A recent court order lifting restrictions on International Business Machines Corp.'s technology sevices business is not likely to alter the bank outsourcing landscape, although it may make the computer giant more nimble in attracting new business, observers said.
The antitrust restrictions, lifted on Jan. 17, were part of a 40-year- old consent decree that barred IBM from selling outsourcing services under its own name.
Among other things, the decree kept IBM from selling computer hardware to its service bureaus at discounts unavailable to nonIBM companies. The goal: to ensure IBM's hardware dominance did not translate into an unfair advantage in the service bureau business.
Though the removal of the restrictions may benefit IBM in the long term, the action should have no significant adverse effect on the outsourcing market, industry observers said.
The restrictions originally were imposed to prevent IBM from dominating a then-nascent computer industry, but are no longer relevant, they said.
The Justice Department concluded as much when it received no responses after putting the proposed partial termination of the consent decree up for public comment.
"The agency concluded that there would be no substantial adverse effects to the industry," said David Turetsky, a deputy assistant attorney general in the department's antitrust division.
Consultants called the former restrictions anachronistic, and said their removal does nothing to significantly change the outsourcing market's competitive environment.
In the 1950s, hardware was the dominant factor in all computer-related businesses, said John McGilvray, principal consultant at Input, a market research firm based in Mountain View, Calif. "Whoever owned the hardware owned the industry."
"Today," he continued, "hardware is secondary. What's important is what you do with it, so there's a much higher value on service. You don't just sell hardware, you provide solutions."
William Bradway, an analyst with Tower Group in Wellesley, Mass., added that the rising acceptance of open systems computer architecture has weakened IBM's former stranglehold on the computer market.
He said the lifting of IBM consent decree restrictions falls into the "nonevent category. The marketplace has changed to the point that this is not that significant."
In 1991, complaints that IBM was violating the terms of its consent decree led to antitrust investigations into the IBM's service bureau operations.
IBM repeatedly denied engaging in anticompetitive activities and eventually satisfied the terms of the decree by establishing a wholly owned subsidiary, Integrated Systems Solutions Corp., to handle its outsourcing business with banks and other companies.
Several of IBM's competitors in the bank service bureau business - including Dallas-based Affiliated Computer Services Inc., which asked the Justice Department to examine IBM's compliance with the consent decree four years ago - agreed lifting restrictions on IBM would not significantly affect the business.
With the end of the restrictions, Integrated Systems Solutions will no longer have to exist as a separate company. IBM officials said no decisions have been made regarding changes in the company's status.
Still, the amendment of the decree has the potential to positively affect it, according to Donald Rosenberg, associate general counsel at IBM.
The decree "imposed restrictions on IBM and ISSC employees that made it unable for them to work jointly," he said. "Now the organizations can work more closely and present one face to customers."
This will make it easier for IBM to respond quickly to the market, he said. IBM will now have the freedom to offer price advantages to its service bureau subsidiary, said Mr. Rosenberg.
Integrated Systems Solutions will continue to operate in its present form for some time, he added, so its banking contracts will not be affected in the short term.
The service bureau just renegotiated an outsourcing contract with BankAmerica-Illinois, allowing the company to run the bank's technology and operations for seven more years.