The term "IBM compatible" became exclusively historical once IBM stopped manufacturing personal computers.
Descendants of the IBM PC compatibles make up the majority of microcomputers on the market today, although interoperability with the bus structure and peripherals of the original PC architecture may be limited or non-existent.
The origins of this platform came with the decision by IBM in 1980 to market a low-cost single-user computer as quickly as possible in response to Apple Computer's success in the burgeoning market. On 12 August 1981, the first IBM PC went on sale. There were three operating systems (OS) available for it but the most popular and least expensive was PC DOS, a version of MS DOS licensed from Microsoft. In a crucial concession, IBM's agreement allowed Microsoft to sell its own version, MS-DOS, for non-IBM platforms. The only proprietary component of the PC was the BIOS (Basic Input/Output System).
A number of computers based on the 8086/8088 processors, but with different architecture to the PC, and which ran under their own versions of MS-DOS and CP/M-86, were manufactured during this period. However, software which addressed the hardware directly instead of making standard calls to MS-DOS was faster. This was particularly relevant to games. The IBM PC was the only machine sold in high enough volumes to justify writing software specifically for it, and this encouraged other manufacturers to produce machines which could use the same programs, expansion cards and peripherals as the PC. The 808x computer marketplace rapidly excluded all machines which were not functionally very similar to the PC. The 640kB limit on "conventional" system memory available to MS-DOS is a legacy of that period; other non-clone machines did not have this limit.
The original "clones" of the IBM Personal Computer were created without IBM's participation or approval. Columbia closely modeled the IBM PC and produced the first "compatible" PC (i.e., more or less compatible to the IBM PC standard) in June 1982 closely followed by Eagle Computer. Compaq Computer Corp. announced its first IBM PC compatible a few months later in November 1982—the Compaq Portable. The Compaq was the first sewing machine-sized portable computer that was essentially 100% PC-compatible. The company could not directly copy the BIOS as a result of the court decision in Apple v. Franklin, but it could reverse-engineer the IBM BIOS and then write its own BIOS using clean room design. Compaq became a very successful PC manufacturer, but was bought out by Hewlett-Packard in 2002.
Simultaneously, many manufacturers such as Xerox, HP, Digital, Sanyo, Texas Instruments, Tulip, Wang and Olivetti introduced personal computers that were MS DOS compatible, but not completely software- or hardware-compatible with the IBM PC. Microsoft's intention, and the mindset of the industry from 1981 to as late as the mid-1980s, was that application writers would write to the application programming interfaces (APIs) in MS-DOS, and in some cases to the firmware BIOS, and that this level of interface would form what would now be called a hardware abstraction layer. Each computer would have its own Original Equipment Manufacturer (OEM) version of MS-DOS, customized to its hardware. Any piece of software written for MS-DOS would run on any MS-DOS computer, regardless of variations in hardware design.
This expectation seemed reasonable in the context of the computer marketplace as it existed then. Until then Microsoft was primarily focused on computer languages such as BASIC. The established small system operating software was CP/M from Digital Research, which was in use both at the hobbyist level and at the more professional end of the microcomputer spectrum. To achieve such widespread use, the OS had to operate across a range of machines from different vendors that had widely varying hardware. Those customers who needed additional applications beyond the starter pack could expect publishers to offer their products in several media formats for a variety of computers.
Microsoft's competing OS was initially targeted to run on a similar varied spectrum of hardware, although all based on the 8086 processor. Thus, MS-DOS was for many years sold only as an OEM product. There was no Microsoft-branded MS-DOS: MS-DOS could not be purchased directly from Microsoft, and each OEM release was packaged with the trade dress of the given PC vendor. The different versions were in general incompatible with different hardware. Bugs were to be reported to the OEM, not to Microsoft. However, as clones became widespread, it soon became clear that the OEM versions of MS-DOS were virtually identical, except perhaps for the provision of a few utility programs.
MS-DOS provided adequate support for character-oriented applications such as those that could have been implemented on a text-only terminal. Had the bulk of commercially important software fallen within these bounds, low-level hardware compatibility might not have mattered. However, in order to provide maximum performance and leverage hardware features (or work around hardware bugs), PC applications very quickly evolved beyond the simple terminal applications that MS-DOS supported directly. Spreadsheets, WYSIWYG word processors, presentation software and remote communication software established new markets that exploited the PC's strengths, but required capabilities beyond what MS-DOS interfaces provided. Thus, from very early in the development of the MS-DOS software environment, many significant pieces of popular commercial software was written directly to the hardware, for a variety of reasons:
At first, few "compatibles" other than Compaq's models offered compatibility beyond the DOS/BIOS level. Reviewers and users developed suites of programs to test compatibility; the ability to run Lotus 1-2-3 or Microsoft Flight Simulator became one of the most significant "stress tests". Vendors gradually learned not only how to emulate the IBM BIOS but also where to use identical hardware chips to perform key functions within the system. Eventually, the Phoenix BIOS and similar commercially-available products permitted computer makers to build essentially 100%-compatible clones without having to reverse-engineer the IBM PC BIOS themselves.
