NEWS & ANALYSIS

EU Commission initiates formal investigations against IBM in two cases of suspected abuse of dominant market position

by Directorate General for Competition of the European Commission

(26 July, 2010)

The European Commission has decided to initiate formal antitrust investigations against IBM Corporation in two separate cases of alleged infringements of EU antitrust rules related to the abuse of a dominant market position (Article 102 TFEU). Both cases are related to IBM's conduct on the market for mainframe computers. The first case follows complaints by emulator software vendors T3 and Turbo Hercules, and focuses on IBM's alleged tying of mainframe hardware to its mainframe operating system. The second is an investigation begun on the Commission's own initiative of IBM's alleged discriminatory behaviour towards competing suppliers of mainframe maintenance services.

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BowlerRoger Bowler Responds to IBM Patent Attack on Open Source

by Roger Bowler Creator of Hercules and Co-founder of TurboHercules

(Posted in News & Blogs section of turbohercules.com on 6 April, 2010)

As many of you know, the company I founded to promote the Hercules open source mainframe emulator, TurboHercules SAS, has filed an antitrust complaint against IBM with the European Commission in Brussels. We are not asking that IBM be subjected to punishing fines or anything like that. We simply want IBM to agree to allow legitimate paying customers of its z/OS mainframe operating system to deploy that software on the hardware platforms of their choice – including, should they so choose, on low-cost servers using Intel or AMD microprocessors and Hercules.

I want to make clear that we undertook this action reluctantly, and only after a long period of reflection during which we reached out to IBM to see if there was some way to resolve our differences amicably. I regret to report that IBM rebuffed our efforts at conciliation, and even added fuel to the fire by launching accusations against Hercules. I would like to take this opportunity to respond to some of those charges.

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The Issues of Competition in Mainframe and Associated Services in India

by 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.

Download the report PDF (4MB)

Steven FriedmanThe T3 Technologies story

by Steven Friedman, T3 Technologies

For over 15 years, my company was a successful IBM Business Partner. I used to have a thriving company with over 50 employees, nearly 1,000 customers in 28 countries (including 200 customers in 15 European Community states) and a profitable revenue stream earned through selling mainframe solutions to IBM customers. However, now our company is effectively out of business due to the direct actions of the company I used to be closely aligned with: IBM.

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Thursday
Sep022010

How IBM hopes to make the cloud proprietary

(ZDNet) By Dana Blankenhorn

Asia Dent (right) must be the most famous face in Poughkeepsie today.

She was photographed by IBM PR recently putting a probe to a new 5.2 GHz chip that is at the heart of the company’s new zEnterprise mainframe, shipping next week.

Florian Mueller calls this the most dangerous product announcement of the century. That’s because zEnterprise could let IBM create a cloud monopoly among large enterprises, assimilating Linux under its mainframe patents.

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Wednesday
Aug252010

The next steps for the mainframe

(CIO.uk) By Graham Jarvis

The demise of the mainframe has been predicted since around 1981, but IBM is hoping to put an end to this discussion once and for all with the launch of its zEnterprise mainframe server.

The company’s latest mainframe is described by Mark Anzani, IBM’s Vice President and CTO of System Z, as being a “new workload optimised system.” Reflecting upon the new offering he says: “It is going to shift the conversation towards who can offer the best deep management of the infrastructure, and also towards the company that can drive the broadest economic benefit.”

...Mainframe pricing nevertheless remains a hot issue, and one that puts people off it as a viable platform. “We have our own mainframe and distributed servers,” says Lacy Edwards, CEO of mission-critical mainframe experts NEON Enterprise Software. He argues that it’s not just the cost of the mainframe hardware that remains prohibitive to many people, but the high expense that is attributed to software licensing. “If you look at it from the customers’ perspective, that’s why they are comparing the different systems, and software is the key reason why they say the cost of running a mainframe is too high.”

"...I am not aware of anything else that is like what zPrime is doing, and I have not personally seen any impact at this point on the way customers are making their purchases,” comments Anzani. “The only product where there are objections regarding its installation comes back to the difference of opinion between NEON and IBM regarding zPrime.” Although IBM usually welcomes the exploitation of the specialty processors, the company views any installation of zPrime as being unauthorised. NEON has therefore raised the question about whether customers need the authorisation of IBM to install ‘exploitative technologies’ like this.

