBM Vice President, but he was also an Apple ][ owner. Many members of his small team also owned their own personal computers. IBM normally developed all its own hardware and software, at least all the important bits. But Estridge’s boss, Bill Lowe, had pitched a different approach to management. He claimed that an independent group, not hampered by IBM’s usual policies and practices, could deliver a prototype in a month and a product in a year. His plan was to rely on an open architecture, non-proprietary components, and software, and to sell the product through existing retail stores, all of which was completely contrary to the way IBM did things. He got permission to go ahead, and Estridge got things moving with a visit to Microsoft.
In a way, Lowe and Estridge were thinking like Howard Aiken, who had got IBM to finance his Mark I computer, and then rather than building from scratch, assembled from parts he could find in IBM’s warehouses. Estridge likewise built the IBM PC from widely available parts.
This was highly unusual for IBM, but it would result in IBM’s getting to market with an acceptable, recognizable product before most of the other big boys got off their marks.
But they did keep some things proprietary. Estridge saw the BIOS as IBM’s proprietary edge. He understood the CP/M model: the BIOS is unique to the computer company. He was confident that people would buy an IBM product based on the name. He understood that IBM’s entry into the personal computer market would give this fledgling industry a kick and this would bring in competitors. But the BIOS, the one inviolable proprietary element in an unprecedentedly non-proprietary IBM product, would ensure that no competitor could make a product that worked exactly like the IBM PC.
On August 12, 1981, IBM announced its Personal Computer. That was its name, Personal Computer — or the IBM Personal Computer. As in, now that IBM has arrived, there finally is a personal computer.
The IBM Personal Computer
The Personal Computer had arrived. IBM said so. The business press had a unanimous take on the event: IBM was legitimizing the personal computer industry. Apple responded with a full-page ad in the Wall Street Journal headed, “Welcome IBM. Seriously.”
IBM priced its Personal Computer competitively. It sold it in chain electronics
and computer stores. IBM acted unlike IBM, and the computer and the way
it was presented changed the public perception of IBM. This was helped along
by marketing that employed a Charlie Chaplin everyman character to represent the product. This Personal Computer, the ads conveyed, wasn’t some impersonal giant brain out of the movie “The Desk Set,” manufactured and sold by a company of straight-laced suited salesmen. This was a personal device, with a personal, everyman image.
But what effect did IBM’s PC have on the perception of what a personal
computer was? The consensus definition of a personal computer still held, but
IBM was trying to narrow it to the IBM PC. The machine they were selling
was the Personal Computer. IBM’s attitude was, oh, there are others? How
droll.
There were others, of course. Apple and Radio Shack and a few others stood
alone, making no attempt to mimic IBM. But many other companies saw the
handwriting on the wall. Competitors went along and started producing and
selling IBM PC knockoffs. Our computer is just like an IBM PC, they implied,
but cheaper. Or prettier, or it has this particular feature. Companies defined
their offerings against IBM’s PC. They could do this because IBM used standard parts, just like they did. But also because IBM used Microsoft’s operating system, and Microsoft would license MS-DOS to anybody who wanted it.
But then there was the issue of the BIOS.
IBM could respond by releasing software that wouldn’t run on other machines. The BIOS ensured that competitors couldn’t claim that their machines could do whatever IBM’s could.
The MS-DOS approach to the BIOS followed Gary Kildall’s model. The BIOS
software was specifically designed to work with a particular computer. It
provided the interface to the keyboard, screen, memory, and permanent storage device.
Others could create computers that worked like the IBM PC, but not just like
it. IBM understood that the BIOS gave them a unique product and that others
couldn’t claim one hundred percent compatibility with the IBM PC. Not
unless they were running the IBM BIOS, and that was proprietary, protected.
Until Phoenix Technologies reverse-engineered the BIOS. The issue was not access, it was legality: companies could read the code for the BIOS right there in the IBM Technical Reference Manual. Any programmer could copy that code and put it in a ROM chip. Just not legally. It was all there, protected by copyright, not by secrecy. Some actually did copy it and got sued. Getting sued by IBM was no fun.
Phoenix took a different approach, one designed to crack the code and dodge
the lawyers. They set up a team of programmers to study the IBM BIOS source
listings in the IBM Technical Reference Manual. They made it their own,
they learned every detail and all the implications of all the details. When they
were done, they probably could have rewritten the BIOS in their sleep — just
not legally.
