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Dec 18th, 2019


In those years IBM was the world’s largest computer producer, but its managers decided to not invest money into development of personal computer technology because they thought that this sector would never been profitable, but only a niche market. When IBM’s managers realized that the market was growing very fast and the company was in danger to lose its leadership, they decided to base their personal computer on Intel microprocessor and Gary Kildall’s operating system, named CP/M, instead of developing their own.Kildall decided to not sign with IBM and their choice fell back on Bill Gates that bought an operating system based on CP/M and made it compatible with IBM’s machines, creating Microsoft DOS. Every IBM’s PC used this program, so MS DOS had a huge installed base, and the other companies who wanted to stay in the market could only develop a compatible software, also a lot of applications and complementary goods were developed for this platform and it generated a “virtuous circle” that made Microsoft the world’s fastest-growing software company.

To be more functional for users and to fight against Apple, Microsoft decided to create a new graphical interface, named Windows and with that reached the leadership on personal computer operating system market and a large market share in many other software market such as word processor and presentation programs, influencing software and hardware industries thank also to its capabilities of encouraging third part to make and making itself application completely compatible with DOS and Windows.How might the computing industry look different if Gary Kindall had signed with IBM? In my opinion if Gary Kindall had signed with IBM the dominance of Microsoft might have never happen, surely the future of IBM would have been very different and probably would have become the absolute leader in the production of operating system in the world and have developed other technological innovation based on knowledge built and the valuable contribution ofKindall.

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On the contrary, perhaps, the development of the operating system CP/M might not have been so powerful and IBM probably might have kept its control on that, and it might not have the capabilities or the motivation to create a standard and allows its installation even on computer clones.It is also reasonable to assume that, as a consequence of the choice of Gary, IBM might not have need to seek the help of Bill Gates who might not have the necessity to build the operating system Microsoft Dos, and consequently there would not be the alliance between IBM and Microsoft that led to the creation of Windows and this would have been a great loss for the computing industry. QUESTION 3:Does having a dominant standard in operating system benefit or hurt consumers?Does it benefit or hurt computer hardware producers? Usually competition between various firms can create a massive benefits for consumers because they can get a technologically advanced product at relatively low price, however many markets are affected by network externalities characterized by the fact that the benefit of using a good increases with the number of other users of the same good. In these cases the consumer derive a greater benefits from the presence of a single dominant firms.Microsoft can be a good example in fact some analyst think that the firm have engaged a anticompetitive behavior and have damaged the consumers in its proposal to dominate the personal computer operating system market; other analyst instead think that Microsoft have behaved appropriately and its large share of the market is good for consumers because it created greater compatibility between computers and the invention of a lot of software applications.A method to understand if its more benefit for consumer to have multiple firms or a dominant one is to compare the value that consumer have when a large portion of the market adopts the same good and the cost that users tolerate when a large portion of the market use the same goods. For the computer hardware producers the presence of a dominant design can be profitable because they have to work on the compatibility of their products with a standard but in these way only a few firms can dominate the market.

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