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Monday
Aug162010

Panel recommends SSA continue with mainframe modernization

(FierceGovernmentIT) By David Perera

The Social Security Administration should press on with a project to convert its assembler language-coded master file database into an IBM DB2 mainframe database, despite the fact that other technical approaches "might have been better choices," says an SSA-funded panel.

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Tuesday
Aug032010

IBM vs. Microsoft: The Big Iron Battle

(Redmond Channel Partner) The Schwartz Report by Jeffrey Schwartz

It appears either Microsoft has mainframe-envy or IBM is not too happy about Microsoft's data center ambitions of late. Most likely, it's a combination of both.

Consider the following:

  • Microsoft recently said it is going to offer portable data centers based on its cloud-based Windows Azure platform.
  • IBM just launched a new mainframe that is the first to support virtualization of x86-based blades with Linux, not Windows, as the preferred platform. Big Blue appears cold to the idea of the blade extensions supporting Windows.
  • The European Union last week launched an investigation of IBM's mainframe business. IBM's response: Microsoft and its minions are behind the investigation.

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Monday
Aug022010

Big Tech Problem as Mainframes Outlast Workforce

(Bloomberg BusinessWeek) By Rachael King

When Giorgos Tsapepas started as an intern at IBM in 2002, he had never used a mainframe. At Rensselaer Polytechnic Institute, the university he attended in upstate New York, there was no instruction in handling the powerful machines that tackle complicated computing tasks for such industries as finance and health care. Now a mainframe expert, Tsapepas had to learn his specialty on the job.

Teaching mainframe skills is out of vogue at many universities with the advent of newer approaches to solving the biggest computing challenges. At the same time, many of the engineers capable of tinkering with the refrigerator-sized machines are nearing retirement. The average age of mainframe workers is 55 to 60, according to Dayton Semerjian, a senior vice-president at CA Technologies, the second-largest maker of software for mainframe computers after IBM. "The big challenge with the mainframe is that the group that has worked on it—the Baby Boomers—is retiring," Semerjian says. "The demographics are inescapable. If this isn't addressed, it will be trouble for the platform."

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Monday
Aug022010

Western civilization runs on the mainframe

(FOSS Patents) By Florian Mueller

The EU's latest antitrust investigations target a market that's way more important than some people believe. The mainframe is far from dead.

The demise of "big iron" has been predicted many times. Those "experts" were consistently proven just as wrong as those doomsday prophets huddled on a hill with their sectarian faithful on whatever day they expected the end of the world to come.

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Friday
Jul302010

IBM Remains On U.S. Antitrust Watch

(InformationWeek) By Paul McDougall

As it embarks on a campaign to bring the mainframe back to the mainstream, emboldened by the introduction this month of its most powerful data-center class machine ever, IBM is finding that regulatory authorities on both sides of the Atlantic are keeping a watchful eye on its activities in a market it's come to utterly dominate.

The company is still the subject of a Justice Department antitrust probe into its mainframe licensing policies, and EU authorities this week launched their own investigation.

The DOJ began its probe last October, and a regulatory filing by IBM this week indicated it's still active nine months later. "IBM has been notified that the U.S. Department of Justice (DOJ) is investigating possible antitrust violations by IBM, and the DOJ has requested certain information," IBM said in a second-quarter report filed Tuesday with the SEC. 

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Friday
Jul302010

IBM Forgets Its Past and Lands In European Union Monopoly Probes

(BNET) Wired In Blog by Erik Sherman

IBM has managed to become the subject of two simultaneous European Union antitrust investigations, as if one wouldn’t be enough. What it demonstrates is not that the EU is hungry to protect its own high tech industries — which, by the way, it is — but that even a company as smartly run as IBM can land in hot water when hubris directs it to disregard the past.

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Thursday
Jul292010

More Trouble for IBM

(Data Center Journal) By Jeffery Clark

Coming on the heels of IBM’s as-yet unresolved contract dispute with the state of Texas is a new antitrust probe by the European Union (EU) regarding IBM’s mainframe business. Ostensibly, this probe is investigating claims that the mainframe giant has used its strength in this segment to stifle competition through closely linking its mainframe hardware and operating system and through anti-competitive practices with regard to the mainframe maintenance market.

