Top 10 bad IT decisions

5. IBM turning down Microsoft

Iain Thomson: In the late 1970s Microsoft was just another struggling software company stuck in the heat in New Mexico.

It spent most of its time developing software in BASIC for the Altair, the computer that kicked off personal computers. Its very young leader Bill Gates showed promise but reportedly was at one time trying to sell the company. The sum mentioned was apparently US$80 million and the offer was made to IBM. They said no.

That Microsoft went on to great things is not in question. 'What if' historians would tell you that if Microsoft had been bought by IBM then it would have earned all the money that Microsoft did subsequently, but I'm not too sure.

IBM would have had a useful software arm to be sure, but it's unlikely Bill Gates, and especially Paul Allen would have lasted long at IBM. Without Gates and Allen the investment would have been worthless.

Shaun Nichols: As Iain pointed out earlier, IBM was at the time not a big player in the software market, and the cost of buying Microsoft would have likely exceeded the costs of simply buying the company's products for use in its machines at the time.

I would agree that the only way it would have worked would have been for IBM to leave Microsoft as an independent outfit, which once again would have made little sense when Big Blue could simply buy the rights to Microsoft's products.

Keep in mind that Microsoft didn't really hit it big until DOS, and even then they were still not a huge player in the market until Windows was developed. We have the advantage of hindsight in saying this was a huge mistake, but you can't really fault IBM for not being able to see into the future.

4. Commodore's PC price war

Shaun Nichols: Commodore founder Jack Tramiel operated under the motto "business is war." In 1983, Tramiel would kick off the business equivalent of a nuclear war that wiped out an entire sector of the computing industry.

With the Commodore 64 battling several other firms in the burgeoning home computer market, Tramiel sought to get an edge by cutting the price of his machines. Normally, cutting prices is a good thing. Consumers flock to bargains and the company makes its money back with increased sales.

In this case, however, the cuts were a death blow. Tramiel's cuts were too drastic, wiping out profit margins and causing the company to lose money. Other vendors followed suit and dropped their own retail prices beneath profitability. Perhaps they underestimated the market for home computers, or perhaps they thought the cuts would be temporary.

Regardless, the move bankrupted many companies and triggered what would later be known as the Great Video Game Crash. Console gaming was almost wiped out completely and only began to recover when Nintendo expanded to North America and Europe.

The cuts also dealt a crippling blow to Commodore. When all was said and done, the company had exhausted its financial resources and though the market had been greatly thinned, Commodore was no match for the oncoming wave of Macintosh and Windows PCs.

Iain Thomson: It's a fact you seldom hear from free-marketeers but most businesses hate competition and open markets.

Tramiel was no exception and chose to try and monopolise the market and ensure that everyone used a Commodore. But he took things way too far in his lust to win and ended up nearly tanking the whole sector.

That said it's possible we owe him a small debt of gratitude. Yes, he caused the first PC recession but he also got buyers into the mindset where computers should become faster and cheaper every year, unlike most other market sectors. This expectation isn't solely Tramiel's doing but he played a major part.

3. SCO

Iain Thomson: I have a personal conspiracy theory about Darl McBride, who's still clinging on as head of SCO. I don't think he likes the business of software.

SCO's decision to go after control of UNIX was a mistake so egregious that it's hard to believe it was taken. The small software company took on the open source movement, and Novell and IBM too. The resultant legal battle was epic, and drags on today, although these days SCO is a shell of its former self, limping from lawsuit to lawsuit with occasional bursts of energy as it finds more cash.

So the fact that maybe McBride never wanted to run SCO occasionally creeps into the back of my head. After all, this way he's an internationally known figure, nice salary and he can probably milk this for years to come.

Shaun Nichols: While McBride is almost universally loathed in the IT sector, his guts have to be admired. Taking IBM to court over the rights to a multi-billion dollar software platform is akin to charging a Panzer tank with a pair of rollerskates and a broom handle.

At some point you have to think that one of SCO's lawyers would have turned to the executives and simply asked if they had gone mad. One can imagine IBM's huge legal team had a good laugh when this suit first crossed their desks.

