This weekend, Microsoft Windows celebrated its 25th birthday, though without much dancing in the streets. It was released on November 20, 1985, but not many people stumped up the $99 price. It was a very simple program, by today's standards, but it was also constrained by the capabilities of the installed base of IBM PCs. Many of them had only a 4.77MHz Intel 8088 processor, 256K of main memory, and a 320 x 200 pixel CGA display capable of showing only 4 colours: usually magenta, cyan, white and black. (EGA screens with Enhanced Graphics were less common.)
Windows 1.0 came with a number of applets, including Calendar, Cardfile, Clipboard, Notepad, Terminal, Calculator, Clock, Control Panel, Windows Write, Windows Paint and the Reversi game. It would also work with the Microsoft Mouse, launched in 1982. However, IBM PC DOS (aka MS DOS) software dominated the market, and most users preferred DOS-based TSR (terminate and stay resident) programs such as Borland's Sidekick, which first appeared in 1983.
In 1985, Microsoft had 900 employees and a turnover of $140 million. For comparison, IBM had 405,535 employees and a turnover of $50 billion.
Microsoft kept improving Windows with version 2.0, Windows/286 and Windows/386, but it wasn't a high priority. Microsoft had already launched Xenix, its own version of Unix, which soon became the most widely installed version. However, Microsoft depended on IBM and IBM wanted an operating system it could own. IBM therefore committed to OS/2 (Operating System/2) running on its new PS/2 (Personal System/2) range, and Microsoft lobbied hard to co-develop that.
As Tandy Trower, the launch Windows Product Manager, has noted, once Windows 1.0 shipped, "Ballmer moved most of the core Windows development team to the new joint development project with IBM. Even I had a partial responsibility for working with IBM to try to keep the interfaces between Windows 2.0 and OS/2 consistent so users could easily transition."
At the time, Microsoft might even have preferred to support Apple's Macintosh, launched in 1984. Bill Gates had appeared on stage at the Mac's launch and aimed to become the leading supplier of graphical Mac applications such as Word and Excel, which didn't run in Windows. In 1985, Bill Gates wrote a memo to Apple boss John Sculley urging him to license Mac OS and make it an industry standard, with Microsoft's support. Microsoft might lose $40-$80 in sales of DOS and/or Windows but it expected to sell Mac users $400-$800 worth of applications instead.
Microsoft also had a third operating system in development. DEC, the minicomputer giant, had fallen out with Dave Cutler, its star programmer and developer of the VAX VMS operating system. Gates told Cutler he would back him, and to bring his team to Microsoft to develop the world's next great operating system. Cutler left DEC for Microsoft in October 1988, and started programming what eventually became Windows NT (New Technology).
Things changed when the Windows team came up with a winner in Windows 3.0. This broke free of the limited address space available to DOS under IBM's PC memory map (640K), and could run multiple DOS programs using the "virtual x86" mode in Intel's 80386 processor. Windows 3.0 was launched in 1990 and was an instant hit, selling about 4 million copies in its first year, and 6 million copies the next year. More than 5,000 applications were launched for Windows, and PC manufacturers started to preload it on a growing number of machines.
In 1990, Microsoft had 5,635 employees and a turnover of $1.1 billion. IBM's turnover had grown to $69 billion.
At first, Cutler's OS had been intended as a replacement for the jointly-developed 16-bit OS/2, which had been launched in 1987, but flopped in the marketplace. However, IBM had declined to back Xenix (which Microsoft offloaded to SCO), repeatedly refused to support Windows, and now said it wasn't interested in Cutler's 32-bit OS/2 NT. The two companies had a formal divorce in 1992, with Microsoft getting the rights to Windows and IBM getting OS/2. As The New York Times reported in IBM and Microsoft Settle Operating-System Feud: "The world's largest computer maker, IBM, and the most influential software company, Microsoft, have settled a noisy rift by agreeing to pursue divergent paths without legal and financial squabbling."
IBM, which had dominated data processing for 50 years, then spent hundreds of millions of dollars trying to kill the upstart Microsoft.
Microsoft now had the leading graphical user interface sitting on top of DOS, but it faced two massive tasks. The first was to establish it as a real operating system, which it did with Windows 95. The second was to transition the market from DOS/Windows to a proper operating system, Windows NT.
The first transition went amazingly well: Windows 95 ($149) was one of the biggest hits the software industry has ever seen, and its launch was a global marketing event.
In 1995, Microsoft had 17,801 employees and revenues of $6 billion. A failing IBM was down to 225,347 employees and a turnover of $72 billion.
The second transition was much harder. Windows users appear to be extremely conservative, and will fight to hang on to old versions even when the new one is dramatically better. (In reality, they're not really interested in operating systems per se, only in the work they can do with their applications.) In spite of launching major versions of Windows NT in 1993, 1996 and 2000, it didn't achieve wide adoption until Windows XP appeared in 2001, and even that took a couple of years to take off.
In 2000, Microsoft had 39,170 employees and a turnover of $23 billion, which illustrates the success of Windows 95 and Microsoft Office. In 2010, it has around 90,000 employees and a turnover of $62.5 billion.
More than $50 billion of that is based on Windows in both client and server versions, on Windows applications, and programming tools.
Certainly when Windows 1.0 appeared 25 years ago, nobody predicted that.