Tech Industry Can Learn from DOJ Inquiries into IBM Mainframe Business

Analysts say the Department of Justice's inquiry into complaints about IBM's mainframe business should give other large technology vendors an idea of how the antitrust issue will play out under the Obama administration. The analysts also draw on IBM and Apple as examples to give tech giants a couple of suggestions on how to dull the pain of such inquiries.

Five months ago, on May 11, the Obama administration revoked an antitrust policy established during President Bush's regime that regulators said hindered their ability to take on anticompetitive behavior by companies that dominate their market.

At the time, Department of Justice officials said antitrust policies under Bush contributed to the economic downturn that led to the global recession, and promised that they would be more aggressive in policing such behavior. DOJ officials have also said the technology and telecommunications industries were among the sectors they would keep a particularly close eye on.

Any doubt about that was wiped away in October when the DOJ reportedly began a preliminary investigation into IBM and its dominance in the mainframe space. That came about the same time a U.S. District Court judge in New York dismissed a lawsuit filed by T3 Technologies against IBM charging anticompetitive practices. T3, which sells non-IBM hardware that runs mainframe workloads, will appeal the dismissal.

T3 and the CCIA (Computer & Communications Industry Association) have filed complaints saying IBM's refusal to license its z/OS mainframe operating system is unfair to companies like T3. The CCIA, which counts such vendors as Microsoft, Oracle and Advanced Micro Devices among its members, briefed DOJ investigators in September on its concerns about IBM and the mainframe market.

Charles King, an analyst with Pund-IT Research, said there are numerous issues connected with the case, involving subjects such as competitive Unix systems, questions about how dominant IBM mainframes are in the server space and IBM's continued push to widen the workloads the mainframes will support while also driving down costs.

However, for the IT industry as a whole, what is more worrisome is the degree to which the DOJ is now reflecting the policies of sitting administrations, King said, as "radical shifts in DOJ philosophy and strategy can significantly add to the difficulties that businesses face in operating and competing during what is arguably the most challenging economic environment in a generation," King wrote in a report issued Oct. 13.

President Obama has been vocal about his support for business regulations, particularly given the belief that it was the lack of such regulations that helped create the current economic problems, so the aggressive attitude of regulators now isn't a shock. But it does suggest that competition and antitrust regulation will continue to be tied closely to whatever administration is in charge, creating a moving target for companies.

"The complaints against IBM could eventually qualify as a litmus test of the Obama administration's broader attitudes toward business and market competition," King wrote. "If the DOJ acts in a careful, measured way it could repair a reputation damaged by eight years of laissez-faire excesses. But if the DOJ gives credence to what we consider to be the essentially baseless claims of T3 and the CCIA, it could portend a very long four or eight years, not just for IBM, but for many U.S. companies in the technology industry and other sectors."