Gates: How Microsoft's Mogul Reinvented an Industry and Made Himself the Richest Man in America by Stephen Manes & Paul Andrews

Author:Stephen Manes & Paul Andrews [Manes, Stephen]
Language: eng
Format: mobi
Tags: BIO015000 BIOGRAPHY & AUTOBIOGRAPHY / Science & Technology
Publisher: Cadwallader & Stern
Published: 2013-04-08T14:00:00+00:00

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Meanwhile DOS, the cash cow, was still producing milk, cream, butter, cheese. The days of the flat fee for DOS were long gone, and Microsoft was beginning to insist that the product be called MS-DOS, not Compaq DOS or Zenith DOS or any bright idea some customer came up with. Except for the lucky few who had bought DOS in the early days and had managed to get Microsoft to throw in revisions, OEM customers were paying significant fees, both up front and on a per-machine basis. Except for the tiniest vendors, per-copy deals were strongly discouraged. Per-machine deals were far easier to audit—just send us your sales figures and multiply. Better still, per-machine deals made it virtually impossible for competitors to crack the DOS monopoly. If you were already paying a royalty for DOS on every machine you made, you weren’t likely to offer a different operating system except as a high-priced option.

The deals were structured to include as many limitations as possible, in the hope that in one way or another the contract would expire and the licensee would be back at Microsoft’s doorstep for a new one. Typical licenses lasted two years, were limited to a single machine, and did not extend to any version number with a new digit to the left of the decimal point. So if you had a deal for version 2.1 on your Model F machine, you’d be saying hello to your friendly Microsoft representative whenever DOS version 3.0 or your Model G came out.

The business was coming in faster than the company could handle it. At one point, as an insider remembered it, “The only way of getting an appointment with anybody at Microsoft was to call them up and threaten them. There were four salespeople handling the world. They were just overwhelmed. There was more business than they could do.”

Two representatives of a Finnish company once sat in the lobby for an entire day waiting to meet an account manager with whom they had no appointment. “The next morning, there they were, sitting right in the same spot.” Eventually a member of the sales team took pity on them and ushered them in. It turned out they had been talking with friends at a Swedish company that had done its own DOS deal. “And they were told, ‘Don’t send a letter. Don’t call on the phone. Get the money, U.S. dollars. Go there and stay there until they talk to you and give you the software so you can go home, because otherwise you’ll never hear from them.’ And . . . they were absolutely right!” Without DOS, your machine might as well be a doorstop.

As DOS became mandatory, the price kept going up, though the sales force had tremendous discretion in structuring deals. In general, the more you were willing to commit to up front, the better deal you got. In January 1983 Televideo guaranteed a minimum of $300,000 over four years, which enabled it to license DOS for $10 per machine—$5 after the commitment level was reached.

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