IBM dumps New York State for China
IBM dumps New York State for China
Date: Saturday, October 14, 2006 3:28 PM
<<<<< JOB DESTRUCTION NEWSLETTER No. 1569 -- 10/14/2006 >>>>>
IBM should be called "Big Red", not "Big Blue".
I read many articles on IBM's move to China but only found one that had the
insider quotes -- the China Daily. In this quote from the China Daily IBM
Chief Procurement Officer John Paterson made his case for global labor
arbitrage:
"In a globally integrated enterprise, for the first time, a
company's worldwide capability can be located wherever in the
world it makes the most sense, based on the imperatives of
economics, expertise and open environments," he added.
Just in case people missed the meaning of Paterson's statement, an analyst
named Eagle Zhang brings it into focus in blunter terms.
"It is a very significant event in this industry," said Zhang, who
added that IBM would make big savings after its procurement
headquarters moves to Shenzhen.
I searched the U.S. media to find out if anyone in the U.S. mainstream
media quoted Zhang since he is the only one that seems to admit the truth
behind IBM's move to China. Couldn't find any -- not a single one! I looked
at articles in the New York Times, CNN, Forbes, MSNBC, Houston Chronicle,
Reuters, USA Today, and ZDNET etc, etc,
Does it strike any of you as odd that to find out the truth we have to read
China Daily?
CHALLENGE: If any of you can find an article in the mainstream U.S. media
that quotes Zhang, or any one else who explains that IBM is moving it's
procurement operations to China to save money, please forward it so I can
share it with everyone on this mailing list.
John Paterson is moving to China and you can bet that he will earn more
than the minimum wage he will pay many of his employees.
Shenzhen raised its mandatory minimum wage rates by up to a
quarter earlier this year in a bid to accelerate the flight of
labour-intensive businesses.
It seems that every company that moves operations offshore wants to
reassure their American employees that despite the massive investment
overseas, everyone in the U.S. will retain their highly paid jobs. Is
anyone at IBM stupid enough to believe this?
The company said the move would not affect staffing levels in the
US, where it employs about 2,500 people in its procurement
operations.
Three cheers for Big Red for setting such an excellent example for all
other companies who claim to be American!
Eagle Zhang, said that IBM, often regarded as a trailblazer,
had now set another example for fellow multinational firms to
follow.
We shouldn't call companies like IBM multinational, they are transnational
because they don't consider themselves citizens of any nation-state.
Articles Included
http://www-03.ibm.com/press/us/en/pressrelease/20422.wss
IBM Shifts Global Procurement Headquarters to China
http://www.theinquirer.net/default.aspx?article=35040
IBM dumps New York State for China
http://www.forbes.com/business/2006/10/13/ibm-procure-shenzhen-biz-logistics-cx_rm_1013ibm.html
IBM Moves Global Procurement To China
http://www.chinadaily.com.cn/bizchina/2006-10/13/content_707344.htm
IBM to move major HQ to China
http://www.ft.com/cms/s/53a96d3c-5a13-11db-8f16-0000779e2340,_i_rssPage=9a36c1aa-3016-11da-ba9f-00000e2511c8.html
IBM to move procurement HQ to China
+++++++++++++++++++++++++++++++++++++++++++++++++++
http://www-03.ibm.com/press/us/en/pressrelease/20422.wss
IBM Shifts Global Procurement Headquarters to China
SHENZHEN, China - 12 Oct 2006: IBM (NYSE:IBM) today announced the
relocation of its global procurement headquarters to Shenzhen, China as the
company continues its strategy to draw more efficiently on its global
capabilities and capitalize on emerging market opportunities.
The decision to move Chief Procurement Officer John Paterson's office from
Somers, NY, to China marks the first time the headquarters of an IBM
corporate-wide organization has been located outside the U.S. This move
illustrates a shift underway at IBM from a multinational corporation to a
new model -- a globally integrated enterprise.
"In a multinational model, many functions of a corporation were replicated
around the world -- but each addressing only its local market," said Mr.
Paterson. "In a globally integrated enterprise, for the first time, a
company's worldwide capability can be located wherever in the world it
makes the most sense, based on the imperatives of economics, expertise and
open environments."
Once this shift occurs, it requires a focused and thoughtful approach to
simultaneously transfer knowledge and build the management capabilities to
lead the work. Mr. Paterson is in Asia to do just that; to expand and
strengthen IBM's internal procurement skills in the region; develop leaders
and prepare them to take on global roles.
The other reason Mr. Paterson has relocated to Asia is to lead an effort to
reshape the company's supply base in the region. Although IBM has been
sourcing in Asia for more than 50 years, most of it has been in support of
its hardware businesses. While that's still important, the demand for
software and services skills -- across Asia and worldwide -- is growing. To
meet the demand, it will require developing relationships with new partners
and suppliers and working with existing ones to help them build skills,
processes and management practices to compete globally in the services
market.
