What really changed the game was the entry of IBM into the market. IBM knew that to beat Apple, it needed to drive down costs as low as possible. Initially, lBM was a large vertically integrated company that produced most of its parts and components itself within the U.S. In the early 1980s, how- ever, IBM realized that it needed to use external suppliers for key components in an effort to create a cheaper alternative to the Apple ll computer, the successor to Jobs' and Woz's successful Apple l computer. Then lBM outsourced its operating system to Microsoft and its microprocessor to Intel, and the race was on. By taking a close look at the value chain. IBM was able to modularize the industry so that Microsoft, for example, could sell its operating system to any company that wanted to use it, and Intel could develop semiconductors for a wide range of products for many different companies. This allowed them to achieve even greater economies of scale.