1990-1995: Microsoft's Yellow Road to Cairo
Automatic PC sales of DOS rapidly made Microsoft one of the largest software companies of the 80s. As its market power increased, it gained a reputation as a vendor with staying power. Nobody wanted to invest in the software of a company that might go out of business.
Microsoft used its new clout to introduce a product vision called Cairo in 1991; it disrupted development and marginalized competition throughout the next decade.
The tactic worked so well that Microsoft repeated it in the following decade as Longhorn. Here's how it happened, and why Microsoft won't be able to repeat the same fraud again.
Platform Death Match introduced the difficulty of launching a new platform and the work involved in maintaining one. This series looks at the historical march of computing platforms, to sort out why winners won and why losers lost. While the computing environment is always changing, the same basic rules are in effect today, and will shape the future developments between Mac OS X Leopard and Windows Vista.
Previous articles:
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•1990-1995: Why the World Went Windows The smart strategies and dirty tricks used to establish the PC.
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•1990-1995: Platform Crisis: The Tentacles of Legacy Balancing past compatibility with future technology.
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•1990-1995: Platform Crisis: The Lazy Dinosaur Apple and Microsoft get lost in a rapidly changing world climate.
1990-1995: Microsoft’s Yellow Road to Cairo
Along with Ashton-Tate and Lotus Development, Microsoft was considered one of the Big Three software developers of the 80s. Apple courted all three to develop software for its new Macintosh.
Ashton-Tate managed to run itself out of business, and Lotus was eventually bought up by IBM in 1995, leaving Microsoft as one of the largest and most influential developers of desktop applications.
Microsoft's position as a vendor for both DOS and office applications gave it certain advantages over its rivals, particularly when Windows 95 appeared and obsolesced not just previous versions of DOS and Windows, but also competing developers’ existing applications, including DOS standards WordPerfect and Lotus 1-2-3.
Rapid advancements in technology created a wildly chaotic market, where simple announcements of future plans could trump real products. Given the prevalence of misinformation wars in the tech industry, it's no surprise that Microsoft applied its vast market power to become one of the most notorious sources of FUD and vaporware.
Innovations in Vaporware
Previous articles have considered Microsoft's vaporware attacks on QuickTime and the Newton and PenPoint OS.
While many companies in the competitive tech field announced products they were ultimately unable to deliver, Microsoft applied an innovative, two handed approach to playing the vaporware game.
Rather than just bluffing its hand like other companies, Microsoft played the game with a set of cards in one hand, while waving the illusion of another set of cards in the other hand. The fake set of cards were highly distracting because they looked like a much better hand than anyone else could possibly have.
Standing around the card table were a number of analysts who all expressed how impressed they were by the cards Microsoft waved in the air, and made regular remarks about how foolish it would be for anyone else to stay in the game. The worst part was that many of those analysts could see Microsoft's real hand, and knew the company was bluffing.
Microsoft's NT Plans Prior to Cairo
In 1991, Apple was releasing the Mac System 7 and Tim Berners-Lee was using his NeXT to build the world's first web server and browser.
PCs were still using the character based DOS in a slightly faster version than was released a decade earlier in 1981, although Windows 3.0 was beginning to provide DOS PC users with a rough approximation of Apple's graphical desktop.
After witnessing sales of Windows 3.0 take off, Microsoft began its schism with IBM over OS/2 3.0 development. Microsoft's new plan involved an entirely new operating system based on its contributions to OS/2; the new OS was referred to as Windows NT.
Unlike the existing DOS based Windows 3.0, NT aimed at being entirely new and modern in every respect, untied to DOS or to the existing x86 PC architecture.
Microsoft initially targeted NT to run on the i860, Intel's new 64-bit RISC processor that was supposed to usher in the future. The i860 was a modern design and carried none of the legacy baggage of the standard x86 based PC.
It included graphics acceleration features similar in principle to the forthcoming PowerPC Altivec and Pentium MMX; those features resulted in the i860 being used by NeXT to power its high end NeXTDimension video card.
Unfortunately, the i860 didn't work out for Microsoft. All that remained from its efforts to build a new operating system based on the processor was the i860's code name: N10, which is widely repeated to be the meaning of NT. Of course, Microsoft and IBM had also long referred to OS/2 3.0 as "NT," for new technology, so the idea behind the i860 as the source of NT's name might be historical revisionism.
