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on august 27, a beijing business daily reporter learned that ibm china has confirmed that it will completely close its r&d department in china, involving more than 1,000 employees. ibm said: "ibm will adjust operations as needed to provide the best service to customers. these changes will not affect our ability to provide support to customers in greater china."

during the interview, beijing business daily learned that ibm's business has indeed not been as prosperous as before in recent years, and some employees also feel that a storm is coming. in the eyes of market insiders, it is somewhat regrettable that ibm, which has been with china for 30 years, is in such a state, but this is also the result of market competition in the it service and big data industries. whether to leave or stay, the market's strategy and logic have quietly changed.

sudden layoffs

regarding the layoffs, a former ibm employee confirmed it to the beijing business daily reporter. ms. luo, who worked as a consulting manager at ibm and left the company not long ago, said that the rumor that ibm would provide n+3 compensation for layoffs, plus a two-month grace period, was true, and that some employees currently had the hope of getting 2n compensation, plus a six-month grace period.

a beijing business daily reporter logged onto ibm china's official website and found that there are still a lot of recruitment information, covering a number of categories from consulting to software engineering. although the work location can be chosen, most of them are not in china, mainly in luzon island in the philippines, bangalore in india and other places.

former employees of ibm said they were not surprised by the layoffs. ms. luo said that she previously worked in consulting for the "big four" and later switched to ibm. in the past, she had too many projects to take on and had to be selective. however, in the past year, she always had one or two months with nothing to do at ibm, so she was happy to get any projects, and there was no room for pick and choose.

during the interview, beijing business daily learned that some ibm employees had a premonition of layoffs, but they didn't know when they would come. before the layoffs, the company's employees were still going to get off work as usual, and some technicians were even working overtime. later, some employees found that they could not log in to the company's intranet, and the rights of employees in r&d and testing positions were revoked. after that, the company notified the employees whose rights were revoked to have a talk on monday and participate in an online meeting.

this online meeting, which ended abruptly in just 3 minutes, was even more abrupt. jack hergenrother, vice president of ibm global enterprise system development, said in the meeting: in order to support ibm's global customers and corporate business strategy, it has decided to transfer development tasks from the china system laboratory to other ibm infrastructure bases overseas. this shift was affected by market dynamics and fierce competition. in recent years, the company's infrastructure business in china has declined.

the challenges ibm faces in china and even in the asia-pacific region are very obvious. according to ibm's 2023 financial report, the asia-pacific region accounts for only 18.92% of the total revenue, far lower than the 51.19% level of the us market, and also lower than europe, the middle east and other places.

in terms of revenue growth, ibm's year-on-year growth in the asia-pacific region was only 1.6%, 2% in the united states, and about 3% in europe, the middle east, africa, etc. the decline in business in china is an important reason for the decline in asia-pacific revenue. the financial report shows that ibm's revenue in china fell by 19.6% in 2023.

it’s not a complete farewell to china

in fact, ibm has a long history with china. as early as 1995, ibm china research institute was established. it was ibm's first research center in a developing country and one of ibm's eight global research centers. the ibm china development center, established in 1999, is one of its largest software development bases in the world.

in 1994, ibm established a joint venture with great wall company to produce personal computers. it was also the first multinational company to locate its pc production line in china. in the 21st century, ibm's business in china has expanded to consulting, telecommunications, industrial manufacturing and other fields. apart from the united states, ibm has the most complete departmental structure in china.

if we use one sentence to summarize ibm's business in china, it is to help enterprises with digital transformation. ibm has large systems such as storage and servers at the hardware level. at the software level, ibm helps customers design internal systems. the company has five major software including lotus, websphere, db2, rational, and tivoli, which can meet customers' open source innovation needs. it is precisely with the hardware and software foundation that ibm can better expand its consulting business and help enterprises solve problems and formulate strategies.

behind this adjustment, ibm also stated that it is not completely bidding farewell to china, but is only withdrawing from the research and development work of ibm china systems center (csl) and ibm china development center (cdl), and transferring the laboratories to other overseas bases. ibm emphasized in an official statement that this adjustment will not affect its ability to provide support to customers in greater china, and the company will continue to conduct business in the chinese market.

a new way to play

as ibm said in the video conference, "reducing costs and increasing efficiency" and "getting rid of burdens" are the only options under market pressure in china. with the development of the big data industry, ict companies such as huawei and zte, internet companies such as baidu, tencent, and alibaba, and even the three major domestic operators are all eyeing the "digitalization" cake, and the players have both the ability and ambition.

zhang xiaorong, director of the deep technology research institute, told the beijing business daily that the current supply of big data is generally in a state of oversupply, forcing companies to compete at low prices. at the hardware level, facilities such as storage devices and computer rooms are similar for each company, so they can only seek advantages in price. at the software level, the needs of small and medium-sized enterprises are increasing, but at the same time they do not have much budget, which requires the price of software to be adapted to the size of the customer.

experts pointed out that for a "leading company" like ibm, it is not so easy to lower its profile and sacrifice profits, especially since ibm's previous clients were large institutions such as governments and banks. it can be said that it is standing on the "main road" of the digital industry. however, the current market situation requires companies to take the narrow paths, tap into niche groups, and earn some hard-earned money.

for a long time, ibm's biggest advantage has been its full-process services from infrastructure to front-end consulting, which have controlled every link in the industry chain. however, this advantage has gradually eroded in the competition. take huawei as an example. huawei cloud is based on huawei's 5g technology. because it can better integrate with local 5g networks and provide a lower latency experience, it has attracted more customers. it is also with a large customer base that it can provide more advanced solutions in the field of big data and help enterprises transform into intelligent ones.

not to mention internet giants like alibaba. compared with ibm, the former has accumulated massive transaction data through applications such as taobao and tmall. judging from the source of the data, it involves multiple tracks such as finance, logistics, and cloud computing, and can also feed back to enterprises more quickly, such as using data for precise marketing and personalized recommendations. this is an indispensable service for many small and medium-sized enterprises, but this is ibm's shortcoming.

industry observer hong shibin believes that ibm's early rise in china relied on its technological advantages. today, the technological gaps among companies are no longer obvious. more importantly, the overall market strategy and logic have long since changed. as the saying goes, "he who wins the customers wins the world." instead of comparing who has better service, it is better to directly compare who has a wider ecological coverage.

in view of this, ibm also emphasized in its statement that it will turn to serving chinese private enterprises and some multinational companies in china in the future. however, whether this can give ibm a new lease of life remains unknown.

beijing business daily reporter tao feng and wang zhuli