Compuware Brings IBM to Antitrust Court

pcs305 writes " According to a news article at Yahoo, Compuware is accusing IBM of stealing code and copying Compuware manuals. They also accuse IBM of being a monopoly in the mainframe market and of anti-competitive behaviour. "

Comments

Can't compete? Sue!

[ryants]

"Can't compete? Sue!" seems to be the going business model nowadays. In big enough cases, such as this one, it leads to the "Can't compete? Government do something!" strategy.

Rather unfortunate. Of course, the article is scant on details, but on the face of it it just seems that IBM delivered what customers wanted, and their competitors waffled. mmmmmm free market.

As for the copying, I sure hope nobody posts any opinions, because there isn't enough information here to even form one about that question.

This is "anti-competitive"?

[nigelthellama]

From the article:

"The Compuware suit says Armonk, New York-based IBM uses its massive Global Services arm, the world's largest computer consultancy, to steer customers to its own products even when products made by other software vendors may be more suitable."

How is this somehow wrong? This is called "sales" in the real world. Sales people specialize in getting potential customers to use their product even "when products made by other software vendors may be more suitable", it's what they're paid to do. Yes, IBM may have a large sales department, and yes, maybe they do try to get people to buy their products even when a competitor's products might work better, but this the nature of sales, and is hardly anti-competitive.

Re:This is "anti-competitive"?

[nurightshu]

Agreed.

I work for UPS, and we're currently working with the Teamsters Union on contract negotiations for all of our union employees. FedEx has taken the opportunity to lure some of our current customers away from us, by talking up the possibility of another strike like the one in '97. It's so remote as to be almost an impossibility (that strike caused a huge financial dent in the Teamsters' strike reserves), but it doesn't stop them from using it as a marketing tool.

Should UPS sue FedEx over their sales force's marketing tactics? I don't think so. Most of my fellow employees don't think so either. We'll simply press on and complete the negotiations, while we continue delivering the packages, same as always. If we can't, we sink. Simple as that.

Business is a fairly brutal Darwinian process sometimes, and if Compuware can't handle the fact that IBM's sales weasels are slick fast-talkers, maybe they should find another line of work. I hear that selling watercress sandwiches in front of the airport is pretty lucrative...

Lazy or malicous

[Merik]

Parts of IBM's manuals were identical to his company's and documented features available in Compuware products but not in IBM's, he added.

I wonder if this damning evidence was the result of a moron or by some employee pissed off cause he was forced to rip someone elses sh!t.

Re:IBM a monopoly in the mainframe market?

[neurojab]

Make no mistake... the world runs on IBM mainframes. All other systems and os's are fledgling for small players only. From airports, to financial institutions to nearly every one of the Fortune 500... they all use IBM mainframes for their core business. The reason isn't because it's a monopoly... there are always other options, but would you rather pin your business on a 50 node cluster of failure-prone DELL boxes (that may catch fire at any minute) or a slick, bulletproof mainframe? It's just good business sense to buy reliability. No one else can offer that yet.

Let's look at this the other way....

[Gollo]

For years IBM stayed well out of the mainframe database tools market, instead it was dominated by tools from Platinum (now CA, I believe), BMC, Compuware and others. To be realistic, you couldn't really run DB2 effectively without some of these tools.

Then all of a sudden IBM announces that they are going to begin selling competing tools (not bundled, but separately priced products) and the 3rd party vendors were screaming.

Why? Yes, they would have cause to be unhappy about the new competition, but one would think that their products would be technically superior in the short term (having been around for 10 years) and too well-entrenched in many shops to be easily surplanted.

Well, it actually turns out that some of these products actually didn't do much themselves. They were basically fancy front ends to code that IBM supplied with DB2 that wasn't entirely easy to access (only programmatically). We are not talking just basic funtionality here, were talking enhanced processing. IBM discovers this, and realizes that these vendors are really riding IBM's gravy train (and anyone who has ever looked at mainframe software costs will understand how much these vendors charge for a 'front-end'). So now IBM separates that code from DB2 and ships it (and their own front end) as a separate product. What does that mean for a 3rd party vendor? That if you want to use their product, you also have to have the equivalent IBM product installed. No brainer, really.

As far as I'm concerned, the 3rd party vendors deserve to get shafted here. I've seen how much they charge - and they couldn't even be bothered to write a decent tool that could ever possibly compete with an IBM supplied one...

Anyway, that's the story as I heard it..... YMMV.

IBM _is_ a monopoly

[Ed Avis]

It's clear that IBM has a monopoly in the mainframe market, or at least something close to it. You can deduce this simply by looking at their pricing policies.

If you buy a mainframe then it often comes with say six CPUs, of which only one is activated. If you pay IBM some extra subscription money they will send an engineer round to activate the second CPU, or up to all six depending on how much you pay. It costs them almost nothing to do this, and it would cost nothing extra to simply have all six enabled when the machine leaves the factory, but IBM charges extra for it.

You can consider this as market segmentation - selling the same product to different parts of the market and charging different prices, so as to squeeze the most out of each consumer. If there were plenty of competition in the market, then IBM would need to sell mainframes with the best price/performance possible and would ship with six CPUs by default, at a price close to the manufacturing cost. The fact that they can get away with this pricing scheme shows they have considerable market power, if not an outright monopoly.

A more positive way of looking at the situation is that the cost of a mainframe reflects less the manufacturing costs (marginal cost), and more the R&D effort that went into desigining it or the expense of building the factory (fixed costs). In this case IBM's charging different prices, despite the marginal cost to them being no different, is just like Novell charging different prices for a 10-client Netware licence and a 100-client licence. So IBM has a monopoly on that particular mainframe design in the same way Novell has a monopoly on Netware. This is still not ideal for the consumer, but it's often considered a necessary evil to provide incentive to invest in new designs.

Re:IBM _is_ a monopoly

[perky]

I think you might be slightly missing the point here. The actual hardware shipped by IBM constitutes only a relatively small proportion of the cost of making that delivery. Whereas there are millions of x86 machines shipped each year and the R&D cost is spread over each of them, there are only tens or hundreds of S/390s/zSeries shipped each year, and hence the R&D value in each piece of physical hardware is significantly larger. The relative cost of shopping with more procs on board is small. Now add to this that many s/390 machines will still be in operation in a dozen or more years having been upgraded rather than replaced, and it makes sense for IBM and its customers for each parallel sysplex board to be shipped with 6 procs onboard. This way upgrades can be completed more quickly and cheaply, with less disruption to the running of the machine.

Sure, IBM is segregating its market, but there is competition from the big *NIX clusters, so they can't push things too far. On top of this many of the big s/390 users also have very large CICS and MQ/series installations bringing in millions a year to IBM software group. It wouldn't really make sense to price the hardware out of range because the software and suport contracts would dry up too.

Re:IBM _is_ a monopoly

[perky]

Yet again, you haven't appreciated that the hardware cost of an s/390 is only a small proportion of the cost to IBM of delivering an s/390. The marginal cost of adding 5 processors when you have the fab up and running is negligible when compared to the cost of R&D, software development, marketing, support, building and tooling the plant etc. yes, the margin is big, but not that big.

Re:IBM a monopoly in the mainframe market?

[hawk]

>well, you know the concept of clusters, do you?

Yeah, that's when a bunch of them are close enough to one another that the fire can spread from one to another . . .

:)

hawk