IBM's Mainframe Business Draws Antitrust Probe

EU officials say they will take a closer look at Big Blue's heavy metal operation to ensure it's not breaking competition regulations.

Paul McDougall, Editor At Large, InformationWeek

July 26, 2010

2 Min Read

Less than a week after it launched its most powerful mainframe to date, IBM has become the subject of an EU antitrust probe into its business practices in the market for the data-center class machines.

The European Commission, which is the European Union's competition watchdog, claimed Monday that IBM's refusal to license its z0S mainframe operating system for use on generic hardware offered by vendors T3 and Turbo Hercules may be a violation of European rules. In a separate charge, the EU said IBM may be illegally shutting out competitors in the mainframe services arena by maintaining a monopoly over spare parts.

The first part of the probe came in response to formal complaints from T3 and Turbo Hercules, while the EU launched the latter investigation on its own. The probe's existence does not necessarily mean IBM will face actual antitrust charges. "The 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," the EU said in a statement.

IBM now stands virtually alone in the mainframe sector, as most competitors have left the field in recent years. But the company said the EU's viewing of mainframes as discrete from the overall server market is misguided. If lumped in with Windows, Unix, and Linux-based servers, IBM mainframes represent just .02% of all servers shipped in 2009.

"Today, the mainframe is a small niche in the overall, highly-competitive server landscape," an IBM spokesman said.

IBM also said it's got a right to protect its investments in mainframe technology, given that it spent billions of dollars resurrecting such systems at a time when the IT market was moving to distributed computing setups for corporate data centers. "These investments reinvigorated the mainframe server as a vital competitor in a highly dynamic marketplace," IBM's spokesman said.

Still, IBM said it plans "to cooperate fully" with EU investigators.

IBM last week rolled out a new mainframe designed to dramatically cut data center costs and complexity. The zEnterprise server, which supercedes the z10 in IBM's heavy metal lineup, can absorb a broad range of tasks and platforms that are generally strewn across data center floors in the name of distributed computing.

The zEnterprise 196, the first in the new line, ships later in the current quarter with prices starting at $1 million. The specs would appear to justify IBM's description of the system as a "data center in a box" or a "cloud in a box." With 96 industry-fastest 5.2 GHz processors on board, the raw speed is there for real-time and in-line transaction processing, and the system can support up to 100,000 virtual images.

Investors shrugged off news of the EU's probe, as IBM shares were down just 0.48%, to $127.76, in afternoon trading Monday.

About the Author(s)

Paul McDougall

Editor At Large, InformationWeek

Paul McDougall is a former editor for InformationWeek.

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