Behind Big Blue's Big Buy

SOFTWARE is a lot like pulp fiction. Popularity counts much more than quality. Sometimes you have to hold your nose to make it in the business.

Just ask IBM's Louis Gerstner. His company has poured $1 billion and untold programmer hours into building an industrial-strength operation system called OS/2. This week it offered to spend $3.3 billion to buy Lotus Development Corporation, in part to ensure that Lotus would keep making programs that run on OS/2.

No one argues with the fact that OS/2 is quite good. If you had to invent the desktop computer industry out of thin air, you'd probably choose an operating system like OS/2 - or, for that matter, Macintosh's System 7 - to run the machines.

The trouble is, the desktop computer industry is more than a decade old. And most of its machines - an estimated 8 out of 10 worldwide - have been running operating systems from Microsoft Corporation. Microsoft's latest incarnation - Windows - mimics most of the functions of OS/2. In a world where popularity is almost everything, that's good enough. The past success of Windows almost certainly guarantees its future.

To put it simply, Microsoft has solved the classic chicken-egg problem. People flock to Windows because it runs all of the best programs. It runs all the best programs because software companies know that most people run Windows. So they write programs that use Windows.

In two months, Microsoft is set to unveil its next-generation operating system: Windows 95. A new chicken-egg cycle is already beginning. Software companies are writing programs that run on Windows 95 because they anticipate a huge market. It will have a huge market because computer users will want to run the latest programs. A colleague grumbles: "Everything I read suggests I should buy a Macintosh or a PC running OS/2, but it seems the computer industry is leading me where I don't want to go."

Which brings us back to Mr. Gerstner's dilemma. How long will he continue backing OS/2? He can't ignore Windows. If he ever does acquire Lotus, he can't tie its future to OS/2.

So either he spends billions more dollars to keep OS/2 ahead of Windows in the slim hope that Microsoft stumbles. Or he cancels the program, making the software world a little less diverse and rich.

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