Although the EU investigation does not mean that IBM is automatically guilty of any wrongdoing in the sight of regulators, it does signify additional bad publicity that the IT giant certainly doesn’t need, especially in light of the recent spat between the company and the state of Texas regarding an $863 million state data center consolidation project. According to an EU announcement (“Antitrust: Commission initiates formal investigations against IBM in two cases of suspected abuse of dominant market position”), the European Commission has initiated two separate investigations, but, presumably, IBM’s guilt is not a foregone conclusion: “initiation of proceedings does not imply that the Commission has proof of infringements. It only signifies that the Commission will further investigate the cases as a matter of priority.”

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Thursday
Jul292010

IBM Needs a Good Lawyer

(Motley Fool on MSNBC) By Rich Smith 

Pity IBM. They don't get no respect -- not at home, and not abroad, either.

Nearly one year ago, we regaled you with the tale of how IBM's friends in the tech industry ("friends" of the "who needs enemies" variety) were trying to lay the tech titan low. Instigating a Justice Department investigation into alleged "tying" of mainframe computer hardware to mainframe software, the Computer & Communications Industry Association (a broad organization supporting open competition that includes such disparate companies as Advanced Micro Devices in semiconductors, Oracle in databases and Google in Internet search) aimed to force IBM to license use of its software by competitors who hawked competing, presumably cheaper, hardware.

Now the European Union -- which never met a monopoly complaint against a U.S. company that it didn't like -- is getting in on the fun. Earlier this week, we learned that the EU Competition Commission, lately the domain of the dread knight Neelie Kroes, is now leveling its lance at IBM, and sounding the charge.

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Wednesday
Jul282010

IBM Mainframe Niche Market Draws EU Regulatory Probe

(eWeek) By Wayne Rash

...But in fact, IBM could decide to do business with the makers of emulators. The reason is simple, and is a lesson that IBM learned the last time this happened. IBM makes a lot of money out of selling its operating systems. This is revenue that IBM wouldn't receive otherwise. It's unlikely to cannibalize mainframe sales because it's unlikely that buyers of an x86 server are really customers that would buy a mainframe...

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Wednesday
Jul282010

EU tech firm probes could spill over to Canada

(Toronto Sun) By Stefania Moretti, QMI Agency

It could be the beginning of the end of market dominance for giant technology firms like IBM and Apple, which have managed to monopolize their sectors for years by chaining their software to their hardware.

Earlier this week, the European Union launched two anti-trust probes against IBM. Competition regulators suspect the U.S. company of abusing its dominant position in mainframe computer markets after other software vendors complained about IBM unfairly tying its hardware to its own operating system, denying other the opportunity to compete.

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Tuesday
Jul272010

SHARE Ranks Cost Cutting, Virtualization as Top IT Concerns

(eWeek) By Daryl K. Taft

What are the most pressing issues facing enterprise IT organizations? Cost management and virtualization, according to a recent survey of more than 160 IBM customers.

...SHARE conducted the survey of more than 160 of IBM's top customers to review the current state of enterprise IT in terms of where companies are putting the most resources and focus, the organization said in a press release about the survey. Results of the study provide industry analysis to help SHARE better shape its programs and events for the greater member—and enterprise IT—community. The information also provides valuable insights to IBM and ISVs (independent software vendors) about issues that concern their customers the most. The survey was conducted during June and July 2010. 

"Companies were asked to rank their top five concerns, and cost management, especially when it comes to cost reduction and avoidance, continues to be top of mind for these companies," said Al Williams, president of SHARE, in a statement. "The survey reinforces why one of the themes for SHARE in Boston—How to Empower Your Bottom Line—is so important. It's not enough to just cut costs—the successful enterprise IT professional knows there is a need to demonstrate IT's value and how it can provide a competitive advantage every day."

Click to read more...

Tuesday
Jul272010

IBM's Probes Show EU Will Continue 'Tough Stance' on Technology

(Bloomberg Businessweek) By Stephanie Bodoni and Erik Larson

...The probe is the second time the EU has looked at IBM’s position in the mainframe market. The company settled an earlier case in the 1980s.

“There are some interesting parallels with the 1980s IBM settlement,” said Robert O’Donoghue, a London lawyer who specializes in EU competition law. “What will be very interesting in this case is whether IBM will fight to the bitter end or whether it thinks there’s some remedy that could be offered that would make the investigation go away.”

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Tuesday
Jul272010

(Main)framed?

