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Computer industry

IBM's Mainframe Monopoly Under Scrutiny Again After 25 Years

Strategic Insights

— 2 min read

European regulators are preparing to reexamine a case dating back to the early days of the computing industry, when IBM's dominance in the high-end computing market led to regulatory pressure. The mainframe industry, dominated by IBM, has attracted competition from companies like General Electric and Honeywell, but today it is once again the almost exclusive preserve of IBM. The renewed attention comes at a time of significant innovation in high-powered computing, with new technologies like multi-core processors and virtualization giving customers new, lower-cost choices for handling intensive computing tasks.

Key Takeaways:

  • IBM's mainframe profit margin has decreased significantly due to competition from new computing architectures, with analyst John Phelps stating that "people do have the options of moving off the mainframe, and they are doing it."
  • Legacy computing systems like IBM's mainframe have a long life, with the cost of switching to new systems being substantial, particularly for governments, banks, retailers, and healthcare companies with large numbers of customers.
  • Companies like T3 have developed techniques to "trick" software applications into thinking they are running on a mainframe, using software that can only be produced with IBM's approval, highlighting the central issue at stake in the latest complaint against IBM in Europe.
  • IBM has dropped the practice of licensing its patented mainframe technology, leaving potential rivals with no way to produce compatible machines.
  • IBM's rivals have accused the company of infringing its patents by trying to produce their own mainframes, with IBM maintaining that mainframes are not a monopoly due to competition from other high-end computing systems.
  • A former Amdahl engineer-launched start-up, Platform Solutions Inc, was backed by Microsoft, Intel, and Goldman Sachs, but ultimately agreed to be bought by IBM, effectively ending the case.
  • Hewlett-Packard has been the main supporter of Intel's Itanium chip, a processor seen as a rival to IBM's mainframe business, and Microsoft's interest in fostering an IBM rival points to opportunities for its software in high-end computing.

Statistics:

  • 11% of IBM's mainframe hardware is sold for Linux operating systems rather than IBM's own software.
  • Companys like T3 have developed techniques to "trick" software applications into thinking they are running on a mainframe, using software that can only be produced with IBM's approval.
  • Signification of the potential in the mainframe market was the powerful list of backers that lined up behind Platform Solutions Inc, including Microsoft, Intel, and Goldman Sachs.

Sources:

  • Richard Waters and Nikki Tait, The Times, "Big Blue is operating a monopoly, say critics"

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