March 11, 2010 The Issues of Competition in Mainframe and Associated Services in India
(Indian Council for Research on International Economic Relations and Indicus Analytics)
Very little is known about the extent and nature of competition in the mainframe and associated services market in India. This is the first study to analyze competition and related issues in the Indian server market, with an extensive focus on mainframe computing.
Structural indicators of competition are estimated using secondary data across different segments of the server market. These reveal that the market is highly concentrated, especially in the high end segment. Concentration progressively reduces in the mid and entry level segments respectively. Since structural indicators of competition do not always reflect or imply abuse, firm conduct is gauged from an extensive primary survey of users and vendors. The survey of users across different size classes and verticals belonging to both the private and public sectors reveals that by being late starters, Indian users were able to avoid many of the costs associated with being locked in to a proprietary technology such as the mainframe. While competition to the mainframe has developed in recent times, our survey also points to the difficulty of migrating away from a proprietary technology such as the z/OS owned by IBM and tied to its mainframe hardware. The low installed base of such systems in India compared to Europe and the United States implies that there are no immediate public policy concerns in this regard. At the same time the report cautions that expansion in the installed base of mainframes with the proprietary z/OS could lead to welfare losses like those reported for Europe and suggests a possible role for the Competition Commission of India (CCI) under the existing legal framework.
Reader Comments (2)
The publication of the report, “The Issues of Competition in Mainframe and Associated Services in India” by the Indian Council for Research on International Economic Relations (ICRIER) and Indicus Analytics has received an exceptional amount of coverage in the Indian press. Some of the stories have quoted accusations by IBM that OpenMainframe.org influenced this report and that the report has no credibility because “there is no mainframe monopoly”.
OpenMainframe.org would like to state categorically that beyond sponsoring the study we have no involvement in the research or the findings thereof. The report is an extremely substantial piece of research that was authored entirely by ICRIER and Indicus Analytics without any editorial control whatever by OpenMainframe.org. The findings of these highly respected and independent Indian research institutes should be judged on their own merits. Many of the report’s conclusions are echoed in the antitrust investigations currently under way against IBM by the U.S. Department of Justice and the European Commission for bundling or tying its operating systems to its hardware and other exclusionary practices. We are disappointed that IBM has sought to manufacture distractions rather than address the important issues that face customers in the mainframe market.
We would also like to clarify that OpenMainframe is in no way hostile to the IBM mainframe. On the contrary, we seek to strengthen and broaden the mainframe ecosystem by insuring that free and fair competition exists in this market. Such competition requires that IBM cease its unfair practice of bundling mainframe operating systems and middleware with its own brand of mainframe hardware, thereby denying customers the right to mix and match software and hardware according to their needs. OpenMainframe is only asking that IBM apply to its own mainframe business the same principles of open standards and free competition that it recommends in other areas of IT such as Cloud Computing and Open Document Formats.