I’m at IBM Edge this week and listening to my old friend Adalio Sanchez talk about the coming integration of IBM’s System X division into Lenovo as the key foundation for a much more intimate relationship between the two companies. This comes at an interesting time, when the U.S. and China are increasingly at odds over cyber intelligence. The NSA has been exposed as having gone after both foreign and domestic citizens and this week the U.S. Department of Justice began action against the Chinese military for stealing U.S. company secrets. This is making it far harder for U.S. technology companies to sell into China (Cisco is effectively locked out) and for Chinese companies to sell into the U.S. (virtually all of the Chinese networking companies are locked out of much of the western world). These moves clearly hurt IBM’s ability to move into China and Lenovo’s ability to move out, even though both firms have historically done better than most in terms of their ability to move into both regions.
A blend of both should assure that the concerns of the U.S. government are met, with IBM providing that assurance, and the concerns of the Chinese government are met, with Lenovo providing that assurance. Sanchez reported in his session today that even though the deal isn’t finalized, IBM’s products are already moving more freely in China.
Let’s talk about that this week.
At the core of this problem for both companies is FUD, or fear, uncertainty and doubt, which has come out of this international dispute. With all of the disclosures, there has been no evidence that either IBM or Lenovo have ever been compromised by their respective governments. Yet that often doesn’t make a ton of difference during events like this because every tech company in both countries appears to be getting caught up in the same ugly net and competitors are using related concerns to hurt sales. So you’d think there would be a natural advantage to being from someplace other than China or the U.S., but right now, the most powerful solutions appear to be coming from both of those feuding countries.
Balancing the Countries
Both Lenovo and IBM are multi-nationals, with executives out of a broad variety of countries. Both firms use best practices in this regard by having a significant company presence in every major geography they sell in.
Typically, this strategy is required to be successful because you can’t possibly understand the unique tastes and needs of a country unless you have a presence in it. This is often why U.S. companies don’t do well in China and Chinese companies don’t do well in the U.S.; both make false assumptions about the countries they aren’t in, which result in sales failures. Both IBM and Lenovo avoid this mistake because the folks making decisions in the U.S. about the U.S. market are typically U.S. citizens and those making decisions about the Chinese market are Chinese citizens. This has resulted in Lenovo not only being the most successful company out of Japan but the leader in PCs worldwide. For IBM, this practice assured its long-term existence, over a century, and near unmatched geographic breadth.
So both firms today are more global entities than entities focused on their countries of origin. But reality often loses in the face of perception, which is why this partnership could be unusually powerful.
Together, the two firms can better address the perception of a geolocation problem. The deal to sell Lenovo the IBM X Series intact (products, technology, people) ties the firms together into a relationship where IBM can and will resell Lenovo products and Lenovo can and will resell IBM. So in the U.S., when someone is concerned about Lenovo’s origin, IBM can step in and close the deal. In China, if a similar situation exists with IBM, Lenovo can step in. Each supplements the other to provide what is already working as a successful hedge against the FUD that is surrounding firms from both China and the U.S.
This is an interesting and elegant solution to a perception problem and effectively ties IBM and Lenovo together at the hip because both firms need the other in order to achieve their global objectives. This is a unique solution to what has to have become a very annoying problem for both U.S .and Chinese companies.