November 14, 2019

IBM and the Clones

 

When IBM launched its PC, there were other competing systems using a different architecture, albeit running a version of MS-DOS. The hardware on these systems were not IBM compatible. Plug-in cards for the machines were not cross-system compatible and the card manufacturers could not afford to produce hardware specific to every system. To achieve success, a company would have to produce identical machines to IBM, i.e. clones.

Reverse engineering

IBM had retained ownership of its BIOS, the link between the system's architecture and its OS. A rival company could buy the same components as IBM and also purchase MS-DOS, but without the IBM BIOS they could not produce IBM compatibility. Reverse engineering was the means of replicating the functionality of the BIOS without copying the code and hence infringing IBM copyright. By using "virgins", engineers who could prove no contact with IBM code, it was possible to produce, by minute observation of the IBM BIOS, a specification for a BIOS device. A second wave of "virgins" would subsequently build the device to this specification.

Compaq (Rod Canion) was the first to achieve this. It was followed by Phoenix Technologies who produced BIOS as ROM chips for sale to other companies. Thus commoditization of the PC was achieved. IBM lost control of the market and customers gained from both widening choice and reduced prices. Companies such as Dell introduced mail order and competition with Big Blue increased. IBM introduced the AT in 1984, which proved successful, based as it was on Intel's 80286. Estridge attempted to keep IBM at the forefront of the technology, but he was moved sideways. IBM's mainframe mentality prevailed. His attempt to introduce a 386 PC was scuppered. It was perceived as a threat to IBM's own minicomputer market. Compaq introduced its own 386 in 1986 and IBM lost a substantial market share.

What makes technology successful?

MS-DOS

DOS outstripped CP/M to become the dominant OS. Yet many consider DOS to be if not inferior, then certainly not that different to CP/M. Even so, MSDOS formed the keystone to Gate's success.

Intel's 8088

Intel's success was built on IBM's choice of the 8088 chip. Intel regarded this as a stripped down 8086, a 16-bit chip. The 8088 was less powerful, but was compatible with 8-bit software and cheaper than the 8086. Many thought it inferior to the even cheaper Motorola 68000.

IBM-PC

At the time of the IBM's introduction of its PC, the Apple II was the most successful machine on the market. Once again this was regarded by many as a superior machine.

Why is this?

  • Legacy - Success gives momentum to sales and this success breeds customer loyalty. The company develops new products that are backwards compatible (new chips are capable of running old software). IBM chose the 8088 because of legacy issues. They wanted existing customers to be able to use existing 8-bit software. Really new technology can alienate your customer base.
  • Market leader - IBM's name was synonymous with computing. Its position as market leader, which had been attained with a reputation for excellence, attracted sales, both in the corporate sector and to the general public.
  • Society's acceptance - Good technology does not ensure sales. Is the product affordable? Is there a perceived need for it? The general public's acceptance of PCs was helped by the development of games and CD ROMs.
  • Product desicisions - Advertising plays a large part in this process, e.g. Intel's TV campaigns.

IBM after the PC

In 1990 Gates predicted that IBM would fold in 7-10 years, the reporting of this hastened the split between the two. In 1992 IBM announced a $5 billion loss and over $8 billion the following year. IBM was a huge company, with over 300,000 employees, as opposed to Microsoft's 20,000. IBM had to adapt to a rapidly changing market and the size of the company dictated that this would be a slow process. By 1994 they were reporting profits of $3 billion and over $6 billion in 1997. They are still very successful in the large computer and minicomputer market. Furthermore, with the purchase of Lotus Notes they have successfully developed the sales of Internet solutions to business. It would seem that Gates' report of Big Blue's potential demise was greatly exaggerated.

 

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