IBM Mainframe Monopoly Probe Questioned By Analyst

Question marks have been raised about the Justice Department’s preliminary antitrust inquiry of IBM’s domination of the mainframe sector, considering the fact that there are so many modern alternatives to big iron.

It all began last week when reports emerged that the Justice Department had begun a preliminary investigation into whether IBM has abused its monopoly position in the market for mainframe computers.

The investigation followed a complaint filed by the Computer and Communications Industry Association, a trade group with a history of involvement in antitrust disputes, and which has reportedly often complained about IBM’s dominance in the mainframe space.

In addition, association member T3 Technologies said it had received a civil investigation demand from the Department of Justice in relation to IBM’s mainframe business. T3 is an established provider of IBM-compatible mainframe alternatives and has been a vocal critic of IBM in the past.

But Jeff Goldberg, a senior analyst with Celent, a Boston-based financial research and consulting firm, has questioned whether there was actually a monopoly in the first place.

In a blog entitled “Is there such a thing as a mainframe monopoly?” Goldberg wrote that while he couldn’t speak as to whether certain actions taken by IBM or other companies were lawful or not, he believed that the investigation “speaks more to current problems in the industry than it does to any particular wrongdoing.”

“Much of the action seems to be driven by the fact that IBM has a near-mainframe monopoly and businesses rely on mission-critical code that can only run on these mainframes. The issue here is not just IBM’s mainframe monopoly but, rather, the fact that companies are relying on code that was written twenty or thirty years ago,” Goldberg wrote.

“I say the mainframe monopoly is not the main issue because calling it a monopoly ignores the realities of modern computing. Customers clearly have options beyond the mainframe; most (if not all) consider and purchase modern servers for production systems that either run alongside mainframes or have replaced mainframes. A mainframe monopoly is like a train monopoly… It might be a point of contention if one company owned all the trains, but this company would still be competing against all the very prevalent and modern options (trucks, boats, cars, planes) for shipping and travel,” he wrote.

Goldberg pointed out that the real issue around the probe is not the hardware monopoly, but the fact that “many companies have mission-critical systems running on these mainframes; systems they have invested too much money in to move.”

“Any company that cannot ever move off of its existing base of code because it has invested ‘too much’ in it will one day face extinction, if it does not face it already,” he warned. “From where I sit, the software and services industry is fuelled by the multi-billion dollar business of selling companies modern solutions and consulting to migrate off of legacy solutions. In fact, IBM, as a major force in professional services, is one of the companies helping consumers move off of legacy code to modern enterprise software.”