IBM chose Asia as the global procurement headquarters because it already
has more than 1,850 procurement and logistics professionals in the region,
many of them at its China Procurement Center in Shenzhen, China, which has
been in operation for more than a decade. The center is one of IBM's
largest procurement organizations outside the U.S. The company also has
strong and collaborative relationships with nearly 3,000 suppliers across
Asia, accounting for about 30 percent of the $40 billion IBM spends
annually on procurement.
Given the focus on Asia, Mr. Paterson said it is important for him to be
there, yet he is quick to point out that cultivating the company's supply
base is a global effort. "IBM has procurement professionals in 60 countries
in 400 cities worldwide and the competitive advantage procurement provides
IBM is to locate those skills close to our clients and suppliers around the
world," he said. "That strategy does not change."
The move will help IBM expand its own capabilities, but it also has
benefits for local markets. IBM's procurement activities have long aided
the economic development of the regions from which it buys. In China, and
in Asia, for example, Mr. Paterson says the investments IBM has made in its
hardware business to ensure suppliers develop the capabilities to meet the
very stringent requirements of IBM and its clients have helped those
companies become more competitive and grow their businesses on a global
scale. He expects the same scenario to play out in the software and
services arena.
"IBM is a global company," Mr. Paterson said. "And today that is as much
about making efficient and effective use of skills everywhere in the world
and integrating them globally to serve clients, as it is about developing
deep local relationships in markets around the world. We are becoming a
globally integrated company that allows us to do both."
Contact(s) information
Fred McNeese
IBM Media Relations
914-499-6584
fredmc@us.ibm.com
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http://www.theinquirer.net/default.aspx?article=35040
IBM dumps New York State for China
Procurement takes the long trek east
By: INQUIRER staff Thursday 12 October 2006, 14:03
BIG BLUE said it's shifting its global procurement office from Somers in
New York state, to Shenzhen.
This, it is said, is the first time the HQ of an IBM corporate wide unit
has moved outside the US. It hailed this as the invention of a new model to
a "globally integrated enterprise".
It has shifted John Paterson, head of the division, to Shenzhen too. He
said IBM has collaborative relationships with 3,000 suppliers in Asia, 30
per cent of the $40 billion it spends on procurement.
IBM did not say how many of Paterson's staff were making the long trek
east. In the old days, IBM used to stand for I've Been Moved. And he has.
5
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http://www.forbes.com/business/2006/10/13/ibm-procure-shenzhen-biz-logistics-cx_rm_1013ibm.html
IBM Moves Global Procurement To China
Robert Malone, 10.13.06, 2:40 PM ET
IBM is moving its global procurement headquarters to Shenzhen, China. It
will be the first time the headquarters of a corporate-wide IBM division
has been moved outside the U.S.
The company's chief procurement officer, John Paterson, will move from
Somers, N.Y., to Shenzhen. IBM already has 1,850 employees in the area and
manufactures there for the Asian/Pacific market products and systems
including servers, retail store systems, storage devices and computer
printers. The company originally manufactured PCs there but sold off that
business to a Chinese-owned firm.
"In a multinational model, many functions of corporations were replicated
around the world--but each addressing only its local market. In a globally
integrated enterprise, for the first time, a company's worldwide capability
can be located wherever in the world it makes the most sense," says
Paterson.
Shenzhen is not an arbitrary selection; it is at the center of one of the
three most active Chinese trading centers and part of Asia's
ever-more-powerful emerging markets. Shenzhen is the third-largest port in
China and the fourth-largest port in the world.
"We established our Shenzhen center over ten years ago and have had
procurement people in China for 50 years," Paterson says. "The Shenzhen
area has many electronic hardware suppliers that we will continue to use."
This move emphasizes a series of corporate objectives: to move to the place
in the world where procurement makes the most sense, as Paterson has said;
to modify IBM's own supply base; and to expand the company's internal
procurement skills and develop executives for global roles.
The move will involve both IBM's hardware and software businesses. By
emphasizing software and services skills, it will make possible the
development of new partners and suppliers. IBM, as a company, spends $45
billion a year with external suppliers. More than half its business is in
services to its clients.
"Part of our focus is to try to develop a supply base in China and other
parts of Asia that can globally support our services business," says
Paterson.
IBM has 3,000 suppliers across Asia. It has procurement professionals in 60
countries and 400 cities worldwide, and the company is attempting to gain
competitive advantages by locating those in charge of procurement as close
to their clients and suppliers as possible. Their global and integrative
skills are to be complemented by continued interest in deep local
relationships.
