DOJ investigating IBM for Antitrust Violation in Mainframe Licensing

The DOJ announced it was investigating allegations that IBM is engaging in anticompetitive conduct by declining to license certain components of its mainframe technology, such as software, to potential competitors. For example, IBM allegedly did not license its software to Platform Solutions, one of several companies working on software to enable smaller servers to mimic the capabilities of mainframes. IBM, of course, denies that its licensing practices are anticompetitive or violate antitrust laws, and the mere refusal to license is usually insufficient to prove wrongdoing.

It is an interesting reminder of how important mainframe technology is, even decades after the PC revolution. According to the NYT, mainframes still comprise 25% of IBM's revenue, and handle 50 billion transactions a day. Indeed, some have noted that the modern "cloud computing" phenomenon is an attempt to recreate the interactivity and functionality of mainframes from the 1960's, when companies remotely used the storage and bandwidth provided remotely by large machines.

The Big Switch, by Nicholas Carr (Jaideep Venkatesan)

Nicholas Carr's The Big Switch is the latest entry in the "Cloud Computing" genre, though Carr forecasted the phenomena in his earlier book "Does IT Matter?". Carr compares the Internet, which he tries to rename the "World Wide Computer", will do for computing what the electric power grid for electricity - move companies from strategic customization of computing resources to a complete outsourcing for access to computing technologies. It is an intriguing metaphor for something that has been written about extensively elsewhere - the use of outsourced centralized servers for hardware and software applications, most notably offered by Amazon and Google.

Car admits that there are important differences between electricity in the early twentieth century and computing technologies in the twenty-first. Unlike electric power, computing technologies are much more protean, and the programmability inherent in computing technologies ultimately differentiates it from power sources. But even if that is the case, the metaphor Carr explores provides a useful starting point for forecasting what will happen to the industry.