IBM tightens high-end grip

Two significant yet seemingly unconnected events in March had IT enthusiasts buzzing. First, Microsoft was fined EU497 million by the European Commission (EC) and forced to rethink some of its most aggressive business practices for violating monopoly law. Then IBM said it was buying Candle, one of its longstanding rivals in the business of supplying mainframe systems software.

The two events were steeped in irony. Microsoft’s (alleged) crime was to use its dominant position in the software market to unfairly discriminate against rivals. It did this, the EC argued, by bundling in components (free or cheaply) that others supply at a price; and by holding back critical interface information that others needed.

Back in the 1970s and 1980s, IBM faced exactly the same charges. And one of those companies that suffered as a result of IBM’s practices – and which complained loudly – was Candle.

Candle and many others survived and, for a few years, even thrived. IBM, under pressure in several areas of business and facing Japanese competition, appeared for a while not only to lose full control of the mainframe market, but the mainframe business itself seemed to be in danger.

It is not clear whether the EC’s remedies at the time, which forced IBM to open up its interfaces, had any effect. And in any case, few people cared: the world focused on client/server and PC technology. But now, there is talk of a mainframe resurgence (see Information Age, March 2004). IBM has recorded big sales recently as some large companies invest more in centralised, resilient servers.

This is why the Candle acquisition is so ironic, set against the Microsoft case. If the world’s largest 500 organisations were asked which is more important to them – IBM or Microsoft – almost all would say IBM. And IBM’s grip on both mainframe hardware and, increasingly, the systems software, is perhaps tighter than it has ever been.

Candle’s sales in recent years show that it was struggling to win new business against IBM, even though its tools are highly regarded, because IBM’s account control is now so strong. Candle’s CEO, Aubrey Chernick, has been fiercely independent over the years, saying he would never sell to certain named rivals, including IBM. That was one reason why he refused ever to take the company public.

But times change. IBM is building a middleware and systems software suite that is vast in its scope and its functionality – as is Microsoft. But perception is all: Microsoft is seen as obscenely wealthy and rapaciously competitive, while IBM is viewed as a model citizen and only moderately profitable.

Some analysts still say that large parts of its business are non-strategic or unfashionable. As a result, no one should expect the competition lawyers to look at IBM, at least not for a while yet. But its influence at the world’s largest companies continues to grow.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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