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There is a weird moment toward the end of the 1990s when Microsoft is trying to show their NT is a serious competitor in this space.

Traditionally this was a profitable niche, Microsoft would like to take a fat piece of that, and instead what happened is that Linux destroyed the profit margin. A million dollars overhead that would have kept a hungry UNIX® vendor alive on your project didn't turn into an extra million dollars on Microsoft's balance sheet, instead it evaporated because Linux is "free". And so then Microsoft lost interest.

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Yeah, and one of the ways to show it was a serious OS for DoD projects was to have a POSIX subsystem, which had they kept it around, Linux would never have taken off on the PC, and there would be no need for WSL 40 years later.
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The POSIX subsystem is a box checking exercise. The reason the box was there isn't satisfied but the box was checked and Microsoft hoped that's good enough. If you need "a Unix" and they give you NT and circle the stuff about POSIX you don't go "Oh, perfect" you ask them to fix the requirements document so that you can have an actual Unix next time.

WSL is Redmond going OK yeah, here you go, an actual Unix.

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There was also SUA and Interix in the meantime, before WSL came to be.

The point still stands, that POSIX checkbox was relevant enough for spending the money in engineers salary during Windows NT 3.51 development.

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WindowsNT was the other operating system of that time.
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That's way way later. UNIXes were the ones running in 70s and 80s. WindowsNT and Linux only later came to take a slice and, still later on, Linux won the day. How anyone would consider UNIX "niche" is beyond me.
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In the other direction then, IBM mainframes.
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With Win32, OS/2 and POSIX subsystems.
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