IBM Will Share Tech With China To Help Build IT Industry There

An anonymous reader sends this report from Reuters: IBM Corp will share technology with Chinese firms and will actively help build China's industry, CEO Virginia Rometty said in Beijing as she set out a strategy for one of the foreign firms hardest hit by China's shifting technology policies. IBM must help China build its IT industry rather than viewing the country solely as a sales destination or manufacturing base, Rometty said. ... [Her] remarks were among the clearest acknowledgements to date by a high-ranking foreign technology executive that companies must adopt a different tack if they are to continue in China amid growing political pressure. A number of U.S. technology companies operating in China are forming alliances with domestic operators, hoping a local partner will make it easier to operate in the increasingly tough environment for foreign businesses.

Comments

Buy american only.

[Anonymous Coward]

Bad idea. they will get all the information and ditch IBM take it all for themself. Unless they only share opensource things that is already open then its fine.

Re:Buy american only.

[Trepidity]

I think IBM probably realizes that, but hopes to make money in the medium-term anyway. If a pro-China strategy gets them into the Chinese market for the next 10-15 years, they could profit significantly. If that results in their Chinese partners eventually taking over their business and nudging them out, well, in 10-15 years someone else will be CEO, and that's their problem.

A lot of petrochemical firms are doing similar things. When Dupont goes into a joint venture with a Chinese firm to build a plastics facility, there are not many illusions about is going to happen to the technology: the JV partner will stay with Dupont for a few facilities until they develop enough skill in the tech to do it on their own, then subsequently will start building its own plants without Dupont.

Re:Buy american only.

[parkinglot777]

Most of that information is only valuable if it's applied.

How expensive and difficult is it to apply in the USA vs China?

IBM can keep it in the USA, where it with whither in an atmosphere of economic stagnation, or sell it to China, a nation that will take it and use it in industry.

You are too optimistic about the situation. History has been shown how things go. Also, you are short sighted about the cost applied. You underestimate and assume that Chinese are too stupid to gain values from the information (or too stupid to reverse engineer) without USA? Have you ever thought of the situation could be reversed in, let say, 10 or 15 years?

Look at Trepidity post. His post nailed it. This is just for the current CEO who wants get credit right now. When shit hits the fan, the CEO is no where near by and the one in place takes all the blames.

Re:Buy american only.

[Anonymous Coward]

To Godwin this thread early; didn't IBM help the NAZIs to round up all the jews, gypsies, black, feeble-minded, etc.? So this is just a continuation of their traditional behaviour.

Re:Buy american only.

[Kagato]

My experiences with IBM is you get a couple true blue IBM guys that act as front men that go to meetings while the real work is done by off-shore workers. Sometimes the offshore folks are IBM, but a lot of the time they are someone IBM has contracted to do the work. Which is why increasingly American companies have been dumping IBM and cutting deals directly with the offshore companies. Why pay IBM to be a middle-man? It's unclear to me exactly what value IBM brings in China outside a name to make executives and investors feel like good decisions are being made. Maybe that's enough.

Training Your Competition

[Dutch Gun]

And this will be the last of the money made by IBM in China. They're going to spend a few more years teaching other companies everything they know, and then the Chinese will kick them out and undercut them with their own technology. Just brilliant, IBM. *golf clap* Now they're actually training their own competitors for some short term profits.

If you haven't yet sold your IBM stocks in the last few decades, now might be the time to do so.

Re:Training Your Competition

[renzhi]

First off, I've been living and working in China for 11 years, even founded my own software company and ran for 6 years, before merging with another company. So I'll comment on this one.

You took a very simplistic view.

An IT industry can not be built overnight, it took many generations to build up the experiences, the talent pool, the mind set, the mentality that people had on software (A lot of Chinese people, especially those in the power to make decision on IT purchase, have a very different mind set on software/service values), etc, etc. I've been here for over a decade now, although there's been some progress in software engineering here, mainly in the few big Internet companies such as Baidu, Alibaba, Tencent, etc, there's not much progress. Enterprise software? Frankly, due to the mentality toward the values of software/services, there's not much changes over the decade. The local software companies in the field are extremely small, compared to the western giants such as IBM, HP, SAP, Oracle, etc. The enterprise software, and that includes systems acquired by government, is dominated by these foreign companies. They took the big profit, and leave the hard work to the locals to slave over. This situation is stupid to all parties. Very stupid of the government, especially to let this kind of shit happen over two decades without doing the proper thing. Very stupid of the foreign companies, as they could have made their life easier and made the cake larger. Very stupid of the local companies, as they are slaving to death, as most projects are losing money for them. And as a matter of fact, a lot of the local IT people, the smarter ones besides that, are giving up on a career in IT, they make more money selling pancakes and without the stress and overtime.

Second of all, if these foreign companies are not trying to share, they will fight over a cake that will never grow. Look, none of the Internet biggies, the fastest growing sector, are buying anything from them. Their markets are in the enterprise software (and government sector). And these markets are not growing, and if you look seriously into the numbers, these companies are making their money by selling hardware and to a certain extent, software licenses, which are quite small as compared to the hardware portion. And software licenses are getting smaller still, as more and more open source softwares are made available. And selling services? Haha, don't make me laugh. Service is money-losing on all fronts. As the policies changed, if these foreign companies are not trying to change, their cake gets smaller and smaller, and their profit will be significantly squeezed, as they would have to sell via local distributors.