From this deep understanding of what the BIOS software did, they wrote
technical specs for it — describing exactly what it could do and how you made
it do it, but without copying a single line of source code. Copyright law protects the expression of an idea or technique, not the idea or technique itself. The BIOS code was protected, but what the BIOS did was not.
Then they gave it all to a developer. This was a very special developer. He had never seen the code, didn’t even have experience with the Intel 8088 chip. What he then did was to write a BIOS that did exactly what the specs dictated. In doing so, he produced a BIOS that did exactly what IBM’s BIOS did, but he did it without copying IBM’s code. He literally couldn’t copy it because he had never seen it. The process of recreating software from studying what it does is called “reverse engineering.” When you do it while preventing access to the source code, the technique is called using a “Chinese wall.” The end result of these machinations was that Phoenix had created a legal clone of IBM’s precious BIOS.
They took one more step. They bought two million dollars worth of insurance
against copyright-infringement lawsuits — not for their own peace of mind,
but to reassure their customers. And then they went after those customers. For $290,000 you could have a perfectly IBM-compatible BIOS. With the Phoenix BIOS, you could not sell just copies of the IBM PC but one hundred percent compatible clones.
Scene: Hotel Conference Room, Mountain View, California
We’re sitting in the front row at a press conference announcing a new computer from one of dozens of microcomputer companies to spring up in the wake of IBM entering and shaking up the nascent microcomputer industry. Vector Graphic co-founder Bob Harp is describing the machine, drilling down into the technical details. His business-minded co-founder Lori is out of sight in the wings.
Bob: The disk-read speed is unparalleled. And we’ve done what I think are some clever things regarding screen refresh —
A loud whisper from the wings: Don’t forget the IBM compatibility.
Bob: — and of course it’s one hundred percent compatible with IBM’s personal computer.
Clones
Steve Jobs had predicted that it would come down to Apple versus IBM. For a brief moment, it looked like that could be true. Apple had a fanatically loyal following, Apple ][ graphics made it an ideal platform for games, and VisiCalc had given Apple a headstart in business, though that edge would disappear quickly. On December 12, 1980, Apple launched the initial public offering of its stock and instantly created 300 millionaires. The company ended the day with a market value of over a billion dollars. Apple was obviously able to hold its own against IBM.
But on the IBM side, the clone market exploded and it looked more like Apple versus everybody. Companies came and went like comets in the night sky. Adam Osborne, the ex-Intel documentation writer who had been selling his own books out of a box in back of Homebrew a few years before, hired Lee Felsenstein, who had chaired those Homebrew meetings and had designed the Processor Technology Sol computer for Bob Marsh, to create a portable computer. Osborne Computer Company became one of the fastest-growing companies in history, and one of the quickest to fail. Profiled on Sixty Minutes
Software, which had been a marginal business for most companies, became serious business. Big software companies were emerging, and Microsoft was going to be one of them. Having expanded beyond languages into operating systems, they staked out territory in application software with an editing program called Word.
But it was a presentation at a computer conference somewhat earlier, in the late 1960s, that started in motion events that would ultimately undermine the IBM PC vision of what a personal computer was.
Computer magazines appeared, with ads driving their growth. PC Magazine,
focused on IBM’s computers and the clones, grew to hundreds of pages, until
it literally couldn’t get any thicker without its spine breaking, at which point
it moved from monthly to biweekly publication. There was plenty to write
about, though, with new models of computers appearing every week, and new companies almost as frequently. The magazines set up product testing labs, and the reviews they published helped sort out the good from bad software, driving quality. Customers were hungry for information, devouring the magazines, joining clubs and user groups, attending computer shows and
conferences.
But it was a presentation at a computer conference somewhat earlier, in the late 1960s, that started in motion events that would ultimately undermine the
IBM PC vision of what a personal computer was.
Next: the Mother of All Demos.
About the Author
Michael Swaine served as editor of PragPub Magazine and was Editor-in-chief of the legendary Dr. Dobb’s Journal. He is co-author of the seminal computer history book, Fire in the Valley, and an editor at Pragmatic Bookshelf.
