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IBM starts restricting hardware patches to paying customers

Joab Jackson | Aug. 29, 2013
Following an Oracle practice, IBM starts to restrict hardware patches to holders of maintenance contracts.

This practice is problematic to IBM customers for a number of reasons, DRTR asserted.

Such a practice limits the resale of hardware, because any prospective owner of used equipment would have to purchase a support contract from IBM if it wanted its newly acquired machine updated.

And this could be expensive. IBM also announced last year it would start charging a "re-establishment fee" for equipment owners wishing to sign a new maintenance contract for equipment with lapsed IBM support coverage. The fee could be as high as 150 percent of the yearly maintenance fee itself, according to DRTR.

IBM could also use the maintenance contracts as a way to generate more sales.

"If IBM decides it wants to jack the maintenance price in order to make a new machine sale, they can do it because there is no competition," Gordon-Byrne said.

IBM is not the first major hardware firm to use this tactic to generate more after-market sales, according to Gordon-Byrne. Oracle adopted a similar practice for its servers after it acquired Sun Microsystems, and its considerable line of hardware, in 2010.

The Service Industry Association -- which focuses on helping the computer, medical and business products service industries-- created DRTR in January 2013 to fight against encroaching after-market control of hardware manufacturers. The SIA itself protested Oracle's move away from free patches as well.

DRTR is actively tracking a number of similar cases involving after-market control of hardware, such as an Avaya antitrust trial due to start Sept. 9 in the U.S. District Court for the District of New Jersey.

IBM declined to comment for this story.

 

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