No Operating System Experience
Microsoft struggled with the complex reality of building its own operating system without IBM. Up to that point, Microsoft had only been delivering tepid updates to MS-DOS, which it had licensed from a small developer. That original product, QDOS, was based on a clone of Digital Research’s CP/M.
Prior to DOS, Microsoft had originally tried to sell Xenix, a version of Unix it had licensed from AT&T in 1979. Xenix eventually turned into today's SCO UNIX.
Despite quaint stories about Bill Gates singlehandedly writing DOS on the back of a napkin, Microsoft had no real experience in building or designing operating systems at all. Throughout the second half of the 80s, it had relied on IBM to develop OS/2 as the replacement for DOS.
Sales of Windows 3.0, a DOS application, suggested that Microsoft could make more money without IBM by simply licensing an underlying OS for the Windows environment, or hiring a team to write a new one in house.
That turned out to be a bigger task than anyone at Microsoft had imagined. In 1988, Gates had recruited a development team from DEC, headed by Dave Cutler, initially to work on the next version of OS/2. In 1990, Microsoft officially set Cutler loose on building a new OS kernel for Windows to use in place of IBM’s OS/2.
That effort resulted in Windows NT, which was eventually delivered many years later than initially planned. In trade magazines of the day, NT was joked to stand for “Not on Time.”
But Wait, There’s More
With its NT project moving along slowly, Microsoft invented a much rosier view of the future under the code name Cairo. Shortly after it planned to ship the first version of NT, Microsoft said it would deliver Cairo, a product that would not only leapfrog NT, but also anything that Apple, NeXT, or IBM were already offering.
Cairo was Microsoft’s Pink: a cloud of ideas that was talked about as a specific product, a series of products, then eventually just as an overall strategy or vision.
While Apple’s Pink was constrained by legacy realities of the existing Mac System 7 market, Microsoft Windows 3.0 was barely a finished product in 1990, with very little Windows specific software available, particularly from major developers. That allowed Microsoft the freedom to paint out Cairo any way it desired on a clean canvas.
Slippery Plans and Brands
Many of the terms and brand names Microsoft used shifted over time or as its strategies changed. This creates some confusion in retrospect.
Prior to 1990, Windows was described as a programming and user environment intended to be folded into the new OS/2; in the interim, it could run on DOS.
At some future point, the world was supposed to trade in the essentially free-to-obtain DOS with a paid $200 copy of OS/2. That would enable PC users to run the software designed for DOS and Windows they already could run, as well as new software native to OS/2 that they did not have and did not yet exist. Hmm.
It's amazing that neither IBM nor Microsoft seemed to worry that this strategy might not work out, but everything is much clearer in hindsight. OS/2 was the first attempt to deliver a new platform for the PC; Apple had earlier learned about the difficulty of moving customers to a new platform with the Apple IIGS and the Mac.
At the time, nobody was really selling desktop operating system software at retail. Apple had historically given away updates to the Mac System Software, and had just begun its own attempts to turn System 7 into an actual retail product it could sell. As it turns out, consumers aren't usually very interested in buying software unless they have to, particularly unsexy utility software.
In 1990, when sales of the DOS based Windows 3.0 took off; it allowed the PC to rather cheaply be used as a poor man's Macintosh for graphic applications such as PageMaker. That prompted Microsoft to pull out of its OS/2 partnership with IBM, and focus its efforts on delivering its own new OS kernel, in parallel with the ongoing development of Windows.
Microsoft's new operating system to replace DOS was called NT, a name that had earlier applied to the upcoming third version of OS/2. Windows still referred to the user environment that would run on top of NT. IBM also continued its own plans to make sure existing Windows apps would continue to work on its OS/2.
For NT, Microsoft began work on a new 32-bit version of Windows. This environment was called Win32, and the existing Windows was renamed Win16. That change left IBM supporting an old version of Windows, and made Microsoft the only source for running the new and more powerful Win32 applications.
It also gave Microsoft the inside track in developing Win32 applications. Other developers selling competing PC desktop applications complained that they could not get equal access to information on how to write the new Win32 apps, particularly the secret APIs that Microsoft used to deliver its own apps, principally Office.
