In-Depth

IBM Walks Fine Line in Competing with Partners

Big Blue must navigate a torturous path as it competes against, and partners with, Compuware, CA, BMC, and other vendors in the mainframe tools space

• By Stephen Swoyer
• 03/29/2005

As IBM Corp. has grown its portfolio of software and services offerings, it has increasingly found itself in competition with many long-time partners. Proof came last week, when Big Blue settled a long-standing lawsuit with application testing tools specialist Compuware Inc.

Compuware originally filed suit two years ago, in March of 2002, alleging that IBM had illegally misappropriated Compuware’s proprietary source code in at least two of its z/OS-based tools—File Manager and Fault Analyzer.

Compuware’s most sensational claims, from the perspective of market watchers, anyway, were that IBM had engaged in anti-competitive behavior by tieing sales of its mainframe software tools with other product offerings, and—alarmingly—withholding hardware- and software-specific technical information and other resources from Compuware.

From Long-Time Partner to Frequent Competitor

Putting aside the merits of Compuware’s allegations, the lawsuit highlighted IBM’s quiet emergence as a mainframe software tools vendor on par with established players such as Compuware, Computer Associates International Inc. (CA), and BMC Software Corp.

With the resurgence of the mainframe as a revenue source, IBM has introduced a raft of new mainframe-specific products and services, some of which replicate offerings that one or more vendors have marketed, in many cases, for a decade or more. With a not-insignificant pool of mainframe software revenue up for grabs and established players controlling the field, could Big Blue resist the temptation to take a page from Microsoft Corp.’s playbook?

As it stands now, Compuware’s lawsuit won’t provide an answer to this question. Barely six weeks into the trial, Compuware—which was fronting multi-million dollar legal costs, owing to its original suit and a countersuit filed by IBM—reached a $400 million settlement with Big Blue. Actually, “settlement” isn’t quite the right term; as one journalist who participated in a conference call with Compuware executives suggested, the accord smacks more of a “business arrangement."

For the record, IBM agreed to purchase a total of $400 million in software and services from Compuware over the next four years. At the same time, however, Compuware has already ponied up nearly $100 million in legal expenses—chief executive Peter Karmanos puts the figure at $95 million—and under the terms of the settlement, each party has agreed to pay its own legal expenses. IBM, for its part, admits no wrongdoing. And with that, it appears as if it’s business as usual for both IBM and Compuware.

“We’re still going to have to compete with them,” said Karmanos, during a conference call with analysts and reporters. “They’re still going to sell their products. We have in recent periods of time been increasing our market share, so they’re going to have to work hard to compete with us.”

But when Karmanos was asked about the charges of anti-competitive behavior that first prompted his company’s suit, he effectively punted. “I’m not sure what [IBM] plan[s] to do [in terms of how they market their products], but we have competed very effectively against their products, and we are more interested in a partnership going forward that involves all of our products,” he said. “And we don’t think they’re going to change much. We don’t think they have a reason to change much, and we’re just going to compete as hard as we can.”

But does Karmanos think Compuware would have prevailed on the merits of its case? Alas, he punted on this question, too. “We’ll never know that, but winning is very elusive, but when either side has lost a verdict, whether it’s us or them, you can rest assured that [any of us] would have appealed it,” he said.

At What Price Co-opetition?

Big Blue’s relationships with other vendors in the mainframe tools space have grown more complex over the last few years, too.

Consider what happened this summer, when a mini-fracas erupted between IBM and BMC. In late July, IBM marked the 35th birthday of its CICS transaction-processing platform by announcing two new CICS-specific tools and three updated ones. In an interview at the time, Rick Thomas, a CICS business development manager with IBM, claimed that Big Blue’s new CICS VSAM Copy was the first offering of its kind that allowed customers to do an online backup of CICS VSAM data stores (see http://www.esj.com/Enterprise/article.aspx?EditorialsID=1064).

When BMC officials heard this claim, they disagreed—vehemently. Not only wasn’t CICS VSAM Copy the first tool of its kind to support online backup, said Rick Weaver, a product marketing manager with BMC, but BMC had been marketing just such a product (its Recovery Utility for VSAM) since the early 1990s (see http://www.esj.com/Enterprise/article.aspx?EditorialsID=1091).

At the time, Weaver acknowledged that BMC’s relationship with IBM was more complicated than it once had been, but stressed that—Big Blue’s misleading CICS VSAM claims notwithstanding—Armonk mostly kept things on the up and up in its dealings with vendors such as BMC. “We call it co-opetition, because we do go toe to toe with IBM in certain markets, and they’re very aggressive when they go into some of our customers,” he said. “This causes some friction in some areas, but generally things are still great.”

A BMC representative was not available to comment about the Compuware settlement, but a CA executive dismissed it as a non-event, at least from his company’s perspective. “The reality is we don’t really see this as being that significant in the overall scheme of the market,” says Sam Greenblatt, a senior vice-president and senior technical advisor with CA. “ What’s happening in this tools market is what the settlement was and is really between IBM and Compuware. Our customers are still very happy with our own offerings.”

But has CA found IBM to be an above-the-board partner and competitor? Greenblatt thinks so. “We have not seen a conflict with IBM. When people tend to use our testing tools, they do it because it’s got superior value, and enhanced functionality, but we don’t see it being a cannibalized market, as it was portrayed in the court case,” he comments. “I don’t talk about IBM as a competitor, because we both compete with them and we cooperate with them, and the market is large enough for both of us to co-exist.”

One reason Greenblatt thinks there’s plenty of market share to go around is that mainframe software itself continues to evolve.

“It is a mature market, but an evolving market. As CICS changes, as IMS changes, as Java gets introduced into the environment, the tools are obviously evolving to support those,” he observes.