Tech Industry Can Learn from DOJ Inquiries into IBM Mainframe Business

Rob Enderle, an analyst with the Enderle Group, said the Obama administration and the European Union both now seem to be creating an increasingly hostile environment for tech companies. With larger companies faced with antitrust allegations, regulators both in the United States and in Europe presume the company is guilty, and "the judicial process is simply an exercise in confirming that guilt."

To prosper in such an environment, Enderle suggested that IBM's course of action in the 1950s or Apple's current practices might help businesses more than the combative strategies employed in recent years by Microsoft and by Intel, which in May was fined $1.45 billion by the European Commission—the antitrust arm of the European Union—for anticompetitive practices.

In the 1950s, when the issue of IBM's dominance arose, IBM officials were proactive and agreed to a consent decree that was in effect for four decades.

"Not only did IBM show a great deal of respect for the DOJ and other federal entities, they seemed to realize that the cost of a public fight would be more than the firm could bear," Enderle wrote in an Oct. 13 report. "In essence, the company decided that by effectively self-regulating, they could keep the U.S. government out of their business. They were right. For most of the time the consent decree was in place, IBM enjoyed some of the most successful, and strongest, financial years in the firm's history."

Apple also has garnered the scrutiny of the DOJ, Securities and Exchange Commission, and Federal Trade Commission for such issues as its behavior toward Mac clone maker Psystar, and Enderle suggested that the company has eased that scrutiny by putting former Vice President Al Gore on its board of directors.

"Is Apple's Teflon resistance to government oversight due to Al Gore's presence?" Enderle asked. "It is certainly intriguing, in that bureaucrats tend to learn early (if they are successful) to pick their fights carefully and leave powerful political figures alone. In any case, Gore appears to be vastly more valuable to Apple than the ex-attorney general hires that Microsoft tried to use to its advantage during its own antitrust trial."

Joe Clabby, president of Clabby Analytics, said the DOJ may have a difficult time making its case against IBM. Investigators can't say mainframe customers are locked in when there are other alternatives out there, including Unix-based systems running such RISC processors as IBM's Power or Sun Microsystems' SPARC, or Intel's EPIC (Explicitly Parallel Instruction Computing)-based Itanium chips, which power Hewlett-Packard's Integrity line of servers, Clabby said in an Oct. 13 report.

In addition, mainframes are open systems in that they can run Linux and Java workloads, as well as SOA (service-oriented architecture) applications. So on the hardware side, there's no lock-in, which leaves the issue of licensing for z/OS, he said.

"Ultimately, the biggest question on the table is whether other vendors should have a right to deploy z/OS on other platforms," Clabby wrote. "If allowed to do so, competing vendors could undermine IBM's mainframe pricing structure by delivering lower-cost alternatives to mainframe hardware. And, to us, that would be unfair."