Dominance of global IT cos threat to Indian growth

by CXOtoday Staff    Mar 12, 2010

High-end servers such as mainframes are very crucial for India’s IT needs for its developmental programmes. However monopolistic practices of dominant global IT firms in this sector are detrimental to its growth. This was highlighted in the report titled "The Issues of Competition in Mainframe and Associated Services in India" by ICRIER and Indicus Analytics.

Sponsored by OpenMainframe, the report is based on a survey conducted among infrastructure verticals, including financial services, process manufacturing, retail trade, services (telecommunications), transportation, utilities and wholesale trade. The report calls for lending serious thought to issues of free and fair competition, entry of new innovators in this space, international or Indian, deterrence to bundling of IT goods and services, ensuring universal inter-operability between different IT systems, including high-end computers.   

India’s high-end computer market is dominated by IBM (with 50 percent market share), HP (33 percent) and Sun (17 percent). 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. 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 monopolise the market.

The report further added that lack of competition in mainframes tests the security mechanism of the country. For one, security agencies and departments are likely to be held to single-player ransom. The proprietary nature of the operating system of the IBM mainframe creates problem for legacy mainframe workloads as these cannot switch to high-end servers, because they are tied to an operating system (z/OS) that cannot run on these servers because of IBM’s restrictive licensing practices.

Although IBM has had a "history of antitrust violations" in Europe and the US, "the Indian mainframe market is relatively young but growing rapidly". At the same time, the report has cautioned that expansion in the installed base of mainframes with the proprietary z/OS could lead to "welfare losses like those reported for Europe".  

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, as the report puts it,
"closed standards would create serious patent and interoperability complications". z/OS is an example of such standards.

As the report points out, IBM is alleged to have extracted huge profits from proprietary mainframe offerings for long in the US and Europe and "it is unlikely that this will change in the near future". IBMs India-specific revenue is estimated at Rs 57.83 trillion from domestic business for fiscal 2009, up from Rs 42.42 trillion in fiscal 2008 and Rs 33.80 trillion in fiscal 2007.