IBM will buy Platform Solutions and plans to blend the company's technology into its own System z mainframes. IBM and PSI have a longstanding legal rivalry that involved accusations about intellectual property and unfair competitive practices.
IBM is acquiring mainframe rival Platform
Solutions and plans to blend the company's technology into its own System z
The July 2 announcement also means that the
longstanding legal rivalry between IBM and PSI
that involved accusations
about intellectual property and unfair competitive practices will come to an
end once the purchase is formally approved by both companies.
The financial terms of the agreement were not released. In a statement, IBM
executives said PSI's employees and its intellectual property and mainframe
technologies would eventually be folded into IBM's
System z mainframe division.
"IBM's strategy is to continually
evolve our mainframe technology to help our clients tackle the most demanding
business issues," Anne Altman, general manager of IBM
System z, said in a statement. "We will continue to move the mainframe
forward through both IBM innovation and by
acquiring new technologies. We welcome Platform Solutions, Inc., and look
forward to collaborating with them."
For years, IBM has dominated the
mainframe industry as it remains one of only a handful of vendors that still
design, develop and support mainframe technology. Since vendors such as Amdahl
and Hitachi stopped making
mainframes, Big Blue now has a virtual lock on the field of Big Iron.
announced its new mainframe, the System z10,
earlier in 2008 and the
company continues to make improvements to the mainframe operating system.
In 1999, PSI
attempted to counter IBM's dominance of the mainframe market.
attempted to offer mainframe technology at a much lower cost by tapping into
more industry-standard technology such as Linux and Windows. The company's
mainframe systems were powered by Intel's Itanium processors.
In November 2006, IBM took PSI to court
to dispute claims that the smaller company's mainframe technology would work
with System z. In its lawsuit, IBM argued
that PSI's claims of compatibility were causing confusion in the marketplace
and threatened IBM's business.
In 2007, PSI countersued IBM and claimed
that the company had been using its dominance of the market to squash any and
all competition when it came to the mainframe.
"By leveraging its position in the market of operating systems and
exploiting the inability of consumers to easily change platforms, IBM
is depriving PSI of any meaningful opportunity to compete and is preventing
PSI's customers from purchasing the mainframe products they want," PSI
argued in the court papers that were filed at the time in the U.S. District
Court for the Southern District of New York.
Now, those questions will go unanswered as IBM
folds PSI into its mainframe division.
"This acquisition makes the most sense for our companies-to collaborate
on future technology offerings and maximize our combined knowledge and skills
for the benefit of IBM clients
globally," PSI President and CEO
Michael Maulick said in statement.
The news that IBM had bought one of the
few competitors left in the mainframe market drew an immediate rebuke from the nonprofit CCIA (Computer & Communications
which claimed the acquisition would hurt competition
and the businesses that rely on mainframe systems.
"This is a Black Hole acquisition," CCIA President Ed Black wrote
in a statement. "It sucks the life out of the market and destroys the
matter. It is transforming a market with latent potential for competition and
innovation into a sector with little prospects for anything but complete
domination by IBM."
mainframe business proved profitable to IBM in the first quarter of 2008.
IBM's System z mainframe business grew 10.4 percent year-over-year with
revenues of $1.1 billion in the first quarter, according to IDC. IBM is also
looking to develop its mainframe as a tool for consolidating large data centers
and for virtualization.
The question for IBM now is what it will do
with the technology it inherits from PSI.
Charles King, an analyst with Pund-IT Research, said he believes that IBM
will use the PSI technology to offer customers that are running legacy
mainframe applications a chance to switch to a newer, although smaller,
mainframe platform instead of moving those applications to an x86-based server
or a higher-end Hewlett-Packard or Sun Microsystems system. In other words,
it's a way to keep existing customers who might seek an alternative to the IBM
"The acquisition is more of a benefit to IBM
than just taking a competitor off the board," King said. "The
mainframe customers that have wanted to migrate away from the traditional
mainframe have not had a lot of options within IBM
... This is a question that IBM has been
dealing with for a while: What do you do with clients that have mainframe applications
but do not need a full-blown mainframe? The technology from PSI gives IBM
the ability to offer some interesting IBM-based
Then there is a question of what happens to the PSI
mainframe systems that use Intel's Itanium processors,
has its own processors built into the mainframe. King said he believes that IBM
will take what it needs from PSI for System z but no longer develop on Itanium,
which could be a setback for Intel as it looks to increase the community
building applications around Itanium.
Editor's note: This story was updated to
include quotes from an analyst and CCIA.