When IBM contacted other companies to obtain components for the IBM PC, the as-yet unreleased CP/M-86 was its first choice for an operating system because CP/M had the most applications at the time. Negotiations between Digital Research and IBM quickly deteriorated over IBM's non-disclosure agreement and its insistence on a one-time fee rather than DRI's usual royalty licensing plan. After discussions with Microsoft, IBM decided to use 86-DOS (QDOS), a CP/M-like operating system that a Seattle area computer company had made for its own hardware. Microsoft adapted 86-DOS for the PC hardware and IBM shipped it as PC-DOS.
After learning about the deal, Digital Research founder Gary Kildall threatened to sue IBM for infringing DRI's intellectual property, and IBM agreed to offer CP/M-86 on the PC to settle the claim. CP/M-86 was released a few months after the PC and was one of three operating systems a customer could buy from IBM. At $240 per copy it sold poorly compared to the $40 PC-DOS. Kildall would later accuse IBM of setting the prices to marginalize him, but the accounts of Microsoft, IBM, and other DRI executives indicate that Kildall had demanded a substantial royalty for CP/M-86 while Microsoft had accepted a fixed sum. Customers rapidly adopted the PC platform with PC-DOS as the new industry standard, and opportunities for DRI to license CP/M-86 to other customers dwindled.
Microsoft decided to create a portable operating system, compatible with OS/2 and POSIX support and with multiprocessing in October 1988. When development started in November 1989, Windows NT was to be known as OS/2 3.0, the third version of the operating system developed jointly by Microsoft and IBM. In addition to working on three versions of OS/2, Microsoft continued parallel development of the DOS-based and less resource-demanding Windows environment. When Windows 3.0 was released in May 1990, it was eventually so successful that Microsoft decided to change the primary application programming interface for the still unreleased NT OS/2 (as it was then known) from an extended OS/2 API to an extended Windows API. This decision caused tension between Microsoft and IBM and the collaboration ultimately fell apart. IBM continued OS/2 development alone while Microsoft continued work on the newly renamed Windows NT. Though neither operating system would immediately be as popular as Microsoft's MS-DOS or Windows products, Windows NT would eventually be far more successful than OS/2.
Windows NT was intended to complement consumer versions of Windows that were based on MS-DOS. NT was the first fully 32-bit version of Windows, whereas its consumer-oriented counterparts, Windows 3.1x and Windows 9x, were 16-bit/32-bit hybrids. Windows 2000, Windows XP, Windows Server 2003, Windows Vista, Windows Home Server, Windows Server 2008 and Windows 7 are based on Windows NT, although they are not branded as Windows NT.