IBM has, over the past few years, made it clear that the supply chain,
including the procurement process, is a core focus of its business. It is a
major means by which the company can--through end-to-end execution and
productivity optimization--balance cost savings with customer or client
satisfaction. This strategy has allowed IBM to significantly decrease
logistics costs, totaling some 20% savings from 1996 through 2003, despite
a significant increase in the volume of goods being transported. The move
to Shenzhen will clearly play a significant role in the continuing success
of this strategy.
+++++++++++++++++++++++++++++++++++++++++++++++++++
http://www.chinadaily.com.cn/bizchina/2006-10/13/content_707344.htm
IBM to move major HQ to China
By Liu Baijia (China Daily)
Updated: 2006-10-13 08:47
In a first for China, global information technology giant IBM yesterday
announced it will move its global procurement headquarters from New York to
Shenzhen in South China's Guangdong Province.
It will be the first time IBM will have a global headquarters outside the
United States, as well as being the first time a major technology firm has
decided to locate its global procurement headquarters in China.
IBM said that the shift is part of its efforts to transform from a
multinational into a globally integrated company.
"In a multinational model, many functions of a corporation are replicated
around the world but each addresses only its local market," said IBM Chief
Procurement Officer John Paterson.
"In a globally integrated enterprise, for the first time, a company's
worldwide capability can be located wherever in the world it makes the most
sense, based on the imperatives of economics, expertise and open
environments," he added.
Eagle Zhang, senior vice-president of the domestic consulting firm Analysys
International, said that IBM, often regarded as a trailblazer, had now set
another example for fellow multinational firms to follow.
"It is a very significant event in this industry," said Zhang, who added
that IBM would make big savings after its procurement headquarters moves to
Shenzhen.
The southern Chinese city, neighbouring Hong Kong, is already a major
manufacturing centre for IBM, where it makes its servers, its major
hardware product following the sale of its personal computer business to
Chinese firm Lenovo.
Shenzhen is also one of the world's most important computer and
communications hardware manufacturing bases.
IBM has more than 1,850 procurement professionals and nearly 3,000
suppliers in Asia, where it buys 30 per cent of its US$40 billion supplies
every year.
Apart from hardware, China has also become an important sourcing
destination for IBM's software and services, so this requires the company
to build relations with new partners and suppliers in Asia and improve
their skills, processes and management capabilities.
China has already become a major procurement base for most of the major
technology giants, such as Motorola, Ericsson, and Fujitsu.
South Korean conglomerate Samsung also moved its international purchasing
centre from Hong Kong to Shanghai.
Last year, it bought products and services worth US$15.3 billion from
almost 4,600 vendors in China. Its target for this year is US$18.5 billion.
A survey by global consultancy firm McKinsey of 39 US companies in China
showed these firms only achieved a fraction of China's potential as a
source of low-cost products.
The survey revealed that they only purchase 30 per cent of their
potentials, with this figure expected to rise to 50 per cent.
They only achieve 25 per cent of potential savings in China, but this will
rise to 40 per cent in three years, according to the McKinsey survey.
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http://www.ft.com/cms/s/53a96d3c-5a13-11db-8f16-0000779e2340,_i_rssPage=9a36c1aa-3016-11da-ba9f-00000e2511c8.html
IBM to move procurement HQ to China
By Tom Mitchell in Hong Kong
Published: October 12 2006 19:05 | Last updated: October 12 2006 19:05
IBM said on Thursday it would move its global procurement headquarters from
New York to China in an endorsement of the countrys ever-growing role as
a supplier to the global economy.
The company said John Paterson, its chief procurement officer, had
relocated to Shenzhen, the Chinese special economic zone that borders Hong
Kong.
It is the first time the company has moved the headquarters office of a
global unit outside the US.
The company said the move would not affect staffing levels in the US, where
it employs about 2,500 people in its procurement operations.
IBM has operated a China procurement centre in Shenzhen for more than 10
years, and also established a PC manufacturing joint venture there in the
early 1990s.
The company sold its PC business to Chinese rival Lenovo two years ago and
has also hived off its hard-drive business to Hitachi, but it still
maintains a large sourcing operation in Asia.
IBM says it spends about 30 per cent of its $40bn annual procurement budget
in Asia, and also employs more than 1,850 procurement and logistics staff
in the region.
Shenzhen has successfully attracted investment from a large number of
multi-national IT companies, as it seeks to upgrade its industrial base.
The government has actively encouraged low-tech industries to move out of
the zone, to cheaper locations inland.
Shenzhen raised its mandatory minimum wage rates by up to a quarter earlier
this year in a bid to accelerate the flight of labour-intensive businesses.
While rising labour and other costs in Shenzhen are also a concern for
high-tech investors such as IBM, these are mitigated by a dense network of
component suppliers that have taken root in the Pearl River Delta, as well
as the regions first-rate infrastructure.
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