IBM’s lawyers can take the day off!

IBM’s dark-suited legal team can relax a little following the news that three organisations have agreed to drop antitrust complaints filed against IBM in Europe and the USA. The companies involved are T3 Technologies, NEON Enterprise Software, and TurboHercules.

Back in October 2009, the US Department of Justice (DoJ) started investigating IBM’s mainframe monopoly following complaints from T3. Back in 2000, T3 launched its tServer low-end mainframe based on the FLEX-ES technology from Fundamental Software Inc (FSI). IBM is saying T3 withdrew its appeal for a ruling in the US courts in May this year. IBM also says T3 has withdrawn its European Commission complaint, alleging antitrust behaviour by IBM.

IBM also says that NEON has dropped its European Commission complaint. This makes sense because in June NEON agreed (in the sense that a person with their arm twisted agrees) to stop reselling and distributing its zPrime product and requested customers to remove and destroy their copies. zPrime was controversial since it first appeared in July 2009 because it allowed mainframe users to run workloads on specialty processors rather than on the main processor. IBM’s revenue stream is based on main processor workloads. So you can see why users would welcome such a product (and the consequent savings they would make) and why IBM would not. As a consequence claims and counter claims flew back and forth between the two companies until the resolution in early June. Since then, NEON’s IMS products have been acquired by BMC.

Finally, TurboHercules has dropped complaints about IBM with the EU. TurboHercules, a French company, was set up in 2009 by Roger Bowler, who created the open source Hercules mainframe hardware emulator. TurboHercules allows mainframe operating systems and applications to run on x64 and Itanium processors running Windows, Linux, Mac OS, or Solaris as the host environment for Hercules. The organisation was part funded by Microsoft (obviously, no lover of mainframe technology).

But it’s not all good news for IBM. It’s still the subject of antitrust probes by the US DoJ and the European Commission. So, those lawyers can’t take off too many days!

And on a completely different topic: don’t forget it’s the Virtual IMS user group meeting on Tuesday with Scott Quillicy, CEO and Founder of SQData talking about IMS replication for high-availability. There are more details at www.fundi.com/virtualims.

IBM v EU

Just as IBM was basking in the success of its zEnterprise mainframe-in-a-box, along comes the European Union regulators to take it to task for not allowing its operating system to run on other hardware, and not being fair to spare-part vendors.

The European Commission has already warmed up for its probe into IBM’s workings by taking action against Intel and Microsoft. EU antitrust laws ensure that big organizations deal carefully with small competitors. The EU can issue a range of fines and sanctions should it believe a dominant organization in the market place is abusing its position. IBM’s legal team are used to this kind of battle. Back in 1956 the US Department of Justice reached a consent decree with IBM that, in effect, created a market for used mainframes and mainframe parts. In 1984 the EU agreed with IBM that competing mainframe companies would have access to the mainframe platform.

As we’ve mentioned before, the first complaint comes from T3 and TurboHercules saying that IBM ties its mainframe operating system to its mainframe hardware – and thereby destroys the emulation market. The second investigation was initiated by the Commission alleging discriminatory behaviour towards competing suppliers of maintenance services – spare parts to you and I.

How does IBM respond? The company said that it intends to cooperate with any EU inquiries, while denying there was any merit to the complainants’ claims. It then alleged that the accusations were being fuelled by business rivals. Microsoft is a minority stakeholder in T3. IBM went on to suggest some of its larger competitors want “to mimic aspects of IBM mainframes without making the substantial investments IBM has made and continues to make”. IBM declared these competitors, “are violating IBM’s intellectual property rights”. It continued: “IBM is fully entitled to enforce its intellectual property rights and protect the investments we have made in our technologies”.

It will be interesting to see what comes out this. Bear in mind there’s the NEON zPrime case waiting in the wings as well.

In its on-going watch on successful companies, the Commission has also launched a preliminary anti-monopoly investigation into Google, examining its power in the online search and digital advertising markets.

The recession is over, IBM is in profit!

Well, half right at least! IBM has reported its first quarter results for 2010 saying that profits are up 13 percent to $2.6 billion and sales are up 5 percent at $22.9 billion. As a consequence, IBM has raised its profit guidance for the year by 20 cents to $11.20 per share.

The UK managed an 8 percent increase in revenues. The Americas had 6 percent growth. Europe, as a whole, provided revenue growth of 5 percent. And Asia/Pacific provided 4 percent revenue growth.

In terms of hardware – provided by the Systems and Technology Group – sales were up by 5 percent. However, System z mainframe sales fell by 17 percent. This can be explained by the fact the new z11 mainframes are due later this year and people will be holding of purchasing until those new mainframes become available. Trouble-makers may suggest that hardware sales are down because people are running their mainframe applications on TurboHercules boxes!

Software grew by 10.6 percent to just over $5 billion. Sales of Tivoli management software increased by 23 percent. WebSphere middleware sales climbed by 13 percent. Income from Rational development tools was up by 7 percent. Disappointingly, but perhaps not surprisingly, Lotus software increased by only 1 percent.

Global Services was responsible for $13.7 billion of sales resulting in a 4 percent increase.

But life isn’t all good news for IBM with that antitrust claim from the European Commission brought by TurboHercules. It was only a couple of weeks ago that I was talking about the 10th birthday of Linux on a mainframe – and Linux is open source software. IBM seems unable to make up its mind whether it is the king of open source (Linux) or the arch-enemy of Intellectual Property rights in the open source community (TurboHercules). IBM claims that its battle with TurboHercules in Europe is a result of the hidden hand of Microsoft pulling the strings.

I’m pleased to see IBM making a profit. I earn my living by working with people who work on IBM mainframes. However, recently, I have had a strange nagging doubt. What if you could run mainframe software on a reasonably beefy x86 box with some kind of emulator like TurboHercules? What if the whole mainframe hardware strategy that IBM has been driving for all these years is little more than a house of cards? If that were the case, then no wonder IBM is doing its best to get rid of any company offering low-entry access to mainframe software. I wonder...