Commencement: April 2009
Completion: September 2009
Funded by: Indicus / Openmainframe.org
This study is the first to examine the nature and extent of competition in the server market in India by investigating both structure and conduct using a combination of secondary and primary information. At the higher end, servers are used for large-scale and critical computing purposes, features historically associated with mainframe computers, typically made by IBM. Over time, vendors like HP and Sun Microsystems have begun to manufacture high-end machines that can potentially compete with the mainframe, although IBM enjoys significant first mover advantages.
Secondary data show that the high-end market in India is dominated by the big three – IBM, HP and Sun Microsystems – while the lower-end market has ‘commoditised’ recently, making it a highly competitive segment. The high-end has proved resistant to commoditisation, despite technological advancements such as ‘cloud computing’. Network effects and vendor lock-in render exit from the high-end segment to alternative vendors and / or platforms difficult, making clients vulnerable to potential abuse. While there is evidence of such abuse from other markets, the primary survey across 71 users in India does not support the abuse of dominance hypothesis. Case studies across various verticals reinforce this result. At the same time, the study advocates a forward looking role for the Competition Commission of India (CCI) to prevent vendor lock-in from establishing itself in the Indian economy. Although the study does not quantify the economic benefits to India of such “pre – emptive” action, these are likely to be large indeed in the long – term, and rather significant even in the short term.