History of Microsoft: this is how one of the most important companies of the digital era was created

Some companies play a significant role in our everyday lives, and undoubtedly, Microsoft is one of them. Back in the 1970s, people still wrote by hand in offices, phones were limited to landlines, and the Internet wasn’t essential. It was in this context that Microsoft emerged—a company that has been boosting our productivity for decades and has transformed our workplaces, study environments, and homes.

For this reason, we’re taking a look back at Microsoft’s history and the steps that have made it one of the world’s most iconic companies.

Founders of Microsoft

Microsoft’s journey began when two young men, Paul Allen and Bill Gates, opted to leave their respective universities to start Microsoft on April 4, 1975, in Albuquerque. At the time of founding the company, neither could have anticipated the immense success they would achieve in the market and the impact it would have on the telecommunications world.

The company was founded on a single principle: to change the way work was done and to make sure every home, office, or school could have a computer.

The First Major Success: Altair BASIC

On January 1, 1975, Bill Gates came across an article in Popular Electronics magazine about the MITS company and its latest microcomputer, the Altair 8800, the first personal computer available to the public. Gates promptly reached out to Ed Roberts and Forrest M. Mims (the creators) and offered to implement the BASIC programming language for their microcomputer.

For the next eight weeks, Gates and Allen focused on developing a BASIC interpreter for the Altair, which worked on the partial version of the program. This led to a distribution agreement with MITS for Altair BASIC. As a result, even before its official inception, Microsoft established itself as an innovative force in personal computer software.

After this achievement, Gates and Allen decided to leave their universities and relocate to Albuquerque, New Mexico, where MITS was based, and officially founded Microsoft. A fun fact: do you know where the name Microsoft comes from? It is a combination of microcomputer and software, first coined by Gates in a letter, and by November 26, 1976, it was registered as a trademark.

By January 1, 1979, Microsoft had moved to Bellevue, Washington, and was officially inaugurated on June 11, 1980, by Steve Ballmer, who later succeeded Gates as the office manager. In 1981, the company underwent restructuring and became incorporated in Washington State, becoming known as Microsoft Inc. Bill Gates became the company’s president, and Paul Allen the executive vice president.

In 1980, Microsoft launched its first operating system, a variation of Unix—a portable, multitasking, and multiuser operating system developed by AT&T employees—which they acquired through a distribution license from AT&T. Microsoft renamed it Xenix and leased it to Santa Cruz Operation to adapt their system to other significant platforms.

In the spring of 1983, Microsoft released the first version of its word processor within the Unix variant, known as Microsoft Word (originally called “Multi-Tool Word”), featuring innovative capabilities like bold text. Interestingly, demo copies were freely distributed through the computer magazine PC World.

First Significant Contracts

Microsoft’s success was bolstered by IBM, the leading technology company of the time, when it granted Microsoft a contract to develop a version of the CP/M operating system for its forthcoming personal computer.

It was then that Microsoft acquired the QDOS (Quick and Dirty Operating System) for under $50,000, which they transformed into MS-DOS (Microsoft Disk Operating System). Allen and Gates reached a savvy agreement with IBM: receiving a royalty for each computer sold with their software MS-DOS installed, while also retaining the operating system’s licensing rights.

In the mid-80s, software development companies Columbia Data Products, Eagle Computer, and Compaq cloned IBM PC hardware. Microsoft seized a unique opportunity: selling MS-DOS to all these manufacturers, making its operating system a market leader.

Following this, they continued developing their own operating system: Windows. By the 1990s, this company software had achieved widespread popularity.

In the 1990s, Microsoft’s software had already captured 90% of the market share for personal computers. This dominance helped establish the company as a giant in the industry.

Windows: the operating system par excellence

From its inception, Windows provided a user-friendly operating environment. Version 1.0, which successfully integrated both keyboard and mouse functionality, was a major hit.

The subsequent release, Windows 2.0, introduced features like desktop icons, expanded memory, enhanced graphics, and keyboard shortcuts, along with screen design control and window overlay capabilities.

By 1989, Microsoft had developed its suite of office applications, including Microsoft Office, featuring Word and Excel, which became one of the company’s flagship products.

In the early 1990s, Windows 3.0 was launched, featuring 16-color graphics, new icons, and games like Solitaire and Minesweeper. In 1992, Windows 3.1 was released, selling nearly three million copies in its initial months. That same year, Microsoft also introduced its database software, Microsoft Access.

In 1995, Windows 95 gained immense popularity by introducing the Start button and enabling Internet connectivity through a phone line. That year also saw the release of the first version of the Internet Explorer browser and the online messaging service MSN.

By 1997, with the release of Office 97 and Internet Explorer 4.0, Microsoft was able to overtake Netscape, the leading browser at the time.

In the following years, Microsoft experienced rapid growth, releasing various operating systems, including Windows 2000, Windows XP, Windows Vista, Windows 7, Windows 10, and the latest, Windows 11.

As of now, Windows holds a 68.8% market share, making it the most popular and widely used computer operating system globally, according to Statista data from 2023. Additionally, Microsoft’s market capitalization has reached 3.31 billion dollars, making it one of the largest companies in the market, just behind Apple at 3.45 billion dollars.

Microsoft’s hits and misses: Xbox, Tablet-PC, and Zune

In 2001, Microsoft ventured into the video game market with the Xbox console, aiming to compete with Sony and Nintendo. While Xbox didn’t surpass the PlayStation 2, it brought considerable benefits to the company during a period when internet-related companies were struggling due to the dot-com bubble burst, providing a much-needed breath of fresh air.

