Log in

No account? Create an account
Katana on red

How did Bill Gates retain the rights to his operating system?

I was watching a Bill Gates biography while eating lunch and there was something that confused me. Bill Gates was introduces to the head of IBM by his mother and then hired by IBM to write an operating system. But when he was done he refused to give it to them, instead he chose to retain the rights and license the operating system to IBM so he could get paid for each computer that used it.

Obviously a smart move that made him insanely wealthy. But how do you do that in business. How do you say, "Yeah, you know that job you hired me to do? Well I did it but I changed my mind and I'm not going to give it to you. But hey, I would be happy to license it to you if you pay me for every computer that uses it."

Is there a book somewhere that explains how that conversation and negotiation REALLY went? Because I don't get how you can accept a job and then re-negotiate the rights after you have already been hired to do the job. Or was that the terms he negotiated during the hiring. And if so, why would IBM hire him in the first place when they could have looked elsewhere for some one that would both write it AND sell them the rights?



Apparently he already had a company and furthermore he bought the right for the existing operating OS on the market (QDOS) and finally

Gates then talked IBM into letting Microsoft retain the rights, to market MS DOS separate from the IBM PC project, Gates proceeded to make a fortune from the licensing of MS-DOS.

He negotiated it up front...not after the fact.
The biography wasn't too specific about whether it was before or after he did the job. But what I want to know is HOW did Bill Gates talk them into that? It seems like it would have been in their best interest not to let him keep the rights. Did he offer them a super cheap deal or something? I would love to hear how that negotiation went down.
It probably didn't hurt he had bought the rights to the *existing* OS on the market -- it probably gave him some small leverage.

Furthermore, if there weren't tons of other companies that could do the job at the price they wanted...well, there ya go...
Did he buy the rights to the existing OS before or after negotiating his deal with IBM? Because that was a huge $50k risk he was taking if he purchased the rights before he negotiated the deal.
Before the deal... and yeah, that was the risk.

Although in truth his family was financially comfortable even then, so his risk tolerance was higher than say yours or mine would be at that point.
Actually, I've heard he didn't yet have the rights to that DOS when he made the deal with IBM.

The way I understand it he'd talked with the owner's of the DOS system, but hadn't finalized a deal, then made a deal with IBM, then went back and finalized the deal with the DOS people.

I could be mistaken, but I swear I've seen that version of the story in a couple places over the years.
You could be right, although this article is saying something slightly different.

That said - I cant vouch for the article so you could be right.


market size

At that time, IBM didn't believe there was demand for personal computers. They probably thought a per-license cost would be lower overall than a lump sum.