As they worked on the hardware and software to make the computer and disk drive work together, Kildall and Torode traded thoughts on the potential of these microprocessors. Neither of them thought that the computer system in the back of Gary's classroom would have a very large market. Microprocessors, they thought, as most everyone at Intel itself thought, would see their chief use in smart consumer devices, like blenders and carburetors. Kildall and Torode did see a small market for development systems like the Intellec-8, but only among the engineers who would be designing and developing those smart blenders and carburetors. This view was fostered by Intel management. In fact, Intel's top brass was even more conservative about the potential market for the devices than Kildall. When Gary and some Intel programmers wrote a game that ran on the 4004 and suggested that Intel market it, Intel chief Bob Noyce vetoed it. The future of microprocessors was elsewhere, he told them; "It's in watches."
When Intel passed on marketing the game, Gary wasn't fazed. He more or less agreed with Noyce about the market. But when the company turned down a piece of software closer to Gary's heart, he began to think that he might have a better sense of the value of microcomputer software than the powers-that-be at Intel.
When Torode finished the controller, Gary polished the software to control it. This was a disk operating system, the first such for a microcomputer, and Gary called it CP/M, for "Control Program/Monitor" or "Control Program for Microcomputers." He presented it proudly to Intel and suggested a reasonable price for it: $20,000. Intel passed. The thinking, apparently, was that the target market for Intel development systems was people like Gary, and since Gary had written some impressive software for the 4004, 8008, and 8080 without an operating system, clearly an operating system was not necessary for the target market. Not $20,000 necessary, anyway. Intel did buy Gary's system programming language, PL/M, but not CP/M.
Gary had been doing his consulting and development work under the name "MAA," or "Microcomputer Applications Associates." MAA (that is, Kildall) completed CP/M in 1974. It was a spartan system, containing only what was essential. It was also remarkably simple, reliable, and well suited to the limited microcomputers of the day. Gary believed in CP/M, and if Intel didn't want it, he was sure there were a lot of hardware hackers and engineers who would. He could sell it himself.
Gary might have been content to run a small ad in the back of one of the electronics magazines, maybe putting a note on that bulletin board. What actually ensued was a little more ambitious. At Dorothy's urging, the Kildalls formed a corporation. Gary would do the programming and Dorothy would run the business. She started using her maiden name, McEwen, so she wouldn't be seen as just "Gary's wife." They incorporated, dropping the MAA name and calling their corporation "Intergalactic Digital Research Inc." This was later shortened to Digital Research Inc. And they started selling CP/M.
It was the beginning of the personal-computer revolution. (Everything Gary had been doing up to then was prerevolution.) The Altair had been announced, and a flock of other startup companies were starting work on microcomputers, usually kits but sometimes assembled systems, some with a paper tape interface but many with no satisfactory provision for data storage. They needed disk drives, and they needed a disk operating system.
In those days, there was no model for software pricing, so Digital Research's first customers got some pretty good deals. When Tom Lafleur came to them wanting a license for his company, GNAT Computers, Dorothy gave him unlimited rights to use CP/M as the operating system on any product his company produced, for a whopping $90. Within a year the price had gone up by a factor of 100.
The deal with IMSAI in 1977 was the turning point, and Dorothy knew it. Until 1977, Digital Research was, like most of the industry, little more than a hobby. And until 1977, IMSAI had been purchasing CP/M from Digital Research on a single-copy basis. But IMSAI, with its grandiose plans to sell thousands of floppy-disk-based microcomputers for use in businesses, wanted to restructure the deal. Marketing director Seymour Rubenstein (later of WordStar fame), a shrewd negotiator, haggled with Dorothy and Gary, ultimately arriving at a license fee of $25,000. Rubenstein gloated. He felt that he had virtually stolen CP/M from them. He respected Kildall's programming expertise, but thought the Kildalls were babes in the woods when it came to business. Perhaps they were, but the Kildalls' perspective was a bit different. After the IMSAI deal, Digital Research was a real, full-time business. The IMSAI deal also solidly established CP/M as the standard, and other companies followed IMSAI's lead in licensing it. CP/M quickly became and remained so solid a standard that, until IBM introduced a personal computer, Digital Research faced no serious competition.
