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EC Asked To Nail IBM for Alleged Monopoly Maintenance

The complaint accuses IBM of preventing competitors from selling rival mainframe hardware

T3 Technologies Inc, once the world’s second-largest IBM mainframe systems integrator, filed a formal antitrust complaint with the European Commission Tuesday charging IBM with shutting it out of the market. The complaint alleges a history of IBM abusing its monopoly and accuses IBM of preventing competitors from selling rival mainframe hardware.

T3, which sued IBM in New York over a year ago seeking to break Big Blue’s mainframe monopoly, threatened last summer to take its case to the EC. It hired the Brussels office of the London-based law firm of Berwin Leighton Paisner to prepare and file the complaint. It also assembled expert witnesses who have submitted reports and documentation to the EC in support of its case.

The complaint alleges a history of IBM abusing its monopoly and accuses IBM of preventing competitors from selling rival mainframe hardware by tying the sale of its operating system to its own mainframe hardware and withholding the patent licenses and IP it had pledged to the United States government would always be available to rivals for a reasonable royalty.

Because of that undertaking, the 1956 consent decree that IBM operated under – practically from the dawn of the computer era – was finally phased out in 2001.

Since then, T3 says IBM has been squeezing out any and all mainframe competitors to secure its monopoly and eliminating the licensing programs that would let customers buy its mainframe software and run it on non-IBM mainframe hardware.

T3’s allegations echo those lodged by wannabe mainframe maker and T3 partner Platform Solution Inc (PSI), which filed a massive antitrust countersuit against IBM and also complained to the EC.

IBM dealt with the PSI threat by buying the company last July presumably for hundreds of millions of dollars.

The EC is now expected to reopen the investigation it started when PSI complained. One of T3’s experts claims that Europeans could save $48 billion over 20 years if the mainframe market was open to competition.

In a statement T3 president Steven Friedman said observers should get over the notion that the mainframe market is shrinking. IBM’s mainframe business was up 25% in Q3 and about 25% of its annual $100 billion in revenues and 40% of its profits come from mainframes.

“The machines,” Friedman says, “remain essential to the operation of just about every industry including manufacturing, banking, healthcare, retail and government. In the past, companies such as Amdahl, Hitachi, Comparex, PSI and T3 used to compete in the mainframe market. However, through a calculated set of actions, only IBM now offers IBM-compatible mainframes and, based on IDC reports, controls over 99% of all existing IBM-compatible mainframes in use today.”

IBM itself calculates that 80% of all corporate and government data lives on mainframes and the value of legacy COBOL-based mainframe applications is believed to be somewhere between $1 trillion and $5 trillion. Nobody could afford to rewrite the application to run on a different machine.

T3 has also launched a web site to lay out its case and focus a spotlight on IBM’s methods. It’s out to collect other people’s complaints about IBM. See www.OpenMainframe.org.

Sensing an opportunity to bedevil IBM, Microsoft has basically been running guns to its enemies. It bought a piece of T3 in November ostensibly to “help fund the ongoing development of new solution offerings to assist mutual customers” and it bought into PSI supposedly for the same kind of reason. The size of the investments has not been disclosed. Prosecuting an antitrust case is an expensive exercise, especially when you’ve allegedly been run out of business.

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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