Neon Targets IBM with Unfair-Competition Suit

Neon Targets IBM with Unfair-Competition Suit

IBM is being sued by Neon Enterprise Software for mainframe software anticompetitive practices. Neon says IBM is blocking its zPrime software, which it says can save IBM System z mainframe users 20 percent of their annual mainframe costs. Another company also challenged IBM on its mainframe business with a similar antitrust lawsuit in August.

On Monday, IBM Relevant Products/Services came under legal fire from Neon Enterprise Software. The company filed a lawsuit alleging that Big Blue is blocking System z mainframe owners from using its zPrime software.

Neon Enterprise Software filed its suit in the Austin division of the United States District Court for the Western District of Texas. The company claims IBM is violating the Lanham Act and state unfair-competition laws, and that Big Blue is liable for business disparagement and tortious interference with prospective contracts.

Neon is also seeking a declaratory judgment with respect to claims IBM made concerning the characteristics of zPrime. Specifically, Neon is seeking actual and enhanced damages, disgorgement of IBM profits, a declaratory judgment, and reasonable and necessary attorneys' fees.

Understanding zPrime

Neon zPrime is a proprietary software product that makes it possible for IBM System z business application workloads, such as IMS, DB2, CICS, TSO/ISPF and batch, to run on Big Blue's lower-cost zIIP and zAAP specialty processors. As Neon sees it, consumers would benefit from dramatic cost reductions in processing workloads on mainframe computers by using zPrime -- if IBM would allow it.

Neon points to rigorous testing conducted by nearly 50 organizations that has validated that zPrime can save System z mainframe users 20 percent or more of their annual mainframe costs under conventional-use pricing structures. The company held a webinar in October to emphasize the need for competition in the mainframe market with products such as zPrime.

"zPrime can safely and significantly reduce IT Relevant Products/Services costs while optimizing legacy application investments. It does so without sacrificing functionality or disrupting mainframe environments in any way," said Richard Ptak, principal and analyst at Ptak, Noel & Associates. "The innovative features in zPrime make it even easier for organizations to benefit from the significant cost savings to be achieved by taking advantage of specialty processor capacity."

Neon said zPrime is legal to use, free of any intellectual-property infringements, and, based on customers' legal reviews, has not jeopardized any standard contracts customers have with IBM. If a zPrime user ever loses the primary zPrime benefit of saving money, the company offers the option of cancelling the contract and receiving a prorated refund from Neon for any unused license fees.

Comparing IBM To Apple

"Neon's claims have no merit, and its product offers no innovation Relevant Products/Services," said Steve Eisenstadt, an IBM spokesperson. "Neon's software deliberately subverts the way IBM mainframe computers process data Relevant Products/Services. This is akin to a homeowner tampering with his electrical meter to save money. IBM has invested billions of dollars in the mainframe this decade, and we will vigorously protect our investment."

Charles King, principal analyst at Pund-IT, said Neon isn't the first -- and probably won't be the last -- company to challenge IBM's mainframe business. T3 Technologies filed a similar antitrust suit against Big Blue in August.

"IBM is not the only company that is telling users what software they can or can't run on its hardware Relevant Products/Services, and they are not the only company telling application vendors what they can do on their hardware," King said. "You don't have to look much further than Apple computer to see a vendor that's engaged in a similar sort of behavior."

"I personally think that Neon's claims are verging on the hysterical," he said. "It's a fact of life in the IT industry that vendors with proprietary hardware and software tend to make very loud statements about the way that those products should and shouldn't be used."