October 08, 2009, 9:18 PM — IBM's mainframe business has over the years been somewhat of a steamroller, rarely slowing down to take a look at the little things in its way it may have crushed.
Word today that the Department of Justice has begun a preliminary investigation into whether IBM has abused its monopoly in mainframe computers will likely fall under the category of things the Big Iron slowed down for but ultimately ran over anyway.
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Not to diminish what is a preliminary DOJ investigation but the background to this one sounds little like things are just going in a circle.
To start, published reports say the Computer and Communications Industry Association, had complained to the DOJ recently about some unsavory IBM IBM's behavior. Thus the DOJ began asking for information about the mainframe market to IBM rivals.
One of those rivals was T3 Technologies, which just last week lost civil suit it had filed against IBM.
According to the Financial Times, the judge said T3 did not have a case to make because IBM had licensed the technology in the past to two of the company’s suppliers, rather than to T3 directly. He added that the suppliers, which had brought complaints of their own, also lacked a case, since IBM had acted within its rights to stop licensing its old software when it moved on to a new generation of technology.
T3 Technologies has an ongoing antitrust complaint against IBM with European regulators as well.
But T3’s IBM angst runs deeper. The company was a strong supporter of fellow IBM mainframe clone maker Platform Solutions (PSI), a privately held company with whom Big Blue had traded lawsuits with over Big Iron technology until 2008 when IBM had enough and just bought the company outright.
Long time IBM critic CCIA also weighed in at the time calling the IBM/PSI acquisition a black hole: “It sucks the life out of the market and destroys the matter. "
The deal transforms a market with potential for competition into one "with little prospects for anything but complete domination by IBM," said CCIA President and CEO Ed Black. "When it comes to violations of competition law, IBM appears to be an unrepentant recidivist," he said.
The DOJ abandoned a 1956 antitrust consent degree against IBM in 2001, but said that IBM could be subject to a new antitrust lawsuit if it engaged in anticompetitive behavior.
As in the new case, rivals say IBM has shut out other mainframe vendors by ending support for older mainframe systems and not licensing its mainframe software to rivals.
CCIA's complaint against IBM alleges that the company has refused to issue licenses for IBM's mainframe OS to competitors, as required in a 1970s antitrust consent decree with the DOJ that was terminated in 2001. In some cases, IBM has yanked the OS license from customers trying to switch from IBM mainframe hardware to a competitor's,” charges Black.
Will all of this hurt IBM? Seems unlikely. According to a recent study of 300 end users by researchers at IDC nearly one-half of said they plan to increase annual spending on mainframe hardware and software.
Many mainframe users reported that they can plan another wave of investments in the System z platform over the next 2–5 years, citing the system's high availability, reliability, and security for mission-critical applications as major drivers, IDC stated.
The study says IBM’s strategy of building specialty processors for the mainframe, such as the Integrated Facility for Linux (IFL) System z Integrated Information Processor (zIIP) for ERP and CRM transactions and z Application Assist Processor (zAAP) processors for Java and XML transactions are key to ongoing success of the platform.
IBM has engaged in some price cutting to make some of these processors more palatable though. According to a Network World article IBM has cut in half prices for some specialty Linux processors. IBM acknowledged "new pricing" for the IFL processors, but did not offer specific numbers. Another source said the price changed from $90,000 to $47,500 for IFLs running on the System z Business Class mainframe.
But IBM’s mainframes haven’t been immune to the economic downturn. This summer IBM reported that System z mainframe server revenue decreased 39% year-over-year in the second quarter, while overall company revenue declined 13%.
