In 1989, when the Berlin Wall came down and the Eastern European countries trumpeted their int-ention to become democratic market economies, the computer industry recognised a huge opportunity. Eastern Europe may be a grim, polluted landscape with political and economic troubles, but it is, in computer marketing terms, a huge green field. The big companies […]
In 1989, when the Berlin Wall came down and the Eastern European countries trumpeted their int-ention to become democratic market economies, the computer industry recognised a huge opportunity. Eastern Europe may be a grim, polluted landscape with political and economic troubles, but it is, in computer marketing terms, a huge green field. The big companies have moved quickly, establishing subsidiaries, appointing partners, and giving equipment to needy but influential users. IBM Corp, Digital Equipment Corp, HewlettPackard Co, Siemens Nixdorf Informationssysteme AG and ICL Plc have been especially busy. This month, at a large seminar in Prague, Czechoslovakia, IBM set out to convince journalists that it is coming out on top. It has good reason to do so: in the West, according to many analysts, IBM is largely living off its reputation, off its existing user base, especially at the high margin high-end, and off the unwillingness of users to take risks with new suppliers.
Da to IBM
Whatever the truth of these arguments, it is important for IBM to recreate its brand leadership and the impression that no-one ever got sacked for say-ing Da to IBM. For IBM, this is a huge challenge. There is little cash, modern mainframes are extremely rare, and no-name personal computer clones dominate the computing market. Competition is already intense, with huge numbers of suppliers competing for open systems contracts. Despite this, says IBM’s European President Renato Riverso, IBM Eastern Europe, which employs some 500 people, is already making a profit. This is surprised most journalists present, especially given the inevitable plunge in Jugoslavian business, which used to account for 90% of IBM’s sales, and the amount of equipment that has been donated to needy causes. However, although IBM gives profit figures for its other European subsidiaries, neither Riverso nor Dilip Chandra, IBM’s general manager for Eastern Europe, were prepared to give the Eastern European profit figures. However, Riverso did say that Poland, Czechoslovakia and Hungary contributed sales of between $200m and $300m and this is growing at between 20% to 30% a year. IBM was similarly coy about market share. My gut feeling is that we are the major supplier said Riverso. Chandra said that IBM had carried out research that showed this, but the findings are confidential.
With an enormous installed base of obsolete near 360 compatible Rjad machines, IBM has a head start over most of its competitors in the former Comecon countries, where 9370s and 4381s would be suitable upgrades but the company finds that the market is not interested: demand is for open clientserver systems. Andrew Lawrence reports from Prague, Czechoslovakia on the state of play.
We treat this information as proprietary said Chandra. IBM’s determination to be the leading large scale supplier is apparent. Despite the backward conditions, and especially the poor business infrastructure, it has created new subsidiaries in Czechoslovakia and Poland and is expanding its subsidiary in Hungary. It is also active in Bulgaria, Albania, Romania and the states that once made up Jugoslavia. We’re not going through transformation, we’re going through transformation said Chandra. Just as IBM in the UK likes to be seen as a UK company, so IBM wants its Eastern European subsidiaries to be seen as local companies. They are staffed almost entirely by locals following an intensive recruitment campaign. IBM has also appointed over 200 business partners in Eastern Europe. In the so called Commonwealth of Independent States, IBM is moving very carefully. We have never been shooting for easy and immediate business. We have discovered a new meaning of the word complexity said Renato Riverso, president of IBM Europe. A USSR subsidiary has been reestablished as IBM Russia. Contrary to the view that IBM is shipping old iron into the poorer European nations, We’re selling the latest technology said Renato Riverso. This has inevitably led to some problems with CoCom, the Western committee which controls high tec
hnology exports. Among the key customer sites are an ambitious AS/400 banking application spanning 40 branches of Slaski Bank in Poland; a mainframe Unix application at the Polish PTT; and a large transport application at the Maasped transport company in Hungary.
Chandra believes that users of computers in the east have two great advantages over those in the west. First, they are used to using old and underpowered technology, which encourages good habits and use of resources; and second, they are benefiting from the latest technology without having to go through the full evolution cycle. I hope computing will be significantly more efficient than in the West, said Chandra. The demand is not for large systems, but clientserver. To date, IBM’s sales in the East have been largely PS/2s, AS/400s, and, to a lesser extent, RS/6000s and mainframes. But although there is huge demand for open systems, CoCom rules have slowed the flow of RS/6000s into the country (CI No 1,945). This does not mean that there are no mainframes in Eastern Europe. Cheap, second users machines, presumably bought from buyers of new machines in the West, have been provided to several universities across the region.