IBM and the mainframe market
April 29, 2010 (VOX) by Federico Etro, University of Milan, Bicocca
Is another IT giant abusing its market position? This column describes the case of IBM – a near-monopolist in the mainframe market – being accused of preventing firm entry by tying its mainframe operating system with its hardware and withholding information for interoperability. The similarities with the Microsoft case suggest that the European Commission’s Director-General for Competition will not go easy.
After the end of the Microsoft saga, another important antitrust case may soon emerge in the “New Economy”, this time around a well known but largely undisturbed monopolistic position, that of IBM in the mainframe market. (For an evaluation of the Microsoft case, see Komninos and Czapracka 2010.)
Even if the mainframe represents a relatively small percentage of server shipments, a rigid demand for mainframes by corporate and government customers worldwide and technological peculiarities on the supply side make the mainframe market a largely separate and self-contained market, which provides products that are not substitutable with standard Linux, UNIX or Windows servers. For half a century – and not without large merits – IBM has been the leader of this market. But in recent years, by refusing to license its software for use on other mainframe computers and refusing to provide information and licenses to ensure interoperability with its architecture, IBM’s mainframe computers and operating systems have reached a position of near-monopoly, owning almost the entire installed base for IBM-compatible mainframes and losing any substantial entry pressure. It is calculated that around 90% of mainframe applications use native IBM mainframe operating systems and run on IBM hardware.