NEW DELHI, INDIA: The Indian Council for Research on International Economic Relations (ICRIER), along with Indicus Analytics, released a report, 'The Issues of Competition in Mainframe and Associated Services in India', in which it has alleged that dominant players namely IBM, HP and Sun Microsystems are together restricting competition in the high-end server market segment of India, as these companies bundle their proprietary un-interoperable operating system along with the hardware.

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“India’s growing prowess in the ITeS segment attracted immense attention but the server side (hardware and operating system) has been largely ignored,” says Professor Rajat Kathuria of ICRIER, who spearheaded the ICRIER-Indicus study, which was released here on Thursday.

He said '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,” he added.

According to the report, India’s high-end computer market is dominated by IBM, with 50 per cent market share, HP with 33 per cent and Sun with 17 per cent.

“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,” said the report.

“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,” it added.

The report mentions that in the high-end market, installed Linux is very low, whereas the share of proprietary OS provided by hardware vendors is comparatively higher. The survey in this report reveals that users prefer a bundled purchase of hardware and OS in the enterprise-level segment.

For HP, this report has pointed out that a larger share of the installed OS goes to its own UNIX base OS, whereas in the case of IBM the larger share goes to its own AIX OS.

Likewise for IBM mainframes, in most cases they only use IBM's mainframe operating systems such as z/OS. This finding, however, needs to be juxtaposed with the fact that in most cases vendors allow no other choice, according to the report.
 
If one buys a high-end RISC server from IBM, HP or Sun, the only server OS choice is, usually, the variant of Unix sold by that vendor - AIX, HP-UX and Solaris, respectively. One cannot choose to run Sun Solaris or HP-UX on IBM Power hardware. Moreover, one cannot run Windows OS on IBM Power or Sun SPARC hardware, though one can on the Intel Itanium-based versions of HP Superdome, it added.

Prof. Katuria mentioned that this report build up prima facie case of investigation against IBM and other players dominating high-end server market.

“We will approach competition commission of India tomorrow. We have two main points on which the regulator should intervene, First is that operating system should be made interoperable and unbundling of software with hardware. There are a number of government projects like Unique ID and program under e-governance coming, which will need open and interoperable system. If these kind of practices are not checked now then these are going to have adverse impact on the country’s economy,” said Katuria.

When the point of letting this matter decide by market forces was raised, Prof Bibek Debroy of Center for Policy Research and advisor to the research committee of this report supported the move for the regulator to step in.

“Market forces don’t break down conduct, if they do then eventual cost on the consumers will be too high. So it is better for the regulator to step in,” said Debroy.

Jeff Gould, Editor, OpenMainframe.org and CEO, Peerstone Research alleged that due to bundled and proprietary OS, IBM milks its customers when it comes to upgradation. 

“There is an analogy that IBM’s dominating operating system forces its customers to buy hardware which is 10 times high in price,” alleged Gould.

Further, Kathria pointed out that almost 95 per cent of IBM revenues comes from upgrades and not new sales.