(The Economist) Newsbook blog

...The [European Commission's] probe into the alleged tying of software and hardware sales has been triggered by complaints from two firms, T3 Technologies and TurboHercules, which make “emulation” software that allows important applications to run on cheap, non-IBM hardware. They say that IBM won’t allow their customers to buy or license its mainframe operating system to use in conjunction with their software. T3 has lodged an antitrust complaint in America as well as Europe.

IBM retorts that the accusations are groundless and that the firms “want regulators to create for them a market position that they have not earned” by allowing them to effectively steal its intellectual property.  It has also accused them of being “satellite proxies” of Microsoft, one of IBM’s biggest competitors, which makes software that runs on servers that compete with mainframes. And it has been telling anyone who will listen that mainframes’ share of total server sales is so paltry that its market share needs to be seen in the context of the overall server market. It looks like big iron is set to generate some pretty big fees for competition lawyers.

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Tuesday
Jul272010

EU Adds IBM to Target List

(Wall Street Journal) By Charles Forelle

BRUSSELS—Reanimating long-dormant scrutiny of International Business Machines Corp., European Union antitrust authorities said Monday they have opened formal investigations into Big Blue's conduct in the market for powerful mainframe computers.

One of the EU's probes was spurred by complaints from two small technology companies that IBM improperly blocks customers from using the mainframe's operating system without IBM's own pricey hardware. The other probe is examining whether IBM is squelching third-party providers of spare mainframe parts.

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Tuesday
Jul272010

Good for the Gander?

(The Wall Street Journal) Real Time Brussels blog by Charles Forelle

...The week’s big news is the commission’s formal probe into International Business Machines Corp., Competition Commissioner Joaquín Almunia’s biggest step yet onto the well-worn battlefield that is the high-tech industry.

IBM, we’ll all recall, was a principal antagonist of Microsoft during the software giant’s epic wars with Brussels. The IBM-backed European Committee for Interoperable Systems fought on the commission’s side during the lengthy legal process. ECIS’s efforts paid off in 2007 with a court ruling that forced Microsoft to sell a version of Windows without its media-playing application, and to provide technical information needed for rivals to work with its machines.

Now it’s time to print off a few more copies of that ruling. It’ll be used against IBM for sure.

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Monday
Jul262010

EC Opens Two Antitrust Investigations of IBM

(Client Server News) By Maureen O'Gara

 The European Commission said this morning that has opened not one but two formal investigations of IBM and its mainframe business on the suspicion that Big Blue has abused its dominant position...

IBM is the only mainframe maker left and as it told the UK press last week “Western civilization runs on this system.” The Commission acknowledges that the vast majority of corporate data worldwide still lives only on the mainframe. It is too expensive to move it.

The EC puts the worldwide market for mainframes last year at roughly €8.5 billion ($11 billion) and €3 billion (~$4 billion) in the European Union, but those estimates apparently just cover mainframe hardware and operating systems.

IBM’s mainframe margins are understood to be quite handsome – BusinessWeek reckons the new next-generation mainframe that IBM just announced last Thursday could have a profit margin of ~70% – and Sanford Bernstein, for one, says the mainframe contributes over 20% of IBM’s revenues and 40% of its profits all things considered: hardware, software, storage, services, financing.

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Monday
Jul262010

IBM comes under two anti-trust probes from the EC news

(domain-b.com)

IBM the world's largest technology company has come under two antitrust probes from the European Commission (EC) for abusing its dominance in the computer mainframe markets.

The EC today said that it had initiated formal anti-trust investigations against IBM in two separate cases of alleged infringements of EU antitrust rules related to IBM's conduct on the market for mainframe computers.

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Monday
Jul262010

IBM takes dim view of EU claims "being made by Microsoft and its satellite proxies"

(NetworkWorld) By Michael Cooney

IBM responded angrily to the claims behind investigations being brought by the European Union today that the company has abused its dominant market position in mainframe computers.

IBM stated it intends to cooperate fully with any inquiries from the European Union. "But let there be no confusion whatsoever: there is no merit to the claims being made by Microsoft and its satellite proxies. IBM is fully entitled to enforce its intellectual property rights and protect the investments we have made in our technologies. Competition and intellectual property laws are complementary and designed to promote competition and innovation, and IBM fully supports these policies. But IBM will not allow the fruits of its innovation and investment to be pirated by its competition through baseless allegations."

Click to read more...