IBM Works for Free to Build Relationships With African Cities

International Business Machines Corp., which makes most of its money from high-end technology contracts, is betting that some of its growth will come from customers who don’t pay anything -- yet.

The company has developed an application to track the water system in Tshwane, South Africa, where more than half the population lives in slums that often aren’t connected to plumbing. IBM is letting the community use the app for free, after it sent a team of executives to evaluate the system as part of a corporate service project in October.

The benefit to IBM is it can use the city as a testing ground for the application, while gaining favor with the local government. It also may catch the attention of other cities with similar problems. Relationships are key to building the company’s business in Africa, where it now has offices in more than 20 countries, compared with just four in 2006.

“We’re not just walking in and saying, ‘Throw us our money,’” said Perry Hartswick, an architect of IBM’s Smarter Planet program, which tries to fix civic problems with tracking technology. “We’re walking in to say we’re here to be a part of Africa. That’s a very important part of the way we approach any new geography.”

IBM has deployed almost 100 teams of employees in Africa as part of a corporate-service program, working on everything from infant mortality to cleanliness of water, Chief Executive Officer Ginni Rometty said this month at the Council on Foreign Relations. The continent is a priority for the company, which plans to top $1 billion in African revenue by 2015, an industry consultant who declined to be named said last month.

Wasted Water

The free application in Tshwane will let locals report water leaks, faulty pipes and conditions of canals by sending text messages. The city enlisted IBM for the project because about a quarter of its water supply is unaccounted for or wasted.

IBM expects to have invested more than $16 million in its corporate-service projects in the region by the end of the year.

Shares of IBM, based in Armonk, New York, fell 1.3 percent to $212.26 yesterday. The stock has climbed 11 percent this year.

Before it's here, it's on the Bloomberg Terminal.