BIG BLUE: IBM's Use and Abuse of Power by Richard Thomas DeLamarter

BIG BLUE: IBM's Use and Abuse of Power

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DeLamarter has an ax to grind. He was a senior economist in the employ of the Justice Department and for eight years a member of the team that pressed the Federal antitrust suit against IBM (which was dropped by the Reagan Administration at the start of 1982). Marshalling evidence culled mainly from trial documents, the author here retires the aborted case against the computer colossus; even dedicated IBM critics may not be willing to give DeLamarter any better than a Scotch verdict, i. e., not proven. Size apart, the author's quarrel with Big Blue centers on functional pricing, a practice whereby customers are charged on a performance rather than cost basis. In addition, he maintains, IBM's market position accrues from users' original investment in IBM goods and services for their EDP installations--a commitment that effectively ties them to the company for their expansion needs. The situation stikes DeLamarter as pernicious because it enables IBM to decide where to maximize profits. In effect, he charges, this flexibility permits Big Blue to keep the competition--notably, copycat suppliers of so-called plug-compatible machines--at bay and to pre-empt emergent markets with periodic introductions of new systems. DeLamarter notes that the company has sold the stone products at Widely variant prices to different groups of customers--a policy not unknown in the food industry where vendors do appreciably better by supermarket chains than by local delis. Nor will it come as news that IBM is something less than a pacesetter in state-of-the-art technology. It does, though, have a demonstrable knack for service and catch-up campaigns, as recorded in Robert Sobel's more balanced entry, IBM vs. Japan. As a practical matter, DeLamarter's concern that Big Blue will make abusive use of its dominant position in information-processing and allied systems seems overblown. Of late, in fact, rivals have staked a solid claim to better than half the corporate PC market, while an ongoing slump in demand for computers has forced the company to institute an early-retirement program. Even when overtaken by events, activists such as the author play an important watchdog role in a democratic society. In this perspective, DeLamarter's less-than-damning indictment represents a moderately valuable contribution to contrarian lore on Big Blue.

Pub Date: Nov. 3rd, 1986
Publisher: Dodd, Mead