Two years before it first shipped Windows NT as a product, Microsoft began describing Cairo as the next generation of Windows NT. Rather than a simple graphic shell running Win32 on its new, unreleased, and unproven NT kernel, Cairo would offer an entirely rethought, futuristic new architecture, from its core OS and file system to its new user environment.
Distracting Vapors of the Future
This was important for Microsoft to announce, because the existing Mac user environment from Apple, and the existing development environment and operating system technology from NeXT were both clearly far in advance of what Microsoft Windows currently offered, or could be expected to offer in any reasonable time frame.
Cairo, like Apple's Pink, was vaporware. It was a loudly announced vision of the future to distract from the current realities of the market. Just as Apple's Pink was supposed to eventually match all the things NeXT had already delivered, Microsoft's Cairo announced things that would not be deliverable for a decade or more.
Microsoft simply had no car worthy of competing in the race, so it drew up an impressive picture of flying race rocket instead. The press, impressed by this compelling Cairo illusion, stopped comparing the ridiculously lame Windows 3.0 and DOS to the contemporary Macintosh and NeXT, and instead began comparing Apple and NeXT’s existing products to the future promises of Cairo. 
Even NeXT believed Cairo would turn up eventually.
The company plotted out charts showing how it planned to compete against the imminent arrival of both Taligent and Cairo.
Like other victims of vaporware, NeXT had trouble selling reality because everyone only wanted to hear about Microsoft’s fictional plans that would not end up getting delivered for another half decade or more; significant parts of Cairo would never be delivered at all.
Unhindered by Reality
Without having to accommodate legacy compatibility with existing applications, and artificially isolated from having to compete in the market against real opponents, Microsoft was free to imagineer a magic future for a world ready to believe that everything Microsoft could plan would be delivered at some point, even though Microsoft had absolutely no history of delivering any significant or original operating system technology.
Microsoft's distraction hand was waving a hand of five Aces, but rather than questioning how that could even be possible, the press just gushed about how great Microsoft's future looked. The company's bluffing was actually empowered by the uncritical appraisal of the press, which only encouraged Microsoft to continue in announcing unrealistic plans.
Time or resources would not be a factor, because this was the computer industry! Time to deliver could be infinitely shortened by simply hiring more engineers to work on the project, and resources were irrelevant because of the economies of scale working in Microsoft's advantage. By suspending basic logic, everything made simply made sense.
It's just like putting a cake in the oven and setting the temperature to twice as hot as recommended: obviously, the cake will be done in half the time. Or so news analysts said.
Cairo: Buzzword Compliant
Cairo described a new OS and user environment bathed in the industry buzzwords of the day. It also borrowed heavily from the ideas of existing competitors. After all, if other companies were already selling this technology, it shouldn't be difficult for Microsoft to duplicate it. Or so they said.
Specifically, Cairo promised to deliver:
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•an object oriented user interface, featuring direct manipulation of desktop objects like OS/2 already had
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•an object oriented development environment like the one already offered by NeXT
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•distributed computing features like those offered by NeXT
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•an object or database file system that would replace the flat file system with a fully searchable object store
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•a standards based messaging system like Lotus Notes
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•a standards based directory system just like Novell's NDS
Failure to Launch
Microsoft’s Cairo ended up being perpetually a year or two away from release until the company stopped talking about it in the late 90s.
In 1992, Microsoft said it expected Cairo to debut in 1994. The next year, in 1993, Microsoft delivered the first version of Windows NT, which was given the version number 3.1 to position it as the obvious successor to the DOS based Windows 3.0.
The NT kernel was generally considered to be well designed, so much so that DEC accused Microsoft of stealing its proprietary software technology when it hired away Dave Cutler to build the new OS. However, the original NT didn't perform well on standard PCs, which lacked the resources to run it.
That sent Microsoft scrambling for an interim plan. It dusted off the DOS based Windows 3.0 and improved it enough to act as a placeholder until NT could be fixed. Microsoft hoped to call its next version of NT "4.0," so the new version of DOS based Windows was called “Windows 95” rather than being named after a version number.
Cairo Falls Apart