Perhaps SCO simply wanted to push IBM and Novell into a settlement, making some cash and perhaps even securing a new licensing deal. Whatever the company's motive, the move proved to be catastrophic failure which has all but killed SCO.

2. Apple losing Steve Jobs

Shaun Nichols: Through much of the 90s it seemed that Apple could do nothing right. Stifled with a dated and unreliable operating system and under assault from cheaper Windows machines, the company was nearly killed off by one fizzling product after another.

Those woes, however, can arguably be traced back to a single decision: the removal of Steve Jobs. In 1983 Jobs himself moved to bring John Sculley on board. Two years later, Sculley convinced Apple's directors that the company had outgrown Jobs' erratic ways and moved to push the company's co-founder out of the business.

In the following years the company would experience a fall from grace that would only become fully apparent ten years after Jobs departure. A former Pepsi executive, Sculley was unable to keep up with the rapid pace of development in the computer market and by the mid-90s the company saw both sales and profits take a dive.

With the company on the ropes in 1997, Jobs returned only to find Apple on the brink of bankruptcy. Perhaps as a testament to the failures of the old regimes, one of Jobs first moves was to halt development on nearly every new project and overhaul the company's entire product line. The rest is history.

Iain Thomson: Jobs lured Sculley from his old job with the line "Do you want to spend the rest of your life selling sugared water or do you want a chance to change the world?" He certainly changed Jobs' life.

If I'd have been on the board of directors of Apple at the time I'd probably have got rid of the annoying little git as well, given his penchant for meetings that began early or ended past midnight. Jobs is not a good person to work for - although he is an excellent person to serve if you are so inclined.

That said Sculley really should have hired people who knew what they were doing after ousting Steve and Apple's death spiral could only be halted by the return of the king. I just hope they know what to do the next time Jobs can't show up for work.

1. Digital Research

Iain Thomson: Very few companies are unfortunate enough to know the precise moment of their peak. In the case of Digital it was when IBM came knocking.

IBM needed an operating system for its first PC and didn't have time to develop one itself. So it went to discuss purchasing a licence for CP/M, the leading operating system of the time and sold by Digital.

Negotiations didn't go well, due to IBM's notoriously strict non-disclosure agreement which totally gagged Digital while allowing IBM full use of whatever was discussed. On the advice of its legal team they declined the meeting. Luckily the chairman of IBM knew Bill Gates' mother and Microsoft was happy to sign because it saw the bigger picture.

In a way the final deal was a tipping point for two companies not one. Digital saw Microsoft's code on the bulk of the world's computers. Its competitive operating system drowned in numbers and was not supported by Microsoft.

But for IBM it was also a tipping point. The company had just handed over control of the most valuable bit of the deal. It's understandable, IBM at the time was all about big iron computing and that was insanely profitable at the time.

But the software industry, or at least a few people in it, saw that you could still make plenty of money by building something once and then copying it and selling millions of copies at almost no extra cost. Microsoft showed the world just how much that could be.

Shaun Nichols: Think for a moment about just how different the computing industry, and the world as a whole, would be if the Kildalls hadn't baulked at IBM's disclosure demands. Perhaps Digital would be the biggest company in the business and Bill Gates would have be toiling in obscurity as a niche software developer. Without Windows does Apple become the dominant provider? Or perhaps Commodore and Amiga take over the market.

While it now looks like an epic missed opportunity, without the benefit of hindsight it's an understandable decision by Digital. Rather than pay royalties IBM was said to be looking to pay out a single lump sum, and who could have known that the PC and DOS would take off the way it did?

Unfortunately, the deal was never made and the saga with IBM and Microsoft haunted DRI founder Gary Kildall until his untimely death at the age of 52.

As Iain noted, the deal was also a turning point for IBM, though I think it was bound to happen sooner or later. The company with all the savvy and precision of a well-oiled machine, and when it comes down to it they want little to do with the low-margin PC sector. Ironically, outside of its server efforts IBM is now for the most part a software and IT services outfit.