And the programmers who would provide that competition were still working at MITS in Albuquerque.
After the IMSAI deal, Digital Research began to grow rapidly. Although it wasn't a financial necessity, Gary continued to teach at the Naval Postgraduate School for years after the founding of DRI. DRI itself felt very academic. Relationships tended to be collegial, the atmosphere casual, discussions animated and cerebral. Or not so cerebral: The atmosphere sometimes was less like a college classroom than a college dorm. Gary liked to rollerskate through the halls, and once conducted an employee interview in a toga.
The staff was young, eager and deeply loyal.
"Gary built a campus in Monterey," Alan Cooper would later remember. DRI "was collegial in every respect." It was only when the company didn't function like a college that Gary got frustrated. Employees would come to him expecting him to solve business problems, marketing problems, personnel problems. He didn't know the answers; didn't really want to think about the problems. What he wanted to do was write code. "Code was his element," Cooper says.
So he wrote code, keeping out of the business end of things as much as possible. He improved CP/M, making it more portable. Certain features of the program were logically independent of the hardware, while others were intimately dependent on the exact features of the machine the program was running on. Gary shrewdly carved out the smallest possible set of machine-dependent elements, and made them easily field customizable. The result was that DRI could write one version of CP/M, and hardware vendors, field engineers, or whoever could customize it to their particular hardware configuration. This approach would be reinvented years later as the "hardware abstraction layer," but Gary had it down cold in 1978.
Even his second-in-command waslet's not mince wordsa total code geek. Tom Rolander was exactly the sort of person Gary liked to have around him: just a kid in a candy store when it came to programming, without a business bone in his body. There weren't many business-boned bodies at DRI. But the company did have the operating system that you pretty much had to run on your computer system. It had the market because it had the technology.
DRI didn't actually have the entire market. In the early '80s, the Apple II was the largest-selling machine that did not run CP/M, but it was also the largest-selling machine, period. The base of software for CP/M systems was large and growing, and Microsoft, seeing an opportunity, made an uncharacteristic move into hardware: It developed a SoftCard for the Apple II that would let it run CP/M. Then it licensed CP/M from DRI to sell with the SoftCard. Soon Microsoft was selling as much CP/M as DRI.
Gary had moments of doubt about whether this was what he wanted to be doing with his life. In one of the darkest of those moments in the late '70s, Gary passed the parking lot by on his way in to work, and continued around the block, realizing that he just couldn't bring himself to go in the door. He circled the block three times before he could force himself to confront another day at DRI.
Later, in frustration, he offered to sell the company to friends Keith Parsons and Alan Cooper. Parsons and Cooper were running one of the first companies to deliver business software for microcomputers, a kitchen-table startup named "Structured Systems Group." Gary was fed up with all the pointless games and distractions of business. They could have the whole operation for $70,000, he told them. As for him, he would go back to teaching.
It was a dream: There was no way it would have happened. Keith and Alan had little hope of coming up with $70,000, and Dorothy would never have okayed the deal. Dorothy's self-taught business skills would be sorely tested in the near future, but in the late '70s, she knew well enough that the Kildalls had something worth a lot more than $70,000 in DRI. By 1981, it was obvious to the dullest wit that she was right: In that year, there were some 200,000 microcomputers running CP/M, in more than 3000 different hardware configurations, a spectacular testament to the portability that Gary had designed into CP/M. That year, the company took in $6 million. Digital Research employed 75 people in 1981 in various capacities. It had come a long way since its inception only seven years earlier in Gary and Dorothy's house.
That was also the year that IBM announced its plan to build a personal computer.
The story has been told often and variously of how Digital Research lost the IBM operating-system contract to Microsoft, and how this made Microsoft's success. It had a big impact on DRI, too.