ICBC deal shows U.S. tech giant IBM still engaged in China

[August 26, 2014]  By Gerry Shih

BEIJING (Reuters) - Industrial and Commercial Bank of China (ICBC) has deployed a new IBM mainframe computer system, the two companies said on Tuesday, boosting the U.S. technology giant's credentials in the country.

IBM's joint announcement with ICBC, the world's largest bank by market capitalization, shows IBM is still doing business with China's state-owned banks despite widely circulated media reports in May that suggested China's central government had ordered banks to remove IBM equipment because of cyber security concerns.

The U.S. company's efforts to repair any public relations damage have included the announcement in recent weeks of a string of deals in China to assure investors of its future in the market and salvage its reputation with other potential Chinese buyers.

In a statement released only in Chinese, ICBC chief technology officer Lin Xiaoxuan said that ICBC was the first bank in mainland China to introduce IBM mainframes 30 years ago and that they have since played an "important role" in the bank's IT operations".

"IBM mainframes have consistently helped us keep our IT systems steady and safe and will continue to do so in the future," Lin said.

ICBC's newly deployed mainframe, which was purchased from IBM several months ago, allows sensitive financial data to be routed around the world in the event of a crash at one of its 40 global branches.

BAN REPORTS 'OVERBLOWN'

Beijing-based Forrester analyst Gene Cao said that the Chinese government would like to reduce its banks' dependence on foreign technology but added that his conversations with IT officials at large banks lead him to believe that the reports about an IBM ban were overblown.

These officials have expressed concern that the outcry to push out IOE - the moniker in China for Western tech giants IBM, Oracle and EMC - could hamper their business, Cao said.

"Perpetuating rumors that there’s a ban on IOE would pose a risk for the banks, too, and I don't think they necessarily want that," Cao added.

IBM Greater China Chief D.C. Chien told the state-run China Daily newspaper in a recent interview that local banks have continued to purchase its products.

IBM additionally announced this week that it would team up with China Telecom <0728.HK> to provide cloud computing services to small and medium-sized businesses.

Before the most recent public relations push, IBM said in April that sales in China had fallen by 20 percent, echoing disappointing results from many U.S. technology companies that suffered plummeting sales in China after revelations by Edward Snowden of extensive U.S. government spying.

In an unexpected development, Inspur, a Chinese rival to IBM that marketed itself as a more secure option for Chinese banks, announced this week that it will sell its high-end K1 server system with IBM's database and web application software installed.

(Editing by Matt Driskill and David Goodman)

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