Thirdly, even if they share, you are not going to think that they will share their crown jewel, are you? They will probably just play the games to comply, to make sure their cake is still there. These companies are exploiting like crazy, without actually investing much here. They have a very strong sale department, and very small tech support, nothing technically challenging. The technical works they do here? Could be done by any code monkey in any country.

Fourthly, you might want to look at other industries, such as the car industry, for example. They had shared something, but look at how much more they have earned back? Just take a look at the chinese branch of GM, Volkswagen, Honda, Toyota, etc. They only share the parts that they do not have the competitive edge, or are on the edge of losing it, and still keep the core technologies. They think long term. In 15 years, the car market became the largest one in the world. Sure, they have now more and stronger local competitors, but so what? Their cake is so much bigger, they made so much money than before. Try to imagine the enterprise software market, if you can. If we can make it like the car market, this is going to be gigantic. I can tell you that most Chinese firms, even the big ones, have very little IT deployment.

Anyway, my point is, it is stupid for

Re:Training Your Competition

[Dutch Gun]

I think you're underestimating how easily and quickly both technology and infrastructure can be copied given a concerted effort. The Chinese are absolutely brilliant at creating clones of American-designed products. What can take generations to invent for the first time can be duplicated in mere years. Consider the case of the Americans and the atomic bomb technology, and how quickly the Russians achieved parity. Or consider Germany's initial lead in rocketry and then the US / Russia catching up to them in mere years. This is all done with high-level transfer of knowledge. Once you know how something is done, it's much, much easier to duplicate those results rather than inventing all that technology through expensive R&D the first time.

China has clearly indicated that they're not interested in long-term relationships with the west in terms of critical technological infrastructure, and honestly, I can't really blame them. Would we want to buy Chinese-designed operating systems and computer systems? We're already starting to become wary of products *built* in China, let alone designed there. They're going to absorb and utilized the knowledge gained from IBM far faster than people are predicting, and once their industry is kick-started, they'll say goodbye to IBM. This is essentially a one-time sale for IBM - they're just selling off their IP and expertise for short term profits.

However nuanced you believe this move to be, I just don't see it that way. It's nothing but a short-term profit grab that will hurt IBM in the long run. You don't see the most successful tech companies racing to sell their IP or expertise to the Chinese... only their manufacturing. And that's only if they feel it's worth giving up their control over that process - note that Intel keeps it's fab plants mostly in the US or other first-world countries. That's because IP/expertise *is* the crown jewels of a tech company.

IBM is already dying a slow death, desperate to snap out of years of declining revenue. This will just hasten it by a few more years.

Re:Training Your Competition

[turbidostato]

"It's nothing but a short-term profit grab"

What else have US corporations become in the last 20 to 30 years?

"that will hurt IBM in the long run"

So what? This will be the problem of another CEO. I already got my big bonuses.

"IBM is already dying a slow death, desperate to snap out of years of declining revenue."

Or is it USA?

On the other hand, don't count your chickens before they are hatched; remember IBM was also dead back in the nineties -I think even Netcraft confirmed it.

Re:Training Your Competition

[plopez]

Well, you cannot buy stocks directly, just derivatives which I do not trust. You could directly lend or invest in a company there but the cash out mechanism can be highly restricted. So good luck with that.

Re:Training Your Competition

[Bonzoli]

Or fix NAFTA and the WTO, and actually penalize incoming products where the servants are bonded and jumping off buildings because they lost all Hope. hmmm..... Nope, lets just give it to china so they can shoot down satellites faster.

Re:Training Your Competition

[blind biker]

You are writing your comment assuming that the IBM CEO actually gives a shit about the company's long (or even medium) term viability. This hasn't been true in the last 35 years in corporate USA. In publicly traded companies where there isn't a clear owner and therefore someone who cares about hi/her company, CxOs have been rampaging, merging, reorganizing, divesting, outsourcing etc. etc. all kinds of buzzword MBA-ese goes. None of those things were actually done to improve the company, but to make more money for the executives.

She should be fired

[MikeRT]

And sued into the poor house by the shareholders and board of directors. This is not just training competition, but competition in a country notorious for wiping its ass with IP and trade secrets, using every other dirty trick to get ahead and using hyper nationalist politics to freeze out companies like IBM. Were she a politician and not a business executive, it would be roughly grounds for treason.

Re:She should be fired

[PolygamousRanchKid]

Ginni Rometty is pushing 60 years old. She will probably dead in twenty, or so Alzheimered out, that there is no difference anyway.

What does she care, how her decision affects the position of IBM or the US in the future?

She is concerned with cashing in, like, now.

Re:Well that should make it easy

[PolygamousRanchKid]

for IBM to lay off another couple hundred thousand.

The last time Ginni Rometty fired a bunch of IBMers . . . just a few months ago . . . she was rewarded with a $7 million bonus.

Why would she not want to lay off another bunch? She will get another $7 million for that again.

If you want the Chinese to use your tech

[sabbede]

just work with them. They'll steal it before long.

In other words, a very very

[Grey Geezer]

small number of wealthy people, will become even more wealthy at the expense of American, middle class, workers. Welcome to the global economy!