They did develop their own OS (OS2) but it went nowhere.
It was too late by the time OS2 came out. All the Fortune 500 Companies had already purchased Millions in hardware and sent at least the same amount in training employees to use Dos and Lotus 123/Word Perfect.
He's smart and IBM was stupid. For the last 200 years it was demonstrated that you can make WAY more money owning intellectual property than making the medium.
Publishers make much more money than book binders or paper mills. Song writers make more than performers, etc
IBM was used to selling Million dollar mainframes to fortune 100 companies that also required hundreds of thousands in support and professional services so the software was basically included.
They thought stand alone pcs were a niche. By the time they realized the potential they missed the bus.
Although I'm more an apple/Unix guy I would tell Bill I love Windows7