The Xbox’s success, however, did not extend to Microsoft’s Tablet PCs. Although the tablet market truly boomed in 2010 with the iPad’s launch, the concept of such devices had been around for quite some time.

In 2001, Microsoft attempted to launch its own Tablet PC, an ultimately unsuccessful endeavor to replace desktop computers, largely due to Microsoft’s poor execution. While these devices offered more convenience for certain tasks, people preferred to continue using their computers daily.

Microsoft’s efforts to extend beyond personal computers didn’t stop there. Observing Apple’s success with the iPod, Microsoft quickly developed its own music players. Thus, the Zune was released at a time when the iPod already had a solid foothold in the market.

Shortly after, the Zune project was discontinued. With the advent of the iPhone and the integration of music players into mobile devices, the market for standalone players was entirely overshadowed, marking another significant failure for the company.

Acquisition of Nokia and the Windows Phone Failure

Apple’s introduction of the iPhone created a shift that continued to impact Microsoft’s trajectory for a long time. This product revolutionized the telephone industry.

In 2007, companies like Blackberry and Microsoft remained focused on phones with physical keyboards, which were popular in the business sector. However, many other companies began to emulate Apple by releasing their own smartphones, phasing out phones with keypads.

Beyond this, Google swiftly developed its own mobile operating system, Android, which left Windows Phone with little room to compete in the mobile market.

In an effort to expand its reach in the mobile sector, Microsoft acquired Nokia’s mobile division for $7 billion. However, after several years of trying to establish Windows Phone in the telecommunications market, Microsoft eventually decided to sell the division.

The failure of this venture can be attributed to several factors, but the main issue was the business model. Mobile manufacturers were reluctant to adopt Windows Phone for their devices because they had to pay licensing fees. This increased the cost of their products, making them less competitive in the market.

Microsoft Office 365 and Microsoft Surface

Since the early 2000s, Microsoft has concentrated on enterprise technology and cloud solutions. In 2001, it acquired Great Plains Software and developed Microsoft Dynamics, a CRM offering sales management, customer service, and marketing capabilities.

Later, in 2010, Microsoft introduced Microsoft Office 365, a cloud-based productivity suite with the groundbreaking feature of enabling file creation, editing, and collaboration from anywhere.

Also in 2010, it launched Office 365, a cloud solution allowing users to create and collaborate on various document formats via a browser, rather than installing software on individual computers. This represented a major shift in software consumption for both individuals and businesses, transitioning Microsoft to a subscription-based model.

In 2012, Microsoft made a significant pivot in its business strategy by introducing the Surface product line, which includes tablets, laptops, desktops, and interactive whiteboards, along with their accessories. These devices come pre-installed with Windows 11, Wi-Fi, Bluetooth, mobile networks, OneDrive, the Edge browser, and the Microsoft 365 suite (Word, PowerPoint, and Excel).

The Surface RT was the inaugural device in the Surface lineup, introduced by Steven Sinofsky, then-President of Windows and Windows Live, in 2012. This was followed by the Surface Pro, the second series of Surface devices based on Intel architecture.

Microsoft’s early steps into the AI era

Another strategic move for Microsoft was launching Windows Azure in 2010, a cloud service platform designed to support the development and execution of ASP.NET web applications. Initially, Azure was accessible only to developers creating web application categories, not businesses, and was later rebranded as Microsoft Azure in 2014.

Under the leadership of Satya Nadella in 2014, Microsoft began to delve into Artificial Intelligence. The company initially focused on big data and introduced several services (Azure HDInsight, Azure Data Lake Store, and Azure Data Lake Analytics) to enhance its Big Data capabilities on the cloud platform scale, which included the launch of the first version of Azure Machine Learning.

Today, Azure competes with Amazon Web Services and Google Cloud Platform. Its success is largely due to its wide range of infrastructure, platform, and SaaS offerings, allowing companies to efficiently and scalably develop, deploy, and manage applications.

Collaboration with OpenAI and the Introduction of Microsoft Copilot

In 2019, Microsoft began investing in a promising startup, OpenAI. Initially investing $1 billion followed by additional capital injections, Microsoft made a long-term investment of $10 billion in January 2023.

Thanks to OpenAI, Microsoft was able to update Bing and launch Bing Chat, available for Microsoft Edge and the Bing mobile app, featuring an AI-driven chatbot. The “new Bing” also includes an AI image generator based on DALL-E 2, later upgraded to DALL-E 3.

In May 2023, Microsoft released Windows Copilot, an AI-powered virtual assistant using a large language model to handle tasks such as text generation and translation, creative content writing, and informative responses. A paid version, Microsoft 365 Copilot, is also available.

Microsoft 365 and Copilot: A New Era in AI Integration

Microsoft has introduced Microsoft 365 Copilot, which is now accessible to all Microsoft 365 subscribers.

In January 2024, Microsoft Copilot, an AI-powered chat assistant, was launched. This new tool replaces the previous Bing Chat and allows users to access it without needing a web browser. Soon, PCs pre-installed with Microsoft Copilot will be available, aiming to improve user experience and streamline various tasks.

Even though the original founders of Microsoft have retired, their journey in establishing the company as a global leader, influencing millions, remains a key reference and a source of inspiration for future generations.

It is evident that Microsoft remains committed to its founding principle of enhancing lives through technology, and despite its setbacks, it has continued to grow and innovate over the years.