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IBM Taps into China's SMBs

Officials announced the launch of an IBM Innovation Center in Beijing Thursday to find better ways to get software from ISVs around the world into the computers of small- to medium-sized businesses (SMBs) in China.

It's not as easy as it may sound. The hundreds of researchers IBM officials say are now in the country will need to find a way to match software providers with their Chinese peers.

"There are some unique challenges to the area, I think, that are indigenous to the local economy and states of modernization," said Dave Carlquist, IBM vice president of global emerging marketplaces, in a press conference Thursday morning. "First of all, SMBs prefer to buy and look to buy from local solution providers. So while there are some very large, very well-known and successful packages for ERP, CRM and the like, the small- to mid-market company is looking for a local software provider, a local systems integrator."

The new innovation center is part of an expansion effort at IBM's China Research Lab, located in China's capital city. Officials expect to double the size of the current facility and later combine the information garnered at the campus with the seven other research centers around the world.

The SMB market in China is red hot, which isn't in line with a country known more for its super-size, government-sponsored companies. According to IBM researchers, 99 percent of Chinese businesses can be categorized as SMBs, while the Chinese SMB market makes up $4 billion to $5 billion of the $300 billion global SMB market.

The Chinese SMB market is so large, in fact, that IBM is calling it the epicenter of the world's global supply chain, with the average company doing business with roughly 485 customers every month. Still, Carlquist said, SMBs face the logistics costs involved with transactions, which can sometimes double that of companies in other locations worldwide.

"One of the biggest challenges that SMB accounts companies face in China are dealing with is being able to foster and improve connectivity between their suppliers, their partners, their customers," he said.

In addition to providing technical solutions for hardware or software problems, the Chinese lab will also concentrate efforts on meeting the unique business demands of the country.

The payoff for IBM's innovation center falls on the company's large ISV partner base, the members of the PartnerWorld program. Earlier this month, IBM took the reins off its advanced-level membership requirements, giving more ISVs access to the company's marketing and region-specific assistance initiatives. Of course, PartnerWorld member software is required to run off the WebSphere middleware line, which works out well for IBM in the end.