International wasn’t thrilled about Ford using their engines in the medium duty market, where International already had a presence with their own trucks. So Ford had to make a separate deal with other manufacturers for their medium duty line, which wasn’t too difficult as Ford was already buying diesel engines for their larger trucks elsewhere prior to their deal with International.
In 1975, the IH light line of pickups was discontinued before the IDI began development, in 1978, and shortly after that, in the early 80s, Ford was asking around about the light duty diesel engines available from other manufacturers. As the Cummins B series didn’t begin production until 1984 (for industrial versions), Ford was primarily looking at CAT at first, whom they had done business with in their medium duty line. But, CAT also didn’t have an engine suitable for a light duty truck, and since Ford and CAT couldn’t agree on terms for a joint operation to design and build such an engine (largely because CAT wanted way more money than Ford was willing to spend, among other things they disagreed on, for example, engine paint color) which forced Ford to look elsewhere. As the IDI had begun its design phase with International in ‘78, followed by their first prototype in ‘80, and the engine largely met Ford’s criteria, a deal was made, in 1982, to begin offering the IDI as a factory option for ‘83 model year trucks, for the F250 and F350 trucks. And the rest, is history.
Ironically, the original HEUI system used on the 7.3 PSD was a joint effort between CAT and International, for the PSD (T444E), DT series 1995-2003, except in some stationary applications that were emissions exempt after the diesel emissions standards changes of 03. CAT used the HEUI system in the 3126, and some early versions of the C7 and C9 engines. There was an extremely limited run of 3408 and 3412 engines with HEUI, (big V8 and big V12) but I think only for a couple of years in the late 90s.