IBM Sets Aside Rivalry to Partner With China’s Inspur

International Business Machines Corp. (IBM) formed a partnership with Inspur Group Ltd. after the Chinese company tried to lure away customers with its “IBM to Inspur” marketing campaign.

IBM’s database and WebSphere software will be used on Inspur’s servers, which are the first high-end hardware to be wholly developed and produced by a Chinese company. Inspur also will be using IBM’s Power8 chips to help design its own systems, the companies said in an e-mailed statement yesterday.

The deal sets aside the companies’ rivalry, spurred by tensions between the U.S. and Chinese governments over claims of cyberspying and hacking American companies. Inspur had set out on a campaign to win over IBM’s customers after Bloomberg News reported in May that China’s government was studying if domestic banks’ reliance on the American company’s technology threatened national security.

IBM said at the time that it wasn’t aware of any Chinese government policy recommending against the use of IBM servers within the country’s banking industry. Earlier yesterday, China Daily reported that IBM said it never stopped providing new servers to Chinese banks, citing an interview with D.C. Chien, chairman and chief executive officer of IBM China Group.

Photographer: Angel Navarrete/Bloomberg

International Business Machines Corp. Chief Executive Officer Ginni Rometty. Close

International Business Machines Corp. Chief Executive Officer Ginni Rometty.

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Photographer: Angel Navarrete/Bloomberg

International Business Machines Corp. Chief Executive Officer Ginni Rometty.

IBM has been trying to turn around falling revenue in China, which has weighed heavily on CEO Ginni Rometty’s profit goals. Sales in the country declined 11 percent from a year earlier in the second quarter, after tumbling 20 percent in the first three months of the year, adjusted for currency conversions.

Almost half of IBM’s China revenue comes from hardware sales, the company said in May.

Middleware Market

For Inspur, the deal could help convince potential customers to buy its hardware with the option to use IBM’s software. Inspur will design its own systems based on technology from the OpenPower Foundation, which has 53 members and supports open-source technology, according to the statement.

That makes it easy to integrate IBM’s software on the new Inspur servers. IBM’s sales of application infrastructure and middleware -- the type of offerings its new Chinese partner will deploy -- accounted for the biggest share of the worldwide market last year at 30 percent, according to researcher Gartner Inc.

In a separate statement yesterday, IBM said it’s also working with China Telecom Corp. (728) in a three-year agreement to help small- and medium-sized businesses run cloud-based applications, which are stored on remote servers instead of on-site.

To contact the reporter on this story: Alex Barinka in New York at abarinka2@bloomberg.net

To contact the editors responsible for this story: Sarah Rabil at srabil@bloomberg.net Ben Livesey

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