Informing the IBM Community

Is IBM back in the game in China?


IBM has signed a number of deals that point to an improvement in its fortunes in China.

Big Blue looked like it was dealt a mortal blow in the world’s second biggest economy after being caught in the cross-fire caused by Edward Snowden’s revelations last year. But now local server manufacturer Inspur will use DB2 and WebSphere technologies in its line of K1 Unix servers (pictured).

More importantly, Inspur is set to start using IBM’s POWER8 processors and recently signed up to the OpenPOWER consortium which seeks to promote IBM’s chip technology. OpenPOWER now has 53 members – 10 of which, including Inspur, are Chinese.

To say this represents a remarkable turnaround would be an understatement. Since last year, Jinan-headquartered Inspur’s avowed intention has been to replace IBM servers in China. It even has a marketing catchphrase to go with its efforts: “I2I”, meaning “IBM to Inspur”.

However, there is no question that IBM’s Power Systems have been very popular in a country where there are few lines between state and private enterprise. With U.S. tech firms in the firing line from Chinese government, alliances with domestic server manufacturers combine a heavy dose of pragmatism with a tangible sense of face-saving realpolitik.

Other signs of a thawing of attitude towards IBM include a big high availability contract for
Industrial and Commercial Bank of China, a potentially huge agreement with China Telecom to serve cloud-based SAP applications to SMBs and a deal with key financial firm Shanghai Wind Information to provide cloud-based risk analysis, all signed in August.

Booz Allen Hamilton employee Edward Snowden arrived in Hong Kong to begin a series of leaks about mass surveillance by America’s security services and their allies (including, most notably, Britain’s GCHQ) on May 20, 2013.

On June 12, 2013, The South China Morning Post published an interview in which Snowden revealed his identity and said that the NSA had been hacking Hong Kong and Chinese systems since 2009.

After this, and as American and Chinese officials engaged in a series tit-for-tat accusations and sanctions, U.S. tech sales in China plummeted.

In the third quarter of 2012, for example, IBM’s revenue growth in China was up 19%, 40% of which was made up of hardware sales. In the same period in 2013, its hardware sales in China were down 40% and haven’t recovered much since.

In March this year, IBM even issued a statement that denied any involvement with the NSA or its PRISM surveillance operation and staked its claim as a defender of privacy. In the meantime, Inspur became the fifth-biggest player in the global server market, according to analyst figures.

While things may be looking up for Big Blue in China right now, other American firms are not so lucky. In recent weeks, the Chinese government has removed ten Apple devices from its procurement list, apparently on a security-risk basis, and blacklisted security software providers Kaspersky and Symantec.

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