Over time, IBM damaged its own market by itself failing to appreciate the importance of "IBM compatibility", introducing products such as the IBM Portable (which failed to outperform and outsell the earlier Compaq Portable) and the PCjr, which had significant incompatibilities with the original PC and was quickly discontinued. By the mid to late 1980s buyers began to regard PCs as commodity items, and doubted that the security blanket of the IBM name warranted the price difference. Meanwhile, MS-DOS-compatible (but not hardware-compatible) systems did not succeed in the marketplace. The inability to run the off-the-shelf high-performance software packages that the IBM PC and true compatibles did resulted in poor sales and the eventual extinction of that category of systems.
However, as the market evolved, IBM derived a considerable income stream from license fees from companies who paid for licenses to use IBM patents that were in the PC design, to the extent that IBM's focus changed from discouraging PC clones to maximizing its revenue from license sales. IBM finally relinquished its role as a PC manufacturer in April 2005, when it sold its PC Division to Lenovo for $1.75 billion.
As of October 2007, Hewlett-Packard and Dell hold the largest shares of the PC market in North America. They are also successful overseas, with Acer, Lenovo, and Toshiba also notable. Worldwide, a huge number of PCs are "white box" systems assembled by a myriad of local systems builders. Despite advances in computer technology, all current IBM PC compatibles remain very much compatible with the original IBM PC computers, although most of the components implement the compatibility in special backward compatibility modes used only during a system boot.
Graphics cards suffered from their own incompatibilities. Once graphics cards advanced to SVGA level, the standard for accessing them was no longer clear. At the time, PC programming involved using a memory model that had 64 KB memory segments. The most common VGA graphics mode's screen memory fitted into a single memory segment. SVGA modes required more memory, so accessing the full screen memory was tricky. Each manufacturer developed their own ways of accessing the screen memory, even going so far as not to number the modes consistently. An attempt at creating a standard called VBE was made, but not all manufacturers adhered to it.
Due to the wide number of third-party adapters for the PC and no standard for interfacing with them, programming the PC could be difficult. When developing for the PC, a large test-suite of various hardware combinations was needed to make sure the software was compatible with as many PC configurations as possible. Even the PC itself had no clear application interface to the flat memory model the 386 and higher could provide in protected mode. Again a protected mode OS could be written for the 80386. This time, DOS compatibility was much easier because of virtual 8086 mode. Unfortunately programs cannot switch directly to protected mode from that mode, so eventually, some new memory-model APIs were developed, VCPI and DPMI, the latter becoming the most popular.
Meanwhile, consumers were overwhelmed by the many different combinations of hardware on offer. To give the consumer some idea of what sort of PC would be needed to run a given piece of software, the Multimedia PC (MPC) standard was set in 1990. It meant that a PC that met the minimum MPC standard could be considered an MPC. Software that could run on a minimalistic MPC-compliant PC would be guaranteed to run on any MPC. The MPC level 2 and MPC level 3 standards were later set, but the term "MPC compliant" never caught on. After MPC level 3 in 1996, no further MPC standards were established.
On the hardware front, Intel initially licensed their technology so that other manufacturers could make x86 CPUs. As the "Wintel" platform gained dominance Intel abandoned this practice. Companies such as AMD and Cyrix developed alternative CPUs that were functionally compatible with Intel's. Towards the end of the 1990s, AMD was taking an increasing share of the CPU market for PCs. AMD even ended up playing a significant role in directing the evolution of the x86 platform when its Athlon line of processors continued to develop the classic x86 architecture as Intel deviated with its "Netburst" architecture for the Pentium 4 CPUs and the IA-64 architecture for the Itanium line of server CPUs. AMD developed the first 64 bit extension of the x86 architecture that forced Intel to make a clean-room version of it, in all its latest CPUs. In 2006 Intel began abandoning Netburst with the release of their line of "Core" processors that represented an evolution of the earlier Pentium III.
The term 'IBM PC compatible' is not commonly used for current computers. The competing, non-compatible platforms have either died off or been relegated to niche, enthusiast markets like the Amiga. The remaining mainstream operating systems like Mac OS X and Linux, have evolved compatibility features easing interoperability and data exchange with Windows.
The processor speed and memory capacity of modern PCs are many orders of magnitude greater than they were on the original IBM PC and yet backwards compatibility has been largely maintained - a modern PC can still run many of the simpler programs written for the PCs of the early 1980s without needing an emulator.