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The encyclopedia · Software & IT · Strategic decision · 1994

IBM's OS/2 was technically better than Windows — and it lost anyway

OS/2 was a superior operating system co-developed with Microsoft. But Microsoft bet on Windows, and IBM couldn't sell OS/2 to the market it helped create.

IBM · Microsoft · 1994

What happened

OS/2 was an operating system co-developed by IBM and Microsoft in the late 1980s, intended to succeed DOS. Technically, OS/2 was superior to Windows: it had preemptive multitasking, better memory management and a more robust architecture. IBM bet its PC future on OS/2.

But Microsoft bet on Windows. When Windows 3.1 and then Windows 95 succeeded, Microsoft shifted its resources away from OS/2 and toward Windows. IBM was left to market OS/2 alone, and it lacked Microsoft's developer ecosystem, marketing budget and OEM relationships.

OS/2 Warp, released in 1994, was well-reviewed but could not overcome Windows' momentum. Developers wrote for Windows because that's where the users were; users bought Windows because that's where the software was. IBM officially stopped supporting OS/2 in 2006. The case illustrated how a technically superior product can lose to an inferior one with a better ecosystem, and how a partnership can become a death sentence when your partner decides to compete.

Why it happened

  • OS/2 was technically superior to Windows but lacked the developer ecosystem and OEM relationships.
  • Microsoft shifted resources from OS/2 to Windows, leaving IBM to market OS/2 alone.
  • The network effect favored Windows: developers wrote for Windows because users were there, and vice versa.
  • IBM's sales culture was enterprise-focused and could not compete in the consumer PC market.
What it costOS/2 killed; IBM lost the PC OS warcostly

The lesson

A technically superior product loses to an inferior one with a better ecosystem. In platform markets, the ecosystem is the product — and you can't build one alone.

Aftermath

IBM stopped supporting OS/2 in 2006. The case is studied as an example of platform competition, network effects and the danger of co-developing a product with a company that may become your competitor.

Sources

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