CRN Network, March 11, 2010, 1100 hrs
The Indian Council for Research on International Economic Relations (ICRIER) has recently released a report, The Issues of Competition in Mainframe and Associated Services in India that calls for a thought on issues of free and fair competition in the high-end computing space.
The report highlights the need to probe IBM’s market conduct in selling its mainframe computers and whether it is flouting market competition rules by stifling competition. “India’s high-end computer market is dominated by IBM (with 50 percent market share), HP (33 percent) and Sun (17 percent). During the MRTP days this would have been sufficient to launch investigations against IBM because of its size. Competition authorities, influenced by Chicago, no longer believe that the relation between a high market share and market power is obvious. We therefore need to further probe IBM’s conduct and ask whether it has denied customers benefits of technological innovation and whether it charged above-market prices for IBM solutions, including the mainframe in India,” says the ICRIER-Indicus report.
The report states that given the need for inclusive growth in India—in the last few years, social sector programs have seen a dramatic increase in scale and scope targeted towards the underprivileged—it is imperative that the public and private sector build a large-scale IT backend, especially high-end servers, including mainframes. For this, it is vital that there is free and fair competition in the mainframe sphere in the country.
“India’s growing prowess in the ITES segment attracted immense attention but the server side (hardware and operating system) has been largely ignored. The Issues of Competition in Mainframe and Associated Services in India is first such study to examine structure and conduct in the server market in the country. As one would expect, the market is tightly controlled by a few firms. The results suggest that the Competition Commission of India needs to be proactive in ensuring that the server market remains open and competitive, and that no one player is able to abuse its dominance in the relevant market segment,” says Professor Rajat Kathuria, who spearheaded the ICRIER-Indicus study.
The report cautions that expansion in the installed base of mainframes with the proprietary IBM OS could lead to welfare losses like those reported in Europe. “High-end servers such as mainframes are very crucial for India’s IT needs for its developmental programs, and monopolistic practices of dominant enterprises in this sector are detrimental to growth. Given that the Indian enterprise IT market is entering its high growth phase, CCI has an excellent opportunity to avoid the pitfalls of the mature IT markets. Unbundling hardware and software, that is, ensuring that the sale of enterprise-class server hardware is not tied to the sale of enterprise software, is an important policy recommendation of the report,” said Kathuria.
The report opines that openness and interoperability are likely to be the basic requirements of developmental project like that of the Unique Identification (UID)—allocated Rs 1,900 crore in the Union Budget 2010-11 for a plan that envisages 600 million people with UIDs within the next four years—and, expresses concerns that closed standards would create serious patent and interoperability complications. IBM’s z/OS is an example of such standards.
The report highlights that vital data like that of UIDs will require storage formats that are open and free of all constraints like royalties, patent claims etc. “Storing large data sets and performing online verification on IBM mainframe z/OS will be eminently possible, but the risk would be in ceding some control over the information to IBM as a result of the proprietary standard,” it says. To take a leaf out of the grim experience in the US, financial institutions have been locked in to the legacy application at high cost, for decades.
The report has raised concerns over the attempts by IBM to tighten its hold on the Indian market by under pricing its products, much lower than other markets. This, in essence, is a clear effort to monopolize the market. The big fish not allowing competition and resorting to predatory pricing is not new, it has happened in the US and Europe earlier.
At the release of the report, eminent economists, including Rajiv Kumar, Director and Chief Executive, ICRIER; Laveesh Bhandari, Director, Indicus Analytics; SL Rao, Chairman, Institute for Social and Economic Change; Jeff Gould, Editor, OpenMainframe.org and CEO, Peerstone Research; Professor Bibek Debroy, Senior Economist; Dr Mahesh Uppal, Director of Com First; and ICRIER Professor Rajat Kathuria, deliberated on the need for a level-playing field in the mainframe and high-end computing market. |